<PAGE>
As filed with the Securities and Exchange Commission on March 13, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
I-MANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7389 01-0524931
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
</TABLE>
537 CONGRESS STREET
5(TH) FLOOR
PORTLAND, MAINE 04101-3353
(207) 774-3244
(Address Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
A. LEIGH POWELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
I-MANY, INC.
537 CONGRESS STREET
5(TH) FLOOR
PORTLAND, MAINE 04101-3353
(207) 774-3244
(Name, Address Including Zip Code and Telephone Number, Including Area Code, of
Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JEFFREY A. STEIN, ESQ. GORDON H. HAYES, JR., ESQ.
HALE AND DORR LLP TESTA, HURWITZ & THIBEAULT, LLP
60 STATE STREET 125 HIGH STREET
BOSTON, MA 02109 BOSTON, MA 02110
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 248-7000
TELECOPY: (617) 526-5000 TELECOPY: (617) 248-7100
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
------------------------------
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,
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, 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 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 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
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.0001 par value per share.................... $86,250,000 $22,770
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
------------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 13, 2000.
[LOGO]
SHARES
COMMON STOCK
I-many, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares. We
have applied for approval for quotation of our common stock on the Nasdaq
National Market under the symbol "IMNY." We anticipate that the initial public
offering price will be between $ and $ per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ------------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to I-many.......................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------
ROBERTSON STEPHENS
J.P. MORGAN & CO.
SG COWEN
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, THE
"COMPANY," "I-MANY," "WE," "US" AND "OUR" REFER TO I-MANY, INC., A DELAWARE
CORPORATION.
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN
ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary..................................................... 1
Risk Factors................................................ 5
Cautionary Note Regarding Forward-Looking Statements........ 13
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Capitalization.............................................. 15
Dilution.................................................... 16
Selected Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 27
Management.................................................. 38
Certain Transactions........................................ 47
Principal Stockholders...................................... 48
Description of Capital Stock................................ 50
Shares Eligible for Future Sale............................. 52
Underwriting................................................ 54
Legal Matters............................................... 56
Experts..................................................... 56
Where You Can Find More Information......................... 56
Index to Financial Statements............................... F-1
</TABLE>
------------------------
We own or have rights to tradenames and trademarks that we use in connection
with the sale of our products and services. We own the U.S. registered trademark
CARS-Registered Trademark-, which is an acronym for our Contract Administration
and Reporting System. "CARS/Medicaid," "CARS/Analytics," "I-many.com" and
"I-many" are also our trademarks. All other trademarks and service marks
referenced in this prospectus are the property of their respective owners.
i
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION IN THIS PROSPECTUS, INCLUDING THE RISK FACTORS REGARDING OUR COMPANY
AND THE COMMON STOCK BEING SOLD IN THIS OFFERING.
OUR COMPANY
We provide Internet-based solutions and related professional services that
allow our clients to negotiate and manage complex contract purchasing
arrangements and facilitate business-to-business e-commerce in the healthcare
and other industries. We sell our products to all parties involved in the
purchase, sale and distribution of healthcare products, including manufacturers,
purchasers, group purchasing organizations, or GPOs, and distributors.
Our proprietary applications are designed to enable our clients to:
- negotiate and structure purchase contracts and special promotions, such as
rebates and chargebacks, which are based on purchase volumes and on
increases in manufacturers' market share;
- track the achievement of goals under these contracts, establish amounts to
be paid under rebate and chargeback programs and resolve associated
disputes; and
- evaluate contracts' effect upon profitability, market share and the
effectiveness of special promotions.
The market for healthcare products is large and growing. According to the
Health Care Financing Administration, total healthcare spending in the United
States is expected to grow from approximately $1.3 trillion in 2000 to
approximately $2.2 trillion in 2008. The Health Industry Group Purchasing
Association, a trade association comprised of group purchasing organizations, or
GPOs, has estimated that as much as $165 billion, or 80%, of hospitals' medical
equipment, supplies and pharmaceutical purchases are channeled through GPOs.
GPOs are organizations that aggregate the demand of their members, which include
hospitals and large physician groups, in order to negotiate with manufacturers
to obtain favorable product pricing. The pricing terms negotiated by GPOs are
typically contained in complex purchase contracts which are designed to meet the
varied goals of manufacturers and purchasers. In addition, other healthcare
industry participants, such as managed care organizations, government payors and
wholesale distributors employ complex contracts for the purchase of their
medical equipment, supplies and pharmaceuticals.
The task of administering complex purchase contracts is currently highly
labor intensive, costly and often yields unreliable results. Information about
the quantities of products purchased, which is required to determine a
purchaser's eligibility for volume discounts, is often entered manually into
legacy software systems. The systems currently used frequently lack the
functionality, flexibility, ease of modification, and interoperability with
diverse data formats required to address the wide variety of contracts. In
addition, existing systems often lack the scalability, ease of use and universal
access now available through Internet-based applications.
Our objective is to become the leading provider of Internet-based contract
management solutions to organizations which utilize complex purchase contracts
to buy or sell products in large volumes. To achieve this objective, we intend
to:
LEVERAGE OUR STRENGTH IN THE HEALTHCARE MARKET. As a quality provider of
contract management services, we have acquired extensive industry knowledge and
experience with contracting practices and the relationships among healthcare
industry participants. We believe that we will be able to leverage our
reputation as a quality provider of complex contract management services and our
extensive industry knowledge to offer additional services to our existing client
base, and to attract new clients in the healthcare industry as well as other
industries.
1
<PAGE>
AGGRESSIVELY DEVELOP OUR PROPRIETARY INTERNET PORTAL, I-MANY.COM. We
launched our Internet portal, I-many.com, in February 2000 and intend to
aggressively promote it as a marketplace for trading partners in the healthcare
industry.
INCREASE OUR SALES AND SUPPORT EFFORTS. We intend to increase significantly
our direct sales and support forces to facilitate our growth and promote the
awareness of the I-many brand through an aggressive advertising and marketing
campaign.
MAINTAIN A TECHNOLOGICAL LEADERSHIP POSITION. By closely partnering with
and listening to our clients, we intend to continue the development of our
products so that they deliver the highest client value.
TARGET OTHER MARKETS. We believe that the purchase contracting practices in
many other industries are similar to those in the healthcare market. We are
exploring these markets, and, if appropriate, expect to develop the necessary
industry expertise to support our entry into such markets.
SELECTIVELY PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We intend to
pursue a selective acquisition strategy as opportunities arise to complement our
product offerings, extend our service capabilities and expand the features on
our website.
Our software products are currently used by more than 55 clients, including
8 of the largest 10 pharmaceutical manufacturers in the world. Our clients
include Bayer, DuPont Pharmaceuticals and Novartis.
OUR ADDRESS
Our principal executive offices are located at 537 Congress Street,
Portland, Maine 04101. Our telephone number at that address is (207) 774-3244.
Our website is located at WWW.IMANYINC.COM. The information contained on our
website is not part of this prospectus.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by I-many.............................. shares
Common stock to be outstanding after the offering........... shares
Use of proceeds............................................. For general corporate purposes,
including working capital,
capital expenditures and
possible acquisitions. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol...................... IMNY
</TABLE>
The number of shares outstanding after the offering is based on 8,822,576
shares of common stock outstanding as of February 29, 2000, assuming the
conversion of our convertible preferred stock into 3,667,875 shares of common
stock. It excludes (a) 2,227,598 shares issuable upon the exercise of
outstanding stock options as of February 29, 2000, and (b) 819,431 shares
reserved for issuance under our stock incentive plans as of February 29, 2000.
See "Capitalization."
Unless otherwise specifically stated, information throughout this prospectus
assumes:
- the underwriters' over-allotment option is not exercised;
- the conversion of all outstanding shares of our convertible preferred
stock into shares of common stock upon the closing of this offering;
- the effectiveness of a -for- stock split immediately prior to
the date of this prospectus; and
- the filing of an amended and restated certificate of incorporation prior
to the closing of the offering.
I-many was originally incorporated in Massachusetts as Systems Consulting
Company, Inc., or SCC, on June 5, 1989. On April 2, 1998, SCC
Technologies, Inc., a Delaware corporation, was formed as a holding company and
acquired all the stock of SCC. In January 2000, SCC Technologies, Inc. changed
its name to I-many, Inc. and SCC merged into I-many, Inc.
3
<PAGE>
SUMMARY FINANCIAL DATA
The summary financial data presented below have been derived from the
financial statements of I-many.
Pro forma net loss per share is computed using the weighted average number
of shares of common stock outstanding, adjusted to include the pro forma effects
of the conversion of preferred stock to common stock as if such conversion had
occurred on the original date of issuance.
The pro forma balance sheet data give effect to the conversion of all
outstanding convertible preferred stock into 3,667,875 shares of common stock.
The pro forma as adjusted balance sheet data also reflect the sale of
shares of common stock at an assumed initial public offering price of $ per
share, after deducting the estimated underwriting discounts and commissions and
offering expenses.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total net revenues.......................................... $7,514 $13,542 $19,411
Cost of revenues............................................ 2,249 2,062 5,354
------ ------- -------
Gross profit............................................ 5,265 11,480 14,057
Total operating expenses.................................... 4,209 9,760 19,142
------ ------- -------
Income (loss) from operations........................... 1,056 1,720 (5,085)
Other income (expense), net................................. (733) (129) 147
Provision for (benefit from) income taxes................... -- (320) 281
------ ------- -------
Net income (loss)....................................... $ 323 $ 1,911 $(5,219)
====== ======= =======
Net income (loss) per share:
Basic................................................... $ 0.08 $ 0.47 $ (1.14)
====== ======= =======
Diluted................................................. $ 0.08 $ 0.27 $ (1.14)
====== ======= =======
Weighted average shares outstanding:
Basic................................................... 3,914 4,077 4,573
====== ======= =======
Diluted................................................. 5,369 7,327 4,573
====== ======= =======
Pro forma net loss per share (unaudited):
Basic and diluted....................................... $ (0.75)
=======
Pro forma weighted average shares outstanding:
Basic and diluted....................................... 7,000
=======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $15,322 $15,322
Working capital............................................. 8,850 8,850
Total assets................................................ 27,482 27,482
Debt, including current portion............................. 41 41
Redeemable convertible preferred stock...................... 12,492 --
Total stockholders' equity.................................. 197 12,689
</TABLE>
4
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR SHARES OF COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS,
TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD LIKELY SUFFER. IN THESE
CIRCUMSTANCES, THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY
LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK. THE RISKS SET
FORTH BELOW MAY NOT BE EXHAUSTIVE.
WE HAVE INCURRED SUBSTANTIAL LOSSES AND ANTICIPATE CONTINUED LOSSES.
We incurred net losses of approximately $5.2 million in 1999 and we had an
accumulated deficit at December 31, 1999 of $9.4 million. We expect to increase
our spending significantly, principally for sales and marketing and development
expenses related to our I-many.com portal, and therefore expect to continue to
incur significant losses for the foreseeable future. Although we have been
profitable in certain prior years, and although our revenues have grown, our
business model is evolving and we cannot assure you that we will achieve
sufficient revenues to become profitable in the future. If our revenue grows
more slowly than we anticipate or if our operating expenses either increase more
than we expect or cannot be reduced in light of lower than expected revenue, our
business, financial condition and results of operations will be materially and
adversely affected.
OUR FUTURE GROWTH IS DEPENDENT UPON THE SUCCESS OF OUR PROPRIETARY INTERNET
PORTAL, WHICH WAS ONLY RECENTLY LAUNCHED.
We have not yet recognized any significant revenue from I-many.com, our
principal Internet initiative, which we launched in February, 2000. We may
encounter delays or difficulties in generating revenues from I-many.com. We
expect that a significant portion of our future revenue will depend on the
success of our Internet portal, and in particular, on the degree to which
manufacturers and their customers enter into contractual supply relationships
using I-many.com.
We believe that recognition and positive perception of the I-many.com brand
name in the healthcare industry will be important to our success. We intend to
significantly expand our advertising and publicity efforts in the near future.
However, we may not achieve our desired goal of increasing the awareness of the
I-many.com brand name. Even if recognition of our name increases, it may not
lead to an increase in the number of visitors to our Internet portal or an
increase in the number of users of our services. There can be no assurance that
I-many.com will achieve widespread customer acceptance, and any failure to do so
would have a material adverse effect on our business, financial condition and
results of operations.
OUR FUTURE GROWTH IS DEPENDENT UPON THE USE OF THE INTERNET FOR
BUSINESS-TO-BUSINESS CONTRACT MANAGEMENT WHICH IS NOT YET FULLY ESTABLISHED.
Our future success is dependent in part upon an increase in the use of the
Internet as a means for healthcare manufacturers, GPOs and other intermediaries,
purchasers and distributors to enter into and manage contract-based purchase
relationships. These parties may not adopt the Internet as a mechanism for
developing and maintaining such relationships. The Internet may not be adopted
for such purposes for many reasons, including:
- contracting parties' comfort with existing contracting processes;
- purchasers' concerns with respect to the accuracy, security and
confidentiality of data shared by all parties to the contract; and
- manufacturers' adherence to their established sales practices, including
the actual and perceived benefits of face-to-face meetings with customers
and potential customers.
5
<PAGE>
If a sufficiently broad base of manufacturers, GPOs and other
intermediaries, purchasers and distributors do not accept the use of the
Internet for negotiating and managing their contracts, our business, financial
condition and results of operations would be materially and adversely affected.
OUR I-MANY.COM PORTAL REPRESENTS A NEW BUSINESS MODEL FOR US AND OUR CLIENTS AND
WE CANNOT ASSURE YOU THAT OUR RESULTS OF OPERATIONS WILL NOT BE ADVERSELY
AFFECTED AS WE ADOPT THIS NEW MODEL.
We launched our Internet portal, I-many.com, in February 2000. Until that
time, our business model was focused principally upon the licensing of software
products and providing related services to entities which maintain and manage
the data necessary for contract management within their own information systems.
I-many.com represents an extension of the existing business model for both us
and our clients and we cannot assure you that our results of operations will not
be affected as we adopt this new model. Our recent focus on I-many.com has
required a significant commitment of company resources, including the attention
of management and significant cash expenditures. We cannot assure you that our
revenues will not be adversely affected as a result of such diverted resources.
WE MAY NOT BE ABLE TO DETERMINE OR DESIGN THE FEATURES AND FUNCTIONALITY THAT
OUR CLIENTS REQUIRE OR PREFER.
Our success depends upon our ability to accurately determine the features
and functionality that our clients require or prefer in an e-commerce solution,
and our ability to successfully design and implement solutions that include
these features and functionality. If we are unable to determine or design the
features and functionality that clients require or prefer in an e-commerce
solution, our business will be negatively affected. We have designed I-many.com
based upon internal development efforts and feedback from a relatively limited
number of clients. We cannot be certain that the features and functionality that
we currently offer in I-many.com, or those that we may offer in future releases
of our solutions, will satisfy the requirements or preferences of our current or
potential clients.
IT IS DIFFICULT FOR US TO PREDICT WHEN OR IF SALES WILL OCCUR AND THEREFORE WE
MAY EXPERIENCE AN UNPLANNED SHORTFALL IN REVENUES.
Our clients view the purchase of our software applications and related
professional services as a significant and strategic decision. As a result,
clients carefully evaluate our software products and services. The length of
this evaluation process is affected by factors such as the client's need to
rapidly implement a solution and whether the client is new or is extending an
existing implementation. The license of our software products may also be
subject to delays if the client has lengthy internal budgeting, approval and
evaluation processes which are quite common in the context of introducing large
enterprise-wide tools. We may incur significant selling and marketing expenses
during a client's evaluation period, including the costs of developing a full
proposal and completing a rapid proof of concept or custom demonstration, before
the client places an order with us. Clients may also initially purchase a
limited number of licenses before expanding their implementations. Larger
clients may purchase our software products as part of multiple simultaneous
purchasing decisions, which may result in additional unplanned administrative
processing and other delays in the recognition of our license revenues. If
revenues forecasted from a significant client for a particular quarter are not
realized or are delayed, we may experience an unplanned shortfall in revenues,
which could significantly and adversely affect our operating results.
WE MAY HAVE DIFFICULTY MANAGING OUR EXPANDING OPERATIONS.
We have recently experienced a period of rapid growth. This growth has
placed a significant strain on our managerial, operational and financial
resources. Our total revenue increased from $7.5 million in the year ended
December 31, 1997 to $19.4 million in the year ended December 31, 1999, and the
number of our employees increased from 68 as of December 31, 1997 to 167 as of
December 31, 1999.
6
<PAGE>
To accommodate this growth, we must implement new or upgraded operating and
financial systems, procedures and controls. We may not succeed in these efforts.
Our failure to expand and integrate these systems in an efficient manner could
have a material adverse effect on our business, financial condition and results
of operations. If we continue to grow, we will need to recruit, train and retain
a significant number of employees, particularly employees with technical,
marketing and sales backgrounds. Because these individuals are in high demand,
we may not be able to attract the staff we need to accommodate our expansion.
WE ARE HIGHLY DEPENDENT UPON THE HEALTHCARE INDUSTRY AND FACTORS WHICH ADVERSELY
AFFECT THAT MARKET COULD ALSO AFFECT US.
Substantially all of our revenue to date has come from pharmaceutical
companies and a limited number of other clients in the healthcare industry, and
our future growth depends, in large part, upon increased sales to the healthcare
market. As a result, demand for our solutions could be affected by any factors
which could adversely affect the demand for healthcare products which are
purchased and sold pursuant to contracts managed through our solutions. The
financial condition of our clients and their willingness to pay for our
solutions are affected by factors which may impact the purchase and sale of
healthcare products, including competitive pressures, decreasing operating
margins within the industry, currency fluctuations, active geographic expansion
and government regulation.
The healthcare market is undergoing intense consolidation. We cannot assure
you that we will not experience declines in revenue caused by mergers or
consolidations among our clients and potential clients. Any decline in the
demand for our solutions would have a material adverse effect on our business,
operating results and financial condition.
WE CANNOT BE CERTAIN THAT WE WILL BE SUCCESSFUL IN SELLING OUR PRODUCTS AND
SERVICES INTO NEW MARKETS.
As part of our growth strategy, we have begun initiatives to sell our
products and services in markets other than the healthcare market, including the
food and beverage, building products, electronics, agricultural/chemical, retail
and other industries. While we believe that the contractual purchase
relationship between manufacturers and customers in these markets have similar
attributes to those in the healthcare markets, we cannot assure you that our
assumptions are correct or that we will be successful in adapting our technology
to these other markets. In connection with these efforts, it will be necessary
for us to hire additional personnel with expertise in these other markets. We
cannot assure you that we will be successful in attracting and retaining
personnel with the necessary industry expertise to operate in these markets. Our
inability to penetrate these other markets could have a material adverse effect
on our business, operating results and financial condition.
OUR PRODUCTS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND IF WE ARE UNABLE TO
ADAPT TO RAPID CHANGE, OUR BUSINESS WILL SUFFER.
The market for contract management software and related training and
consulting services is subject to rapid technological change, changing client
needs and preferences, frequent new product introductions, and other factors
that may render existing products and services obsolete. Our market position
could be eroded rapidly by product advances by our competitors. The life cycle
of our products is difficult to estimate, and our growth and future performance
will depend in part upon our ability to enhance existing products, and to
develop and introduce new products that keep pace with technological
advancements, meet changing customer requirements, respond to competitive
products and achieve market acceptance. Our product development efforts require
substantial investments by us for research, refinement and testing, and we
cannot assure you that we will have sufficient resources to make such
investments. We cannot assure you that we will not experience difficulties which
would delay or prevent the successful development, introduction or
implementation of new or enhanced products. In addition, we cannot assure you
that such products will meet the requirements of the marketplace
7
<PAGE>
and achieve market acceptance, or that our current or future products will
conform to changing industry requirements. If we are unable for technological or
other reasons to develop, introduce or implement new or enhanced products in a
timely and effective manner, our business, operating results and financial
condition could be materially and adversely affected.
OUR SYSTEMS MAY FAIL OR EXPERIENCE SLOWDOWNS AND WE COULD LOSE KEY DATA USED BY
OUR CLIENTS.
We offer to host our software products on our computers or on computers
hosted on our behalf for access by our clients and we offer to maintain certain
of our clients' critical sales data on our computers or on computers hosted on
our behalf. Fire, floods, earthquakes, power loss, telecommunications failures,
break-ins, human error, computer viruses, intentional acts of vandalism and
similar events could damage these systems and result in loss of customer data or
a loss in the ability of our clients to access the software we are hosting for
their use. Our business, financial condition and results of operations could be
materially and adversely affected if our systems were affected by any of these
occurrences or if any client data were lost. Our insurance policies may not
adequately compensate us for any losses that may occur due to any failures or
interruptions in our systems or loss of data.
THE POLITICAL, ECONOMIC OR REGULATORY HEALTHCARE ENVIRONMENT REGARDING THE
PURCHASING PRACTICES AND OPERATION OF HEALTHCARE ORGANIZATIONS COULD AFFECT THE
DEMAND FOR OUR SOLUTIONS OR OUR BUSINESS MODEL.
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. Factors such as changes in
reimbursement policies for healthcare expenses and general economic conditions
affect the purchasing practices and operations of healthcare organizations.
Changes in regulations or the issuance of interpretations affecting the
healthcare industry, such as any increased regulation of the purchase and sale
of our products, could require us to make unplanned enhancements of our
solutions, or result in delays or cancellations of orders or reduced demand for
our solutions or affect our ability to implement our business strategy. The
federal and state governments have periodically considered and adopted programs
to reform or amend the U.S. healthcare system at both the federal and state
level. These programs have contained provisions which prohibit payments for
arranging for sales of government-reimbursed drugs and provisions to increase
governmental involvement in healthcare, lower reimbursement rates or otherwise
change the environment in which healthcare industry providers operate. The
application of any such initiatives to our solutions or to our clients because
of their use of our solutions would adversely affect our business, the demand
for our solutions and our ability to fully implement our business model.
WE FACE RISKS ASSOCIATED WITH OUR PLANS FOR INTERNATIONAL EXPANSION.
Our business strategy includes the expansion of our international sales and
marketing efforts. To date, we have limited experience in marketing and selling
our solutions internationally.
Our international operations will be subject to risks such as:
- compliance with the laws and regulations of different countries;
- difficulties in enforcing contractual obligations and intellectual
property rights in some countries;
- difficulties and costs of staffing and managing foreign operations; and
- fluctuations in currency exchange rates.
These risks may materially and adversely affect our business, results of
operations and financial condition.
8
<PAGE>
WE MAY NOT BE SUCCESSFUL IN ACQUIRING AND INTEGRATING NEW TECHNOLOGIES OR
BUSINESSES.
We intend in the future to consider acquisitions of or investments in
complementary businesses, products, services or technologies. We cannot assure
you that we will be able to identify appropriate acquisition or investment
candidates. Even if we do identify suitable candidates, we cannot assure you
that we will be able to make such acquisitions or investments on commercially
acceptable terms. In addition, we could have difficulty in assimilating the
acquired products, services or technologies into our operations. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and adversely affect our results of operations.
Furthermore, we may incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities could be dilutive to our
existing stockholders.
OUR FIXED COSTS MAY LEAD TO FLUCTUATIONS IN OPERATING RESULTS IF OUR REVENUES
ARE BELOW EXPECTATIONS.
A significant percentage of our expenses, particularly personnel costs and
rent, are fixed costs and are based in part on expectations of future revenues.
We may be unable to reduce spending in a timely manner to compensate for any
significant fluctuations in revenues. Accordingly, shortfalls in revenues may
cause significant variations in operating results in any quarter. Factors that
could cause these fluctuations include:
- the timing of orders and the length of the sales cycles for our products;
- the timing and market acceptance of new products or product enhancements
by us and our competitors;
- the timing of product implementations, which are highly dependent on
clients' resources and discretion; and
- economic conditions which may affect our clients' and potential clients'
budgets for technological expenditures.
The timing, size and nature of individual license transactions are important
factors in our quarterly operating results. Many such license transactions
involve large dollar commitments by clients, and the sales cycles for these
transactions are often lengthy and unpredictable. Furthermore, we have often
recognized a substantial portion of our revenues in the last month of the
quarter and often in the last week of that month. As a result, license fees in
any quarter have been substantially dependent on orders booked and shipped in
the last month or last week of that quarter. Accordingly, delays in the closing
of sales near the end of a quarter could cause quarterly revenues to decline,
and increase our net loss substantially in excess of anticipated levels. We
cannot assure you that we will be successful in closing large license
transactions within the fiscal quarter in which they are budgeted, if at all.
Because of these factors, we believe that period-to-period comparisons of
our results of operations are not necessarily meaningful. In addition, it is
possible that in some future quarters our results of operations will be below
the expectations of public market analysts and investors, in which case the
price of our common stock could be materially adversely affected.
WE HAVE MANY COMPETITORS AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The market for contract management software and services and related
consulting and training services is competitive and subject to rapid change. We
encounter significant competition from the internal information systems
departments of existing and potential clients, software companies that target
the contract management markets, professional services organizations and
Internet-based merchants offering healthcare products through online catalogs.
Our competitors vary in size and in the scope and breadth of products and
services offered. We anticipate increased competition for market
9
<PAGE>
share and pressure to reduce prices and make sales concessions, which could
materially and adversely affect our business, operating results and financial
condition.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. Such competitors may also engage in more extensive
research and development, undertake more far-reaching marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to existing and
potential employees and strategic partners. We cannot assure you that our
competitors will not develop products or services that are equal or superior to
our solutions or that achieve greater market acceptance than our solutions. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties. We cannot
assure you that we will be able to compete successfully or that competitive
pressures will not materially and adversely affect our business, financial
condition and results of operations.
WE MAY NEED ADDITIONAL FINANCING WHICH COULD BE DIFFICULT TO OBTAIN.
We may require significant external financing in the future. Obtaining
additional financing will be subject to a number of factors, including:
- market conditions;
- our operating performance; and
- investor demand, particularly for Internet-related companies.
These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us. If we are unable to raise capital to
fund our growth, our business, financial condition and results of operations
would be materially and adversely affected.
OUR BUSINESS MAY SUFFER IF WE CANNOT PROTECT OUR INTELLECTUAL PROPERTY.
We rely on a combination of trade secrets, copyright and trademark laws,
nondisclosure agreements and other contractual provisions and technical measures
to protect our proprietary rights in our products and technology. We presently
do not have, and we have not applied for, any patents on our products. The
source code for our proprietary software is protected both as a trade secret and
as a copyrighted work. We believe, however, that the foregoing measures afford
only limited protection, and we cannot assure you that such measures will be
adequate or that our trade secrets will not otherwise become known to or
independently developed by competitors. Litigation to defend and enforce our
intellectual property rights could result in substantial costs and diversion of
resources and could have a material adverse effect on our business, financial
condition or results of operations, regardless of the final outcome of such
litigation.
OUR BUSINESS MAY SUFFER IF WE ARE ALLEGED TO INFRINGE THE PATENTS OR PROPRIETARY
RIGHTS OF THIRD PARTIES.
We are not aware that any of our products infringe proprietary rights or
patents owned by third parties. We cannot assure you, however, that third
parties will not claim that our current or future products infringe their patent
or proprietary rights. Defending any such claims, with or without merit, could
be time-consuming and result in costly litigation. An adverse judgment may cause
us to delay or cease altogether the shipment of products, and require us to pay
money damages or enter into royalty or licensing agreements which may not be
available on terms acceptable or favorable to us, if at all. If any of the
foregoing occurs, it could have a material adverse effect on our business,
financial condition or results of operations.
10
<PAGE>
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO RETAIN KEY PERSONNEL.
We depend on the services of our senior management and key technical
personnel. In particular, our success depends on the continued efforts of A.
Leigh Powell, our Chief Executive Officer, and other key employees. The loss of
the services of any key employee could have a material adverse effect on our
business, financial condition and results of operations.
REGULATION OR TAXATION OF THE INTERNET OR TRANSACTING BUSINESS OVER THE INTERNET
MAY INHIBIT THE GROWTH OF OUR INTERNET-BASED PURCHASING SOLUTION.
Due to the increasing popularity and use of the Internet and of e-commerce,
it is possible that a number of taxes, laws and regulations may be adopted in
the U.S. and abroad with particular applicability to the Internet and e-commerce
transactions. It is possible that governments will adopt taxes and enact
legislation that may be applicable to us in areas such as content, product
distribution, network security, encryption and the use of key escrow, data and
privacy protection, electronic authentication or "digital" signatures, illegal
and harmful content, access charges and re-transmission activities. Moreover,
the applicability to the Internet of existing laws governing issues such as
property ownership, content, taxation, defamation and personal privacy is
uncertain. Taxes, laws or regulations may limit the growth of the Internet,
discourage e-commerce, reduce the number of transactions made over the Internet,
increase our cost of doing business or increase our legal exposure. Any of these
factors could have a negative effect on our business, revenues, results of
operations and financial condition.
GOVERNMENT REGULATION OF THE INTERNET OR HEALTHCARE E-COMMERCE COULD HARM OUR
BUSINESS.
Our services may be subject to extensive and frequently changing regulation
at federal, state and local levels. The Internet and its associated technologies
are also subject to government regulation. Many existing laws and regulations do
not specifically address the Internet or buying and selling healthcare products
through the type of e-commerce applications we are developing. We believe,
however, that some of these laws and regulations may nonetheless be applied to
our business. In addition, numerous jurisdictions have laws and regulations that
may affect the services we offer. Our business may be affected by current
regulations as well as future regulations specifically targeting the healthcare
supply industry or the nature of our services.
We intend to conduct our business in compliance with the federal, state and
local laws and regulations. However, the impact of regulatory developments in
the healthcare industry is complex and difficult to predict, and we cannot
assure you that our business will not be harmed by existing or new regulatory
requirements or interpretations. It is also possible that those requirements or
interpretations could limit the effectiveness of the use of the Internet for the
methods of e-commerce we are developing. Application of any regulations or
requirements to our business could adversely affect us.
CONCENTRATION OF OWNERSHIP MAY GIVE SOME STOCKHOLDERS SUBSTANTIAL INFLUENCE AND
MAY PREVENT OR DELAY A CHANGE IN CONTROL.
After the offering, executive officers, directors and their affiliates will,
in the aggregate, own approximately of our outstanding common stock. As a
result, these stockholders will be able to influence significantly all matters
requiring approval by our stockholders, including the election of directors and
the approval of significant corporate transactions. This concentration of
ownership may also delay, deter or prevent a change in control of our company
and may make some transactions more difficult or even impossible without the
support of these stockholders.
11
<PAGE>
CERTAIN PROVISIONS OF OUR CHARTER AND BYLAWS COULD DISCOURAGE ACQUISITION
PROPOSALS, DELAY A CHANGE IN CONTROL OR PREVENT TRANSACTIONS THAT ARE IN YOUR
BEST INTERESTS.
Our certificate of incorporation and bylaws state that any action that can
be taken by stockholders must be done at an annual or special meeting and may
not be done by written consent, and require reasonable advance notice of a
stockholder proposal or director nomination. Furthermore, the chairman of the
board, the president or the board of directors are the only people who may call
a special meeting. The amended and restated certificate of incorporation and
amended and restated bylaws also provide for a classified board of directors,
and provide that members of the board of directors may only be removed by the
vote of the holders of at least 75% of the shares entitled to vote for that
director. In addition, the board of directors has the authority, without further
action by the stockholders, to fix the rights and preferences of and issue
5,000,000 shares of preferred stock. These provisions may have the effect of
deterring hostile takeovers or delaying or preventing changes in control of
management, including transactions in which you might otherwise receive a
premium for your shares. In addition, these provisions may limit your ability to
approve other transactions that you find to be in your best interests. See
"Description of Capital Stock--Preferred Stock" and "--Delaware Anti-Takeover
Law and Certain Charter and Bylaw Provisions."
WE WILL HAVE DISCRETION AS TO THE USE OF THE PROCEEDS OF THIS OFFERING AND MAY
APPLY THEM IN A WAY WITH WHICH INVESTORS DISAGREE.
We currently have no specific uses planned for the net proceeds of the
offering. As a result, our management will have broad discretion in applying the
net proceeds of the offering which could include uses with which stockholders
may disagree. The failure of management to apply such funds effectively could
have a material adverse effect on our business, financial condition and results
of operations. See "Use of Proceeds."
OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
Following this offering, an active trading market may not develop or be
sustained for our common stock. The underwriters and we will determine the
initial public offering price of our common stock based on negotiations
concerning the valuation of our common stock. The public market may not agree
with, or accept this valuation. After the offering, therefore, you may not be
able to resell your shares at or above the initial public offering price. The
price at which our common stock will trade after this offering is likely to be
highly volatile and may fluctuate substantially due to a number of factors,
including:
- actual or anticipated fluctuations in our results of operations;
- changes in or our failure to meet securities analysts' expectations;
- technological innovations;
- increased competition;
- conditions and trends in the technology and healthcare industries; and
- general market conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies. These broad market fluctuations may result
in a material decline in the market price of our common stock, regardless of our
operating performance. In the past, following periods of volatility in the
market price of a particular company's securities, securities class action
litigation has often been brought against that company. We may become involved
in this type of litigation in the future. Litigation is often expensive
12
<PAGE>
and diverts management's attention and our resources, which could have a
material adverse effect upon our business, financial condition and results of
operations.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE.
The availability of a large number of shares for sale could result in the
need for sellers to accept a lower price in order to complete a sale. This would
result in a lower market price of our common stock. After this offering, there
will be outstanding shares of our common stock, or shares if
the underwriters' over-allotment option is exercised in full. Of these shares,
the shares sold in this offering will be freely tradable except for any
shares purchased by our "affiliates" as defined in Rule 144 under the Securities
Act. Of the remaining shares of common stock held by existing
stockholders, are subject to 180-day lock-up agreements and are
eligible for sale only if registered or if they qualify for an exemption from
registration under Rules 144 or 701 under the Securities Act. Subject to the
provisions of Rules 144 and 701, at least shares will be available for
sale in the public market 180 days after the date of this prospectus, subject in
the case of shares held by affiliates to compliance with applicable volume
restrictions.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price per share will significantly exceed the
net tangible book value per share. If we were to liquidate immediately after the
offering, investors purchasing shares in this offering would receive a per share
amount of tangible assets net of liabilities that would be less than the initial
public offering price per share. Investors purchasing shares in this offering
will suffer dilution of $ per share from their investment.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing forward-looking statements may be found in
the information set forth under "Risk Factors," "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as
well as in the prospectus generally. We use words such as "believes," "intends,"
"expects," "anticipates," "plans," "estimates," "should," "may," "will,"
"scheduled" and similar expressions to identify forward-looking statements. We
have used these words to describe our present belief about future events
relating to, among other things, our changing business model, our expected
marketing plans, future hiring, expenditures, and sources of revenue. This
prospectus also contains third party estimates regarding the size and growth of
our market. You should not rely on these forward-looking statements, which apply
only as of the date of this prospectus. Our actual results could differ
materially from those anticipated in the forward-looking statements for many
reasons, including the risks described above and elsewhere in this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results or to changes in our expectations.
13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from sale of the common stock will be
$ million, after deducting the underwriting discount and estimated offering
expenses. If the underwriters' over-allotment option is exercised in full, we
estimate that the net proceeds will be $ million.
We intend to use a portion of the net proceeds from this offering for
general corporate purposes, including working capital and capital expenditures.
We also may use a portion of the net proceeds to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. We currently have no specific understanding, commitment or
agreement with any party with respect to any potential such acquisition or
investment. Pending these uses, the net proceeds of this offering will be
invested in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Payment of future cash dividends, if any, will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs and plans for expansion and any credit facilities or other agreements
which may restrict the payment of dividends.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis, after giving effect to the -for- common
stock split and after the filing of amended and restated articles of
incorporation to authorize 5,000,000 shares of undesignated preferred
stock;
- on a pro forma basis to reflect the conversion of all of our convertible
preferred stock into 3,667,875 shares of common stock; and
- on a pro forma as adjusted basis to reflect the conversion of all of our
convertible preferred stock into common stock and the application of the
net proceeds from this offering, after deducting the underwriting
discounts and offering expenses. See "Use of Proceeds."
The capitalization information set forth in the table below is qualified by
the more detailed financial statements and notes thereto included elsewhere in
this prospectus and should be read in conjunction with such financial statements
and notes. The pro forma and pro forma as adjusted information presented below
is unaudited.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------- -------------- ----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents............................... $15,322 $15,322 $
======= ======= =========
Debt, including current portion......................... 41 41 $
Series C redeemable convertible preferred stock......... 12,492 --
Stockholders' equity:
Series A convertible preferred stock, par value $0.01;
2,100,000 shares authorized; 2,023,550 shares issued
and outstanding (actual); no shares issued and
outstanding (pro forma and pro forma as adjusted)..... 20 --
Series B convertible preferred stock, par value $0.01;
400,000 shares authorized, issued and outstanding
(actual); no shares issued and outstanding (pro forma
and pro forma as adjusted)............................ 4 --
Preferred stock, par value $0.01; 5,000,000 shares
authorized; no shares issued and outstanding (actual,
pro forma and pro forma as adjusted).................. -- --
Common stock, par value $0.0001; 12,000,000 shares
authorized; 4,913,554 shares issued and outstanding
(actual); 8,581,429 shares issued and outstanding (pro
forma); shares issued and outstanding (pro forma as
adjusted)(1).......................................... -- 1
Additional paid-in capital.............................. 9,830 22,345
Deferred stock-based compensation....................... (235) (235)
Accumulated deficit..................................... (9,422) (9,422)
------- -------
Total stockholders' equity............................ 197 12,689
------- ------- ---------
Total capitalization.............................. $12,730 $12,730 $
======= ======= =========
</TABLE>
- --------------------------
(1) Assumes no exercise of the underwriters' over-allotment option and excludes
(a) 2,222,345 shares of common stock issuable upon the exercise of stock
options outstanding at December 31, 1999, and (b) 976,556 shares reserved
for issuance under our stock incentive plans at December 31, 1999. New
investors will be further diluted if any shares of common stock are issued
upon exercise of currently outstanding options or other rights are granted
in the future are reserved for future issuance under our stock plans. See
"Management--Benefit Plans" and Note 5 to our financial statements.
15
<PAGE>
DILUTION
As of December 31, 1999, our pro forma net tangible book value was
approximately $10.7 million, or $1.25 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible assets
less total liabilities, divided by the 8,581,429 shares of common stock
outstanding after giving effect to the conversion of our convertible preferred
stock into 3,667,875 shares of common stock.
After giving effect to the receipt of the proceeds from the sale of
shares of our common stock in this offering and after deducting the
estimated underwriting discount and offering expenses, our pro forma net
tangible book value as of December 31, 1999 would have been approximately
$ million. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value, per share, as of
December 31, 1999....................................... $
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after this
offering..................................................
Dilution per share to new investors......................... $
=======
</TABLE>
The following table summarizes as of December 31, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total cash consideration paid to us and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
the offering, before deducting the underwriting discount and estimated offering
expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 8,581,429 % $22,359,713 % $
New investors........................... $
---------- ----- ----------- -----
Total................................. 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
16
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below are as of and for each of the
years in the five-year period ended December 31, 1999, and are derived from our
financial statements. The financial statements as of and for each of the years
in the three-year period ended December 31, 1999, are included elsewhere in this
prospectus and have been audited by Arthur Andersen LLP, independent public
accountants. The financial statements as of and for the years ended
December 31, 1995 and 1996 are unaudited, but have been prepared on
substantially the same basis as the audited financial statements and include, in
the opinion of our management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the information set
forth therein. Historical results are not necessarily indicative of future
results. The following selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes to those statements and other
financial information included elsewhere in this prospectus.
Pro forma net loss per share is computed using the weighted average number
of shares of common stock outstanding, adjusted to include the pro forma effects
of the conversion of convertible preferred stock to common stock as if such
conversion had occurred on the original date of issuance.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Product................................................... $ 321 $2,101 $5,043 $8,526 $ 9,228
Service................................................... 886 1,252 2,471 5,016 10,183
------- ------ ------ ------ -------
Total net revenues...................................... 1,207 3,353 7,514 13,542 19,411
Cost of revenues............................................ 910 1,040 2,249 2,062 5,354
------- ------ ------ ------ -------
Gross profit............................................ 297 2,313 5,265 11,480 14,057
Operating expenses:
Sales and marketing..................................... 268 448 1,223 3,676 6,613
Research and development................................ 1,039 1,325 1,523 2,339 8,222
General and administrative.............................. 576 479 1,302 3,379 3,556
Depreciation and amortization........................... 77 85 161 366 751
------- ------ ------ ------ -------
Total operating expenses.............................. 1,960 2,337 4,209 9,760 19,142
------- ------ ------ ------ -------
Income (loss) from operations............................... (1,663) (24) 1,056 1,720 (5,085)
Other income (expense), net................................. (581) (428) (733) (129) 147
Provision for (benefit from) income taxes................... -- -- -- (320) 281
------- ------ ------ ------ -------
Net income (loss)....................................... $(2,244) $ (452) $ 323 $1,911 $(5,219)
======= ====== ====== ====== =======
Net income (loss) per share:
Basic................................................... $ (0.53) $(0.11) $ 0.08 $ 0.47 $ (1.14)
======= ====== ====== ====== =======
Diluted................................................. $ (0.53) $(0.11) $ 0.08 $ 0.27 $ (1.14)
======= ====== ====== ====== =======
Weighted average shares outstanding:
Basic................................................... 4,200 4,200 3,914 4,077 4,573
======= ====== ====== ====== =======
Diluted................................................. 4,200 4,200 5,369 7,327 4,573
Pro forma basic and diluted net loss per share.............. $ (0.75)
=======
Pro forma basic and diluted weighted average shares
outstanding............................................... 7,000
=======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 290 $ 282 $ 1,872 $ 5,129 $ 15,322
------- ------- ------- -------- --------
Working capital (deficit)................................... (4,216) (2,499) (736) 4,518 8,850
------- ------- ------- -------- --------
Total assets................................................ 809 2,281 4,705 11,609 27,482
------- ------- ------- -------- --------
Debt, including current portion............................. 2,358 2,379 5,869 75 41
------- ------- ------- -------- --------
Redeemable convertible preferred stock...................... -- -- -- -- 12,492
------- ------- ------- -------- --------
Total stockholders' equity (deficit)........................ (4,340) (4,791) (6,335) 5,331 197
------- ------- ------- -------- --------
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. IN ADDITION TO HISTORICAL INFORMATION,
THE FOLLOWING DISCUSSION AND OTHER PARTS OF THIS PROSPECTUS CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY SUCH FORWARD-LOOKING
INFORMATION DUE TO VARIOUS FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We provide Internet-based solutions and related professional services that
allow our clients to negotiate and manage complex purchasing arrangements and
facilitate business-to-business e-commerce in the healthcare and other
industries. In February 2000, we launched our proprietary Internet portal,
I-many.com, which we expect will serve as a marketplace for trading partners in
the healthcare industry. Our historical financial statements do not include any
revenues from I-many.com. Prior to the introduction of our Internet portal, our
business model was focused principally upon licensing software products and
providing related services to entities which maintain and manage the data
necessary for contract management within their own information systems. Our
Contract Administration and Reporting System, or CARS, software suite is used by
8 of the largest 10 and 15 of the largest 20 pharmaceutical manufacturers ranked
according to annual revenues.
We have generated revenues from both products and services. Historically,
product revenues have been principally comprised of software license fees
generated from our CARS software suite, which accounted for 47.5% of net
revenues in 1999. Service revenues include maintenance and support fees directly
related to our CARS software suite and professional service fees derived from
consulting, installation, business analysis and training services related to our
software products. Service revenues accounted for 52.5% of net revenues in 1999.
In 1999, one customer accounted for approximately 10.5% of our net revenues.
Historically, software license agreements have been for a three-year period.
We recognize software license fees upon execution of a signed license agreement
and delivery of the software, provided that there are no significant
post-delivery obligations, the payment is fixed or determinable and collection
is probable. We provide an allowance for sales returns at the time of revenue
recognition based on historical experience. To date, such returns have not been
significant.
We recognize revenue for professional services as the services are performed
for time and materials contracts and we use the percentage-of-completion method
for fixed fee contracts. However, if customer acceptance is required, we
recognize revenue for professional services upon client acceptance. We recognize
training revenues as the services are provided. We recognize maintenance and
client support fees ratably over the term of the maintenance contract on a
straight-line basis. When maintenance and support is included in the total
license fee, we allocate a portion of the total fee to maintenance and support
based upon the price paid by the client to purchase maintenance and support in
the second year.
In the latter part of 1999, we started offering our clients an enterprise
agreement that includes the software license, maintenance and support and a
fixed number of days of professional services. Clients opting for this
enterprise agreement will enter into a three-year, fixed-fee, all-inclusive
agreement payable in three equal annual installments commencing upon the
execution of the agreement. Due to the extended payment terms, we recognize the
software license component and the maintenance and support component ratably
over the term of the enterprise agreement and recognize the professional service
component as the related services are performed, provided that the aggregate
revenue recognized under the enterprise agreement does not exceed the total cash
received. During the year
18
<PAGE>
ended December 31, 1999, we entered into two enterprise agreements totaling
$2.9 million. Of that amount, we recognized $200,000 in net revenues, resulting
in deferred revenue related to these enterprise agreements of $2.7 million at
December 31, 1999. We expect that enterprise agreements will represent a more
significant component of our total revenues in the future.
Our business model for our Internet portal operations contemplates that we
will generate future revenues in a number of different ways, including the
following:
- subscription fees paid by manufacturers, GPOs and distributors for access
to our software and the contract data which will be hosted on our servers;
and
- fees paid by manufacturers and distributors for the opportunity to place
advertising or other promotional information on our website, which we
believe will be repeatedly and frequently accessed by contract
administrators, purchasing managers and other persons responsible for
healthcare purchase decisions.
We cannot assure you that we will be successful in generating revenues using
this business model.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data for the periods
expressed as a percentage of total net revenues for each period indicated. The
historical results are not necessarily indicative of the results to be expected
for any future period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product............................................... 26.6% 62.7% 67.1% 63.0% 47.5%
Service............................................... 73.4 37.3 32.9 37.0 52.5
------ ----- ----- ----- -----
Total net revenues.................................. 100.0 100.0 100.0 100.0 100.0
Cost of revenues........................................ 75.4 31.0 29.9 15.2 27.6
------ ----- ----- ----- -----
Gross profit........................................ 24.6 69.0 70.1 84.8 72.4
Operating expenses:
Sales and marketing................................... 22.2 13.4 16.3 27.1 34.1
Research and development.............................. 86.1 39.5 20.3 17.3 42.4
General and administrative............................ 47.7 14.3 17.3 25.0 18.3
Depreciation and amortization......................... 6.4 2.5 2.1 2.7 3.9
------ ----- ----- ----- -----
Total operating expenses............................ 162.4 69.7 56.0 72.1 98.7
------ ----- ----- ----- -----
Income (loss) from operations....................... (137.8) (0.7) 14.1 12.7 (26.3)
Other income (expense):
Interest income (expense), net........................ (45.9) (12.4) (8.9) (0.6) 0.9
Other expense, net.................................... (2.2) (0.3) (0.9) (0.3) (0.1)
------ ----- ----- ----- -----
Total other income (expense)........................ (48.1) (12.7) (9.8) (0.9) 0.8
------ ----- ----- ----- -----
Income (loss) before income taxes................... (185.9) (13.4) 4.3 11.8 (25.5)
Provision for (benefit from) income taxes............... 0.0 0.0 0.0 (2.4) 1.4
------ ----- ----- ----- -----
Net income (loss)................................... (185.9)% (13.4)% 4.3% 14.2% (26.9)%
====== ===== ===== ===== =====
</TABLE>
19
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
NET REVENUES. Net revenues increased by $5.9 million, or 43.3%, to
$19.4 million for the year ended December 31, 1999 from $13.5 million for the
year ended December 31, 1998. This increase in total net revenues is principally
a result of the increase in service revenues, including consulting services
performed during the year.
Product revenues increased by $700,000, or 8.2%, to $9.2 million for the
year ended December 31, 1999 from $8.5 million for the year ended December 31,
1998. This increase is attributable to an increase in the number of software
licenses sold. As a percentage of total net revenues, product revenues decreased
to 47.5% for the year ended December 31, 1999 from 63.0% for the year ended
December 31, 1998. This decrease in product revenues as a percentage of total
revenues is mainly attributable to the expansion of our professional services
business.
Service revenues increased by $5.2 million, or 103.0%, to $10.2 million for
the year ended December 31, 1999 from $5.0 million for the year ended
December 31, 1998. As a percentage of total revenues, service revenues increased
to 52.5% for the year ended December 31, 1999 from 37.0% for the year ended
December 31, 1998. This increase in service revenues both in dollars and as a
percentage of total revenues is attributable to an increase in the number of
employees in our professional services group in response to the growing demand
on the part of our clients for more services related to the implementation of
our CARS software suite. Prior to 1999, most of our clients who purchased our
CARS software solutions relied on third party integrators. We expect that
service revenues, and revenues from consulting services in particular, are
likely to increase both in dollars and as a percentage of total revenues for the
foreseeable future.
COST OF REVENUES. Cost of revenues consists primarily of payroll and
related costs and subcontract costs related to providing professional services
and maintenance and support services. Historically, cost of product revenues has
not been a significant component of total cost of revenues. Cost of revenues
increased by $3.3 million, or 159.7%, to $5.4 million for the year ended
December 31, 1999 from $2.1 million for the year ended December 31, 1998. This
increase is due to the increased number of employees in our professional
services group, as well as increased costs related to subcontract consultants
working on our professional service engagements. As a percentage of total net
revenues, cost of revenues increased to 27.6% for the year ended December 31,
1999 from 15.2% for the year ended December 31, 1998. This increase in cost of
revenues as a percentage of total net revenues is attributable to the increased
level of service revenues, which typically generate lower margins than product
revenues, and an increase in the personnel within our professional services
organization.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
payroll and related benefits for sales and marketing personnel, commissions for
sales personnel, travel-related costs and recruiting fees. Sales and marketing
expenses increased by $2.9 million, or 79.9%, to $6.6 million for the year ended
December 31, 1999 from $3.7 million for the year ended December 31, 1998. As a
percentage of total net revenues, sales and marketing expenses increased to
34.1% for the year ended December 31, 1999 from 27.1% for the year ended
December 31, 1998. This increase in sales and marketing expense both in dollars
and as a percentage of total net revenues is primarily a result of our efforts
to build our internal sales force in anticipation of the I-many.com site launch
and in support of our CARS software suite. The increase in sales and marketing
expenses is also attributable to an increase in commissions expense as a result
of the increase in total net revenues.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of payroll and related costs for development personnel and external
consulting costs associated with the development of our products and services.
Research and development costs, including the costs of developing computer
software, are charged to operations as they are incurred. Software development
costs incurred to build I-many.com, our proprietary Internet portal, are
accounted for in accordance with
20
<PAGE>
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," under which costs incurred during the
preliminary project stage are expensed as incurred and costs incurred during the
application development stage are capitalized.
Research and development expenses increased by $5.9 million, or 251.5%, to
$8.2 million for the year ended December 31, 1999 from $2.3 million for the year
ended December 31, 1998. As a percentage of total net revenues, research and
development expenses increased to 42.4% for the year ended December 31, 1999
from 17.3% for the year ended December 31, 1998. This increase in both dollars
and as a percentage of total net revenues is primarily due to an increase in
research and development personnel and external consulting costs incurred to
build I-many.com and new software products within the CARS software suite.
During the year ended December 31, 1999, we incurred approximately $3.0 million
of software development costs related to building I-many.com, of which
approximately $2.0 million was capitalized and the remainder was charged to
research and development expense. We expect to incur significant additional
expenses related to the further development of I-many.com.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of payroll and related benefits for personnel in our administrative,
finance and human resources departments. General and administrative expenses
also include legal and accounting professional service fees. General and
administrative expenses increased by $200,000, or 5.2%, to $3.6 million for the
year ended December 31, 1999 from $3.4 million for the year ended December 31,
1998. As a percentage of total net revenues, general and administrative expenses
decreased to 18.3% for the year ended December 31, 1999 from 25.0% for the year
ended December 31, 1998. The increase in general and administrative expenses in
dollars is primarily related to increased costs associated with legal and
accounting professional fees and additional administrative personnel to support
our increased sales, marketing and development activities. We expect general and
administrative costs to increase in absolute dollars as we continue to expand
our infrastructure and incur costs as a public company.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $400,000, or 105.2%, to $800,000 for the year ended December 31,
1999 from $400,000 for the year ended December 31, 1998. This increase is a
result of significant additions of computer hardware and computer software
related to our increased personnel.
OTHER INCOME (EXPENSE), NET. Other income (expense), net increased by
$276,000, or 214.0% to other income, net of $147,000 for the year ended
December 31, 1999 from an expense of $129,000 for the year ended December 31,
1998. This increase is primarily the result of interest earned in 1999 on higher
average cash balances combined with a decrease in interest expense as a result
of reduced borrowings in 1999.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. During the year ended
December 31, 1999, we recorded a provision for income taxes of $300,000,
compared to a benefit from income taxes of $300,000 for the year ended
December 31, 1998. Upon our inception, we elected to be treated as an S
corporation for income tax purposes. Since income taxes related to the income of
S corporations are the responsibility of the individual stockholders, no
provision for income taxes was recorded for the period during which we were an S
corporation. On April 2, 1998, we re-incorporated as a Subchapter C corporation
and our S corporation status was terminated. On that date, we recorded a
deferred tax asset, and a corresponding tax benefit, for certain future tax
deductions for which it was deemed more likely than not that the asset would be
realized due to actual and expected future taxable income. Due to the incurrence
of a net loss in 1999, the deferred tax asset was deemed to not be recoverable
and, therefore, was expensed, resulting in a provision for income taxes.
21
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
NET REVENUES. Net revenues increased by $6.0 million, or 80.2%, to
$13.5 million for the year ended December 31, 1998 from $7.5 million for the
year ended December 31, 1997. This increase in net revenues is a result of an
increase in both product and service revenues related to our CARS software
suite.
Product revenues increased by $3.5 million, or 69.1%, to $8.5 million for
the year ended December 31, 1998 from $5.0 million for the year ended
December 31, 1997. This increase is attributable to an increase in the number of
software licenses sold from 16 in the year ended December 31, 1997 to 33 in the
year ended December 31, 1998. In 1998, we introduced several new modules and
enhancements to the CARS software suite. As a percentage of total net revenues,
product revenues decreased to 63.0% for the year ended December 31, 1998 from
67.1% for the year ended December 31, 1997.
Service revenues increased by $2.5 million, or 103.0%, to $5.0 million for
the year ended December 31, 1998 from $2.5 million for the year ended
December 31, 1997. As a percentage of total net revenues, service revenues
increased to 37.0% for the year ended December 31, 1998 from 32.9% for the year
ended December 31, 1997. This increase in service revenues both in dollars and
as a percentage of total net revenues is attributable to the increase in
software licenses for which maintenance and support fees are being earned, and
to an overall increase in professional services, including implementation and
training.
COST OF REVENUES. Cost of revenues decreased by $200,000, or 8.3%, to
$2.1 million for the year ended December 31, 1998 from $2.3 million for the year
ended December 31, 1997. As a percentage of total net revenues, cost of revenues
decreased to 15.2% for the year ended December 31, 1998 from 29.9% for the year
ended December 31, 1997. This decrease in cost of revenues is attributable to
greater efficiencies in our customer support group.
SALES AND MARKETING. Sales and marketing expenses increased by
$2.5 million, or 200.6%, to $3.7 million for the year ended December 31, 1998
from $1.2 million for the year ended December 31, 1997. As a percentage of total
net revenues, sales and marketing expenses increased to 27.1% for the year ended
December 31, 1998 from 16.3% for the year ended December 31, 1997. This increase
in sales and marketing expense both in dollars and as a percentage of total
revenues is primarily a result of an increase in sales and marketing personnel
and increased sales commissions as a result of the increase in total revenues.
RESEARCH AND DEVELOPMENT. Research and development expenses increased by
$800,000, or 53.6%, to $2.3 million for the year ended December 31, 1998 from
$1.5 million for the year ended December 31, 1997. This increase is primarily
due to an increase in research and development personnel and associated
recruiting and training costs incurred to develop new software products within
the CARS software suite. As a percentage of total net revenues, research and
development expenses decreased to 17.3% for the year ended December 31, 1998
from 20.3% for the year ended December 31, 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by $2.1 million, or 159.5%, to $3.4 million for the year ended December 31, 1998
from $1.3 million for the year ended December 31, 1997. As a percentage of total
net revenues, general and administrative expenses increased to 25.0% for the
year ended December 31, 1998 from 17.3% for the year ended December 31, 1997.
The increase in general and administrative expenses both in dollars and as a
percentage of total net revenues is primarily related to the addition of
administrative, finance and human resources to support our increased sales,
marketing and development activities, recruiting fees and also to increased
costs associated with legal and accounting professional fees.
22
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $200,000, or 127.3%, to $400,000 for the year ended December 31,
1998 from $200,000 for the year ended December 31, 1997. This increase is a
result of additions of computer hardware and computer software related to our
increased personnel.
OTHER EXPENSE, NET. Other expense, net decreased by $600,000 to $100,000
for the year ended December 31, 1998 from $700,000 for the year ended
December 31, 1997. This decrease is primarily the result of the conversion of
notes payable to common and preferred stock which resulted in a decrease in
interest expense of $500,000 combined with an increase in interest income from
higher cash balances in 1998.
BENEFIT FROM INCOME TAXES. During the year ended December 31, 1998, we
recorded a benefit from income taxes of $300,000, compared to no provision or
benefit for the year ended December 31, 1997. Upon our inception, we elected to
be treated as an S corporation for income tax purposes. Since income taxes
related to the income of S corporations are the responsibility of the individual
stockholders, no provision for income taxes was recorded for the period during
which we were an S corporation. On April 2, 1998, we became a subchapter C
corporation and our S corporation status was terminated. On that date, we
recorded a deferred tax asset, and a corresponding tax benefit, for certain
future tax deductions for which it was deemed more likely than not that the
asset would be realized due to actual and expected future taxable income.
23
<PAGE>
QUARTERLY OPERATING RESULTS
The following tables present our unaudited statement of operations data for
each of the eight quarters in the period ended December 31, 1999 and such
operating results expressed as a percentage of total revenues. The information
for each of these quarters is unaudited, but has been prepared on the same basis
as the audited financial statements appearing elsewhere in this prospectus. In
our opinion, all necessary adjustments, consisting only of normal recurring
adjustments, have been made to present fairly the unaudited quarterly results
when read in conjunction with our audited financial statements and the notes
thereto appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of the results of operations that may be expected for any
future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product........................... $1,959 $ 592 $1,811 $4,164 $2,306 $1,761 $ 2,743 $ 2,418
Service........................... 1,031 1,089 1,619 1,277 2,010 2,678 2,528 2,967
------ ------ ------ ------ ------ ------ ------- -------
Total net revenues.............. 2,990 1,681 3,430 5,441 4,316 4,439 5,271 5,385
Cost of revenues.................... 330 393 489 850 817 1,105 1,566 1,866
------ ------ ------ ------ ------ ------ ------- -------
Gross profit.................... 2,660 1,288 2,941 4,591 3,499 3,334 3,705 3,519
Operating expenses:
Sales and marketing............... 991 1,009 746 930 1,278 1,360 1,818 2,157
Research and development.......... 349 321 664 1,005 1,249 1,681 2,206 3,086
General and administrative........ 732 766 771 1,110 918 827 827 984
Depreciation and amortization..... 74 88 95 109 146 177 200 228
------ ------ ------ ------ ------ ------ ------- -------
Total operating expenses........ 2,146 2,184 2,276 3,154 3,591 4,045 5,051 6,455
------ ------ ------ ------ ------ ------ ------- -------
Income (loss) from operations... 514 (896) 665 1,437 (92) (711) (1,346) (2,936)
Other income (expense), net......... (343) 194 12 8 34 35 30 48
Provision for (benefit from)
taxes............................. 0 (320) 0 0 0 281 0 0
------ ------ ------ ------ ------ ------ ------- -------
Net income (loss)................. $ 171 $ (382) $ 677 $1,445 $ (58) $ (957) $(1,316) $(2,888)
====== ====== ====== ====== ====== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
(AS A PERCENTAGE OF TOTAL NET REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product........................... 65.5% 35.2% 52.8% 76.5% 53.4% 39.7% 52.0% 44.9%
Service........................... 34.5 64.8 47.2 23.5 46.6 60.3 48.0 55.1
----- ----- ----- ----- ----- ----- ----- -----
Total net revenues.............. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues.................... 11.0 23.4 14.3 15.6 18.9 24.9 29.7 34.7
----- ----- ----- ----- ----- ----- ----- -----
Gross profit.................... 89.0 76.6 85.7 84.4 81.1 75.1 70.3 65.3
Operating expenses:
Sales and marketing............... 33.1 60.0 21.7 17.1 29.6 30.6 34.5 40.1
Research and development.......... 11.7 19.1 19.4 18.5 28.9 37.9 41.9 57.3
General and administrative........ 24.5 45.6 22.5 20.4 21.3 18.6 15.7 18.3
Depreciation and amortization..... 2.5 5.2 2.8 2.0 3.4 4.0 3.8 4.2
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses........ 71.8 129.9 66.4 58.0 83.2 91.1 95.9 119.9
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from operations... 17.2 (53.3) 19.3 26.4 (2.1) (16.0) (25.6) (54.6)
Other income (expense), net......... (11.5) 11.5 0.3 0.1 0.8 0.8 0.6 0.9
Provision for (benefit from)
taxes............................. 0.0 (19.0) 0.0 0.0 0.0 6.3 0.0 0.0
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)............... 5.7% (22.8)% 19.6% 26.5% (1.3)% (21.5)% (25.0)% (53.7)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital and liquidity needs historically have related to the
development of new products and services, our sales and marketing activities,
our investments in infrastructure and general capital needs. Our capital and
liquidity needs have been met, in large part, with the net proceeds from the
private placement of debt and equity securities, cash flows generated from
operations and through equipment lease financings.
As of December 31, 1999, we had cash and cash equivalents of $15.3 million
and working capital of $8.9 million, primarily as a result of the private
placement of Series C redeemable convertible preferred stock on December 30,
1999 which generated net proceeds of $12.5 million. As of December 31, 1999, we
had no long-term debt, other than obligations under capital lease financings. In
addition, we have no existing line of credit facility with a bank.
Net cash provided by operating activities for the year ended December 31,
1999 was $1.2 million. Our net loss of $5.2 million and increases in accounts
receivable of $2.3 million and prepaid expenses and income taxes of $800,000
were offset by non-cash charges totaling $1.1 million and increases in accounts
payable of $2.4 million, accrued expenses of $3.0 million, deferred revenue of
$1.6 million and unearned revenue of $1.4 million.
Net cash used in investing activities for the year ended December 31, 1999
was $3.8 million and consisted of purchases of property and equipment, including
approximately $2.0 million of capitalized software development costs incurred
related to the building of I-many.com, our proprietary Internet portal.
Net cash provided by financing activities for the year ended December 31,
1999 was $12.8 million and consisted of net proceeds of $12.5 million from the
private placement of Series C redeemable convertible preferred stock, a bank
overdraft of $200,000 and $100,000 of proceeds from the exercise of stock
options.
At December 31, 1999, we had approximately $6.3 million of net operating
loss carryforwards to offset future taxable income. Due to the uncertainty
related to the realization of such benefits, we have placed a full valuation
allowance against this otherwise recognizable deferred tax asset.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures for at least the next 12 months. Our
future long-term capital needs will depend significantly on the rate of growth
of our business, the timing of expanded product and service offerings and the
success of these offerings once they are launched. Any projections of future
long-term cash needs and cash flows are subject to substantial uncertainty. If
the net proceeds of this offering, together with our available funds and cash
generated from operations, are insufficient to satisfy our long term liquidity
needs, we may seek to sell additional equity or debt securities to raise funds,
and those securities may have rights, preferences or privileges senior to those
of the rights of our common stock. In connection with such a sale of stock, our
stockholders may experience dilution. In addition, we cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
IMPACT OF YEAR 2000
As of the date of this filing, we have not incurred any significant business
disruptions as a result of year 2000 issues. However, while no such occurrence
has developed, year 2000 issues may arise related to key suppliers, service
providers and information systems that have not become readily apparent. As a
result, we will continue to monitor our year 2000 compliance and the year 2000
compliance of our suppliers and customers. We do not expect to incur any
material costs in the future in connection with year 2000 computer issues.
However, we can provide no assurance that we will not be adversely
25
<PAGE>
affected by the non-compliance of our suppliers, service providers, customers
and information systems in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 is effective
for financial statements for the years beginning after December 15, 1998. SOP
98-1 provides guidance regarding accounting for computer software developed or
obtained for internal use, including the requirement to capitalize specified
costs and amortize such costs. The Company adopted SOP 98-1 beginning
January 1, 1999.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 is effective for fiscal years beginning after
December 15, 1998, and provides guidance on the financial reporting of start-up
activities and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. Because we expensed these costs
as incurred, the adoption of this standard had no impact on our results of
operations, financial position or cash flows.
In June 1998, the Financial Accounting Standards Board (FASB), issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts and for hedging activities.
SFAS No. 133, as amended by SFAS No. 137, is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. We do not expect SFAS No. 133 to
have a material impact on our financial statements.
26
<PAGE>
BUSINESS
THE COMPANY
We provide Internet-based solutions and related professional services that
allow our clients to negotiate and manage complex contract purchasing
arrangements and facilitate business-to-business e-commerce in the healthcare
and other industries. Our clients include all parties involved in the purchase,
sale and distribution of pharmaceutical and other healthcare products, including
manufacturers, purchasers, groups of purchasers and distributors. Our
proprietary applications enable our clients to:
- negotiate and structure purchase contracts and special promotions,
including rebates and chargebacks based upon purchase volume and on
increases in manufacturers' market share;
- track the achievement of goals under those contracts, establish amounts to
be paid under rebate and chargeback programs, and resolve associated
disputes; and
- evaluate contracts' effect upon profitability, market share and the
effectiveness of special promotions.
To date, our business model has been based principally on licensing software
products for installation on our clients' computer systems and providing
maintenance, support and professional services.
With the launch of our proprietary Internet portal, I-many.com, in
February 2000, we are broadening our solutions and target customer base to
include an Internet-based environment which we expect will serve as a
contracting marketplace for all trading partners in the healthcare industry. We
believe that our Internet portal will enable our clients and their customers to
access historical sales volume and pricing data on a real-time basis, permitting
them to make timely and informed decisions about the effectiveness of their
purchasing contracts and the eligibility of purchasers for rebates, chargebacks
and other pricing incentives.
We sell our products and services principally to healthcare companies. Our
products are currently used by more than 55 clients, including 8 of the largest
10 and 15 of the largest 20, pharmaceutical manufacturers, ranked according to
annual revenues. Our clients include Bayer, DuPont Pharmaceuticals and Novartis.
INDUSTRY BACKGROUND
INDUSTRY SIZE
The market for healthcare products is large and growing. According to the
Health Care Financing Administration, total healthcare spending in the United
States is expected to grow from approximately $1.3 trillion in 2000 to
approximately $2.2 trillion in 2008. The Health Industry Group Purchasing
Association, or HIGPA, estimates that as much as $165 billion, or 80%, of
hospitals' medical equipment, supplies and pharmaceutical purchases are
channeled through group purchasing organizations, or GPOs. GPOs are
organizations that aggregate the demand of their members, which include
hospitals and large physician groups, in order to negotiate with manufacturers
to obtain favorable product pricing. The pricing negotiated by GPOs is often
contained in complex purchase contracts, which are designed to meet the varied
goals of manufacturers and purchasers. Other healthcare industry participants,
such as managed care organizations, government payors and wholesale distributors
also employ complex contracts for the purchase of their medical equipment,
supplies and pharmaceuticals.
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INDUSTRY PARTICIPANTS
Parties involved in the purchase, sale and distribution of goods in the
healthcare industry include:
- MANUFACTURERS of pharmaceuticals, medical and surgical equipment and other
healthcare products that wish to use the contracting process to establish
favorable prices, assure a reliable channel of distribution and offer
incentives to achieve their marketing goals;
- GROUP PURCHASING ORGANIZATIONS, OR GPOS, AND OTHER INTERMEDIARIES
representing groups of purchasers, including hospitals, physician practice
groups, nursing homes, health maintenance organizations, pharmacy benefits
managers and integrated delivery networks. GPOs aggregate their members'
demand for products to obtain for them favorable pricing terms;
- PURCHASERS such as hospitals, clinics, physicians, and long-term care
providers that purchase products under contracts negotiated on their
behalf by GPOs or other intermediaries; and
- DISTRIBUTORS that purchase goods for resale and sell to GPO members
according to the terms of the contracts negotiated between manufacturers
and GPOs.
COMPLEXITY OF HEALTHCARE CONTRACT PURCHASING
GPOs negotiate long-term purchase contracts with manufacturers to obtain
pricing concessions for the benefit of GPO members. Once these contracts are in
place, hospitals and other GPO members issue purchase orders against the
contracts. Typically, these orders are then filled by distributors acting on the
manufacturers' behalf.
The following chart illustrates the contractual relationships involved in
healthcare product purchasing:
[insert graphic]
Healthcare purchasing contracts are complicated. Typically, they contain
pricing incentives designed to meet the varied goals of manufacturers and
purchasers. The price of any particular product purchased under these contracts
may vary substantially, depending upon, among other things:
- total volume of products purchased;
- overall sales of particular products;
- duration of the contract;
- number of parties to the contract;
- number of products covered by the contract;
- external factors such as a manufacturer's market share and a purchaser's
demographic information; and
- quantities of a manufacturer's products used in an individual surgical
procedure.
Because these contracts are often negotiated by a GPO or other intermediary
on behalf of a large number of purchasers, pricing incentives often result in
different prices for otherwise similarly-situated purchasers, based on the
purchasers' achievement of, or failure to achieve, certain volume-related goals
under the contract.
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While many purchase contract variations exist, there are two fundamental
types of pricing incentives in the healthcare purchase environment: chargebacks
and rebates. Chargebacks are generally used in connection with contracts between
manufacturers and GPOs. Eligible GPO members order products either directly from
the manufacturer or, more commonly, through a large distributor. When a product
is ordered through a distributor, the distributor must sell the item at the
price which is negotiated between the manufacturer and the GPO. Often, the
distributor is asked by the manufacturer to sell to the GPO member at a price
which is lower than the price the distributor paid the manufacturer. In these
cases, the distributor attempts to verify the eligibility of the GPO member to
receive the lower contract price and if the purchaser is eligible, the
distributor seeks to recoup, or chargeback, from the manufacturer, the
difference between the distributor's cost and the lower contract price. Given
the large volume of purchases under these contracts, constantly changing
membership in GPOs, complicated eligibility requirements and disparate
information systems involved, it is not uncommon for manufacturers, purchasers,
GPOs, and distributors to calculate significantly different chargebacks,
resulting in disputes among the parties.
The second type of pricing incentive is a rebate. Typically, rebate
provisions entitle a purchaser to a return of a portion of the purchase price
based on the volume of product purchased. Rebate provisions are common in
contracts between manufacturers and intermediaries such as managed care
organizations, pharmacy benefits managers and integrated delivery networks.
Manufacturers generally adopt this kind of agreement in order to further their
marketing objectives. For example, manufacturers often pay rebates based on
increases in their market share. In order to determine the applicability of that
kind of provision, the parties must refer to external market share data. As with
chargeback contracts, the complicated task of administering rebate-based
contracts often results in high administrative costs and disputes involving
substantial amounts of money.
The Omnibus Budget Reform Act of 1990 added further complexity to the
process by requiring manufacturers of certain outpatient drugs to provide
rebates to ensure that federally-funded state Medicaid agencies receive the
"best price" as compared to the net prices available to most other U.S.
purchasers, or approximately 15% off the average manufacturer price, whichever
is lower. Lesser rebates are required for other drugs. Without automated
solutions, it is difficult and costly for manufacturers to constantly monitor
the data necessary to ensure compliance with these and other requirements.
As a result of these intricacies, the administration of healthcare purchase
contracts is difficult and expensive. Among other things, each participant in
the supply chain must be able to:
- monitor the impact of different pricing strategies;
- process enormous volumes of data related to invoices, inventory, shipments
and market share;
- validate purchasers' eligibility for agreed-upon rebates and distributors'
eligibility for chargebacks; and
- integrate pricing, inventory, market share and other data relevant to the
contract with existing enterprise resource planning and other management
systems.
The task of administering these contracts, which includes manual data entry
and the use of existing enterprise resource planning software, is highly labor
intensive, costly and often yields unreliable results. Existing legacy software
products, including enterprise resource planning solutions, are often difficult
to implement and maintain. Often, these systems do not have the functionality,
flexibility, ease of modification, and interoperability with diverse data
formats required to address a wide variety of contracts and to respond to
frequent changes in these contracts. In addition, users of these systems often
find it difficult to configure the systems rapidly enough to permit their use
during the negotiation of a contract. Finally, existing systems often lack the
scalability, ease of use and universal access available from modern Internet
applications.
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In addition, due to the high initial cost of software licenses for existing
enterprise resource planning software, many manufacturers avoid the use of
contract purchasing altogether, placing them at a disadvantage relative to their
competitors.
THE I-MANY SOLUTION
We provide Internet-based solutions and related professional services that
allow our clients to manage complex contract purchasing arrangements and
facilitate business-to-business e-commerce. The following chart illustrates the
manner in which our solutions transform the otherwise complicated healthcare
purchase contracting process:
[insert graphic]
Key components of our solution include:
COMPLETE OFFERING OF CONTRACT MANAGEMENT CAPABILITIES. Our solutions
provide our clients with the broad range of features they need to efficiently
negotiate, manage and analyze their purchase contracts, including:
- an Internet portal which enables manufacturers to promote their products,
allows purchasers to become knowledgeable about their product options and
facilitates the matching of manufacturers with GPOs and other
intermediaries, purchasers and distributors for the negotation of
contracts;
- comprehensive software which provides real-time access to relevant
contract data, thereby enabling users to better understand the impact of
contract terms and their purchase decisions; and
- sophisticated analysis tools which enable contracting parties to see the
effects of their special promotions.
By providing this broad functionality, we eliminate the need for the users
of our solutions to combine often incompatible software from multiple vendors,
thereby decreasing costs and implementation time and enhancing reliability.
INTERNET-BASED SOLUTIONS. Through our proprietary Internet portal,
I-many.com, we offer a comprehensive web-hosted contract management service. We
provide our solutions on an application service provider basis, for which our
clients pay a subscription fee. Through I-many.com, manufacturers, purchasers,
GPOs and distributors can access key contract data, such as quantities purchased
and the contract pricing structure, in real-time using standard Internet
browsers. We believe that our Internet-based solution benefits our clients by
reducing their initial capital investment and by giving all users access to the
same data, thereby helping to reduce disputes regarding the amount of rebates
and chargebacks owed under the contract.
ENHANCED TRANSACTIONAL EFFICIENCY. Our solutions help reduce transaction
costs and increase the efficiency and reliability of the purchasing process. By
using our solutions:
- manufacturers may accurately evaluate the effectiveness of their pricing
initiatives on a real-time basis;
- distributors may calculate and process chargebacks more quickly, improving
their cash flow;
- purchasers may evaluate their eligibility for rebate programs; and
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- GPOs may negotiate contracts on behalf of their members more efficiently.
This increased efficiency enables all parties to increase the quality of the
purchasing process and redeploy personnel and other resources currently
allocated to contract administration. In addition, by simplifying and
accelerating the processing of chargeback and rebate transactions, our solutions
promote more predictable cash flow and proper accounting treatment.
BROADER ACCESS TO THE BENEFITS OF CONTRACT PURCHASING. Our
subscription-based pricing model permits smaller manufacturers and distributors
to enjoy the benefits of contract-based pricing without large up-front cash
outlays for license fees. Because we offer centralized data storage on our
servers, our clients do not need to purchase expensive, maintenance-intensive
servers and data storage equipment or to hire additional staff to maintain that
equipment.
BUSINESS STRATEGY
Our objective is to become the leading provider of contract management
solutions to organizations which utilize complex purchase contracts to buy or
sell products in large volumes. To achieve this objective, we are pursuing the
following strategies:
LEVERAGE OUR STRENGTH IN THE HEALTHCARE MARKET. We provide contract
management solutions and services to many of the largest pharmaceutical
manufacturers and other healthcare companies. As a quality provider of contract
management services, we have acquired extensive industry knowledge of and
experience with contracting practices and the relationships among healthcare
industry participants. We believe that we will be able to leverage our
reputation as a quality provider of complex contract management services and our
extensive industry knowledge to offer additional services to our existing client
base, and to attract new clients in the healthcare industry as well as other
industries.
AGGRESSIVELY DEVELOP OUR PROPRIETARY INTERNET PORTAL, I-MANY.COM. We
launched our Internet portal, I-many.com, in February 2000 and intend to
aggressively promote it as a marketplace for trading partners in the healthcare
industry. We are seeking to increase the number of manufacturers that list their
product offerings through I-many.com and attract hospitals, retail pharmacies,
GPOs and other intermediaries and other purchasers of these products.
INCREASE SALES AND SUPPORT EFFORTS. We intend to increase significantly our
direct sales and support forces to facilitate our growth, particularly with
respect to our website. We are seeking to promote the awareness of the I-many
brand through an aggressive advertising and marketing campaign, including
participation in trade shows and the placement of advertisements in key industry
publications.
MAINTAIN A TECHNOLOGICAL LEADERSHIP POSITION. We seek constant feedback
from our clients to understand their needs during both the implementation and
post-implementation stages. Following implementation, we meet with our clients
to identify their needs. The feedback from these focus groups serves as a basis
for product upgrades. We believe that, by closely partnering with and listening
to our clients, we will continue to develop our products so that they deliver
the highest value.
TARGET OTHER MARKETS. We believe that the purchase contracting practices in
many other industries are similar to those in the healthcare market. Other
industries with similar practices include food and beverage, building products,
electronics, agricultural/chemical products and retail. We believe that our
solutions are readily adaptable to these additional markets. We are exploring
these markets, and, if appropriate, expect to develop the necessary industry
expertise to support our entry into such markets.
SELECTIVELY PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We intend to
pursue a selective acquisition strategy as opportunities arise to complement our
product offerings, extend our service capabilities and expand the features on
our web site. In addition, we intend to enter into strategic relationships as
opportunities arise, to help us develop and market our products and services
more effectively.
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PRODUCTS AND SERVICES
The components and features of our products are designed to address
particular business areas, but all share our core technology. To date,
substantially all of our revenues have been derived from the sale of our
healthcare products and related professional services.
HEALTHCARE PRODUCTS
I-MANY.COM is our proprietary Internet-based portal which enables
manufacturers, GPOs and other intermediaries, distributors and purchasers to
share information relating to healthcare products and to negotiate and manage
contracts relating to the purchase and sale of those products. Through
I-many.com, manufacturers may, for a fee, post promotional material about their
products and seek information from GPOs and other intermediaries, distributors
and other purchasers who have indicated an interest in entering into a contract
to purchase their products. Through I-many.com, the various parties may license
our CARS contract management software for a monthly fee through our application
hosting service, and may utilize our servers to store contract data, which may
then be accessed by all licensed users which are party to the contract.
The following is a list of our principal healthcare contract management
software products. They may be licensed on a stand-alone basis for use on our
clients' own computer systems or on a Web-hosted basis through our I-many.com
portal.
CONTRACT ADMINISTRATION AND REPORTING SYSTEM, OR CARS/IS, is an
enterprise-scale software solution that delivers end-to-end management and
optimization of an organization's incentive-driven contracting processes. CARS
is used by 15 of the largest 20 pharmaceutical manufacturers, ranked according
to annual revenues.
CARS/MEDICAID is a ready-to-install software solution that automates the
management and clerical tasks of the federally-mandated Medicaid Drug Rebate
Law. The system processes data and calculates rebates and payments for both
federal and state rebate programs. CARS/Medicaid provides the capability to
track and resolve disputes, and is designed to assist users to comply with
applicable federal and state government regulations.
CARS/ANALYTICS provides sophisticated analyses and reporting across a
spectrum of sales and contract management processes. CARS/Analytics uses the
information generated by CARS/IS and third party information sources through a
specific data application in CARS/IS to generate analyses and reports which are
designed to enable users to determine the estimated profitability of contract
business strategies and to examine key contract and sales performance
measurements and trends.
CONSUMER GOODS PRODUCTS
In addition to our healthcare industry products, we offer the ENTERPRISE
PROMOTIONS MANAGER, or EPM. EPM is a solution for the complete management and
reporting of critical and complex trade promotion and sales management
activities in consumer goods industries. We are also in the process of building
additional modules and products for the consumer goods market, including a
module which will facilitate the management and reconciliation of advances and
accruals, as well as an analytical product designed to quickly create reports on
key performance drivers such as trade promotion effectiveness, customer
profitability and brand performance.
PROFESSIONAL SERVICES
Our professional services group provides implementation and deployment
services, training and customer support and consulting services. At
December 31, 1999 this group was comprised of 50 I-many employees and is
augmented by outside consultants whom we have trained.
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CONSULTING SERVICES. We work with our clients during and after installation
of our solution to optimize the functionality of the system. These services
include project planning and management, business process analysis, integration
with clients' enterprise resource planning systems and quality assurance. Our
goal is to empower our clients with the knowledge and confidence to
independently operate, refine and develop their systems.
DEPLOYMENT SERVICES. Our deployment services include pre-installation
planning, on-site installation, upgrade services, system testing, database
administration support and professional service support.
EDUCATIONAL SERVICES. We offer training programs and business analysis
services for those persons within the client organization responsible for
utilizing our solutions, such as contract administrators. In addition, we offer
user group meetings to enable customers to learn about product directions and
influence our future development process.
CUSTOMER SUPPORT. We offer comprehensive maintenance and support services
and 24 hours a day, 7 days a week customer service, documentation updates and
new software releases.
REVENUE MODEL
To date, we have generated revenues from both products and services related
to our CARS software suite. Product revenues are comprised of software license
fees, which have historically been recognized upon execution of a signed license
agreement and delivery of the software, provided there are no significant
post-delivery obligations, the payment is fixed and determinable and collection
is probable. Historically, software license agreements have been for a
three-year period. Service revenues are comprised of maintenance and support
fees directly related to our CARS software suite and professional service fees
derived from consulting, installation, business analysis and training services
related to our software products.
In the latter part of 1999, we started offering our clients an enterprise
agreement that includes a software license, maintenance and support and a fixed
number of days of professional services. Clients opting for this enterprise
agreement will enter into a three-year, fixed-fee, all-inclusive agreement
payable in three equal annual installments commencing upon the execution of the
agreement.
Although we have not generated significant revenues to date from our
Internet portal, we expect that Internet-based sales through I-many.com will
differ from our historical sales model. We expect that these revenues will be
generated from:
- subscription fees paid by manufacturers, GPOs and distributors for access
to our software and the contract data which will be hosted on our servers;
and
- fees paid by manufacturers and distributors for the opportunity to place
advertising or other promotional information on our web site, which we
believe will be repeatedly and frequently accessed by contract
administrators, purchasing managers and other persons responsible for
healthcare purchase decisions.
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CUSTOMERS
Our primary market is enterprises within the healthcare industry. We have
approximately 55 clients, over 90% of which are pharmaceutical companies. We
also have recently sold our solutions to clients representing other components
of the life sciences supply chain, including a major group purchasing
organization, wholesale distributors, and managed care organizations. During
1999, approximately 10.5% of our revenue was derived from a single client.
Our clients include the following:
MANUFACTURERS
<TABLE>
<S> <C>
3M Pharmaceuticals, a division of Minnesota Halsey Drug Company, Inc.
Mining and Manufacturing Co. Immunex Corporation
Agouron Pharmaceuticals, a division of Knoll Pharmaceutical Company
Warner-Lambert Co. Mallinckrodt, Inc.
Alcon Laboratories, Inc. Mylan Pharmaceuticals, Inc.
Allergan Inc. Novartis Consumer Health, Inc.
Alpharma, Inc. Novartis Pharmaceuticals Corporation
Altana Inc. Novo Nordisk Pharmaceuticals, Inc.
Aventis Pharmaceutical Inc. Nycomed-Amersham, Inc.
Aventis Pharmaceutical Products Inc. Organon Inc.
Bausch & Lomb Pharmaceutical, a division of Parke-Davis, a division of Warner-Lambert Co.
Bausch & Lomb Inc. PepsiCo., Inc.
Baxter Healthcare Corporation Pharmacia & Upjohn Co.
Bayer Corporation Purdue Pharma, L.P.
Boehringer Ingelheim Corporation Roche Laboratories Inc.
Bracco Diagnostics, Inc. Roxane Laboratories, Inc.
Centocor, Inc. Sanofi Synthelabo, Inc.
CIBA Vision Corporation Schein Pharmaceutical, Inc.
DuPont Pharmaceuticals Company G.D. Searle & Co.
Dura Pharmaceuticals, Inc. Sepracor Inc.
Faulding Inc. Solvay Pharmaceuticals, Inc.
Galderma Laboratories, Inc. UCB Pharma, Inc.
Genentech, Inc. Whitehall-Robbins Healthcare, a division of
Glaxo Wellcome Inc. American Home Products Corp.
</TABLE>
DISTRIBUTORS, PURCHASERS AND GPOS
Abbott Laboratories, Inc.
Bergen Brunswig Corporation
California Physician Services, d/b/a/ Blue Shield of California
TDI Managed Care Services, Inc., d/b/a/ Eckerd Health Services
Integrated Pharmaceutical Services
Premier, Inc.
SALES AND MARKETING
We market our software and services primarily through a direct sales force.
As of December 31, 1999, our sales force consisted of a total of 21
salespersons, including 8 national account executives, 7 sales support
professionals and 5 e-commerce account executives. Since December 31, 1999 we
have hired an additional 5 e-commerce account executives. We intend to continue
to increase substantially
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the size of our sales force as we seek to expand the market for our Internet
portal. In addition, we are seeking to enhance the productivity of our direct
sales force by hiring additional support personnel. Competition for qualified
sales personnel is intense and there can be no assurance that we will be able to
attract such personnel. If we are unable to hire additional qualified sales
personnel on a timely basis our business, operating results and financial
condition could be materially and adversely affected. See "Risk Factors--Our
business will suffer if we are unable to retain key personnel."
TECHNOLOGY AND PRODUCT DEVELOPMENT
Since our inception, we have made substantial investments in product
development. We believe that our future financial performance depends on our
ability to maintain and enhance our current products and develop new products.
Our research and development expenses were approximately $1.5 million in 1997,
$2.6 million in 1998 and $8.2 million in 1999.
As of December 31, 1999, we employed 66 people in our product development
organization who are responsible for the design, development and release of our
products. The group is organized into four disciplines: development, quality
assurance, documentation and project management. Members from each discipline,
along with a product marketing manager from our marketing department, form
separate product teams to work closely with our sales, marketing, services,
client and prospects organizations to better understand market needs and user
requirements. Each product team also hosts a series of user focus groups and
attends our yearly user conference. When appropriate, we also utilize third
parties to expand the capacity and technical expertise of our internal product
development organization. Periodically, we have licensed third-party technology.
We believe this approach shortens our time to market without compromising our
competitive position or product quality, and we plan to continue to draw on
third-party resources as needed in the future.
We utilize a well-defined software development methodology that emphasizes
quality assurance throughout the process. Our methodology involves specifying
and reviewing business requirements, functional requirements, prototypes,
technical designs, test plans and documentation plans. We perform quality
assurance testing throughout our iterative development of code and
modifications. In addition, we perform functional, component, systems,
integration, performance and stress testing on all software before release.
Our CARS family of applications is designed as an open client/server
application, supporting Windows 95, 98 and NT-based clients, Microsoft NT or any
Unix based server operating systems and Oracle relational database software. The
applications are developed using an object-oriented methodology and provide
users with a scalable, modular solution.
Our CARS software also provides standard interfaces for integration with a
wide variety of back office enterprise resource planning systems utilized by our
clients. In addition, a specific integration application is supported for the
SAP platform. Our Imany.com marketplace is developed utilizing an open,
multi-tier distributed architecture using well established components from
Microsoft, Oracle and a number of other software vendors. Our architecture
allows us to continuously enhance the features and functionality of our
offerings to meet our clients' evolving requirements. Our distributed
architecture enables us to add capacity as the number of users and transactions
increase on our system. We have a fully redundant hardware architecture,
including power to the website and Internet connections through our hosted data
center at Exodus Communications in New Jersey.
Our platform contains a variety of features to ensure the secure
transmission of business information among multiple trading partners. We use
SSL, or secure sockets layer, an Internet security technology, for all
confidential information transmitted by our website. User and confidential
information is always encrypted during transmission from our website. Our
employees do not have access to our website, except as necessary to perform
customer service functions. We use a challenge-and-respond authentication system
to ensure that only authorized users can access our
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website, as well as Checkpoint firewall software to keep out unwanted intruders.
Moreover, we ensure that users can access only that information for which they
are authorized.
COMPETITION
The contract management software market is subject to rapid change.
Competitors vary in size and in the scope and breadth of the products and
services offered. We encounter competition primarily from internal information
systems departments of potential or current customers that develop custom
software, software companies that target the contract management markets,
professional services organizations and Internet-based merchants offering
healthcare products through on-line catalogs. Increased competition may result
in price reductions, less beneficial contract terms, reduced gross margins and
loss of market share, any of which could materially and adversely affect our
business, operating results and financial condition.
We believe that the principal competitive factors affecting our market
include product reputation, functionality, ease-of-use, ability to integrate
with other products and technologies, quality, performance, price, customer
service and support and the vendors' reputation. Although we believe that our
products currently compete favorably with regard to such factors, we cannot
assure you that we can maintain our competitive position against current and
potential competitors.
Many of our competitors have greater resources than we do, and may be able
to respond more quickly and efficiently to new or emerging technologies,
programming languages or standards, or to changes in customer requirements or
preferences. Many of our competitors can devote greater managerial or financial
resources than we can to develop, promote and distribute customer service
management software products and provide related consulting, training and
support services. We cannot assure you that our current or future competitors
will not develop products or services which may be superior in one or more
respects to ours or which may gain greater market acceptance. Some of our
competitors have established or may establish cooperative arrangements or
strategic alliances among themselves or with third parties, thus enhancing their
abilities to compete with us. It is likely that new competitors will emerge and
rapidly acquire market share. We cannot assure you that we will be able to
compete successfully against current or future competitors or that the
competitive pressures faced by us will not materially and adversely affect our
business, operating results and financial condition. See "Risk Factors--We have
many competitors and may not be able to compete effectively."
INTELLECTUAL PROPERTY AND LICENSES
We rely primarily on a combination of copyright, trademark and trade secrets
laws, as well as confidentiality agreements to protect our proprietary rights.
We presently do not have, and we have not applied for, any patents on our
products. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain the use of
information that we regard as proprietary. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States. We cannot assure you that our means of protecting our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology. See "Risk Factors--Our business may
suffer if we cannot protect our intellectual property."
We are not aware that any of our products infringe the proprietary rights of
third parties. We cannot assure you, however, that third parties will not claim
infringement by us with respect to current or future products. We expect that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
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be available on terms acceptable to us or at all, which could have a material
adverse effect upon our business, operating results and financial condition. See
"Risk Factors--Our business may suffer if we are alleged to infringe the patents
or proprietary rights of third parties."
From time to time, we license software from third parties for use with our
products. We believe that no such license agreement to which we are presently a
party is material and that if any such license agreement were to terminate for
any reason, we would be able to obtain a license or otherwise acquire other
comparable technology or software on terms and on a timetable that would not be
materially adverse to us.
EMPLOYEES
As of December 31, 1999, we had a total of 167 employees, of whom 113 were
based in Portland, Maine, 35 were based at our sales and marketing headquarters
in Edison, New Jersey and 19 worked at remote locations. Of the total, 73 were
in operations and development, 33 were in sales and marketing, 37 were in
professional services, and 24 were in administration and finance. Our future
performance depends in significant part upon the continued service of our key
technical, sales and marketing and senior management personnel and our
continuing ability to attract and retain highly qualified technical, sales and
marketing and managerial personnel. Competition for such personnel is intense
and we cannot assure you that we will be successful in attracting or retaining
such personnel in the future. None of our employees is represented by a labor
union or is subject to a collective bargaining agreement. We have not
experienced any work stoppages and consider our relations with our employees to
be good. See "Risk Factors--Our business will suffer if we are unable to retain
key personnel."
FACILITIES
Our executive, administrative and operating offices are located in
approximately 29,000 square feet of leased office space located in Portland,
Maine under leases expiring in October 2000. We also maintain approximately
6,000 square feet of office space for our sales, marketing and e-commerce
personnel in Edison, New Jersey, and have recently leased an additional 11,000
square feet in Edison. In addition, we are presently negotiating to lease
approximately 9,000 additional square feet of office space in Portland, Maine.
LEGAL PROCEEDINGS
We are not a party to any material pending litigation or other legal
proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding our directors and
executive officers as of March 6, 2000:
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITION(S)
- -------------------------------- -------- ------------------------------------------------------------
<S> <C> <C>
William F. Doyle (1)(2) 37 Chairman of the Board of Directors
A. Leigh Powell (2) 38 President, Chief Executive Officer and Director
Philip M. St. Germain 63 Director and Chief Financial Officer
Jeffrey Horing (1) 36 Director
John C. Phelan (1)(2) 34 Director
Terrence M. Nicholson 45 General Manager and Vice President, I-many
Timothy P. Curran 33 General Manager and Vice President, I-many.com
Stephen Liscovitz 45 Vice President, Development
Steven I. Hirschfeld 37 Vice President, Sales
Thomas Mucher 42 Vice President, Professional Services
Glenn J. Wira 34 Vice President, Marketing
Michael C. Pinto 31 Vice President, Business Development
</TABLE>
- ------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
WILLIAM F. DOYLE has served as a director and as chairman of our board since
December 1999. He has been a partner of Insight Capital Partners since
June 1999. From November 1995 to November 1999, Mr. Doyle was vice president,
licensing & acquisition and a member of the Consumer Pharmaceutical and
Professional Group Operating Committee of Johnson & Johnson. From June 1996 to
November 1999, Mr. Doyle served as a director of Johnson & Johnson Development
Corporation, Johnson & Johnson's venture capital subsidiary. From 1992 to 1995,
Mr. Doyle was a manager at McKinsey & Co. Mr. Doyle holds an M.B.A. from Harvard
Business School and a S.B. from the Massachusetts Institute of Technology.
A. LEIGH POWELL has served as our president and chief executive officer
since July 1999. From February 1998 to July 1999, Mr. Powell served as our vice
president of marketing and as our chief operating officer. From January 1997 to
February 1998, he served as vice president of business alliances for Think
Systems/I2 Technologies. From January 1996 to January 1997, Mr. Powell worked as
a vice president for American Software. From March 1985 to December 1995,
Mr. Powell worked as a business consultant for Andersen Consulting. Mr. Powell
received his M.B.A. and B.S. from Virginia Polytechnic Institute and State
University.
PHILIP M. ST. GERMAIN has served as our chief financial officer since
September 1997, and as a director since July 1999. From 1986 until joining
I-many, Mr. St. Germain worked as an independent consultant for, and provided
financial management services to, early stage high technology companies.
Mr. St. Germain received a J.D. from Boston College Law School and a B.A. from
Boston College.
JEFFREY HORING has served as a director since September 1997. Since
January 1995, Mr. Horing has been a partner at Insight Capital Partners. From
February 1990 to August 1994, Mr. Horing served as a senior investment
professional at E. M. Warburg Pincus funds. Mr. Horing received an M.B.A. from
the Sloan School of Management at the Massachusetts Institute of Technology, and
a B.S./B.S.E. from the Wharton School and School of Engineering at the
University of Pennsylvania. Mr. Horing serves on the boards of directors of
Exchange Applications, Inc. and SLMsoft.com.
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JOHN C. PHELAN has served as a director since January 2000. Since
April 1998, Mr. Phelan has been a Managing Principal of MSD Capital LLP, a
private investment firm for Michael S. Dell. Mr. Phelan is a co-founder of that
firm. From April 1992 to January 1998, Mr. Phelan worked as a principal and a
limited partner in the general partnership of ESL Investments, a Greenwich,
Connecticut-based investment firm. Mr. Phelan received his M.B.A. from Harvard
Business School in 1990 and graduated CUM LAUDE from Southern Methodist
University in 1986 with a B.A. in Economics and Political Science.
TERRENCE M. NICHOLSON has served as our vice president and general manager
since August 1999. From February 1996 to August 1999, Mr. Nicholson served as
director of information technology at Mallinckrodt, Inc, a pharmaceutical
company. From February 1995 to February 1996, Mr. Nicholson served as program
executive of NCR Corp. Mr. Nicholson received a M.S.C.E. from Rensselaer
Polytechnic Institute and a B.S.E.E. from the University of Notre Dame.
TIMOTHY P. CURRAN has served as vice president and general manager of
I-many.com since July 1999. From June 1998 to July 1999, Mr. Curran served as
director, sales and marketing for our vertical markets line of business. From
March 1997 to May 1998, Mr. Curran served as manager, internal consulting at
EMC(2) Corporation. Prior to March 1997, Mr. Curran was employed for eight years
with Andersen Consulting, beginning as a staff consultant in Andersen's systems
development practice and ending as a senior manager focusing on business process
re-engineering and management consulting. Mr. Curran received an M.B.A. from the
University of Chicago and a B.S. in chemical engineering from Case Western
Reserve University.
STEPHEN LISCOVITZ has served as vice president, development and operations
since June 1999. From March 1998 to June 1999, he served as project manager for
our CARS/Analytics product. From May 1995 to March 1998, he served as project
manager for our CARS/IS product. From November 1992 to May 1995, he served in
various project management roles at I-many. Mr. Liscovitz holds a B.A. from
Rutgers University.
STEVEN I. HIRSCHFELD has served as our vice president, sales since January
1999. From July 1994 to January 1999, Mr. Hirschfeld held various positions with
Janis Group, Inc., including general manager of several business units. He
received his B.S. in Business Administration and Marketing from the University
of Delaware.
THOMAS MUCHER has served as our vice president, professional services since
February 1998. From December 1996 to February 1998, he served as vice president,
professional services with AnswerSoft, Inc. From June 1994 to December 1996, he
served as director, professional services and later as vice president,
professional services for North America with Tivoli Systems Inc. Mr. Mucher
received an AAS certificate in Electronic Engineering Technology from Control
Data Corporation, Institute for Computer Studies.
GLENN J. WIRA has served as our vice president, marketing since April 1999.
From November 1995 through March 1999, Mr. Wira managed our national account
executives and business consultants. From July 1992 through October 1995,
Mr. Wira was the manager, hospital sales administration and national account
executive for McNeil Consumer Healthcare, a division of Johnson & Johnson.
Mr. Wira holds an M.B.A. in marketing and a B.S. in management information
systems, both from Drexel University.
MICHAEL C. PINTO has served as vice president of business development for
I-many.com since February 2000. Prior to his role as vice president, Mr. Pinto
served as I-many's director of business development/strategic alliances from
February 1999 to February 2000. From July 1997 to February 1999 he served in
business planning and development at Bristol-Myers Squibb Company. From
June 1995 to July 1997 he was a management consultant at American Home Products
Corporation working within its Medical/Surgical and Pharmaceutical Divisions.
Mr. Pinto holds an M.B.A. in marketing and finance from New York University's
Leonard Stern School of Business, and a B.A. from Lafayette College.
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<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
Following this offering, our board of directors will consist of five
directors. The terms of the directors will expire upon the election and
qualification of successor directors at each annual meeting of stockholders.
The board of directors has a compensation committee and an audit committee.
The compensation committee, which is composed of Messrs. Powell, Doyle and
Phelan, makes recommendations concerning salaries and incentive compensation for
our employees and administers and grants stock options under our stock option
plans. The stock plan subcommittee, comprised of Messrs. Doyle and Phelan, of
the compensation committee makes recommendations regarding the grant of stock
options to our executive officers and Mr. Powell's compensation. The audit
committee, which is composed of Messrs. Doyle, Horing and Phelan, reviews the
results and scope of the audit and other services provided by our independent
public accountants.
DIRECTOR COMPENSATION
Under the 2000 non-employee director stock option plan, each non-employee
director is entitled to receive options upon his or her initial election
to the board (or with respect to current non-employee directors, on the date of
this offering) and options annually. Such options vest in three equal
annual installments commencing on the first anniversary of the date of grant. We
also reimburse directors for reasonable expenses incurred in attending board
meetings. See "Management--Benefit Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee is comprised of Messrs. Powell, Doyle and Phelan.
Mr. Powell is our chief executive officer. Neither Mr. Doyle nor Mr. Phelan has
been an employee of I-many at any time. Prior to the formation of the
compensation committee in March 2000, all decisions regarding executive
compensation were made by the full board. No interlocking relationship exists
between our board of directors or compensation committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our amended and restated certificate of incorporation limits the liability
of our directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
Our amended and restated certificate of incorporation also generally
provides that we will indemnify, to the fullest extent permitted by Section 145
of the Delaware General Corporation Law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or
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<PAGE>
completed action, suit, investigation, administrative hearing or any other
proceeding by reason of the fact that he or she is or was a director or officer
of ours, or is or was serving at our request as a director, officer, employee or
agent of another entity, against expenses incurred by him or her in connection
with that proceeding. An officer or director will not be entitled to
indemnification by us if:
- the officer or director did not act in good faith and in a manner
reasonably believed to be in, or not opposed to, our best interests; or
- with respect to any criminal action or proceeding, the officer or director
had reasonable cause to believe his or her conduct was unlawful.
In addition, we plan to enter into indemnification agreements with our
directors containing provisions which may require us, among other things, to
indemnify our directors against various liabilities that may arise by virtue of
their status or service as directors and to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified.
Our amended and restated certificate of incorporation also permits us to
secure insurance on behalf of any officer or director for any liability arising
out of his or her actions in such capacity. We intend to obtain directors' and
officers' insurance providing indemnification for our directors and officers. We
believe that these provisions, agreements and insurance are necessary to attract
and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
A. LEIGH POWELL. Under our employment letter agreement dated July 27, 1999,
Mr. Powell received a base annual salary of $200,000 through December 31, 1999,
and a bonus of not less than $100,000 based on achieving certain minimum
performance goals. If we terminate Mr. Powell's employment for any reason other
than for cause, Mr. Powell will be entitled to receive his then current salary
for six months or until he commences employment with another employer, whichever
occurs earlier. If we terminate his employment for disability, he will be
entitled to receive his then current salary for one year or until he commences
employment with another employer, whichever occurs earlier. Upon a sale or
merger of I-many, 50% of the options granted to Mr. Powell prior to July 1999
which are then unvested will vest upon such sale or merger.
PHILIP M. ST. GERMAIN. In December 1997, we entered into an employment
agreement with Mr. St. Germain, our chief financial officer. Under the
agreement, Mr. St. Germain was entitled to receive $125,000 for fiscal year 1997
and a minimum of $140,000 per year for each succeeding year of the agreement.
The term of the employment agreement is three years. Under the employment
agreement, Mr. St. Germain is prohibited from working for any other company that
competes, directly or indirectly, with us for a period of one year from
termination of his employment with us. Mr. St. Germain is also entitled to
severance pay equal to 12 months of his base salary if he is terminated other
than for cause and he shall receive one additional year of vesting of any
previously granted options. Also, all of his unvested options will become
immediately vested upon a merger or change of control of I-many or a sale of
substantially all of its assets, or if Mr. St. Germain's employment is
terminated and we are sold to or merged with another company within 6 months of
such termination.
STEVEN I. HIRSCHFELD. Under our employment letter dated December 26, 1998,
Mr. Hirschfeld received a base salary of $180,000 for fiscal year 1999, as well
as participation in a bonus and commission plan. If we terminate
Mr. Hirschfeld's employment for any reason other than for cause within the first
24 months of his employment, he will receive 12 months of his base pay as
severance. We will also pay this severance if he resigns following a change of
control of I-many which alters his
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duties or responsibilities. Finally, upon a sale of I-many or substantially all
of its assets, or a merger or change of control of I-many, 50% of his then
unvested options will vest at that time, and the remainder will vest within
12 months of such event, provided that the board of directors may prevent such
acceleration in certain circumstances.
EXECUTIVE COMPENSATION
The following table provides information concerning compensation that we
paid during the year ended December 31, 1999, for services rendered during 1999,
to our chief executive officer, our former chief executive officer and our four
most highly compensated executive officers whose salary and bonus exceeded
$100,000 during such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) ---------------------
------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------- -------- -------- --------------------- ------------
<S> <C> <C> <C> <C>
Gerald O'Connell,
Former Chief Executive Officer (5)...... $230,000 $111,905 -- --
A. Leigh Powell,
Chief Executive Officer (6)............. 182,692 152,873 336,550 $ 8,505(2)
Mark Tilly,
Executive Vice President................ 150,000 68,210 -- 9,485(2)
Philip M. St. Germain,
Chief Financial Officer................. 172,885 73,419 93,750 13,408(2)
Steven I. Hirschfeld,
Vice President of Sales................. 173,077 93,128 200,000 5,769(3)
Glenn J. Wira,
Vice President of Marketing............. 109,769 113,227 10,000 8,604(4)
</TABLE>
- ------------------------
(1) Excludes certain perquisites and other benefits, the amount of which did not
exceed either $50,000 or 10% of the employees' total salary and bonus.
(2) Consists of compensation for unused vacation time.
(3) Consists of car allowance.
(4) Consists of car allowance and compensation for unused vacation time.
(5) Mr. O'Connell served as our Chief Executive Officer until June 1999.
(6) Mr. Powell became our Chief Executive Officer in July 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted during the fiscal year ended December 31, 1999 to each of the
executive officers named in the Summary Compensation Table above, including the
potential realizable value over the ten-year term of the options, based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of our future stock price.
Actual gain, if any, on stock options that are exercised will depend on the
future performance of our common stock.
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<PAGE>
We granted the options listed below at an exercise price equal to the fair
market value of our common stock, as determined by our board of directors, on
the date of grant. The options become exercisable as to 25% of the underlying
shares upon the first anniversary of the date of grant and an additional 25% per
year thereafter. The options expire on the earlier of 10 years from the date of
grant or three months after termination of employment.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE
-------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS EXERCISE OPTION TERM
OPTIONS GRANTED TO PRICE EXPIRATION ---------------------------
NAME GRANTED(#) EMPLOYEES(2) PER SHARE DATE 5% 10%
- ---- ---------- ------------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald O'Connell............. -- -- -- -- -- --
A. Leigh Powell.............. 125,000 9.9% $7.50 05/03/09 $590,000 $1,494,000
200,000 15.9 7.50 07/27/09 943,000 2,391,000
11,550 0.9 7.50 09/23/09 54,000 138,000
Mark Tilly................... -- -- -- -- -- --
Philip M. St. Germain........ 35,000 2.8 7.50 05/03/09 165,000 418,000
8,750 0.7 7.50 09/23/09 41,000 105,000
50,000 4.0 9.50 12/01/09 299,000 757,000
Steven I. Hirschfeld......... 200,000 15.9 3.79 01/11/09 477,000 1,208,000
Glenn J. Wira................ 10,000 0.8 9.50 12/01/09 60,000 151,000
</TABLE>
- ------------------------
(1) For disclosure regarding the terms of the options, see "--Benefit Plans."
(2) The percentage of total options granted to employees during the fiscal year
ending December 31, 1999 is based upon options to purchase an aggregate of
1,261,275 shares of common stock granted under our option plans.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND YEAR-END OPTION VALUES
The following table provides information concerning the exercise of options
to purchase common stock by our named executive officers during fiscal 1999 and
the number and value of unexercised stock options held by these executive
officers as of December 31, 1999. The value of unexercised in-the-money options
is based on a value of $9.50, the fair market value of our common stock as of
December 31, 1999 as determined by our board of directors, less the applicable
per share exercise price, multiplied by the number of shares issued upon
exercise of the option.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999(#) DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald O'Connell.................. -- -- -- -- -- --
A. Leigh Powell................... 15,000 $97,500 -- 396,550 -- $1,063,100
Mark Tilly........................ -- -- -- -- -- --
Philip M. St. Germain............. 87,255 825,432 42,928 145,142 $332,099 462,668
Steven I. Hirschfeld.............. -- -- -- 200,000 -- 1,142,000
Glenn J. Wira..................... -- -- 61,250 23,750 579,425 130,075
</TABLE>
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<PAGE>
BENEFIT PLANS
1994 STOCK OPTION PLAN
Our 1994 stock option plan was adopted by our board of directors and
approved by our stockholders in May 1994. The 1994 plan provides for the grant
of incentive stock options intended to qualify under Section 422 of the Internal
Revenue Code, non-statutory stock options, restricted stock awards and other
stock-based awards. As of February 29, 2000, an aggregate of 434,500 shares of
common stock at a weighted average exercise price of $0.04 per share were
outstanding under the 1994 plan and an aggregate of 996,644 shares of common
stock had been issued upon exercise of options previously granted under the 1994
plan. In the event of a merger or other acquisition event, all outstanding
options will become exercisable immediately before the merger or acquisition and
our board of directors or the board of directors of any entity assuming the
obligations of I-many shall, as to outstanding options either (i) make
appropriate provision for the continuation of such options by substituting for
the shares then subject to such options the consideration payable with respect
to the outstanding shares of common stock in connection with the acquisition; or
(ii) upon written notice to the optionee, provide that all options must be
exercised within a specified number of days of the date of such notice, at the
end of which period the options shall terminate; or (iii) terminate all options
in exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such options over the exercise price. On March , 2000,
the board of directors terminated the 1994 plan in conjunction with their
adoption of the 2000 stock incentive plan. Therefore, no further awards will be
granted under the 1994 plan.
1997 STOCK OPTION PLAN
Our 1997 stock option plan was adopted by our board of directors and
approved by our stockholders in April 1997. The 1997 plan provides for the grant
of incentive stock options intended to qualify under Section 422 of the Internal
Revenue Code, non-statutory stock options, restricted stock awards and other
stock-based awards. As of February 29, 2000, an aggregate of 1,793,098 shares of
common stock at a weighted average exercise price of $5.24 per share were
outstanding under the 1997 plan and an aggregate of 206,327 shares of common
stock had been issued upon exercise of options previously granted under the 1997
plan. In the event of a merger, liquidation or other acquisition event, our
board of directors, or the board of directors of any corporation assuming the
obligations of I-many, shall, in its discretion, take any one or more of the
following action, as to outstanding options: (i) provide that such options shall
be assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation; (ii) upon written notice to the optionees, provide that
any and all outstanding options shall become exercisable in full (to the extent
not otherwise so exercisable) as of a specified date or time prior to the
consummation of such transaction, and that all unexercised options shall
terminate as of a specified date or time following that date unless exercised by
the optionee; (iii) in the event of a merger under the terms of which
stockholders will receive a cash payment for each share surrendered in the
merger, terminate each outstanding option in exchange for a payment equal in
amount to the excess, if any, of the merger price over the per-share exercise
price of each such option, times the number of shares of common stock subject to
the option; or (iv) terminate each outstanding option in exchange for a cash
payment equal in amount to the product of the excess, if any, of the fair market
value of a share of common stock over the per-share exercise price of each such
option, times the number of shares subject to such option. On March , 2000 the
board of directors terminated the 1997 plan in conjunction with their adoption
of the 2000 stock incentive plan. Therefore, no further awards may be granted
under the 1997 plan.
2000 STOCK INCENTIVE PLAN
Our 2000 stock incentive plan was adopted by our board of directors in
March 2000. As of March , 2000, an aggregate of shares of common
stock at a weighted average exercise price of
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<PAGE>
$ per share were outstanding under the 2000 stock incentive plan, an
aggregate of shares of common stock were reserved for issuance for
future option grants and an aggregate of shares were issued upon exercise
of options previously granted under the 2000 stock incentive plan. The 2000 plan
provides for the grant of incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code, non-statutory stock options,
restricted stock awards and other stock-based awards.
All of our officers, employees, directors, consultants and advisors are
eligible to receive awards under the 2000 stock incentive plan. Under present
law, however, incentive stock options may only be granted to employees.
We may grant options at an exercise price less than, equal to or greater
than the fair market value of the common stock on the date of grant. Under
present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
may not be granted at an exercise price less than the fair market value of the
common stock on the date of grant or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the voting power of our company. The 2000 stock incentive plan permits the
board of directors to determine how optionees may pay the exercise price of
their options, including by cash, check or in connection with a "cashless
exercise" through a broker, by surrender of shares of common stock, by delivery
to us of a promissory note, or by any combination of the permitted forms of
payment.
Our board of directors administers the 2000 stock incentive plan. The board
of directors has the authority to adopt, amend and repeal the administrative
rules, guidelines and practices relating to the plan and to interpret its
provisions. It may delegate authority under the plan to one or more committees
of the board of directors. The board of directors has authorized the
compensation committee to administer the 2000 stock incentive plan, including
the granting of options to executive officers. Subject to any applicable
limitations contained in the 2000 stock incentive plan, the board of directors,
the compensation committee or any other committee or executive officer to whom
the board of directors delegates authority, as the case may be, selects the
recipients of awards and determines:
- the number of shares of common stock covered by options and the dates upon
which such options become exercisable;
- the exercise price of options;
- the duration of options; and
- the number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including the conditions for repurchase, issue price and repurchase price.
In the event of a merger, liquidation or other acquisition event, our board
of directors is authorized to provide for outstanding options or other
stock-based awards to be assumed or substituted for by the acquiror or to
accelerate the vesting schedule of awards; provided that in the event an
optionee is terminated without cause within 12 months following any such event,
the unvested options then held by such optionee shall automatically vest.
No award may be granted under the 2000 stock incentive plan after March ,
2010, but the vesting and effectiveness of awards previously granted may extend
beyond that time. The board of directors may at any time amend, suspend or
terminate the 2000 stock incentive plan, except that no award granted after an
amendment of the 2000 stock incentive plan and designated as subject to
Section 162(m) of the Internal Revenue Code by the board of directors shall
become exercisable, realizable or vested, to the extent the amendment was
required to grant the award, unless and until the amendment is approved by our
stockholders.
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<PAGE>
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Our 2000 non-employee director stock option plan was adopted by our board of
directors on March , 2000. Under the director stock option plan, directors who
are not our employees will be eligible to receive non-statutory options to
purchase shares of our common stock. A total of shares of our common stock
may be issued upon the exercise of options granted under the director stock
option plan.
Under the terms of the 2000 non-employee director stock option plan, each
person who becomes a non-employee director after the closing of this offering
will be granted an option to purchase shares of our common stock on the
date of his or her initial election to the board of directors. These options
vest in three equal annual installments beginning on the first anniversary of
the option grant date. In addition, each non-employee director will receive an
option to purchase shares of our common stock on the date of each annual
meeting of our stockholders commencing with the 2001 annual meeting of
stockholders, other than a director who was initially elected to the board of
directors at any such annual meeting or, if previously, at any time after the
prior year's annual meeting. These options vest in three equal annual
installments, beginning on the first anniversary of the option grant date. The
exercise price per share of all options will equal the fair market value per
share of our common stock on the option grant date. Each grant under the 2000
non-employee director stock option plan will have a maximum term of ten years,
subject to earlier termination following the optionee's cessation of service.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 employee stock purchase plan was adopted by our board of directors
on March , 2000. The purchase plan will become effective upon the completion
of this offering and authorizes the issuance of up to a total of shares of
our common stock to participating employees.
All of our employees, including our directors who are employees, whose
customary employment is more than 20 hours per week for more than five months in
any calendar year, are eligible to participate in the 2000 employee stock
purchase plan. Employees who would immediately after an option grant own 5% or
more of the total combined voting power or value of our stock or any subsidiary
are not eligible to participate in the 2000 employee stock purchase plan.
We will make one or more offerings to our employees to purchase stock under
the 2000 employee stock purchase plan. Offerings will begin on dates established
by our board of directors, provided that our first offering will commence as
soon as practicable after the date on which the trading of our common stock
commences on the Nasdaq National Market in connection with this offering. Each
offering commencement date will begin a six-month period during which payroll
deductions will be made and held for the purchase of our common stock at the end
of the purchase period.
On the first day of a designated payroll deduction period, or offering
period, we will grant to each eligible employee who has elected to participate
in the 2000 employee stock purchase plan an option to purchase shares of our
common stock as follows: the employee may authorize between 1% and 10% of his or
her pay to be deducted by us during the offering period. On the last day of the
offering period, the employee is deemed to have exercised the option, at the
option exercise price, to the extent of accumulated payroll deductions. Under
the terms of the 2000 employee stock purchase plan, the option price is an
amount equal to 85% of the closing price (as defined) per share of our common
stock on either the first day or the last day of the offering period, whichever
is lower. In no event may an employee purchase in any one offering period a
number of shares which exceeds the number of shares determined by dividing
(a) the product of $2,083 and the number or fraction of months in the offering
period by (b) the closing price of a share of our common stock on the
commencement date of the offering period. Our board of directors may, in its
discretion, choose an offering period of 12 months or less for each offering and
may choose a different offering period for each offering.
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<PAGE>
An employee who is not a participant on the last day of the offering period
is not entitled to exercise any option, and the employee's accumulated payroll
deductions will be refunded. An employee's rights under the 2000 employee stock
purchase plan terminate upon voluntary withdrawal from the purchase plan at any
time, or when the employee ceases employment for any reason, except that upon
termination of employment because of death, the employee's beneficiary has
certain rights to elect to exercise the option to purchase the shares that the
accumulated payroll deductions in the employee's account would purchase at the
date of death.
Because participation in the purchase plan is voluntary, we cannot now
determine the number of shares of our common stock to be purchased by any
particular current executive officer, by all current executive officers as a
group or by non-executive employees as a group.
CERTAIN TRANSACTIONS
On December 30, 1999, we issued an aggregate of 1,244,325 Series C
convertible preferred shares to a number of investors at a purchase price of
$10.05 per share for a total cash consideration to us of approximately
$12,505,466. In this transaction, we sold 895,914 shares to MSD Portfolio
Investments, LP, 124,433 shares to Imprimis SB, LP, 92,493 shares to Insight
Capital Partners III - Coinvestment, LP, 49,773 shares to each of Black Marlin
Investments LLC and Vermeer Investments, LLC, 19,495 shares to Insight Capital
Partners (Cayman) III, LP and 12,444 shares to Insight Capital Partners III, LP.
William Doyle, the chairman of our board of directors, is a partner of Insight
Capital Partners. Jeffrey Horing, a director of I-many, is also a partner of
Insight Capital Partners. John Phelan, a director of I-many, is a partner of MSD
Portfolio L.P. - Investments.
On September 19, 1997, we issued to Insight Capital Partners II, L.P. and WI
Software Investors LLC for an aggregate purchase price of $6,000,000 (a)
$6,000,000 in principal amount of our senior notes due August 31, 1998, bearing
interest at 6% per year and (b) an option to purchase (i) 2,023,550 Series A
convertible preferred shares and (ii) warrants to purchase up to 400,000 Series
B convertible preferred shares. On April 15, 1998, the note holders exercised
their option to convert all principal and accrued interest into 2,023,550 Series
A convertible preferred shares. Insight Capital Partners II, L.P. and WI
Software Investors LLC each received 1,011,775 Series A convertible preferred
shares. In December 1998, Insight Capital Partners II, L.P. and WI Software
Investors LLC each exercised their warrants and each received 200,000 Series B
convertible preferred shares.
On September 19, 1997, we also redeemed an aggregate of 1,018,775 common
shares at $2.94 per share for an aggregate purchase price of $3,000,000, of
which 611,275 common shares were purchased from Alan Hyman and 407,500 common
shares were purchased from Mark Tilly.
On May 27, 1997, we issued convertible notes in the aggregate principal
amount of $150,000 with interest payable at 12% per annum and warrants to
purchase 89,275 common shares, with an exercise price of $1.68 per share.
BayView Ventures purchased for $100,000 a $100,000 note and warrants for 59,525
common shares and Goulder Investments Ltd. purchased for $50,000 a $50,000 note
and warrants for 29,750 common shares. On June 30, 1998 both BayView Ventures
and Goulder Investments converted their notes into 59,525 common shares and
29,750 common shares, respectively. Goulder Investments Ltd. exercised its
warrants on January 4, 2000 for 29,750 common shares and BayView Ventures
exercised its warrants on January 10, 2000 for 59,525 common shares. Philip M.
St. Germain, our chief financial officer, held a 50% stake in BayView Ventures.
47
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as adjusted to reflect
the sale of the common stock in this offering, concerning beneficial ownership
of our common stock as of February 29, 2000 by:
- each shareholder that we know is the beneficial owner of more than 5% of
our common stock;
- each of our directors;
- each executive officer named in the Summary Compensation Table; and
- all directors and executive officers as a group.
Percentages of the outstanding shares of common stock are based on 8,822,576
shares outstanding as of February 29, 2000 plus all shares of common stock
issuable on exercise of options within 60 days of February 29, 2000 held by the
particular beneficial owner, assuming the conversion of all shares of
convertible preferred stock.
All percentages assume no exercise of the underwriters' over-allotment
option. The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the individual or entity has voting power or investment power and any shares
which the individual has the right to acquire within 60 days of February 29,
2000 through the exercise of any stock option or other right. Except pursuant to
applicable community property laws or as indicated in the footnotes to this
table, to our knowledge, each stockholder identified in the table possesses sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by such stockholder. The inclusion herein of any shares
deemed beneficially owned does not constitute an admission of beneficial
ownership of such shares.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o I-many, Inc., 537 Congress Street, Portland, Maine
04101.
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE BENEFICIALLY OWNED
PRIOR TO --------------------------------
NAME OF BENEFICIAL OWNER OFFERING BEFORE OFFERING AFTER OFFERING
- ------------------------ ------------ --------------- --------------
<S> <C> <C> <C>
Jeffrey Horing (1).................................... 3,022,415 34.3%
Entities related to WI Software Investors, LLC (2).... 1,511,208 17.1
Entities related to Insight Capital Partners (3)...... 1,511,207 17.1
Entities related to MSD Capital, L.P. (4)............. 1,345,460 15.3
John C. Phelan (5).................................... 1,295,687 14.7
Alan Hyman (6)........................................ 1,229,207 13.9
Mark Tilly (7)........................................ 1,031,600 11.7
A. George Gitter Trust (8)............................ 751,225 8.5
Gerald F. O'Connell................................... 495,450 5.6
William F. Doyle (9).................................. 299,432 3.4
Philip M. St. Germain (10)............................ 197,639 2.2
A. Leigh Powell (11).................................. 30,000 *
Steven I. Hirschfeld (12)............................. 50,000 *
Glenn Wira (13)....................................... 66,250 *
Michael Pinto (14).................................... 3,750 *
All directors and executive officers as a group
(12 people) (15).................................... 3,238,283 36.0
</TABLE>
- ------------------------
* Indicates less than 1%
48
<PAGE>
(1) Includes 1,511,207 shares held by entities affiliated with Insight Capital
Partners (see note 3 below). Mr. Horing is a member of the general partners
of these funds. Also includes 1,511,208 shares held by entities affiliated
with WI Software Investors, LLC (see note 2 below). Mr. Horing is an owner
of Insight Venture Management, Inc. which, by contract, has limited voting
power over the shares held by WI Software Investors, LLC and Imprimis SB,
L.P. Mr. Horing disclaims beneficial ownership of all such shares except to
the extent of his pecuniary interest in such shares.
(2) Consists of 1,386,775 shares held by WI Software Investors, LLC and 124,433
shares held by Imprimis SB, L.P. The address of these entities is 411 West
Putnam Avenue, Suite 125, Greenwich, CT 06830.
(3) Consists of 1,090,597 shares held by Insight Capital Partners II, L.P.,
121,178 shares held by Insight Capital Partners (Cayman) II, L.P., 210,422
shares held by Insight Capital Partners III, L.P., 36,885 shares held by
Insight Capital Partners III - Coinvestors, L.P. and 52,125 shares held by
Insight Capital Partners (Cayman) III, L.P. The address of these entities is
527 Madison Avenue, 10th Floor, New York, NY 10022.
(4) Consists of 895,914 shares held by MSD Portfolio L.P. - Investments, 350,000
shares held by DBV Investments, L.P., 49,773 shares held by Black Marlin
Investments, LLC, and 49,773 shares held by Vermeer Investments, LLC. The
address of these entities is 780 Third Avenue, 43rd Floor, New York, NY
10017.
(5) Includes 895,914 shares held by MSD Portfolio L.P. - Investments and 350,000
shares held by DBV Investments, L.P., over which Mr. Phelan shares
investment power. Also includes 49,773 shares held by Black Marlin
Investments, LLC.
(6) Includes 8,864 shares held by Dorothy R. Hyman, Mr. Hyman's mother.
(7) Includes 128,000 shares held in trust for the benefit of Mr. Tilly's
children, as to which he disclaims beneficial ownership.
(8) The address of the A. George Gitter Trust is c/o Archelon Partners, Inc.,
411 South Wells Avenue, Suite 500, Chicago, IL 60607.
(9) Consists of 210,422 shares held by Insight Capital Partners III, L.P.,
36,885 shares held by Insight Capital Partners III - Coinvestors, L.P. and
52,125 shares held by Insight Capital Partners (Cayman) III, L.P. Mr. Doyle
is a member of the general partner of these entities. Mr. Doyle disclaims
beneficial ownership of all such shares except to the extent of his
pecuniary interest in such shares.
(10) Includes 31,976 shares held by Toni St. Germain, Mr. St. Germain's spouse.
Includes 30,953 shares issuable upon exercise of stock options exercisable
within 60 days of February 29, 2000.
(11) Includes 15,000 shares issuable upon exercise of stock options exercisable
within 60 days of February 29, 2000.
(12) Consists of 50,000 shares issuable upon exercise of stock options
exercisable within 60 days of February 29, 2000.
(13) Includes 2,500 shares issuable upon exercise of stock options exercisable
within 60 days of February 29, 2000.
(14) Consists of 3,750 shares issuable upon exercise of stock options
exercisable within 60 days of February 29, 2000.
(15) Includes 185,953 shares of common stock issuable upon exercise of stock
options exercisable within 60 days of February 29, 2000.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The total number of shares of all classes of stock which we have authority
to issue is shares, consisting of (i) shares of common stock,
$0.0001 par value per share and (ii) 5,000,000 shares of preferred stock, par
value $0.01 per share.
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available at the times and
in the amounts as our board of directors may determine. Each holder of common
stock is entitled to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the election of
directors is not provided for in our amended and restated certificate of
incorporation. As a result, at each election of directors, the holders of a
majority of the shares voted can elect all of the directors then standing for
election.
Our common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon our liquidation, dissolution or winding-up, the
holders of our common stock are entitled to share ratably with holders of any
participating preferred stock in all assets remaining after payment of all
liabilities and the liquidation preferences of any outstanding preferred stock.
Each outstanding share of common stock is, and all shares of common stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
Under the terms of our amended and restated certificate of incorporation,
the board of directors is authorized to issue shares of preferred stock in one
or more series without stockholder approval. The board has discretion to
determine the rights, preferences, privileges and restrictions, including voting
rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences of each series of preferred stock. The purpose of
authorizing the board of directors to issue preferred stock and determine its
rights and preferences is to eliminate delays associated with a stockholder vote
on specific issuances. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could make it more difficult for a third party to acquire,
or could discourage a third party from acquiring, a majority of our outstanding
voting stock. We have no present plans to issue any shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination" is
defined as including mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
Our amended and restated certificate of incorporation provides for the
division of the board of directors into three classes as nearly equal in size as
possible with staggered three-year terms. Any vacancy on the board of directors,
including a vacancy resulting from an enlargement of the board of directors, may
only be filled by vote of a majority of the directors then in office. The
classification of the board of directors and the limitation on and filling of
vacancies could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, control of us.
50
<PAGE>
Our amended and restated bylaws also provide that after this offering, any
action required or permitted to be taken by our stockholders at an annual
meeting or special meeting of stockholders may only be taken if it is properly
brought before such meeting and may not be taken by written action in lieu of a
meeting. Our amended and restated bylaws further provide that special meetings
of the stockholders may only be called by the chairman of the board, the
president or the board of directors. In order for any matter to be considered
"properly brought" before a meeting, a stockholder must comply with certain
requirements regarding advance notice and provide certain information to I-many.
These provisions could have the effect of delaying until the next stockholders'
meeting stockholder actions which are favored by the holders of a majority of
our outstanding voting securities. These provisions could also discourage a
third party from making a tender offer for our common stock, because even if it
acquired a majority of our outstanding voting securities, it would be able to
take action as a stockholder (such as electing new directors or approving a
merger) only at a duly called stockholders' meeting and not by written consent.
REGISTRATION RIGHTS
As a result of a registration rights agreement between I-many and some of
our stockholders, the holders of approximately 3,667,875 shares of common stock
are entitled to rights with respect to the registration of such shares under the
Securities Act, as described below.
REQUIRED REGISTRATION RIGHTS. At any time after the completion of this
offering, the holders of at least 20% of the shares of common stock issued upon
conversion of our preferred stock can request that we register all or a portion
of their shares. The registration rights agreement requires us to file up to two
registration statements in response to such demands for registration and no more
than one registration statement within any consecutive 360-day period. However,
we are not obligated to file any registration statement during any period in
which we have already filed any other registration statement which has not been
withdrawn or has not been declared effective for over 90 days. Also, we may
postpone the filing of a registration statement for up to 180 days once in any
12-month period if we determine that an earlier filing would be seriously
detrimental to us or our stockholders.
PIGGYBACK REGISTRATION RIGHTS. If we register any securities for public
sale, the holders of the shares of common stock issued upon conversion of our
preferred stock will have the right to include their shares in the registration
statement. The managing underwriter of any underwritten offering will have the
right to limit the number of shares registered by these holders due to marketing
reasons.
We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, and the fees and expenses of any special audit for any registration
initiated pursuant to the required registration rights, which will be paid by
the selling stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is . Its
address is and its telephone number is .
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering as a result of contractual and legal restrictions on resale, sales
of substantial amounts of common stock in the public market after the
restrictions lapse could cause the prevailing market price of our common stock
to fall and impede our ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding an aggregate of
shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options after February 29,
2000. Of these outstanding shares, the shares sold in the offering
will be freely tradable without restriction or further registration under the
Securities Act of 1933 unless purchased by "affiliates" of I-many as that term
is defined in Rule 144 under the Securities Act. The remaining 8,822,576 shares
of common stock outstanding upon completion of the offering will be "restricted
shares," as that term is defined in Rule 144 under the Securities Act.
Restricted shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rules 144 or 701 promulgated
under the Securities Act, which rules are summarized below, or another
exemption. Sales of the restricted shares in the public market, or the
availability of such shares for sale, could adversely affect the market price of
our common stock.
We have agreed not to sell or otherwise dispose of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, or enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the common stock, for a
period of 180 days after the date of this prospectus, without the prior written
consent of FleetBoston Robertson Stephens Inc. In addition, substantially all
officers, directors and certain other holders of common stock have entered into
contractual "lock-up" agreements providing that they will not offer, sell,
contract to sell or grant any option to purchase or otherwise dispose of shares
of common stock owned by them or that could be purchased by them through the
exercise of options for a period of 180 days after the date of this prospectus
without the prior written consent of FleetBoston Robertson Stephens Inc. As a
result of these contractual restrictions, notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144 and 701, additional
shares will be available for sale in the public market as follows:
- None of the additional shares of common stock will be eligible for sale as
of the effective date of the offering;
- 96,150 of the additional shares will be eligible for sale beginning
90 days after the effective date of the offering;
- 8,567,828 additional shares will be eligible for sale beginning 180 days
after the effective date of the offering, subject in some cases to certain
volume limitations.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
52
<PAGE>
- the average weekly trading volume of our common stock on the Nasdaq Stock
Market's National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
generally including the holding period of any prior owner other than an
affiliate, is entitled to sell such shares without complying with the manner of
sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this offering.
RULE 701
Rule 701 provides that, beginning 90 days after the date of this prospectus,
persons other than affiliates may sell shares of common stock acquired from us
in connection with written compensatory benefit plans, including our 1994 stock
plan, 1997 stock plan, and 2000 stock incentive plan, subject only to the manner
of sale provisions of Rule 144. Beginning 90 days after the date of this
prospectus, affiliates may sell these shares of common stock subject to all
provisions of Rule 144 except the one-year minimum holding period.
REGISTRATION ON FORM S-8
We intend to file a registration statement under the Securities Act covering
the shares of common stock subject to outstanding options or reserved for
issuance under our 1994 stock plan, 1997 stock plan, 2000 stock incentive plan,
2000 employee stock purchase plan and our 2000 director stock option plan. This
registration statement is expected to be filed as early as the effectiveness of
the registration statement covering the shares of common stock offered in this
offering and will automatically become effective upon filing. Shares registered
under this registration statement will, subject to Rule 144 volume limitations
applicable to affiliates and the expiration of any 180-day contractual lockup
period, be available for sale in the open market, except to the extent that
these shares are subject to vesting restrictions.
53
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., J.P. Morgan Securities Inc. and SG Cowen
Securities Corporation have severally agreed with us, subject to the terms and
conditions set forth in the underwriting agreement, to purchase from us the
number of shares of common stock set forth opposite their respective names. The
underwriters are committed to purchase and pay for all shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ -------------------------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
J.P. Morgan Securities Inc..................................
SG Cowen Securities Corporation.............................
Total.....................................................
=========================
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at that price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.
Prior to this offering, there has been no public market for our common
stock. Consequently, the public offering price for the common stock offered
under this prospectus will be determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
OVER-ALLOTMENT OPTION
We have granted to the underwriters an option, exercisable during the 30-day
period after the date of this prospectus, to purchase up to additional
shares of common stock to cover over-allotments, if any, at the public offering
price less the underwriting discount set forth on the cover page of this
prospectus. If the underwriters exercise their over-allotment option to purchase
any of the additional shares of common stock, the underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof as the number of shares to be purchased by each of them
bears to the total number of shares of common stock offered in this offering. If
purchased, these additional shares will be sold by the underwriters on the same
terms as those on which the shares offered hereby are being sold. We will be
obligated, pursuant to the over-allotment option, to sell shares to the
underwriters to the extent the over-allotment option is exercised. The
underwriters may exercise such over-allotment option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered in this offering.
The following table summarizes the compensation to be paid to the
underwriters:
<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions
payable by I-many..................... $ $ $
</TABLE>
54
<PAGE>
We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $ .
INDEMNITY
The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
LOCK-UP AGREEMENTS
Each executive officer and director of I-many and substantially all of our
other shareholders have agreed, subject to specified exceptions, not to offer to
sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of common stock or any options or warrants to
purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or thereafter acquired directly by those holders or with respect to which they
have the power of disposition, without the prior written consent of FleetBoston
Robertson Stephens Inc. This restriction terminates after the close of trading
of the shares on the 180(th) day of (and including) the day the shares commenced
trading on the Nasdaq National Market. However, FleetBoston Robertson
Stephens Inc. may, in its sole discretion and at any time or from time to time
before the termination of the 180-day period, without notice, release all or any
portion of the securities subject to lock-up agreements. There are no existing
agreements between the representatives and any of our shareholders who have
executed a lock-up agreement providing consent to the sale of shares prior to
the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period, we will not,
subject to certain exceptions, without the prior written consent of FleetBoston
Robertson Stephens Inc.:
- consent to the disposition of any shares held by shareholders subject to
lock-up agreements prior to the expiration of the lock-up period; or
- issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable
for shares of common stock other than our sale of shares in this offering,
the issuance of our common stock upon the exercise of outstanding options
or warrants, and the issuance of options under existing stock option and
incentive plans provided that those options do not vest prior to the
expiration of the lock-up period. See "Shares Eligible For Future Sale."
LISTING
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "IMNY."
STABILIZATION
The representatives have advised us that, pursuant to Regulation M under the
Securities Act of 1933, some persons participating in this offering may engage
in transactions, including stabilizing bids, syndicate covering transactions or
the imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the shares of common stock at a level above that
which might otherwise prevail in the open market. A "stabilizing bid" is a bid
for or the purchase of common stock on behalf of the underwriters for the
purpose of fixing or maintaining the price of the common stock. A "syndicate
covering transaction" is the bid for or the purchase of common stock on behalf
of the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by such underwriter or syndicate member purchased by the
representatives in a syndicate covering transaction and has therefore not been
effectively placed by such
55
<PAGE>
underwriter or syndicate member. The representatives have advised us that such
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
DIRECTED SHARE PROGRAM
At our request, certain of the underwriters have reserved up to 5% of the
shares of common stock for sale at the initial public offering price, to persons
who are directors, officers or employees of I-many or who are otherwise
associated with us and our affiliates, and who have advised us of their desire
to purchase such shares. The number of shares of common stock available for sale
to the general public will be reduced to the extent of sales of the directed
shares to any of the persons for whom they have been reserved. Any shares not so
purchased will be offered by the underwriters on the same basis as all other
shares offered hereby. We have agreed to indemnify those certain underwriters
against certain liabilities and expenses, including liabilities under the
Securities Act, in connection with the sales of directed shares.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Hale and Dorr LLP, Boston, Massachusetts. Legal matters in
connection with this offering will be passed upon for the underwriters by Testa,
Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements as of December 31, 1998 and 1999, and for each of
the three years in the period ended December 31, 1999 included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, under the Securities Act of 1933, a registration statement on Form S-1
relating to the common stock we are offering. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules filed with it. For further information with respect to I-many and
the shares we are offering pursuant to this prospectus you should refer to the
registration statement, including the exhibits and schedules filed with it. You
may inspect a copy of the registration statement without charge at the Public
Reference Section of the Securities and Exchange Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 or at the Securities and Exchange
Commission's regional offices at 5670 Wilshire Boulevard, 11(th) Floor,
Los Angeles, California 90036. The Securities and Exchange Commission maintains
an Internet site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission. The Securities and Exchange Commission's
world wide web address is www.sec.gov. The Securities and Exchange Commission's
phone number is 1-800-SEC-0330.
We intend to furnish holders of our common stock annual reports containing,
among other information, audited financial statements certified by an
independent public accounting firm and quarterly reports containing unaudited
condensed financial information for the first three quarters of each fiscal
year. We intend to furnish such other reports as we may determine or as may be
required by law.
56
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999....................................... F-4
Statements of Redeemable Preferred Stock and Stockholders'
Equity for the Years Ended December 31, 1997, 1998 and
1999...................................................... F-5
Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
I-many, Inc.:
We have audited the accompanying balance sheets of I-many, Inc. (a Delaware
corporation) as of December 31, 1998 and 1999 and the related statements of
operations, redeemable preferred stock and stockholders' equity and cash flows
for the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of I-many, Inc. as of
December 31, 1998 and 1999 and the results of its operations and its cash flows
for the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Boston, Massachusetts
February 11, 2000
F-2
<PAGE>
I-MANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------- DECEMBER 31,
1998 1999 1999
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................ $ 5,129,339 $15,322,149 $15,322,149
Accounts receivable, net of allowance for doubtful
accounts of $100,000, $250,000 and $250,000,
respectively........................................... 2,468,778 4,800,316 4,800,316
Unbilled receivables..................................... 2,504,241 2,453,817 2,453,817
Prepaid expenses and other current assets................ 56,548 350,668 350,668
Prepaid and refundable income taxes...................... -- 481,438 481,438
Deferred tax asset (Note 5).............................. 312,999 -- --
----------- ----------- -----------
Total current assets............................... 10,471,905 23,408,388 23,408,388
Property and Equipment, net (Note 2)....................... 1,008,553 4,040,467 4,040,467
Deferred Tax Asset (Note 5)................................ 93,951 -- --
Other Assets............................................... 35,046 32,751 32,751
----------- ----------- -----------
Total assets....................................... $11,609,455 $27,481,606 $27,481,606
=========== =========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdraft........................................... $ -- $ 228,873 $ 228,873
Accounts payable......................................... 441,531 2,818,892 2,818,892
Accrued expenses......................................... 2,064,795 5,016,724 5,016,724
Current portion of deferred service revenue.............. 2,766,033 4,432,512 4,432,512
Unearned product revenue................................. 647,668 2,038,075 2,038,075
Current portion of capital lease obligations............. 33,756 23,073 23,073
----------- ----------- -----------
Total current liabilities.......................... 5,953,783 14,558,149 14,558,149
Deferred Service Revenue, net of current portion........... 243,936 216,496 216,496
Capital Lease Obligations, net of current portion.......... 41,147 18,338 18,338
Deferred Rent.............................................. 39,468 -- --
Commitments and Contingencies (Note 6)
Series C Redeemable Convertible Preferred Stock (Note 4)... -- 12,491,663 --
Stockholders' Equity:
Series A convertible preferred stock, $.01 par value-
Authorized--2,100,000 shares
Issued and outstanding--2,023,550 shares in 1998 and
1999; no shares pro forma (liquidation value of
$5,868,295).......................................... 20,236 20,236 --
Series B convertible preferred stock, $.01 par value--
Authorized--400,000 shares
Issued and outstanding--400,000 shares in 1998 and
1999; no shares pro forma (liquidation value of
$2,000,000).......................................... 4,000 4,000 --
Common stock, $.0001 par value
Authorized--12,000,000 shares
Issued and outstanding--4,778,580 and 4,913,554 shares
in 1998 and 1999, respectively; 8,581,429 shares pro
forma................................................ 478 491 857
Additional paid-in capital............................... 9,572,254 9,829,520 22,345,053
Deferred stock-based compensation........................ (66,406) (235,156) (235,156)
Accumulated deficit...................................... (4,199,441) (9,422,131) (9,422,131)
----------- ----------- -----------
Total stockholders' equity......................... 5,331,121 196,960 12,688,623
----------- ----------- -----------
Total liabilities, redeemable preferred stock and
stockholders' equity............................. $11,609,455 $27,481,606 $27,481,606
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
I-MANY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Net Revenues:
Product................................................... $5,042,989 $ 8,526,435 $ 9,227,860
Service................................................... 2,470,870 5,016,085 10,183,552
---------- ----------- -----------
Total net revenues...................................... 7,513,859 13,542,520 19,411,412
Cost of Revenues............................................ 2,248,677 2,062,327 5,354,333
---------- ----------- -----------
Gross profit............................................ 5,265,182 11,480,193 14,057,079
---------- ----------- -----------
Operating Expenses:
Sales and marketing....................................... 1,223,028 3,676,286 6,613,343
Research and development.................................. 1,523,463 2,338,738 8,222,307
General and administrative................................ 1,301,631 3,378,695 3,555,734
Depreciation and amortization............................. 160,568 366,024 751,152
---------- ----------- -----------
Total operating expenses................................ 4,208,690 9,759,743 19,142,536
---------- ----------- -----------
Income (loss) from operations........................... 1,056,492 1,720,450 (5,085,457)
Other Income (Expense):
Interest income........................................... 42,314 97,749 184,729
Interest expense.......................................... (707,482) (184,867) (10,604)
Other expense, net........................................ (67,698) (42,240) (27,537)
---------- ----------- -----------
Total other (expense) income............................ (732,866) (129,358) 146,588
---------- ----------- -----------
Income (loss) before income taxes......................... 323,626 1,591,092 (4,938,869)
Provision for (Benefit from) Income Taxes................... -- (320,695) 281,075
---------- ----------- -----------
Net income (loss)....................................... $ 323,626 $ 1,911,787 $(5,219,944)
========== =========== ===========
Accretion of dividends on redeemable convertible preferred
stock................................................... -- -- 2,746
---------- ----------- -----------
Net income (loss) applicable to common stockholders..... $ 323,626 $ 1,911,787 $(5,222,690)
========== =========== ===========
Net Income (Loss) per Share:
Basic..................................................... $ 0.08 $ 0.47 $ (1.14)
========== =========== ===========
Diluted................................................... $ 0.08 $ 0.27 $ (1.14)
========== =========== ===========
Weighted Average Shares Outstanding:
Basic..................................................... 3,913,930 4,076,962 4,573,178
========== =========== ===========
Diluted................................................... 5,368,845 7,326,796 4,573,178
========== =========== ===========
Pro Forma Net Loss per Share:
Basic and Diluted......................................... $ (0.75)
===========
Pro Forma Weighted Average Shares Outstanding:
Basic and Diluted......................................... 7,000,147
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
I-MANY, INC.
STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
<TABLE>
CONVERTIBLE PREFERRED STOCK
-------------------------------------------
SERIES C REDEEMABLE
PREFERRED STOCK SERIES A SERIES B COMMON
------------------------ --------------------- ------------------- STOCK
REDEMPTION $.01 PAR $.01 PAR ----------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES
---------- ----------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996.............. -- $ -- -- $ -- -- $ -- 4,200,000
Exercise of stock options............. -- -- -- -- -- -- 122,950
Gain on extinguishment of debt with a
related party....................... -- -- -- -- -- -- --
Purchase of treasury stock............ -- -- -- -- -- -- --
Issuance of warrants to purchase
Series B preferred stock............ -- -- -- -- -- -- --
Net income............................ -- -- -- -- -- -- --
---------- ----------- ---------- ------- -------- ------- ----------
Balance, December 31, 1997.............. -- -- -- -- -- -- 4,322,950
Issuance of treasury stock upon the
exercise of stock options........... -- -- -- -- -- -- --
Exercise of stock options............. -- -- -- -- -- -- 41,950
Sale of restricted common stock....... -- -- -- -- -- -- 37,500
Issuance of treasury stock and common
stock upon the sale of restricted
common stock........................ -- -- -- -- -- -- 272,400
Deferred stock-based compensation
associated with the sale of
restricted common stock............. -- -- -- -- -- -- --
Amortization of deferred stock-based
compensation........................ -- -- -- -- -- -- --
Conversion of promissory notes and
accrued interest into Series A
preferred stock..................... -- -- 2,023,550 20,236 -- -- --
Conversion of promissory notes into
common stock........................ -- -- -- -- -- -- 89,280
Exercise of warrants to purchase
Series B preferred stock............ -- -- -- -- 400,000 4,000 --
Net issuance of common stock for
services............................ -- -- -- -- -- -- 14,500
Net income............................ -- -- -- -- -- -- --
---------- ----------- ---------- ------- -------- ------- ----------
Balance, December 31, 1998.............. -- -- 2,023,550 20,236 400,000 4,000 4,778,580
Issuance of Series C redeemable
preferred stock, net of issuance
costs of $16,549.................... 1,244,325 12,488,917 -- -- -- -- --
Accretion of dividends on Series C
redeemable preferred stock.......... -- 2,746 -- -- -- -- --
Exercise of stock options............. -- -- -- -- -- -- 134,974
Deferred stock-based compensation
associated with the issuance of
stock options....................... -- -- -- -- -- -- --
Amortization of deferred stock-based
compensation........................ -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- --
---------- ----------- ---------- ------- -------- ------- ----------
Balance, December 31, 1999.............. 1,244,325 12,491,663 2,023,550 20,236 400,000 4,000 4,913,554
Pro forma conversion of Series A and
Series B convertible preferred stock
to common stock (unaudited)......... -- -- (2,023,550) (20,236) (400,000) (4,000) 2,423,550
Pro forma conversion of Series C
redeemable preferred stock to common
stock (unaudited)................... (1,244,325) (12,491,663) -- -- -- -- 1,244,325
---------- ----------- ---------- ------- -------- ------- ----------
Pro forma balance, December 31, 1999
(Unaudited)........................... -- $ -- -- $ -- -- $ -- 8,581,429
========== =========== ========== ======= ======== ======= ==========
<S> <C> <C> <C> <C> <C> <C> <C>
SERIES B PREFERRED
STOCK
---------- ADDITIONAL WARRANTS DEFERRED TREASURY STOCK
$.0001 PAR PAID-IN ------------------- STOCK-BASED ------------------------
VALUE CAPITAL NUMBER VALUE COMPENSATION SHARES COST
---------- ----------- -------- -------- ------------- ---------- -----------
Balance, December 31, 1996.............. $420 $ 780 -- $ -- $ -- -- $ --
Exercise of stock options............. 12 1,609 -- -- -- -- --
Gain on extinguishment of debt with a
related party....................... -- 576,891 -- -- -- -- --
Purchase of treasury stock............ -- -- -- -- -- 1,011,775 (3,000,000)
Issuance of warrants to purchase
Series B preferred stock............ -- -- 16,000 563,724 -- -- --
Net income............................ -- -- -- -- -- -- --
---- ----------- -------- -------- --------- ---------- -----------
Balance, December 31, 1997.............. 432 579,280 16,000 563,724 -- 1,011,775 (3,000,000)
Issuance of treasury stock upon the
exercise of stock options........... -- (577,696) -- -- -- (751,225) 2,212,142
Exercise of stock options............. 4 31,274 -- -- -- -- --
Sale of restricted common stock....... 4 74,996 -- -- -- -- --
Issuance of treasury stock and common
stock upon the sale of restricted
common stock........................ 27 773,465 -- -- -- (260,550) 787,858
Deferred stock-based compensation
associated with the sale of
restricted common stock............. -- 75,000 -- -- (75,000) -- --
Amortization of deferred stock-based
compensation........................ -- -- -- -- 8,594 -- --
Conversion of promissory notes and
accrued interest into Series A
preferred stock..................... -- 5,848,222 -- -- -- -- --
Conversion of promissory notes into
common stock........................ 9 149,991 -- -- -- -- --
Exercise of warrants to purchase
Series B preferred stock............ -- 2,559,724 (16,000) (563,724) -- -- --
Net issuance of common stock for
services............................ 2 57,998 -- -- -- -- --
Net income............................ -- -- -- -- -- -- --
---- ----------- -------- -------- --------- ---------- -----------
Balance, December 31, 1998.............. 478 9,572,254 -- -- (66,406) -- --
Issuance of Series C redeemable
preferred stock, net of issuance
costs of $16,549.................... -- -- -- -- -- -- --
Accretion of dividends on Series C
redeemable preferred stock.......... -- -- -- -- -- -- --
Exercise of stock options............. 13 69,766 -- -- -- -- --
Deferred stock-based compensation
associated with the issuance of
stock options....................... -- 187,500 -- -- (187,500) -- --
Amortization of deferred stock-based
compensation........................ -- -- -- -- 18,750 -- --
Net loss.............................. -- -- -- -- -- -- --
---- ----------- -------- -------- --------- ---------- -----------
Balance, December 31, 1999.............. 491 9,829,520 -- -- (235,156) -- --
Pro forma conversion of Series A and
Series B convertible preferred stock
to common stock (unaudited)......... 242 23,994 -- -- -- -- --
Pro forma conversion of Series C
redeemable preferred stock to common
stock (unaudited)................... 124 12,491,539 -- -- -- -- --
---- ----------- -------- -------- --------- ---------- -----------
Pro forma balance, December 31, 1999
(Unaudited)........................... $857 $22,345,053 -- $ -- $(235,156) -- $ --
==== =========== ======== ======== ========= ========== ===========
<S> <C> <C>
TOTAL
STOCKHOLDERS'
ACCUMULATED EQUITY
DEFICIT (DEFICIT)
------------ ------------
Balance, December 31, 1996.............. $(4,800,708) $(4,799,508)
Exercise of stock options............. -- 1,621
Gain on extinguishment of debt with a
related party....................... -- 576,891
Purchase of treasury stock............ -- (3,000,000)
Issuance of warrants to purchase
Series B preferred stock............ -- 563,724
Net income............................ 323,626 323,626
----------- -----------
Balance, December 31, 1997.............. (4,477,082) (6,333,646)
Issuance of treasury stock upon the
exercise of stock options........... (1,634,146) 300
Exercise of stock options............. -- 31,278
Sale of restricted common stock....... -- 75,000
Issuance of treasury stock and common
stock upon the sale of restricted
common stock........................ -- 1,561,350
Deferred stock-based compensation
associated with the sale of
restricted common stock............. -- --
Amortization of deferred stock-based
compensation........................ -- 8,594
Conversion of promissory notes and
accrued interest into Series A
preferred stock..................... -- 5,868,458
Conversion of promissory notes into
common stock........................ -- 150,000
Exercise of warrants to purchase
Series B preferred stock............ -- 2,000,000
Net issuance of common stock for
services............................ -- 58,000
Net income............................ 1,911,787 1,911,787
----------- -----------
Balance, December 31, 1998.............. (4,199,441) 5,331,121
Issuance of Series C redeemable
preferred stock, net of issuance
costs of $16,549.................... -- --
Accretion of dividends on Series C
redeemable preferred stock.......... (2,746) (2,746)
Exercise of stock options............. -- 69,779
Deferred stock-based compensation
associated with the issuance of
stock options....................... -- --
Amortization of deferred stock-based
compensation........................ -- 18,750
Net loss.............................. (5,219,944) (5,219,944)
----------- -----------
Balance, December 31, 1999.............. (9,422,131) 196,960
Pro forma conversion of Series A and
Series B convertible preferred stock
to common stock (unaudited)......... -- --
Pro forma conversion of Series C
redeemable preferred stock to common
stock (unaudited)................... -- 12,491,663
----------- -----------
Pro forma balance, December 31, 1999
(Unaudited)........................... $(9,422,131) $12,688,623
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
I-MANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
----------- ---------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)......................................... $ 323,626 $1,911,787 $(5,219,944)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities--
Depreciation and amortization........................... 160,568 357,430 732,402
Deferred income taxes................................... -- (406,950) 406,950
Amortization of debt discount........................... 171,568 98,039 --
Compensation expense related to common stock issued for
services.............................................. -- 58,000 --
Amortization of deferred stock--based compensation...... -- 8,594 18,750
Deferred rent........................................... 40,388 (9,043) (39,468)
Changes in assets and liabilities--
Accounts receivable................................... 667,630 (1,942,344) (2,331,538)
Unbilled receivables.................................. (1,295,250) (654,241) 50,424
Prepaid expenses and other current assets............. 21,234 (36,814) (294,120)
Prepaid and refundable income taxes................... -- -- (481,438)
Accounts payable...................................... 61,595 257,021 2,377,361
Accrued expenses...................................... 867,525 1,027,760 2,951,929
Deferred revenue...................................... (1,339,027) 1,114,163 1,639,039
Unearned revenue...................................... 1,310,000 (1,195,332) 1,390,407
----------- ---------- -----------
Net cash provided by operating activities........... 989,857 588,070 1,200,754
----------- ---------- -----------
Cash Flows from Investing Activities:
Purchases of property and equipment....................... (326,999) (939,115) (3,764,316)
Decrease (increase) in other assets....................... (721) (25,088) 2,295
----------- ---------- -----------
Net cash used in investing activities............... (327,720) (964,203) (3,762,021)
----------- ---------- -----------
Cash Flows from Financing Activities:
Net proceeds from sale of Series C redeemable convertible
preferred stock......................................... -- -- 12,488,917
Proceeds from sale of restricted common stock............. -- 1,636,350 --
Proceeds from exercise of Series B preferred stock
warrants................................................ -- 2,000,000 --
Payments on capital lease obligations..................... (31,023) (36,060) (33,492)
Proceeds from convertible promissory notes................ 6,150,000 -- --
Payments on long--term debt............................... (1,981,750) -- --
Proceeds from exercise of stock options................... 33 33,166 69,779
Payment on loans from stockholders........................ (209,001) -- --
Bank overdraft............................................ -- -- 228,873
Purchase of treasury stock................................ (3,000,000) -- --
----------- ---------- -----------
Net cash provided by financing activities........... 928,259 3,633,456 12,754,077
----------- ---------- -----------
Net Increase in Cash and Cash Equivalents................... 1,590,396 3,257,323 10,192,810
Cash and Cash Equivalents, beginning of year................ 281,620 1,872,016 5,129,339
----------- ---------- -----------
Cash and Cash Equivalents, end of year...................... $ 1,872,016 $5,129,339 $15,322,149
=========== ========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest.................... $ 436,028 $ 26,828 $ 10,604
=========== ========== ===========
Cash paid during the year for taxes....................... $ -- $ -- $ 353,835
=========== ========== ===========
Supplemental Disclosure of Noncash Investing and Financing
Activities:
Accretion of dividends on Series C redeemable convertible
preferred stock......................................... $ -- $ -- $ 2,746
=========== ========== ===========
Deferred stock-based compensation associated with the
issuance of stock options............................... $ -- $ -- $ 187,500
=========== ========== ===========
Conversion of promissory notes and accrued interest into
Series A preferred stock................................ $ -- $5,868,458 $ --
=========== ========== ===========
Conversion of promissory notes into common stock.......... $ -- $ 150,000 $ --
=========== ========== ===========
Issuance of warrants to purchase Series B preferred
stock................................................... $ 563,724 $ -- $ --
=========== ========== ===========
Gain on extinguishment of debt with a related party....... $ 576,891 $ -- $ --
=========== ========== ===========
Property and equipment acquired under capital lease
obligations............................................. $ 60,469 $ -- $ --
=========== ========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
I-many, Inc. (the Company), formerly SCC Technologies, Inc., provides
solutions and related professional services that allow clients to manage complex
contract purchasing arrangements and facilitate business-to-business e-commerce.
The Company's clients include all parties involved in the sale and distribution
of pharmaceutical and other healthcare products, including manufacturers,
purchasers, groups of purchasers and distributors. The Company was originally
incorporated in 1989 in the Commonwealth of Massachusetts as a Subchapter S
corporation. On April 2, 1998, the Company reorganized and reincorporated in the
State of Delaware as a Subchapter C corporation.
The Company's financial statements reflect the application of certain
accounting policies, as described below and elsewhere in these notes to
financial statements.
(A) REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of Position
(SOP) No. 97-2, SOFTWARE REVENUE RECOGNITION and SOP 98-9, SOFTWARE REVENUE
RECOGNITION, WITH RESPECT TO CERTAIN ARRANGEMENTS. The Company generates
revenues from licensing its software and providing professional services,
training and maintenance and support services. Historically, product revenues
have been principally comprised of software license fees generated from the
Company's Contract Administration and Reporting System, or CARS, software suite.
The Company sells software, professional services, training and maintenance
and support services. In multiple-element arrangements, the Company allocates
the total fee to professional services, training and maintenance and support
services based on the fair value of those elements, which is defined as the
price charged when those elements are sold separately. The residual amount is
then allocated to the software license fee.
The Company recognizes software license fees upon execution of a signed
license agreement and delivery of the software, provided there are no
significant post-delivery obligations, the payment is fixed or determinable and
collection is probable. If an acceptance period is required, revenues are
recognized upon customer acceptance. The Company provides for sales returns at
the time of revenue recognition based on historical experience. To date, such
returns have not been significant.
Service revenues include professional services, training and maintenance and
support services. Professional service revenues are recognized as the services
are performed for time and materials contracts and using the
percentage-of-completion method for fixed fee contracts. If conditions for
acceptance exist, professional service revenues are recognized upon customer
acceptance. For fixed fee professional service contracts, the Company provides
for anticipated losses when the loss becomes known and can be reasonably
estimated. To date, losses incurred on fixed fee contracts have not been
significant. Training revenues are recognized as the services are provided.
Maintenance and customer support fees are recognized ratably over the term of
the maintenance contract on a straight-line basis. When maintenance and support
is included in the total license fee, the Company allocates a portion of the
total fee to maintenance and support based upon the price paid by the customer
to purchase maintenance and support in the second year.
In the latter part of 1999, the Company started offering its clients an
enterprise agreement that includes a software license, maintenance and support
and a fixed number of days of professional services. Clients opting for this
enterprise agreement will enter into a three-year, fixed-fee, all-inclusive
F-7
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
agreement payable in three equal annual installments commencing upon the
execution of the agreement. Due to the extended payment terms, the Company
recognizes the software license and maintenance and support component ratably
over the term of the enterprise agreement and recognizes the professional
service component as the related services are performed, provided that the
aggregate revenue recognized under the enterprise agreement does not exceed the
total cash received.
Payments received from customers at the inception of a maintenance period
are treated as deferred service revenues and recognized straight-line over the
maintenance period. Payments received from customers in advance of product
shipment or revenue recognition are treated as unearned product revenues and
recognized when the product is shipped to the customer or when earned.
Substantially all of the amounts included in cost of revenues represent direct
costs related to the delivery of professional services, training and maintenance
and customer support. To date, cost of product revenues have not been
significant. The company has not recorded any historical revenues related to its
e-commerce solution.
(B) USE OF 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.
(C) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid securities purchased with original
maturities of 90 days or less to be cash equivalents. Cash equivalents are
stated at cost, which approximates market value, and primarily consist of money
market funds and overnight investments that are readily convertible to cash.
(D) DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization using the
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
DESCRIPTION LIVES
- ------------------------------------------------------------ ----------------
<S> <C>
Computer software........................................... 2-3 years
Computer hardware........................................... 5 years
Furniture and equipment..................................... 7 years
Equipment under capital leases.............................. 5 years
</TABLE>
(E) LONG-LIVED ASSETS
The Company assesses the realizability of long-lived assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF. The
Company reviews its long-lived assets for impairment as events and circumstances
indicate the carrying amount of an asset may not be recoverable. The
F-8
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company evaluates the realizability of its long-lived assets based on
profitability and cash flow expectations for the related asset. As a result of
its review, the Company does not believe that any impairment currently exists
related to its long-lived assets.
(F) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred. SFAS
No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR
OTHERWISE MARKETED, requires capitalization of certain software development
costs subsequent to the establishment of technological feasibility. Based on the
Company's product development process, technological feasibility is established
upon completion of a working model. Costs incurred by the Company between
completion of the working model and the point at which the product is ready for
general release have not been material. As such, for the years ended
December 31, 1997, 1998 and 1999, all research and development costs have been
expensed as incurred.
(G) COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE
Beginning in the second half of 1999, the Company has incurred significant
expenditures related to the design and development of an Internet web site. The
Company accounts for internal-use software, including software development costs
related to the web site, in accordance with SOP 98-1, ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. In accordance with
this statement, costs incurred during the preliminary project stage and costs
incurred for data conversion, training and maintenance are expensed as incurred.
Once the preliminary project stage is completed, external direct costs incurred
during the application development stage are capitalized and amortized on a
straight-line basis over two years, which is the estimated useful life of the
software. For the years ended December 31, 1997 and 1998, no software
development costs related to the web site were incurred or capitalized. For the
year ended December 31, 1999, the Company incurred approximately $2,978,000 of
software development costs related to the web site, of which $2,000,000 was
capitalized based on costs incurred with a third party and the remainder was
charged to research and development expense. Capitalized software development
related to the web site are included in computer software as part of property
and equipment in the accompanying December 31, 1999 balance sheet.
(H) CONCENTRATIONS OF CREDIT RISK
SFAS No. 105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT
RISK, requires disclosure of any significant off-balance-sheet risk and
concentrations of credit risk. The Company does not have any significant
off-balance-sheet risk. Financial instruments that potentially expose the
Company to concentrations of credit risk consist of cash equivalents and
accounts receivable. Concentration of credit risk with respect to cash
equivalents is limited because the Company places its investments in highly
rated institutions. Concentration of credit risk with respect to accounts
receivable is limited to certain customers to whom the Company makes substantial
sales. To reduce risk, the Company routinely assesses the financial strength of
its customers and, as a consequence, believes that its accounts receivable
credit risk exposure is limited. The Company maintains an allowance for
potential credit losses but historically has
F-9
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
not experienced any significant losses related to individual customers or groups
of customers in any particular industry or geographic area.
The Company had a total of four customers whose accounts receivable balances
individually represented a significant percentage of total accounts receivable
at year-end, as follows:
<TABLE>
<CAPTION>
DECEMBER
31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Customer A.................................................. * 25%
Customer B.................................................. * 12%
Customer C.................................................. * 12%
Customer D.................................................. 27% *
</TABLE>
The Company had a total of four customers whose revenues individually
represented a significant percentage of total net revenues, as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Customer E.................................................. * * 11%
Customer F.................................................. 16% * *
Customer G.................................................. 12% * *
Customer H.................................................. 10% * *
</TABLE>
- ------------------------
* Was less than 10% of the Company's total
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable and capital lease obligations approximate fair
value due to the short-term nature of these instruments.
(J) NET INCOME (LOSS) PER SHARE
In accordance with SFAS No. 128, EARNINGS PER SHARE, basic and diluted net
income (loss) per share is computed by dividing the net income (loss) available
to common stockholders for the period by the weighted average and diluted number
of shares of common stock outstanding during the period. The calculation of
basic weighted average shares outstanding excludes unvested restricted common
stock (see Note 4(a)). For periods in which a net loss has been incurred, the
calculation of diluted net loss per share excludes potential common stock, as
their effect is antidilutive. Potential common stock is composed of
(i) incremental shares of common stock issuable upon the exercise of outstanding
stock options and warrants; (ii) shares of common stock issuable upon the
exchange or conversion of preferred stock and convertible debt; and
(iii) unvested restricted common stock subject to repurchase by the Company. In
accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 98, EARNINGS PER SHARE IN AN INITIAL PUBLIC OFFERING, the Company
determined that there were no nominal issuances of common stock prior to the
Company's initial public offering (IPO).
F-10
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A reconciliation between the shares used to compute basic and diluted net
income (loss) per share is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Weighted average common shares outstanding.................. 3,913,930 4,404,794 4,854,839
Less--Weighted average unvested common shares outstanding... -- 327,832 281,661
--------- --------- ---------
Basic weighted average shares outstanding................... 3,913,930 4,076,962 4,573,178
Add--Incremental effect of the following:
Unvested restricted common stock.......................... -- 327,832 --
Convertible preferred stock............................... -- 1,445,393 --
Convertible debt.......................................... 629,011 622,307 --
Stock options............................................. 825,904 833,555 --
Stock warrants............................................ -- 20,747 --
--------- --------- ---------
Diluted weighted average shares outstanding................. 5,368,845 7,326,796 4,573,178
========= ========= =========
</TABLE>
The calculation of diluted net income (loss) per share excludes the
following potential common stock:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Unvested restricted common stock............................ -- -- 281,661
Convertible preferred stock................................. -- -- 2,426,968
Stock options............................................... -- 727,825 1,017,438
Stock warrants.............................................. 489,275 -- 65,912
------- ------- ---------
489,275 727,825 3,791,979
======= ======= =========
</TABLE>
In computing diluted net income per share for the years ended December 31,
1997 and 1998, approximately $113,000 and $60,000, respectively, has been added
back to net income applicable to common stockholders related to interest expense
on convertible debt that is assumed to have been converted to common stock.
(K) UNAUDITED PRO FORMA BALANCE SHEET
Upon the closing of the IPO, each outstanding share of convertible preferred
stock and redeemable convertible preferred stock will be converted into common
stock at the applicable conversion ratios, as defined. This conversion has been
reflected in the unaudited pro forma balance sheet as of December 31, 1999.
(L) PRO FORMA NET LOSS PER SHARE (UNAUDITED)
The Company's capital structure at December 31, 1999 is not indicative of
its capital structure after the closing of the IPO due to the assumed conversion
of all shares of convertible preferred stock into common stock concurrent with
the closing of the Company's IPO. Accordingly, pro forma net loss per share is
presented for the year ended December 31, 1999 assuming (i) the net loss before
the accretion of preferred stock dividends and (ii) the conversion of all
outstanding shares of convertible
F-11
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
preferred stock into common stock using the as-converted method from their
respective dates of issuance, but excluding shares to be issued in the IPO.
(M) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 is effective
for financial statements for the years beginning after December 15, 1998. SOP
98-1 provides guidance regarding accounting for computer software developed or
obtained for internal use, including the requirement to capitalize specified
costs and amortization of such costs. The Company adopted SOP 98-1 beginning
January 1, 1999.
In April 1998, the AICPA issued SOP 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES. SOP 98-5 is effective for fiscal years beginning after December 15,
1998 and provides guidance on the financial reporting of start-up activities and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. As the Company historically expensed these
costs as incurred, the adoption of this standard had no impact on the Company's
results of operations, financial position or cash flows.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
statement establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts and
for hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS
No. 133 is not expected to have a material impact on the Company's financial
statements.
(N) COMPREHENSIVE INCOME (LOSS)
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires disclosure of all
components of comprehensive income on an annual and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from nonowner
sources. For the years ended December 31, 1997, 1998 and 1999, the Company had
no items of other comprehensive income; therefore, comprehensive income (loss)
for all periods presented is the same as reported net income (loss).
(O) RECLASSIFICATIONS
Certain prior year account balances have been reclassified to be consistent
with the current year's presentation.
F-12
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(2) DETAILS OF FINANCIAL STATEMENT COMPONENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Property and Equipment:
Computer software......................................... $ 268,408 $2,705,700
Computer hardware......................................... 1,017,778 1,986,251
Furniture and equipment................................... 272,326 465,025
Equipment under capital leases............................ 150,798 116,571
---------- ----------
1,709,310 5,273,547
Less--Accumulated depreciation and amortization........... 700,757 1,233,080
---------- ----------
$1,008,553 $4,040,467
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Accrued Expenses:
Accrued software development costs........................ $ -- $1,375,000
Accrued payroll and benefits.............................. 1,360,946 1,301,896
Accrued consulting........................................ -- 892,930
Accrued commissions....................................... 359,146 810,534
Accrued other............................................. 344,703 636,364
---------- ----------
$2,064,795 $5,016,724
========== ==========
</TABLE>
(3) CONVERTIBLE PROMISSORY NOTES
In May 1997, the Company issued convertible promissory notes (the 12% Notes)
in a private placement in the principal amount of $150,000. The 12% Notes bore
interest at a rate of 12% per annum, payable upon maturity (June 30, 1998) or
upon conversion of the notes. At the option of the note holders, the 12% Notes
were convertible at any time on or prior to June 30, 1998 into an aggregate of
89,280 shares of common stock. In June 1998, the note holders exercised their
option to convert all principal outstanding under the 12% Notes into common
stock. In conjunction with the 12% Notes, the Company also issued to the note
holders warrants to purchase an aggregate of 89,275 shares of common stock at an
exercise price of $1.68 per share. The Company has calculated the value of these
warrants using the Black-Scholes option pricing model. As the calculated value
was immaterial, the Company has recorded no value for the warrants. In
January 2000, the warrant holders exercised all warrants then outstanding for
total proceeds to the Company of approximately $150,000.
In September 1997, the Company issued convertible promissory notes (the 6%
Notes) in a private placement in the principal amount of $6,000,000. The 6%
Notes bore interest at a rate of 6% per annum, payable upon maturity
(August 31, 1998) or upon conversion of the notes. At the option of the note
holders, the 6% Notes and accrued interest were convertible into an aggregate of
2,023,550 shares of Series A preferred stock. In March 1998, the note holders
exercised their option to convert all principal and accrued interest then
outstanding into Series A preferred stock. In conjunction with the 6% Notes, the
Company also issued to the note holders warrants to purchase an aggregate of
400,000
F-13
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(3) CONVERTIBLE PROMISSORY NOTES (CONTINUED)
shares of Series B preferred stock at an exercise price of $5.00 per share and
with an expiration date of December 31, 1998. At the time of issuance, the fair
market value of the warrants, calculated using the Black-Scholes option pricing
model, was recorded as an original issuance discount on the 6% Notes in the
amount of $563,724. The discount was being amortized as additional interest
expense over the term of the 6% Notes. In December 1998, the warrant holders
exercised all Series B preferred stock warrants then outstanding for total
proceeds to the Company of $2,000,000.
(4) REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has authorized 1,250,000 shares of redeemable convertible
preferred stock, all of which have been designated Series C redeemable
convertible preferred stock (the Series C). On December 30, 1999, the Company
sold 1,244,325 shares of the Series C for aggregate proceeds of $12,505,466. The
rights, preferences and privileges of the Series C are as follows:
DIVIDENDS
The holders of the Series C preferred stock are entitled to a cumulative 8%
dividend, compounded daily, on the Series C preferred stock issuance price
($10.05 per share). Such dividends will be paid either in cash or in shares of
the Series C preferred stock, at the option of the holder upon the occurrence of
certain dilutive events, as defined.
VOTING
The holders of the Series C preferred stock are entitled to a number of
votes on all corporate matters equal to the number of shares of common stock
into which the preferred stock is then convertible. The holders of the Series C
preferred stock are entitled to elect one representative to the Board of
Directors.
CONVERSION
Each share of the Series C preferred stock is initially convertible at the
option of the holder into one share of voting common stock. The conversion ratio
is subject to adjustment upon the occurrence of certain dilutive events, as
defined. Upon (i) the consent of at least 67% of all outstanding series of
preferred stock; or (ii) the consummation of a qualified public offering, all
outstanding shares of Series C preferred stock will be converted to common
stock. For the purposes of this provision, a qualified public offering is one in
which the offering price per share is greater than $30.15 and the aggregate
proceeds to the corporation are greater than $25,000,000.
LIQUIDATION
Upon the occurrence of a liquidity event, as defined, the Series C
liquidation amount will be the original Series C issue price per share ($10.05)
plus all accrued and unpaid dividends thereon. After liquidation payments are
made to the holders of the Series A, the Series B and the Series C preferred
stock, the holders of the Series C preferred stock will share with the common
stockholders in the remaining assets for distribution in proportion to the
number of shares of common stock into which the
F-14
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(4) REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
Series C preferred stock is then convertible, up to an amount per share equal to
the Series C issue price ($10.05 per share).
REDEMPTION
The Series C preferred stock is redeemable in an amount equal to the
Series C issue price ($10.05 per share) plus all accrued and unpaid dividends
thereon. Because the Series C preferred stock is redeemable at the option of the
holder, the Series C is being carried at its redemption value and is classified
outside of stockholders' equity the accompanying financial statements. The
Series C redemption shall occur as follows:
- On the fifth anniversary of the original issuance date (December 30,
2004), 33% of the outstanding Series C preferred stock shall be redeemed
at the option of the holder.
- On the sixth anniversary of the original issuance date (December 30,
2005), 50% of the then outstanding Series C preferred stock shall be
redeemed at the option of the holder.
- On the seventh anniversary of the original issuance date (December 30,
2006), all of the remaining outstanding shares of the Series C preferred
stock shall be redeemed at the option of the holder.
(5) STOCKHOLDERS' EQUITY
(A) COMMON STOCK
On December 31, 1999, the Company amended and restated its articles of
incorporation. The number of authorized shares of common stock with a par value
of $.0001 per share was increased from 10,000,000 to 12,000,000 shares. Upon its
re-incorporation in March 1998, the Company effected a 25-for-1 stock split. All
share and per share amounts in the accompanying financial statements have been
retroactively adjusted to reflect the reorganization and stock split. At
December 31, 1999, the Company had reserved the following shares of common stock
for issuance upon the conversion of preferred stock and upon the exercise of
options and warrants:
<TABLE>
<S> <C>
Conversion of Series A preferred stock...................... 2,023,550
Conversion of Series B preferred stock...................... 400,000
Conversion of Series C redeemable preferred stock........... 1,244,325
Exercise of stock options................................... 3,198,901
Exercise of stock purchase warrants......................... 89,275
---------
6,956,051
=========
</TABLE>
During 1998, the Company sold at fair market value 495,450 shares of
restricted common stock to an officer of the Company. The restricted common
stock vested over four years. Upon the termination of this officer in 1999, all
unvested shares became fully vested in accordance with the terms of the original
restricted stock purchase agreement. During 1998, the Company sold at less than
fair market value 75,000 shares of restricted common stock to a director of the
Company, for which the Company
F-15
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(5) STOCKHOLDERS' EQUITY (CONTINUED)
recorded deferred compensation of $75,000 that is being amortized over the
vesting period of the restricted stock. The restricted stock vests over four
years.
During 1999, the Company granted 75,000 options to purchase common stock at
less than fair market value to a director of the Company, for which the Company
recorded deferred compensation of $187,500 that is being amortized over the
vesting period of the options. These options vest over four years.
(B) CONVERTIBLE PREFERRED STOCK
The Company has authorized 2,500,000 shares of convertible preferred stock
with a par value of $.01 per share, of which 2,100,000 shares have been
designated Series A preferred stock (the Series A) and 400,000 shares have been
designated Series B preferred stock (the Series B) (collectively, the Preferred
Stock). The Preferred Stock is subject to the following rights and preferences:
DIVIDENDS
The holders of the Series A and the Series B preferred stock shall be
entitled to share in any dividends declared and paid on the common stock pro
rata in accordance with the number of shares of common stock into which the
Preferred Stock is then convertible.
VOTING
The holders of Preferred Stock are entitled to a number of votes on all
corporate matters equal to the number of shares of common stock into which the
Preferred Stock is then convertible.
CONVERSION
Each share of Preferred Stock is initially convertible at the option of the
holder into one share of voting common stock. The conversion ratio is subject to
adjustment upon the occurrence of certain dilutive events, as defined. Upon
(i) the consent of at least 67% of the outstanding Preferred Stock or (ii) the
consummation of a qualified public offering, all outstanding shares of Preferred
Stock will be converted to common stock at the applicable conversion ratio, as
defined. For the purposes of this provision, a qualified public offering is one
in which the offering price per share is greater than $30.15 and the aggregate
proceeds to the corporation are greater than $25,000,000.
LIQUIDATION
Upon the occurrence of a liquidity event, as defined, the Series A and the
Series C preferred stock has preference in liquidation over the Series B
preferred stock and the Series B preferred stock has preference in liquidation
over common stock. The Preferred Stock liquidation amounts are subject to
adjustment, as defined, to prevent dilution.
In the event that the liquidation amount per share is less than $11.86 (four
times the Series A purchase price of $2.90 per share), then the Series A
liquidation amount will be the sum of (i) $2.90 per share; (ii) a pro rata share
of the remaining proceeds calculated based on the number of common shares into
which the Series A is then convertible; and (iii) all declared but unpaid
dividends thereon.
F-16
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(5) STOCKHOLDERS' EQUITY (CONTINUED)
In the event that the liquidation amount per share is greater than $11.86, then
the Series A liquidation amount will be the sum of (i) a pro rata share of the
proceeds available for distribution calculated based on the number of common
shares into which the Series A is then convertible; and (ii) all declared but
unpaid dividends thereon.
The Series B liquidation amount is equal to $5.00 per share plus all
declared but unpaid dividends thereon.
REDEMPTION
The Series A and Series B preferred stock are not redeemable.
(C) STOCK OPTION PLANS
In May 1994, the Company adopted the 1994 Stock Plan (the 1994 Plan), for
which 1,750,000 shares of common stock have been reserved. Under the terms of
the 1994 Plan, the Company may grant nonqualified or incentive stock options,
make awards of stock or authorize stock purchases by directors, officers,
employees or consultants of the Company. The exercise price for option grants
shall be determined by the Board of Directors but in no event shall be less than
(i) the fair market value of the common stock, in the case of incentive stock
options, or (ii) the lesser of (a) the book value per share of the Company or
(b) 10% of the fair market value of the common stock, in the case of
nonqualified stock options. Option grants under the 1994 Plan generally vest
over a period of five years and terminate 10 years from the date of grant.
In April 1997, the Company adopted the 1997 Stock Option/Stock Issuance Plan
(the 1997 Plan), for which 2,500,000 shares of common stock have been reserved.
Under the terms of the 1997 Plan, the Company may grant nonqualified or
incentive stock options, make awards of stock or authorize stock purchases by
directors, officers, employees or consultants of the Company. The exercise price
for option grants shall be determined by the Board of Directors but in no event
shall be less than (i) the fair market value of the common stock in the case of
inventive stock options or (ii) the lesser of (a) the book value per share of
the Company or (b) 30% of the fair market value of the common stock in the case
of nonqualified stock options. Option grants under the 1997 Plan generally vest
over a period of four to five years, as determined by the Board of Directors,
and expire 10 years from the date of grant.
F-17
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(5) STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option activity under all of the
Company's stock option plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE EXERCISE
SHARES PRICE PRICE
--------- ----------------- --------
<S> <C> <C> <C>
Balance, December 31, 1996.................................. 1,404,475 $ .0004--.04 $0.02
Granted................................................... 399,400 .04 0.04
Exercised................................................. (122,950) .0004-.04 0.01
Canceled.................................................. (50,000) .04 0.04
--------- ----------------- -----
Balance, December 31, 1997.................................. 1,630,925 .0004--.04 0.02
Granted................................................... 727,825 3.00--3.79 3.12
Exercised................................................. (793,175) .0004--3.00 0.04
Canceled.................................................. (321,500) .04--3.00 2.18
--------- ----------------- -----
Balance, December 31, 1998.................................. 1,244,075 .04--3.79 1.26
Granted................................................... 1,261,275 3.79--9.50 6.76
Exercised................................................. (134,974) .04--3.00 0.52
Canceled.................................................. (148,031) .04--3.79 3.53
--------- ----------------- -----
Balance, December 31, 1999.................................. 2,222,345 $ .04--9.50 $4.28
========= ================= =====
Exercisable, December 31, 1997.............................. 1,310,599 $ .0004--.04 $0.02
========= ================= =====
Exercisable, December 31, 1998.............................. 659,400 $ .04--3.79 $0.12
========= ================= =====
Exercisable, December 31, 1999.............................. 679,208 $ .04--9.50 $0.39
========= ================= =====
</TABLE>
Additional information regarding options outstanding and exercisable as of
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF RANGE OF REMAINING NUMBER OF
OPTIONS EXERCISE CONTRACTUAL OPTIONS
OUTSTANDING PRICES LIFE EXERCISABLE
- ----------- ------------------ ----------- -----------
<S> <C> <C> <C>
644,320 $ .04 6.14 602,095
657,200 3.00--3.79 8.71 77,113
735,825 7.00--7.50 9.56 --
185,000 9.50 9.92 --
--------- ---- -------
2,222,345 8.35 679,208
========= ==== =======
</TABLE>
The Company applies Accounting Principles Board (APB) Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, in accounting for its stock
compensation plans. In cases where options are granted or stock is issued at a
price below fair market value, the Company calculates compensation as the
difference between the fair market value, as determined by the Board of
Directors, and the exercise or issuance price. The Company recognizes
compensation expense over the vesting term of the related
F-18
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(5) STOCKHOLDERS' EQUITY (CONTINUED)
option or common share. Had compensation expense for stock options been
determined based on the fair values at the grant dates for awards under the
plans consistent with the method of accounting prescribed by SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net income (loss) would
have been decreased (increased) to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1997 1998 1999
-------- ---------- -----------
<S> <C> <C> <C>
Net income (loss)--
As reported............................................. $323,626 $1,911,787 $(5,219,944)
Pro forma............................................... 322,949 1,909,712 (5,377,609)
Basic net income (loss) per share--
As reported............................................. $ 0.08 $ 0.47 $ (1.14)
Pro forma............................................... 0.08 0.47 (1.18)
Diluted net income (loss) per share--
As reported............................................. $ 0.08 $ 0.27 $ (1.14)
Pro forma............................................... 0.08 0.27 (1.18)
</TABLE>
The Company's calculations for the grants under its stock option plans were
made using the Black--Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rates.................................... 6% 6% 6%
Dividend yield.............................................. -- -- --
Volatility.................................................. -- -- --
Expected term............................................... 7 years 7 years 7 years
Weighted average fair value of options granted during the
year...................................................... $0.02 $1.07 $2.32
</TABLE>
(D) WARRANTS
In May 1997, the Company issued warrants to purchase 89,275 shares of common
stock at an exercise price of $1.68 per share to investors in connection with a
private placement of the Company's convertible promissory notes (see Note 3).
The Company had 89,275 warrants outstanding at December 31, 1998 and 1999. In
January 2000, the warrant holders exercised all warrants then outstanding for
total proceeds to the Company of approximately $150,000.
In September 1997, the Company issued 400,000 warrants to purchase Series B
preferred stock at an exercise price of $5.00 per share in conjunction with a
private placement of the Company's convertible promissory notes (Note 3). In
December 1998, the warrant holders exercised all Series B preferred stock
warrants then outstanding for total proceeds to the Company of $2,000,000.
(6) INCOME TAXES
At its inception, the Company elected to be treated as a Subchapter S
corporation for income tax purposes. Since income taxes related to the income of
Subchapter S corporations are the responsibility of the individual stockholders,
no provision for income taxes was recorded in the accompanying financial
statements for the year ended December 31, 1997 or for the period from
January 1, 1998 through April 2, 1998. On April 2, 1998, the Company
re-incorporated as a Subchapter C corporation
F-19
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(6) INCOME TAXES (CONTINUED)
and the Company's Subchapter S corporation status was terminated. As such, the
Company's results of operations were taxed as a Subchapter C corporation for the
period from April 3 through December 31, 1998, for which period a benefit for
income taxes was recorded in the accompanying financial statements related to
recording a deferred tax asset for certain future tax deductions for which it
was deemed at the time more likely than not that the assets would be realized,
due to actual and expected taxable income. Due to a change in the Company's
profitability in 1999, the deferred tax asset was deemed not to be recoverable
and, therefore, was expensed in the 1999 tax provision.
For the year ended December 31, 1997 and the period from January 1, 1998
through April 2, 1998, a pro forma income tax adjustment is required to adjust
the Company's net income as if the Company were a Subchapter C corporation for
all periods presented. However, the Company generated sufficient losses from
operations in the years ended December 31, 1995 and 1996 to offset such taxable
income. Therefore, no pro forma income tax adjustment has been presented.
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, a deferred tax
asset or liability is recorded for all temporary differences between book and
tax reporting of assets and liabilities. A deferred tax valuation allowance is
required if it is more likely than not that all or a portion of any deferred tax
assets will not be realized. During the year ended December 31, 1999, the
Company generated a net operating loss (NOL) carryforward of approximately
$6,302,000 that is available to offset future taxable income through 2019. Due
to the uncertainty surrounding the Company's ability to realize this NOL and the
Company's other deferred tax assets, a full valuation allowance has been placed
against the otherwise recognizable net deferred tax asset.
The components of the (benefit from) provision for income taxes for the
years ended December 31, 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Current--
Federal................................................... $ -- $ 66,818 $(94,406)
State..................................................... -- 19,437 (31,469)
------ --------- --------
-- 86,255 (125,875)
------ --------- --------
Deferred--
Federal................................................... -- (315,249) 305,213
State..................................................... -- (91,701) 101,737
------ --------- --------
-- (406,950) 406,950
------ --------- --------
Total (benefit) provision............................... $ -- $(320,695) $281,075
====== ========= ========
</TABLE>
F-20
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(6) INCOME TAXES (CONTINUED)
The approximate income tax effect of each type of temporary difference and
carryforwards is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ----------
<S> <C> <C>
Net operating loss carryforwards............................ $ -- $2,538,000
Cash to accrual adjustment.................................. 406,950 305,000
Nondeductible reserves and accruals......................... -- 337,000
Capitalized Web site development costs...................... -- (799,000)
Less--Valuation allowance................................... -- (2,381,000)
-------- ----------
Net deferred tax asset.................................. $406,950 $ --
======== ==========
</TABLE>
A reconciliation of the federal statutory rate to the effective rate for the
years ended December 31, 1997, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate...................................... --% 34.0% (34.0)%
State taxes, net of federal benefit......................... -- 6.3 (8.0)
Increase in valuation allowance............................. -- -- 48.2
Income allocable to Subchapter S corporation................ -- (10.6) --
Conversion from Subchapter S to Subchapter C corporation.... -- (48.4) --
Other....................................................... -- (1.4) (0.5)
---- ------ -----
Effective rate.......................................... --% (20.1)% 5.7%
==== ====== =====
</TABLE>
F-21
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases its facilities under operating lease agreements and
certain of its equipment under noncancelable capital and operating lease
agreements through 2004. Future minimum lease commitments under all
noncancelable leases at December 31, 1999 are approximately as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
Year ended December 31,
2000........................................................ $ 495,000 $28,602
2001........................................................ 235,000 15,054
2002........................................................ 226,000 5,938
2003........................................................ 159,000 --
2004........................................................ 17,000 --
---------- -------
Total minimum lease payments.............................. $1,132,000 49,594
==========
Less--Amount representing interest.......................... 8,183
-------
Present value of minimum lease payments................... 41,411
Less--Current portion of capital lease obligations.......... 23,073
-------
Capital lease obligations, net of current portion......... $18,338
=======
</TABLE>
Total rent expense was approximately $219,000, $278,000 and $409,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.
(B) CONTINGENCIES
From time to time, the Company may have certain contingent liabilities that
arise in the ordinary course of its business activities. The Company accrues for
contingent liabilities when it is probable or likely that future expenditures
will be made and such expenditures can be reasonably estimated. In the opinion
of management, there are no pending claims of which the outcome is expected to
result in a material adverse effect to the financial position or results of
operations of the Company.
(8) SEGMENT DISCLOSURE
The Company measures operating results as a single reportable segment, which
provides multiple products and services that allow healthcare manufacturers,
purchasers and intermediaries to manage their complex contracts for the purchase
and sale of goods. To date, substantially all of the Company's revenues have
been derived from customers located within the United States and all of the
Company's assets and operations are located within the United States.
F-22
<PAGE>
I-MANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
(9) VALUATION AND QUALIFYING ACCOUNTS
A summary of the valuation and qualifying accounts of the Company related to
the allowance for doubtful accounts for the years ended December 31, 1998 and
1999 is as follows:
<TABLE>
<S> <C>
Allowance for doubtful accounts at December 31, 1997........ $ --
Additions................................................. 205,000
Write offs................................................ (105,000)
---------
Allowance for doubtful accounts at December 31, 1998........ 100,000
Additions................................................. 362,250
Write offs................................................ (212,250)
---------
Allowance for doubtful accounts at December 31, 1999........ $ 250,000
=========
</TABLE>
F-23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $22,770
NASD filing fee............................................. 9,125
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Directors and officers insurance............................ *
Blue Sky fees and expenses (including legal fees)........... 10,000
Transfer agent and registrar fees and expenses.............. 10,000
Miscellaneous............................................... *
-------
Total....................................................... $
=======
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article SEVENTH of the Registrant's Amended and Restated Certificate of
Incorporation provides that no director of the Registrant shall be personally
liable for any monetary damages for any breach of fiduciary duty as a director,
except to the extent that the Delaware General Corporation Law prohibits the
elimination or limitation of liability of directors for breach of fiduciary
duty.
Article EIGHTH of the Registrant's Amended and Restated Certificate of
Incorporation provides that a director or officer of the Registrant (a) shall be
indemnified by the Registrant against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement incurred in connection with any
litigation or other legal proceeding (other than an action by or in the right of
the Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount advanced
if it is ultimately determined that he is not entitled to indemnification for
such expenses.
Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by
II-1
<PAGE>
the Registrant that the director or officer did not meet the applicable standard
of conduct required for indemnification, or if the Registrant fails to make an
indemnification payment within 60 days after such payment is claimed by such
person, such person is permitted to petition the court to make an independent
determination as to whether such person is entitled to indemnification. As a
condition precedent to the right of indemnification, the director or officer
must give the Registrant notice of the action for which indemnity is sought and
the Registrant has the right to participate in such action or assume the defense
thereof.
Article EIGHTH of the Registrant's Amended and Restated Certificate of
Incorporation further provides that the indemnification provided therein is not
exclusive, and provides that in the event that the Delaware General Corporation
Law is amended to expand the indemnification permitted to directors or officers
the Registrant must indemnify those persons to the fullest extent permitted by
such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under Section 7 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement to be
filed as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth in chronological order is information regarding unregistered
securities issued and options granted by the Registrant during the three years
prior to the date of this Registration Statement.
1. On January 10, 2000, Bayview Ventures exercised warrants to purchase
29,750 common shares at $1.68 per share. On January 4, 2000, Goulder Investments
Ltd. exercised warrants to purchase 59,525 common shares at $1.68 per share. On
December 30, 1999, we issued and sold 1,244,325 shares of Series C preferred
shares to certain accredited investors for aggregate consideration of
$12,505,466.
On December , 1998, Insight Capital Partners II, L.P. and WI Software
Investors LLC each exercised warrants to purchase 200,000 Series B preferred
shares at $5.00 per share.
On April 15, 1998, we issued and sold 2,037,550 shares of Series A preferred
shares and warrants to purchase 400,000 shares of Series B preferred shares to
certain accredited investors for aggregate consideration of $6 million.
On September 19, 1997, we issued and sold $6,000,000 of senior notes due
August 31, 1998 and an option to purchase Series A preferred shares and warrants
to purchase Series B preferred shares to certain accredited investors for
aggregate consideration of $6 million.
On May 27, 1997, we issued and sold $150,000 of 12% convertible notes due
June 30, 1998 and warrants to purchase 89,275 shares (on a split-adjusted basis)
of common stock to certain accredited investors for aggregate consideration of
$150,000.
II-2
<PAGE>
2. The Registrant from time to time has granted stock options to employees,
directors and consultants. The following table sets forth certain information
regarding such grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
--------- -------------------
<S> <C> <C>
January 1, 1997 to December 31, 1997................. 399,400 $ 1.00
January 1, 1998 to December 31, 1998................. 727,825 $ 3.00-3.99
January 1, 1999 to February 29, 2000................. 1,419,950 $ 3.79-10.50
</TABLE>
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from the Securities Act registration
requirements set forth in Sections 3(b) and 4(2) of the Securities Act, or any
regulations promulgated thereunder, relating to sales by an issuer not involving
any public offering, or (ii) in the case of certain options to purchase shares
of common stock and shares of common stock issued upon the exercise of such
options, such offers and sales were made in reliance upon an exemption from
registration under Rule 701 of the Securities Act. No underwriters were involved
in the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ------------------------------------------------------------
<S> <C>
1* Form of Underwriting Agreements
3.1 Certificate of Incorporation of the Registrant, as amended
3.2* Form of Amended and Restated Certificate of Incorporation
3.3 Bylaws
3.4* Form of Amended and Restated Bylaws
4.1* Specimen certificate for shares of common stock
4.2 Description of capital stock (contained in the Certificate
of Incorporation filed as Exhibit 3.1)
5* Opinion of Hale and Dorr LLP
10.1 1994 Stock Plan
10.2 1997 Stock Option/Stock Issuance Plan
10.3* 2000 Stock Incentive Plan
10.4* 2000 Non-Employee Director Stock Option Plan
10.5 Amended and Restated Registration Rights Agreement, dated
December 30, 1999 by and among Registrant and the
stockholders named therein
10.6 Amended and Restated Stockholders' Agreement, dated December
30, 1999, by and among Registrant and the stockholders named
therein
10.7 Form of sublease agreement, dated February 11, 2000, between
Registrant and PXRE Corporation regarding premises at 399
Thornall Street, Edison, New Jersey.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ------------------------------------------------------------
<S> <C>
10.8 Lease agreement, dated September 30, 1998, between
Registrant and Metro Four Associates Limited Partnership
regarding premises at 379 Thornall Street, Suite 406,
Edison, NJ
10.9 Lease agreement, dated September 25, 1997, between
Registrant and Hega Realty Trust regarding premises at 537
Congress Street, Portland, Maine
10.10 Lease agreement, dated May 24, 1996, between Registrant and
Hega Realty regarding premises at 537 Congress Street,
Suites 500, 501 and 504, Portland, Maine
10.11 First amendment, dated February 8, 1999, to lease agreement,
dated May 24, 1996, for premises at 537 Congress Street,
Suites 500, 501 and 504, Portland, Maine
10.12 Second amendment, dated May 27, 1999, to lease agreement,
dated May 24, 1996, for premises at 537 Congress Street,
Suites 500, 501 and 504, Portland, Maine
10.13 Employment letter, dated July 27, 1999, between Registrant
and A. Leigh Powell
10.14 Employment agreement, dated December 23, 1997, between
Registrant and Philip St. Germain
10.15 Employment letter, dated December 26, 1998, between
Registrant and Steven I. Hirschfeld.
10.16 Employment letter, dated January 6, 1998, between Registrant
and Thomas Mucher.
10.17 Employment letter, dated July 23, 1999, between Registrant
and Terry Nicholson.
10.18 Employment agreement, dated April 27, 1998, between
Registrant and Gerald O'Connell.
10.19 Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.20 Master Services Agreement, dated November 15, 1999, between
Registrant and Sapient Corporation.
23.1* Consent of Hale and Dorr LLP (contained in Exhibit 5)
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney of directors (contained on p. II-6)
27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedules.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, 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 Securities Act
II-4
<PAGE>
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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, 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; and (3) that for the purpose of determining any liability
under the Securities Act, 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.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN PORTLAND, MAINE ON
MARCH 13, 2000.
<TABLE>
<S> <C> <C>
I-MANY, INC.
By: /s/ A. LEIGH POWELL
-----------------------------------------
A. Leigh Powell
President and Chief Executive Officer
</TABLE>
SIGNATURES
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.
We, the undersigned officers and directors of I-many, Inc., hereby severally
constitute and appoint A. Leigh Powell and Philip M. St. Germain, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them singly, to sign for us in our names in the capacities indicated below, any
registration statement related to the offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, any and all
amendments and exhibits to this registration statement or any 462(b)
Registration Statement, and any and all applications and other documents to be
filed with the Securities and Exchange Commission pertaining to the registration
of the securities covered hereby or thereby, and generally to do all things in
our names and on our behalf in such capacities to enable I-many, Inc. to comply
with the provisions of the Securities Act of 1933 and all requirements of the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ A. LEIGH POWELL
- --------------------------------- Chief Executive Officer, President and March 13, 2000
A. Leigh Powell Director (Principal Executive Officer)
/s/ PHILIP M. ST. GERMAIN Chief Financial Officer, Treasurer and
- --------------------------------- Director (Principal Financial and March 13, 2000
Philip M. St. Germain Accounting Officer)
/s/ WILLIAM DOYLE
- --------------------------------- Chairman of the Board of Directors March 13, 2000
William Doyle
/s/ JEFFREY HORING
- --------------------------------- Director March 13, 2000
Jeffrey Horing
/s/ JOHN C. PHELAN
- --------------------------------- Director March 13, 2000
John C. Phelan
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ------------------------------------------------------------
<S> <C>
1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant, as amended
3.2* Form of Amended and Restated Certificate of Incorporation
3.3 Bylaws
3.4* Form of Amended and Restated Bylaws
4.1* Specimen certificate for shares of common stock
4.2 Description of capital stock (contained in the Certificate
of Incorporation filed as Exhibit 3.1)
5* Opinion of Hale and Dorr LLP
10.1 1994 Stock Plan
10.2 1997 Stock Option/Stock Issuance Plan
10.3* 2000 Stock Incentive Plan
10.4* 2000 Non-Employee Director Stock Option Plan
10.5 Amended and Restated Registration Rights Agreement, dated
December 30, 1999 by and among Registrant and the
stockholders named therein
10.6 Amended and Restated Stockholders' Agreement, dated December
30, 1999, by and among Registrant and the stockholders named
therein
10.7 Form of sublease agreement, dated February 11, 2000, between
Registrant and PXRE Corporation regarding premises at 399
Thornall Street, Edison, New Jersey.
10.8 Lease agreement, dated September 30, 1998, between
Registrant and Metro Four Associates Limited Partnership
regarding premises at 379 Thornall Street, Suite 406,
Edison, NJ
10.9 Lease agreement, dated September 25, 1997, between
Registrant and Hega Realty Trust regarding premises at 537
Congress Street, Portland, Maine
10.10 Lease agreement, dated May 24, 1996, between Registrant and
Hega Realty regarding premises at 537 Congress Street,
Suites 500, 501 and 504, Portland, Maine
10.11 First amendment, dated February 8, 1999, to lease agreement,
dated May 24, 1996, for premises at 537 Congress Street,
Suites 500, 501 and 504, Portland, Maine
10.12 Second amendment, dated May 27, 1999, to lease agreement,
dated May 24, 1996, for premises at 537 Congress Street,
Suites 500, 501 and 504, Portland, Maine
10.13 Employment letter, dated July 27, 1999, between Registrant
and A. Leigh Powell
10.14 Employment agreement, dated December 23, 1997, between
Registrant and Philip St. Germain
10.15 Employment letter, dated December 26, 1998, between
Registrant and Steven I. Hirschfeld.
10.16 Employment letter, dated January 6, 1998, between Registrant
and Thomas Mucher.
10.17 Employment letter, dated July 23, 1999, between Registrant
and Terry Nicholson.
10.18 Employment agreement, dated April 27, 1998, between
Registrant and Gerald O'Connell.
10.19 Form of Indemnification Agreement between the Registrant and
each of its directors and officers
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ------------------------------------------------------------
<S> <C>
10.20 Sapient Master Services Agreement, dated November 15, 1995
between Registrant and Sapient.
23.1* Consent of Hale and Dorr LLP (contained in Exhibit 5)
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney of directors (contained on p. II-6)
27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
SCC TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of the State of Delaware
SCC Technologies, Inc. (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows;
By written consent of the Board of Directors of the Corporation,
resolutions were duly adopted, pursuant to Sections 141(f) and 242 of the
General Corporation Law of the State of Delaware, setting forth amendments to
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and declaring said amendments to be advisable. The stockholders
duly approved said proposed amendments by written consent in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
The resolutions setting forth the amendments are as follows:
RESOLVED: That Article I of the Certificate of Incorporation be deleted in
its entirety and the following Article I be inserted in lieu
thereof:
"ARTICLE I"
"NAME"
"The name of the corporation is I-many, Inc."
IN WITNESS WHEREOF, SCC Technologies. Inc. has caused this Certificate to
be signed by its Treasurer this 6th day of January, 2000.
By: /s/ Mark Tilly
---------------------------
Mark Tilly
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SCC TECHNOLOGIES, INC.
FIRST: The name of the corporation is SCC Technologies, Inc. (the
"Corporation") The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on April 2, 1998.
SECOND: This Amended and Restated Certificate of Incorporation (this
"Amended and Restated Certificate") has been duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware (the "GCL").
THIRD: This Amended and Restated Certificate restates, integrates and
amends the provisions of the Corporation's Certificate of Incorporation, as
follows:
* * * * * * * * * * *
ARTICLE I
NAME
The name of the corporation is SCC Technologies, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the GCL.
- 1 -
<PAGE>
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 15,750,000 shares, consisting of (i) 12,000,000
shares of Common Stock, $0.0001 par value per share ("Common Stock") and (ii)
3,750,000 shares of Preferred Stock, par value $0.01 per share ("Preferred
Stock"). The Preferred Stock will be divided into series. The first series will
consist of 2,100,000 shares and is designated "Series A Preferred Stock." The
second series will consist of 400,000 shares and is designated "Series B
Preferred Stock." The third series will consist of 1,250,000 shares and is
designated "Series C Preferred Stock." The Series A Preferred Stock, the Series
B Preferred Stock and the Series C Preferred Stock are collectively referred to
as the "Preferred Stock."
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations and restrictions
thereof in respect of each class of capital stock of the Corporation.
1. Dividends.
(a) Dividends on Series C Preferred Stock. Dividends on the Series C
Preferred Stock shall accrue on a daily basis from the Original Issuance Date
(as defined in Section 2(a), below) of the Series C Preferred Stock, and to the
extent they are not paid, shall accumulate annually, at the rate of 8% of the
Series C Issue Price (as defined below), whether or not the Corporation has
earnings or profits, whether or not there are funds legally available for the
payment of such dividends and whether or not dividends arc declared. Dividends
received and not previously paid to the holders of shares of Series C Preferred
Stock shall be paid, in cash or in shares of Series C Preferred Stock, at the
option of the holders of the Series C Preferred Stock at the time of (i) a
redemption of the Series C Preferred Stock pursuant to Section 5, below; (ii) a
Liquidation (as defined in Section 2(a), below); or (iii) conversion of the
Series C Preferred Stock pursuant to Section 4, below; provided, however, that
if the fair market value of the Common Stock at the time of conversion of the
Series C Preferred Stock, as determined by the Board of Directors, is greater
than two times the Series C Issue Price, but is less than four times the then
applicable Series C Issue Price, then the Series C Preferred Stock shall be paid
one half of the amount of all such accrued and unpaid dividends and the
remaining amount of all such dividends shall be waived; provided further,
however, that if the fair market value of the Common Stock at the time of
conversion of the Series C Preferred Stock, as determined by the Board of
Directors, is greater than or equal to four times the then applicable Series C
Issue Price, then no dividends shall be paid on the Series C Preferred Stock
pursuant to this Section 1(a) and the total amount of all such dividends shall
be waived.
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(b) Dividends on Series A and Series B Preferred Stock. Unless full
cumulative dividends on all outstanding shares of Series C Preferred Stock shall
have been declared and paid in full or waived, then no dividend shall be
declared or paid upon, or any sum set apart for the payment of dividends upon,
any shares of Series A and Series B Preferred Stock or Common Stock. At such
time as full cumulative dividends have been paid to the holders of the Series C
Preferred Stock or waived, the holders of the Series A and Series B Preferred
shall be entitled to receive dividends out of funds legally available therefor
and when and if declared by the Board of Directors. The right to dividends on
shares of Series A and Series B Preferred Stock shall not be cumulative and no
right shall accrue to holders of Series A and Series B Preferred Stock by reason
of the fact that dividends on such shares are not declared.
2. Liquidity Event
(a) Definitions.
(i) "Series A Issue Price" means $2.965 per share of Series A
Preferred stock subject to adjustment in the same manner as
the Conversion Price is adjusted under Section 4(d) below.
(ii) "Series B Issue Price" means $5.00 per share of Series B
Preferred Stock, subject to adjustment in the same manner
as the Conversion Price is adjusted under Section 4(d),
below.
(ii) "Series C Issue Price" means $10.05 per share of Series C
Preferred Stock, subject to adjustment in the same manner
as the Conversion Price is adjusted under Section 4(d),
below
(iv) "Liquidation" means any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of
the Corporation, other than any dissolution, liquidation or
winding up in connection with any reincorporation of the
Corporation in another jurisdiction.
(v) "Liquidation Amount" means (A) with respect to any share of
Series A Preferred Stock where the Distribution Amount is
less than four times the Series A Issue Price, an amount
equal to the sum of (x) the Series A Issue Price and (y)
such share's pro rata portion of the remaining proceeds
calculated based upon the number of shares of Common Stock
into which such share is then convertible pursuant to
Section 4(a) plus all declared but unpaid dividends payable
with respect to such share of Series A Preferred Stock and
(B) in all other cases with respect to shares of any series
of Preferred Stock, the Issue Price of such series of
Preferred Stock plus all declared but unpaid dividends
payable with respect to such shares.
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(vi) "Corporate Transaction" means (A) any consolidation or
merger of the Corporation, other than any merger or
consolidation resulting in the holders of the capital stock
of the Corporation entitled to vote for the election of
directors holding a majority of the capital stock of the
surviving or resulting entity entitled to vote for the
election of directors (B) any sale or other disposition by
the holders of shares of Common Stock of a majority of such
shares to a person or entity that is not a Stockholder of
the Corporation as of the Original Issuance Date for Series
C Preferred Stock or (C) any sale or other disposition by
the Corporation or any material subsidiary of all or
substantially all of its assets.
(vii) "Distribution Amount" means, in connection with any
Liquidity Event, the quotient obtained by dividing (A) the
aggregate amount available for distribution to the holders
of capital stock of the Corporation in such Liquidity Event
by (B) the number of outstanding shares of Common Stock at
the time of such distribution, assuming the prior
conversion of all shares of Series A, Series B and Series C
Preferred Stock.
(viii) "Original Issuance Date" for both the Series A and Series B
Preferred Stock, means the date of original issuance of the
first share of Series A Preferred Stock and, for the Series
C Preferred Stock, means the date of original issuance of
the first share of Series C Preferred Stock.
(ix) "Public Offering" means any underwritten public offering
for the account of the Corporation of Common Stock pursuant
to a registration statement filed under the Securities Act
of 1933, as amended (the "Securities Act") (other than on
Form S-8 promulgated under the Securities Act or any
successor forms thereto) that is not a Qualified Public
Offering (defined below).
(x) "Qualified Public Offering" means the first underwritten
public offering for the account of the Corporation of
Common Stock pursuant to a registration statement filed
under the Securities Act at an offering price per share of
Common Stock to the public of not less than three times the
Series C Issue Price and with aggregate proceeds (net of
underwriting discounts and commissions) to the Corporation
of not less than $25,000,000.
(b) Series A and Series C Liquidation Amount. Upon a Liquidation,
Corporate Transaction or Public Offering (collectively, a "Liquidity Event")
after payment or provision for payment of the debts and other liabilities of the
Corporation and all amounts which the holders of any class of capital stock
ranking senior to the Series A Preferred Stock and Series C Preferred
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Stock shall be entitled to receive upon such Liquidity Event, the holders of
Series A Preferred Stock and Series C Preferred Stock shall be entitled to
receive, out of the remaining assets of the Corporation available for
distribution to its stockholders, with respect to each share of Series A
Preferred Stock or Series C Preferred Stock, as applicable, an amount equal to
the Series A Liquidation Amount or Series C Preferred Stock, as applicable,
before any distribution shall be made to the holders of the Common Stock, the
Series B Preferred Stock or any other class of capital stock of the Corporation
ranking junior to the Series A Preferred Stock and Series C Preferred Stock. If,
upon any Liquidity Event, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
Series A Preferred Stock and Series C Preferred Stock the full Liquidation
Amounts to which they shall be entitled, the holders of Series A Preferred Stock
and Series C Preferred Stock shall share pro rata amongst themselves in any
distribution of assets in accordance with their respective full Liquidation
Amounts.
(c) Series B Liquidation Amount. Upon a Liquidity Event, after payment or
provision for payment of the debts and other liabilities of the Corporation and
all amounts which the holders of the Series A Preferred Stock and Series C
Preferred Stock and any other class of capital stock ranking senior to the
Series B Preferred Stock shall be entitled to receive upon such Liquidity Event,
the holders of Series B Preferred Stock shall be entitled to receive, out of the
remaining assets of the Corporation available for distribution to its
stockholders, with respect to each share of Series B Preferred Stock an amount
equal to the Series B Liquidation Amount before any distribution shall be made
to the holders of the Common Stock or any other class of capital stock of the
Corporation ranking junior to the Series B Preferred Stock. If, upon any
Liquidity Event the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of Series B Preferred
Stock the full Series B Liquidation Amount to which they shall be entitled, the
holders of Series B Preferred Stock shall share pro rata amongst themselves in
any distribution of assets in accordance with such full Liquidation Amount.
(d) Additional Distributions. After the payment or setting apart for
payment of the Series A, Series B and Series C Liquidation Amounts as set forth
above, the remaining assets of the Corporation shall be distributed ratably
among the holders of the Series C Preferred Stock and the Common Stock in
proportion to the number of shares of Common Stock that would be held by each
such holder if all shares of Series C Preferred Stock were converted into Common
Stock at the then effective Series C Conversion Price (as defined in Section
4(a), below) until the holders of the Series C Preferred Stock have received an
amount per share pursuant to this subsection (d) equal to one times the Series C
Issue Price (the "Participating Liquidation Amount"). If, upon any Liquidity
Event the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of the Common Stock and
the Series C Preferred Stock the Participating Liquidation Amount, then the
holders of the Common Stock and the Series C Preferred Stock shall share pro
rata amongst themselves in any distribution of assets in proportion to the
number of shares of Common Stock which would be held by each
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such holder if all shares of Series C Preferred Stock were converted into Common
Stock at the then effective Series C Conversion Price (as defined in Section
4(a), below). After the payment or setting apart for payment of the
Participating Liquidation Amount, the remaining assets of the Corporation shall
be distributed ratably among the holders of the Common Stock.
3. Voting Rights.
(a) in addition to the rights provided by law or in the Corporation's
Bylaws, each share of Preferred Stock shall entitle the holder thereof to such
number of votes as shall equal the number of shares of Common Stock into which
such share of Preferred Stock is then convertible pursuant to Section 4(a),
below. The holders of Series A and Series B and Series C Preferred Stock shall
be entitled to vote on all matters as to which holders of Common Stock shall be
entitled to vote, in the same manner and with the same effect as such holders of
Common Stock, voting together with the holders of Common Stock as one class.
There shall be no cumulative voting.
(b) Voting for Directors. The authorized number of directors of the
Corporation will be determined from time to time by the Board of Directors and
shall be at least one, but not more than 15. The Board of Directors will be
composed as follows: (a) the holders of the Series C Preferred Stock, voting as
a separate class on an "as converted to Common Stock" basis, will be entitled to
elect one director to the Board of Directors and (b) the remaining directors
will be elected by the holders of the Preferred Stock and the holders of the
Common Stock as follows: each holder of Preferred Stock will have one vote for
each full share of Common Stock into which its respective shares of Preferred
Stock would be convertible pursuant to Section 4(a) on the record date of the
vote and each holder of Common Stock will have one vote per share of Common
Stock. Any director elected by a class of shares voting aforesaid may be removed
by such holders. Any vacancy in the Board of Directors occurring because of the
death, resignation, or removal of a director elected by the holders of a class
of shares voting as aforesaid will be filled by the vote or written consent of
the holders of a majority of the class which elected such director.
(c) The Corporation shall not, without the affirmative consent or approval
of the holders of two-thirds of the shares of Series A Preferred Stock and
Series B Preferred Stock then outstanding, voting together as a single class on
an "as converted to Common Stock" basis and the separate affirmative consent or
approval of the holders of two-thirds of the shares of Series C Preferred Stock
then outstanding, voting as a separate class:
(i) authorize or designate, whether by reclassification or
otherwise, any new class or series of stock or any other securities
convertible into equity securities of the Company ranking senior to
or pari passu with the Preferred Stock in rights of redemption,
liquidation preference, voting or dividends;
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(ii) issue or pay or declare any dividend or distribution on any
shares of Common Stock;
(iii) redeem, purchase or otherwise acquire for value (or pay into
or set aside for a sinking fund for such purpose) any share or
shares of Common Stock or Preferred Stock otherwise than by
redemption in accordance with Section 5 of this Amended and Restated
Certificate; provided, that this restriction shall not apply to (i)
the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the
Corporation pursuant to agreements under which the Corporation has
the option to repurchase such shares at cost or (ii) separate
repurchases of 5,000 or fewer shares of stock;
(iv) amend, modify or repeal any provision of or add any provision
to the Amended and Restated Certificate or Bylaws if such action
would adversely affect the rights, privileges, preferences or
restrictions created for the benefit of the Preferred Stock;
(v) authorize any transaction or series of transaction which is
reasonably likely to result in a "change of control" as that term is
used in Item 1 of Form 8-K under the Securities Exchange Act of
1934, as amended;
(vi) approve or authorize any Liquidation or any recapitalization or
reorganization of the Corporation or any of its subsidiaries;
(vii) increase or decrease (other than by redemption or conversion)
the authorized number of shares of Preferred Stock; or
(viii) increase or decrease the size of the Board of Directors.
(d) The Corporation shall not, without the affirmative consent or approval
of the holders of a majority of the shares of Series B Preferred Stock then
outstanding, voting separately as a class:
(i) in any manner alter or change the powers, preferences, or
rights, or qualifications, limitations or restrictions
thereof, of the shares of Series B Preferred Stock as to
affect them adversely; or
(ii) approve or authorize any Liquidation or any recapitalization
or reorganization of the Corporation or any subsidiary.
4. Conversion. The holders of Preferred Stock shall have conversion rights as
follows:
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(a) Optional Conversion. Each share of Series A Preferred Stock will be
convertible, at the option of the holder thereof at the office of the
Corporation or any transfer agent for the Preferred Stock, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
$2.965 by the conversion price applicable to such share, determined as
hereinafter provided, in effect at the time of such conversion. The price at
which one share of Common Stock will be deliverable upon conversion of one share
of Series A Preferred Stock (the "Series A Conversion Price") will initially be
$2.965. Each share of Series B Preferred Stock will be convertible at the option
of the holder thereof at the office of the Corporation or any transfer agent for
the Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $5.00 by the conversion price
applicable to such share, determined as hereinafter provided, in effect at the
time of such conversion. The price at which one share of Common Stock will be
deliverable upon conversion of one share of Series B Preferred Stock (the
"Series B Conversion Price") will initially be $5.00. Each share of Series C
Preferred Stock will be convertible, at the option of the holder thereof at the
office of the Corporation or any transfer agent for the Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $10.05 by the conversion price applicable to such share,
determined as hereinafter provided, in effect at the time of such conversion.
The price at which one share of Common Stock will be deliverable upon conversion
of one share of Series C Preferred Stock (the "Series C Conversion Price") will
initially be $10.05. The Series A Conversion Price. Series B Conversion Price
and Series C Conversion Price are referred to individually as a "Conversion
Price" and collectively as the "Conversion Prices." Each such initial Conversion
Price will be subject to adjustment as provided in Section 4(d).
(b) Mechanics of Conversion. The holder of any shares of Preferred Stock
may exercise the conversion right pursuant to paragraph (a) above by delivering
to the Corporation the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the Corporation (if required
by it), accompanied by written notice stating that the holder elects to convert
such shares and stating the name or names (with address) in which the
certificate or certificates for the shares of Common Stock are to be issued.
Conversion shall be deemed to have been effected on the date when such delivery
is made (the "Conversion Date"). As promptly as practicable thereafter, the
Corporation shall issue and deliver to or upon the written order of such holder,
to the place designated by such holder, a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled, and a
cash amount in respect of any fractional interest in a share of Common Stock as
provided in paragraph (c) below. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become a
stockholder of record on the applicable Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event such person
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date. Upon conversion of only a portion of the
number of shares covered by a certificate representing shares of Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to
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or upon the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(c) Fractional Shares. No fractional shares of Common Stock or scrip shall
be issued upon conversion of shares of Preferred Stock. The number of full
shares of Common Stock issuable upon conversion of Preferred Stock shall be
computed on the basis of the aggregate number of shares of such Preferred Stock
to be converted. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any such shares, the Corporation shall
pay a cash adjustment in respect of such fractional interest in an amount equal
to the product of (i) the price of one share of Common Stock as determined in
good faith by the Board and (ii) such fractional interest. The holders of
fractional interests shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interests.
(d) Adjustments to Conversion Prices of Preferred Stock. The Conversion
Prices shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall, at any time or from time to time after
the Original Issuance Date, with respect to any series of Preferred
Stock, issue (or pursuant to Section 4(d)(C) hereof be deemed to
have issued) any shares of Common Stock other than Excluded Stock
without consideration or for a consideration per share less than any
Conversion Price in effect immediately prior to the issuance of such
Common Stock ("Additional Shares"), then such Conversion Price in
effect immediately prior to each such issuance shall forthwith be
lowered to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding on a fully-diluted basis
immediately prior to such issuance, multiplied by such
Conversion Price in effect immediately prior to such issuance,
and (y) the consideration received by the Corporation upon
such issuance; by
(B) the total number of shares of Common Stock outstanding on
a fully-diluted basis immediately after the issuance of such
Common Stock.
(ii) For the purposes of any adjustment of the Conversion Prices
pursuant to clause (i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall
be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or placement
fees payable by the Corporation to any
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underwriter or placement agent in connection with the issuance
and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board
of Directors, irrespective of any accounting treatment.
(C) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such
convertible or exchangeable securities except for options to
acquire Excluded Stock:
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall
be deemed to have been issued at the time such options
or rights were issued and for a consideration equal to
the consideration (determined in the manner provided in
subdivisions (A) and (B) above), if any, received by the
Corporation upon the issuance of such options or rights
plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities or upon
the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a
consideration equal to the consideration received by the
Corporation for any such securities and related options
or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such
securities or the exercise of any related options or
rights (the consideration in each case to be determined
in the manner provided in subdivisions (A) and (B)
above);
(3) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any
such options or
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rights or conversions of or exchange for such
securities, other than a change resulting from the
antidilution provisions thereof, the Conversion Price
shall forthwith be readjusted to such Conversion Price
as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not
converted prior to such change or options or rights
related to such securities not converted prior to such
change been made upon the basis of such change; and
(4) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or
the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion
Price shall forthwith be readjusted to such Conversion
Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or
options or rights related to such securities been made
upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise
of such options or rights, upon the conversion or
exchange of such securities, or upon the exercise of the
options or rights related to such securities and
subsequent conversion or exchange thereof.
(D) Special Adjustment Provisions for Series C Preferred
Stock. Notwithstanding the foregoing, in the event that on or
before the second anniversary of the Original Issuance Date of
the Series C Preferred Stock, the Corporation issues (or
pursuant to Section 4(d)(C) hereof is deemed to have issued)
any Additional Shares, then and in such event, the Series C
Conversion Price will be reduced, concurrently with such
issue, to a price determined by dividing the aggregate
consideration received by the Corporation for the total number
of Additional Shares issued (or pursuant to Section 4(d)(C)
hereof deemed to have been issued) by the total number of
Additional Shares issued (or pursuant to Section 4(d)(C)
hereof deemed to have been issued).
(E) "Excluded Stock" means (1) up to 3,213,901 shares of
Common Stock issuable upon exercise of stock options granted
to officers, directors, consultants, service providers and
employees of the Corporation or its subsidiaries approved by
the Board of Directors, (2) shares of Common Stock issued upon
conversion of shares of Preferred Stock; (3) shares of Common
Stock or other securities issued, directly or indirectly, upon
the exercise of options, warrants, convertible notes or other
rights to acquire equity securities outstanding on the
Original Issuance Date of the Series C
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Preferred Stock; (4) up to 29,750 shares of Common Stock (as
equitably adjusted for stock dividends, stock splits, stock
combinations and similar events) issuable to Goulder
Investments, Ltd. or assigns upon exercise of that certain
warrant dated May 27, 1997, as amended; (5) up to 59,525
shares of Common Stock (as equitably adjusted for stock
dividends, stock splits, stock combinations and similar
events) issuable to Bayview Ventures or assigns upon exercise
of that certain warrant dated May 27, 1997, as amended; (6)
securities issued in connection with a Corporate Transaction
that is approved by the Board of Directors; and (7) securities
that are declared to be "Excluded Stock" for purposes of this
Section by the holders of a majority of the shares of Series A
and Series C Preferred Stock; and (8) any shares of Common
Stock issued in connection with any Qualified Public Offering.
(F) If, at any time after the Original Issuance Date of any
series of Preferred Stock, the number of shares of Common
Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, following the record date for
the determination of holders of Common Stock entitled to
receive such stock dividend, subdivision or split-up, the
Conversion Prices shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of
each share of such series of Preferred Stock shall be
increased in proportion to such increase in outstanding
shares.
(G) If, at any time after the Original Issuance Date of any
series of Preferred Stock, the number of shares of Common
Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record
date for such combination, the Conversion Prices shall be
appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such series of
Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
(H) In the event of any capital reorganization of the
Corporation, any reclassification of the stock of the
Corporation (other than a change in par value or from par
value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split-up or
combination of shares), or any consolidation or merger of the
Corporation, each share of Preferred Stock shall after such
reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or
other securities or property of the Corporation or of the
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corporation resulting from such consolidation or surviving
such merger to which the holder of the number of shares of
Common Stock deliverable (immediately prior to the time of
such reorganization, reclassification, consolidation or
merger) upon conversion of such share of Preferred Stock would
have been entitled upon such reorganization, reclassification,
consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(I) All calculations under this paragraph shall be made to the
nearest one hundredth (1/100) of a cent or the nearest one
tenth (1/10) of a share, as the case may be.
(J) In any case in which the provisions of this Section 4(d)
shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation
may defer until the occurrence of such event (1) issuing to
the holder of any share of Preferred Stock converted after
such record date and before the occurrence of such event the
shares of capital stock issuable upon such conversion by
reason of the adjustment required by such event in addition to
the shares of capital stock issuable upon such conversion
before giving effect to such adjustments, and (2) paying to
such holder any amount in cash in lieu of a fractional share
of capital stock pursuant to Section 4(c) above; provided,
however, that the Corporation shall deliver to such holder an
appropriate instrument evidencing such holder's right to
receive such additional shares and such cash.
(iii) Whenever the Conversion Prices shall be adjusted as provided
in Section 4(d), the Corporation shall make available for inspection
during regular business hours, at its principal executive offices or
at such other place as may be designated by the Corporation, a
statement, signed by its chief executive officer, showing in detail
the facts requiring such adjustment and the Conversion Prices that
shall be in effect after such adjustment. The Corporation shall also
cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to each holder
of Preferred Stock at such holder's address appearing on the
Corporation's records. Where appropriate, such copy may be given in
advance and may be included as part of any notice required to be
mailed under the provisions of paragraph (iv) below.
(iv) If the Corporation shall propose to take any action of the
types described in clauses (F), (G) or (H) of Section 4(d) above,
the Corporation shall give notice to each holder of shares of
Preferred Stock, in the manner set forth in paragraph
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(iii) above, which notice shall specify the record date, if any,
with respect to any such action and the date on which such action is
to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the
date of such notice) on the Conversion Price and the number, kind or
class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Preferred Stock. Failure to
give such notice, or any defect therein, shall not affect the
legality or validity, of any such action.
(v) The Corporation shall reserve, and at all times from and after
the Original Issuance Date keep reserved, free from preemptive
rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the shares of
Series A, Series B and Series C Preferred Stock, sufficient shares
of Common Stock to provide for the conversion of any outstanding
Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock.
(vi) At any time the Corporation makes or fixes a record date for
the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, provision shall be
made so that each holder of shares of Preferred Stock shall receive
upon conversion thereof, in addition to the shares of Common Stock
receivable thereupon, the number of securities of the Corporation
which it would have received had its shares of Preferred Stock been
converted into shares of Common Stock on the date of such event and
had such holder thereafter, during the period from the date of such
event to and including the date of conversion, retained such
securities receivable by it pursuant to this paragraph during such
period, subject to the sum of all other adjustments called for
during such period under this Section with respect to the rights of
such holder of shares of Preferred Stock.
(e) Mandatory Conversion.
(i) Upon (A) the consent of at least two-thirds of the outstanding
Preferred Stock, voting together as a single class on an "as
converted to Common Stock" basis, or (B) the consummation of a
Qualified Public Offering, each share of Preferred Stock then
outstanding shall, by virtue of and simultaneously with such consent
or Qualified Public Offering, be deemed automatically converted at
the Conversion Price then in effect for each such series. In the
event of the automatic conversion of the Preferred Stock upon a
Qualified Public Offering, the person(s) entitled to receive the
Common Stock issuable upon such conversion of the
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<PAGE>
Preferred Stock shall not be deemed to have converted such Preferred
Stock until immediately prior to the closing of the Qualified Public
Offering.
(ii) As promptly as practicable after the date of consummation of
any automatic conversion and the delivery to the Corporation of the
certificate or certificates representing shares of Preferred Stock
which have been converted, duly endorsed or assigned in blank to the
Corporation (if required by it), the Corporation shall issue and
deliver to or upon the written order of each holder of Preferred
Stock, to the place designated by such holder, a certificate or
certificates for the number of full shares of Common Stock to which
such holder is entitled, and a cash amount in respect of any
fractional interest in a share of Common Stock as provided in
paragraph (iii) below. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the date of such automatic
conversion and on such date the shares of Preferred Stock shall
cease to be outstanding, whether or not the certificates
representing such shares have been received by the Corporation.
(iii) The provisions set forth in Section 4(c) shall apply to the
conversion of Series A, Series B and Series C Preferred Stock
pursuant to this Section in the same manner as they apply to the
conversion of Series A, Series B and Series C Preferred Stock
pursuant to Section 4(c).
5. Redemption. To the extent permitted by the GCL and presuming there
previously has not been a Liquidity Event, the Series C Preferred Stock shall be
redeemable as follows:
(a) On each of the fifth, sixth and seventh anniversaries of the Original
Issuance Date of the Series C Preferred Stock (each a "Series C Redemption
Date"), the Corporation shall, upon the affirmative vote of the holders of a
majority of shares of the Series C Preferred Stock as specified in Section 5(c)
below, at the option of a holder of the Series C Preferred Stock, such option to
be effected by delivering a Series C Redemption Notice (as defined below) to the
Corporation at least 60 days prior to such Series C Redemption Date, redeem: (i)
on the fifth anniversary of the Original Issuance Date of the Series C Preferred
Stock (the "First Redemption Date"), an amount not to exceed 33.3% of all such
Series C Preferred Stock outstanding immediately prior to such date, (ii) on the
sixth anniversary of the Original Issuance Date of the Series C Preferred Stock,
an amount not to exceed 33.3% of all shares of Series C Preferred Stock
outstanding as of the First Redemption Date plus any shares of Series C
Preferred Stock which were eligible for redemption on the First Redemption Date,
and (iii) on the seventh anniversary of the Original Issuance Date of the Series
C Preferred Stock, the remainder of all outstanding Series C Preferred Stock.
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<PAGE>
(b) The Series C Preferred Stock to be redeemed on any Series C Redemption
Date shall be redeemed by paying for each share in cash an amount equal to the
Series C Liquidation Amount. Such notice shall state the number of shares of
Series C Preferred Stock to be redeemed.
(c) On or before 90 days prior to each Series C Redemption Date, the
Corporation shall conduct a vote of the holders of the Series C Preferred Stock
with regard to whether to effectuate the redemption provisions as of the then
forthcoming Series C Redemption Date. Should a majority of the then outstanding
shares of the Series C Preferred Stock approve that redemption no less than 60
days prior to each Redemption Date the Company shall send a notice (a "Series C
Redemption Notice") to all holders of Series C Preferred Stock to be redeemed,
setting forth (i) the Series C Liquidation Amount for the shares to be redeemed
and (ii) the place at which such holders may obtain payment of the Series C
Redemption Price upon surrender of their share certificates.
(d) Shares subject to redemption pursuant to this Section 5 shall be
redeemed from each holder of the Series C Preferred Stock on a pro rata basis.
If the Corporation does not have sufficient funds legally available to redeem
all shares to be redeemed at a Series C Redemption Date, then it shall redeem
such shares on a pro rata basis (based on the portion of the aggregate Series C
Liquidation Amount payable to them) to the extent possible and shall redeem the
remaining shares to be redeemed as soon as sufficient funds are legally
available.
ARTICLE V
CORPORATE EXISTENCE
The Corporation is to have perpetual existence.
ARTICLE VI
MANAGEMENT OF THE CORPORATION
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware:
(a) The Board of Directors of the corporation is expressly authorized to
adopt, amend or repeal the Bylaws of the corporation.
(b) Elections of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
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<PAGE>
(c) The books of the corporation may be kept at such place within or
without the State of Delaware as the Bylaws of the corporation may provide or as
may be designated from time to time by the board of directors of the
corporation.
ARTICLE VII
CREDITORS MEETINGS
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this 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 this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this 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 this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as 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 a binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
ARTICLE VIII
PERSONAL LIABILITY
The corporation eliminates the personal liability of each member of its
board of directors to the corporation or its stockholders for monetary damages
for breach of fiduciary duty, as a director, provided that the foregoing shall
not eliminate the liability of a director (i) for any breach of such director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of Title 8 of the Delaware Code or
(iv) for any transaction from which such director derived any improper personal
benefit.
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<PAGE>
ARTICLE IX
AMENDMENTS
The corporation reserves the right to amend or repeal any provision
contained in this Amended and Restated Certificate, in the manner now or
hereafter prescribed by statute, except as set forth in Article IV Section 3 of
this Amended and Restated Certificate.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by Mark Tilly, its Treasurer, and
attested by Philip M. St. Germain, its Secretary, this 30th day of December
1999.
SCC TECHNOLOGIES, INC.
By: /s/ Mark Tilly
--------------------------
Name:
Title:
Attested:
By: /s/ Philip M. St. Germain
------------------------------
Name: Philip M. St. Germain
Title: Secretary
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<PAGE>
Exhibit 3.3
SCC TECHNOLOGIES, INC.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders shall be
held at such place within or without the State of Delaware as may be fixed from
time to time by the board of directors or the chief executive officer, or if not
so designated, at the registered office of the corporation.
Section 2. Annual Meeting. Annual meetings of stockholders shall be held
on the second Tuesday in March in each year if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 10:00 a.m., or at such
other date and time as shall be designated from time to time by the board of
directors or the chief executive officer, at which meeting the stockholders
shall elect by a plurality vote a board of directors and shall transact such
other business as may properly be brought before the meeting. If no annual
meeting is held in accordance with the foregoing provision, the board of
directors shall cause the meeting to be held as soon thereafter as convenient,
which meeting shall be designated a special meeting in lieu of annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, may, unless otherwise prescribed by statute or by the
certificate of incorporation, be called by the board of directors or the chief
executive officer or secretary at the request in writing, of a majority of the
board of directors, or at the request in writing of holders of a majority of the
shares of the capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting shall be limited to
matters relating to the purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, annual or special, stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
that ten or more than sixty
<PAGE>
days before the date of the meeting, to each stockholder entitled to vote at
such meeting.
Section 5. Voting List. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list 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 or town 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 6. Quorum. Holders of a majority of the shares of the capital
stock of the corporation issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business, except as
otherwise provided by statute, the certificate of incorporation or these
by-laws.
Section 7. Adjournments. Any meeting of stockholders may be adjourned from
time to time to any other time and to any other place at which a meeting of
stockholders may be held under these by-laws, which time and place shall be
announced at the meeting, by holders of a majority of the shares of the capital
stock of the corporation, issued and outstanding and entitled to vote thereat,
present in person or by proxy, though less than a quorum, or, if no stockholder
is present or represented by proxy, by any officer entitled to preside at or to
act as secretary of such meeting, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 8. Action at Meetings. When a quorum is present at any meeting,
the vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote on the question shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of law, the
<PAGE>
certificate of incorporation or these by-laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 9. Voting and Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each stockholder entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 10. Action Without Meeting. Any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
DIRECTORS
Section 1. Number, Election, Tenure and Qualification. The number of
directors which shall constitute the whole board shall be not less than one.
Within such limit, the number of directors shall be determined by resolution of
the board of directors or by the stockholders at the annual meeting or at any
special meeting of stockholders. The directors shall be elected at the annual
meeting or at any special meeting of the stockholders, except as provided in
Section 3 of this Article, and each director elected shall hold office until his
successor is elected and qualified, unless sooner displaced. Directors need not
be stockholders.
Section 2. Enlargement. The number of directors comprising the board of
directors may be increased at any time by vote of the holders of a majority of
the shares of the capital stock of the corporation issued
<PAGE>
and outstanding and entitled to vote for the election of any director.
Section 3. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. In the
event of a vacancy in the board of directors, the remaining directors, except as
otherwise provided by law or these by-laws, may exercise the powers of the full
board until the vacancy is filled.
Section 4. Resignation and Removal. Any director may resign at any time
upon written notice to the corporation at its principal place of business or to
the chief executive officer or secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. Any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors, unless otherwise
specified by law or the certificate of incorporation.
Section 5. General Powers. The business and affairs of the corporation
shall be managed by its board of directors, which may exercise all powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Section 6. Chairman of the Board. If the board of directors appoints a
chairman of the board, he shall, when present, preside at all meetings of the
stockholders and the board of directors. He shall perform such duties and
possess such powers as are customarily vested in the office of the chairman of
the board or as may be vested in him by the board of directors.
Section 7. Place of Meetings. The board of directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 8. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board; provided that any director who is absent when
such a determination is made shall be given prompt notice of such determination.
A regular meeting
<PAGE>
of the board of directors may be held without notice immediately after and at
the same place as the annual meeting of stockholders.
Section 9. Special Meetings. Special meetings of the board may be called
by the chief executive officer, secretary, or on the written request of a
majority of the directors, or by one director in the event that there is only
one director in office. Two days' notice to each director, either personally or
by telegram, cable, telecopy, commercial delivery service, telex or similar
means sent to his business or home address, or three days' notice by written
notice deposited in the mail, shall be given to each director by the secretary
or by the officer or one of the directors calling the meeting. A notice or
waiver of notice of a meeting of the board of directors need not specify the
purposes of the meeting.
Section 10. Quorum, Action at Meeting, Adjournments. At all meetings of
the board a majority of directors then in office, but in no event less than one
third of the entire board, shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. For purposes of this section the term "entire board" shall mean
the number of directors last fixed by the stockholders or directors, as the case
may be, in accordance with law and these by-laws; provided, however, that if
less than all the number so fixed of directors were elected, the "entire board"
shall mean the greatest number of directors so elected to hold office at any one
time pursuant to such authorization. If a quorum shall not be present at any
meeting of the board of directors, a majority of the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. If, and at such
times as, the certificate of incorporation provides that directors elected by
holders of a class or series of stock shall have more or less than 1 vote per
director on any matter, every reference in these by-laws to a majority or other
proportion of directors shall refer to a majority or other proportion of the
votes of such directors.
Section 11. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these by-laws, 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 all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
<PAGE>
Section 12. Telephonic Meetings. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the board of directors
or of any committee thereof may participate in a meeting of the board of
directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 13. Committees. The board of directors may, by resolution 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. Any such committee, to the extent provided in the resolution of the
board of directors, 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 which may require it; but no such committee shall have the power or
authority in reference to amending the 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 dissolution, any decision regarding the hiring, termination of
employment or material change in the responsibilities of any executive officer,
or amending the by-laws of the corporation; and, unless the resolution
designating such committee or the certificate of incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the board of directors. Each committee shall keep regular
minutes of its meetings and make such reports to the board of directors as the
board of directors may request. Except as the board of directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the directors or in such rules, its business shall
be conducted as nearly as possible in the same manner as is provided in these
by-laws for the conduct of its business by the board of directors.
Section 14. Compensation. Unless otherwise restricted by the certificate
of incorporation or these by-laws, the board of directors shall have the
authority to fix from time to time the compensation of directors. The directors
may be paid their expenses, if any, of attendance of each meeting of the board
of directors and the
<PAGE>
performance of their responsibilities as directors and may be paid a fixed sum
for attendance at each meeting of the board of directors and/or a stated salary
as director. No such payment shall preclude any director from serving the
corporation or its parent or subsidiary corporations in any other capacity and
receiving compensation therefor. The board of directors may also allow
compensation for members of special or standing committees for service on such
committees.
ARTICLE III
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a secretary and a treasurer and
such other officers with such titles, terms of office and duties as the board of
directors may from time to time determine, including a chairman of the board,
one or more vice-presidents, and one or more assistant secretaries and assistant
treasurers. If authorized by resolution of the board of directors, the chief
executive officer may be empowered to appoint from time to time assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide.
Section 2. Election. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers may be appointed by the board of directors at such
meeting, at any other meeting, or by written consent.
Section 3. Tenure. Each officer of the corporation shall hold office until
his successor is chosen and qualifies, unless a different term is specified in
the vote choosing or appointing him, or until his earlier death, resignation or
removal. Any officer elected or appointed by the board of directors or by the
chief executive officer may be removed at any time by the affirmative vote of a
majority of the board of directors or a committee duly authorized to do so,
except that any officer appointed by the chief executive officer may also be
removed at any time by the chief executive officer. Any vacancy occurring in any
office of the corporation may be filled by the board of directors, at its
discretion. Any officer may resign by delivering his written resignation to the
corporation at its principal place of business or to the chief executive officer
or the secretary. Such resignation shall be effective upon
<PAGE>
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
Section 4. President. The president shall be the chief operating officer
of the corporation. He shall also be the chief executive officer unless the
board of directors otherwise provides. The president shall, unless the board of
directors provides otherwise in a specific instance or generally, preside at all
meetings of the stockholders and the board of directors, have general and active
management of the business of the corporation and see that all orders and
resolutions of the board of directors are carried into effect. The president
shall execute bonds, mortgages, and other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the board of directors to some other officer or
agent of the corporation.
Section 5. Vice-Presidents. In the absence of the president or in the
event of his inability or refusal to act, the vice-president, or if there be
more than one vice-president, the vice-presidents in the order designated by the
board of directors or the chief executive officer (or in the absence of any
designation, then in the order determined by their tenure in office) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice-presidents shall perform such other duties and have such other powers as
the board of directors or the chief executive officer may from time to time
prescribe.
Section 6. Secretary. The secretary shall have such powers and perform
such duties as are incident to the office of secretary. He shall maintain a
stock ledger and prepare lists of stockholders and their addresses as required
and shall be the custodian of corporate records. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the board
of directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be from time to time
prescribed by the board of directors or chief executive officer, under whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
<PAGE>
the corporation and to attest the affixing by his signature.
Section 7. Assistant Secretaries. The assistant secretary, or if there be
more than one, the assistant secretaries in the order determined by the board of
directors, the chief executive officer or the secretary (or if there be no such
determination, then in the order determined by their tenure in office), shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors,
the chief executive officer or the secretary may from time to time prescribe. In
the absence of the secretary or any assistant secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary or acting secretary to keep a record of the meeting.
Section 8. Treasurer. The treasurer shall perform such duties and shall
have such powers as may be assigned to him by the board of directors or the
chief executive officer. In addition, the treasurer shall perform such duties
and have such powers as are incident to the office of treasurer. The treasurer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the board of directors, taking proper vouchers for such disbursements, and
shall render to the chief executive officer and the board of directors, when the
chief executive officer or board of directors so requires, an account of all his
transactions as treasurer and of the financial condition of the corporation.
Section 9. Assistant Treasurers. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors, the chief executive officer or the treasurer (or if there be
no such determination, then in the order determined by their tenure in office),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors, the chief executive officer or the treasurer may from time to time
prescribe.
Section 10. Bond. If required by the board of directors, any officer shall
give the corporation a bond in such sum and with such surety or sureties and
upon such terms and conditions as shall be satisfactory to the board of
directors, including without limitation a bond for the faithful performance of
the duties of his office and for the
<PAGE>
restoration to the corporation of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control and belonging
to the corporation.
ARTICLE IV
NOTICES
Section 1. Delivery. Whenever, under the provisions of law, or of the
certificate of incorporation or these by-laws, written notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram, cable, telecopy, commercial delivery service,
telex or similar means, addressed to such director or stockholder at his address
as it appears on the records of the corporation, in which case such notice shall
be deemed to be given when delivered into the control of the persons charged
with effecting such transmission, the transmission charge to be paid by the
corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of law or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. Actions other than by or in the Right of the Corporation. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is
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or was serving at the request of the corporation as a director, officer,
employee or agent of another enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if be acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceedings, had no reasonable cause to believe this conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
Section 3. Success on the Merits. To the extent that any person described
in Section 1 or 2 of this Article V has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1 or
2 of this Article V
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(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of any person
described in said Sections is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Sections. Such determination
shall be made (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders of the corporation.
Section 5. Advance Payment. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any person described in said Section to repay
such amount if it shall ultimately be determined that he is not entitled to
indemnification by the corporation as authorized in this Article V.
Section 6. Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this Article
V shall not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses 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.
Section 7. Insurance. The board of directors may authorize, by a vote of
the majority of the full board, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article V.
Section 8. Continuation of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article V 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.
Section 9. Severability. If any word, clause or provision of this Article
V or any award made
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hereunder shall for any reason be determined to be invalid, the provisions
hereof shall not otherwise be affected thereby but shall remain in full force
and effect.
Section 10. Intent of Article. The intent of this Article V is to provide
for indemnification and advancement of expenses to the fullest extent permitted
by Section 145 of the General Corporation Law of Delaware. To the extent that
such Section or any successor section may be amended or supplemented from time
to time, this Article V shall be amended automatically and construed so as to
permit indemnification and advancement of expenses to the fullest extent from
time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by or in the name of the
corporation by, the chairman or vice-chairman of the board of directors, or the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased so be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue. Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same in
such manner as it shall require and/or to give the corporation a bond in such
sum as it may
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direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed
or the issuance of such new certificate.
Section 3. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and proper evidence of compliance with other conditions to rightful
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Record Date. In order that the corporation way 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 sixty days nor less then ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. 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. If no record date is fixed, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day before the day on
which notice is given, or, if notice is waived, at the close of business on the
day before the day on which the meeting is held. The record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the board of directors is necessary, shall be
the day on which the first written consent is expressed. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating to
such purpose.
Section 5. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person,
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whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the board of
directors of the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
Section 2. Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
if any, may be declared
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by the board of directors at any regular or special meeting or by written
consent, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. Reserves. The directors may set apart out of any funds of the
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve.
Section 3. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 5. Seal. The board of directors may, by resolution, adopt a
corporate seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended or repealed or new by-laws may be
adopted by vote of the holders of a majority of the shares of the capital stock
of the corporation issued and outstanding and entitled to vote thereon, or by
the board of directors, when such power is conferred upon the board of directors
by the certificate of incorporation, at any regular meeting of the stockholders
or of the board of directors or at any special meeting of the stockholders or of
the board of directors provided, however, that in the case of a regular or
special meeting of stockholders, notice of such alteration, amendment, repeal or
adoption of new by-laws be contained in the notice of such meeting.
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Register of Amendments to the By-laws
Date Section Affected Change
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Exhibit 10.1
SYSTEMS CONSULTING COMPANY, INC.
1994 STOCK PLAN
1. Purpose. This 1994 Stock Plan (the "Plan") is intended to provide
incentives: (a) to the officers and other employees of SYSTEMS CONSULTING
COMPANY, INC. (the "Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations") by providing
them with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under Section
422(b) of the Internal Revenue Code of 1986 (the "Code") ("ISO" or "ISOs"); (b)
to directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in the
Company pursuant to options granted hereunder which do not qualify as ISOs
("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors, officers,
employees and consultants of the Company and Related Corporations by providing
them with awards of stock in the Company ("Awards"); and (d) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with opportunities to make direct purchases of stock in the
Company ("Purchases"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options". Options,
Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 425 of the Code.
2. Administration of the Plan.
A. The Plan shall be administered by the Board of Directors of the Company
(the "Board"). The Board may appoint a Stock Plan Committee (the "Committee") of
three or more of its members to administer this Plan. Subject to ratification of
the grant or authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee, if
so appointed, shall have the authority to (i) determine the employees of the
Company and Related Corporations (from among the class of employees eligible
under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine
(from among the class of individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options and Awards and to make Purchases) to whom
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted; (ii) determine the time or times at which Options or Awards may be
granted or Purchases made; (iii) determine the option price
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of shares subject to each Option, which price shall not be less than the minimum
price specified in paragraph 6, and the purchase price of shares subject to each
Purchase; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 7) the time or times
when each Option shall become exercisable and the duration of the exercise
period; (vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases and the nature of
such restrictions, if any, and (vii) interpret the Plan and prescribe and
rescind rules and regulations relating to it. If the Committee determines to
issue a Non-Qualified Option, it shall take whatever actions it deems
necessary, under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Stock Right granted under it.
B. The Committee may select one of its members as its chairman, and shall
hold meetings at such time and places as it may determine. Acts by a majority of
the Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee. All
references in this Plan to the Committee shall mean the Board if no Committee
has been appointed. From time to time the Board may increase or decrease the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
C. Stock Rights may be granted to members of the Board, but any such grant
shall be made and approved in accordance with paragraph 2(D), if applicable. All
grants of Stock Rights to members of the Board shall in all other respects be
made in accordance with the provisions of this Plan applicable to other eligible
persons. Members of the Board who are either (i) eligible for Stock Rights
pursuant to the Plan or (ii) have been granted Stock Rights may vote on any
matters affecting the administration of the Plan or the grant of any Stock
Rights pursuant to the Plan, except that no such member shall act upon the
granting to himself of Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the
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Board during which action is taken with respect to the granting to him of Stock
Rights.
D. In the event the Company registers any class of any equity security
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), any grant of Stock Rights to a member of the Board (made at any
time from the effective date of such registration until six months after the
termination of such registration) must be approved by a majority vote of the
other members of the Board; provided, however, that if a majority of the Board
is eligible to participate in the Plan or in any other stock option or other
stock plan of the Company or any of its affiliates, or has been so eligible at
any time within the preceding year, any grant of Stock Rights to a member of the
Board must be made by, or only in accordance with the recommendation of, the
Committee or a committee consisting of three or more persons, who may but need
not be directors or employees of the Company, appointed by the Board but having
full authority to act in the matter, none of whom is eligible to participate in
this Plan or any other stock option or other stock plan of the Company or any of
its affiliates, or has been eligible at any time within the preceding year. The
requirements imposed by the preceding sentence shall also apply with respect to
grants to officers who are also directors. Once appointed, such Committee shall
continue to serve until otherwise directed by the Board.
3. Eligible Employees and Others. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan. Non-
Qualified Options, Awards and authorizations to make Purchases may be granted to
any director (whether or not an employee), officer, employee or consultant of
the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.
The granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Stock Rights.
4. Stock. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.0001
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is THIRTY-TWO THOUSAND, subject to adjustment as provided
in paragraph 13. Any such shares may be issued as ISOs, Non-Qualified Options
or Awards, or to persons or entities making Purchases, so long
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as the number of shares so issued does not exceed such number, as adjusted. If
any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Company shall reacquire any vested
shares issued pursuant to Awards or Purchases, the unpurchased shares subject to
such Options and any unvested shares so reacquired by the Company shall again be
available for grants of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time after May 20, 1994 and prior to May 20, 2004. The date of grant of a
Stock Right under the Plan will be the date specified by the Committee at the
time it grants the Stock Right; provided, however, that such date shall not be
prior to the date on which the Committee acts to approve the grant. The
Committee shall have the right, with the consent of the optionee, to convert any
ISO granted under the Plan to a Non-Qualified Option pursuant to paragraph 16.
6. Minimum Option Price; ISO Limitations.
A. The price per share specified in the agreement relating to each
Non-Qualified Option granted under the Plan shall in no event be less than the
lesser of (i) the book value per share of Common Stock as of the end of the
fiscal year of the Company immediately preceding the date of such grant, or (ii)
ten percent of the fair market value per share of Common Stock on the date of
such grant.
B. The price per share specified in the agreement relating to each ISO
granted under the Plan shall not be less than the fair market value per share of
Common Stock on the date of such grant. In the case of an ISO to be granted to
an employee owning stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any Related Corporation,
the price per share specified in the agreement relating to such ISO shall not be
less than 110 percent of the fair market value per share of Common Stock on the
date of grant.
C. In no event shall the aggregate fair market value (determined at the
time an ISO is granted) of Common Stock for which ISOs granted to any employee
are exercisable for the first time by such employee during any calendar year
(under all stock option plans of the Company and any Related Corporation) exceed
$100,000; provided that this paragraph 6(C) shall have no force or effect if its
inclusion in the Plan is not necessary for Options issued as ISOs to qualify as
ISOs pursuant to Section 422(d) of the Code.
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D. If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common stock is traded, if
the Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the NASDAQ
National Market List. However, if the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company or any
Related Corporation. Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. The Option shall either be fully exercisable on the date of grant or
shall become exercisable thereafter in such installments as the Committee may
specify.
B. Once an installment becomes exercisable it shall remain exercisable
until expiration or termination of the Option, unless otherwise specified by the
Committee.
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C. Each Option or installment may be exercised at any time or from time to
time, in whole or in part, for up to the total number of shares with respect to
which it is then exercisable.
D. The Committee shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Committee shall not
accelerate the exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to paragraph 16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in paragraph
6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of sixty (60)
days, from the date of termination of his employment, but in no event later than
on their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. Death; Disability.
A. If an ISO optionee ceases to be employed by the Company and all Related
Corporations by reason of his death, any ISO of his may be exercised, to the
extent of the number
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or shares with respect to which he could have exercised it on his death, by his
estate, personal representative or beneficiary who has acquired the ISO by will
or by the laws of descent and distribution, at any time prior to the earlier of
the ISO's specified expiration date or 12 months from the date of the optionee's
death.
B. If an ISO optionee ceases to be employed by the Company and all Related
Corporations by reason of his disability, he shall have the right to exercise
any ISO held by him on the date of termination of employment, to the extent of
the number of shares with respect to which he could have exercised it on that
date, at any time prior to the earlier of the ISO's specified expiration date or
12 months from the date of the termination of the optionee's employment. For the
purposes of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or successor statute.
11. Assignability. No Stock Right shall be assignable or transferable by
the grantee except by will or by the laws of descent and distribution, and
during the lifetime of the grantee each Stock Right shall be exercisable only by
him.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
A. If the shares of Common Stock shall be subdivided
7
<PAGE>
or combined into a greater or smaller number of shares or if the Company shall
issue any shares of Common Stock as a stock dividend on its outstanding Common
Stock, the number of shares of Common Stock deliverable upon the exercise of
Options shall be appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend.
B. If the Company is to be consolidated with or acquired by another entity
in a merger, sale of all or substantially all of the Company's assets or
otherwise (including without limitation a "reverse-triangular" merger in which
the Company is the surviving entity but stockholders of the Company immediately
prior to such event represent less than 50% of the outstanding voting stock of
the Company immediately after such event) (an "Acquisition"), all outstanding
Options shall become exercisable immediately prior to the Acquisition. In
addition, the Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board") shall, as to
outstanding Options either (i) make appropriate provision for the continuation
of such Options by substituting on an equitable basis for the shares then
subject to such Options the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition; or (ii)
upon written notice to the optionee, provide that all Options must be exercised
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of the
shares subject to such Options over the exercise price thereof.
C. In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior to such
recapitalization or reorganization.
D. Notwithstanding the foregoing, any adjustments made pursuant to
subparagraphs A, B or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 425 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If
8
<PAGE>
the Committee determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments.
E. In the event of the proposed dissolution or liquidation of the Company,
each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Committee.
F. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Company.
G. No fractional shares shall be issued under the Plan and the optionee
shall receive from the Company cash in lieu of such fractional shares.
H. Upon the happening of any of the foregoing events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise of a
Stock Right made hereunder receives shares or securities or cash in connection
with a corporate transaction described in subparagraphs A, B or C above as a
result of owning such restricted Common Stock, such shares or securities or cash
shall be subject to all of the conditions and restrictions applicable to the
restricted Common Stock with respect to which such shares or securities or cash
were issued, unless otherwise determined by the Committee or the Successor
Board.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the
9
<PAGE>
Committee, through delivery of shares of Common Stock having a fair market value
equal as of the date of the exercise to the cash exercise price of the Stock
Right, or (c) at the discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, or (d) at the discretion of the Committee, by any
combination of (a), (b) and (c) above. If the Committee exercises its discretion
to permit payment of the exercise price of an ISO by means of the methods set
forth in clauses (b), (c), or (d) of the preceding sentence, such discretion
shall be exercised in writing at the time of the grant of the ISO in question.
The holder of a Stock Right shall not have the rights of a shareholder with
respect to the shares covered by his Option until the date of issuance of a
stock certificate to him for such shares. Except as expressly provided above in
paragraph 13 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
15. Terms and Amendment of Plan. This Plan was adopted by the Board on May
20, 1994, subject (with respect to the validation of ISO's granted under the
Plan) to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of the stockholders is not obtained before May 20, 1995, any grants of ISO's
under the Plan made prior to that date will be rescinded. The Plan shall expire
on May 20, 2004 (except as to Options outstanding on that date). Subject to the
provisions of paragraph 5 above, Stock Rights may be granted under the Plan
prior to the date of stockholder approval of the Plan. The Board may terminate
or amend the Plan in any respect at any time, except that, without the approval
of such stockholders obtained within 12 months before or after the Board adopts
a resolution authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be extended. Except as
provided in the fourth sentence of this paragraph 15, in no event may action of
the Board or stockholders alter or impair the rights of a grantee, without his
consent, under any Stock Right previously granted to him.
16. Conversion of ISOs into Non-Qualified Options.
10
<PAGE>
Termination of ISOs. The Committee, at the written request of any optionee, may
in its discretion take such actions as may be necessary to convert such
optionee's ISOs for any installment or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options
at any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but are not limited to, extending the
exercise period or reducing the exercise price of the appropriate installments
of such Options. At the time of such conversion, the Committee (with the consent
of the Optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee in its discretion may determine,
provided that such conditions shall not be inconsistent with this Plan. Nothing
in the Plan shall be deemed to give any optionee the right to have such
optionee's ISOs converted into Non-Qualified Options, and no such conversion
shall occur until and unless the Committee takes appropriate action. The
Committee, with the consent of the optionee, may also terminate any portion of
any ISO that has not been exercised at the time of such termination.
17. Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Governmental Regulation. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
19. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includible in such person's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right on the grantee's payment of such additional
withholding taxes.
11
<PAGE>
20. Notice to Company of Disqualified Disposition. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
21. Governing Law; Construction. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of The
Commonwealth of Massachusetts. In construing this Plan, the singular shall
include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
12
<PAGE>
Exhibit 10.2
SYSTEMS CONSULTING COMPANY, INC.
1997 STOCK OPTION/STOCK ISSUANCE PLAN
1. PURPOSE. This 1997 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of Systems Consulting Company, Inc. by giving
incentives to the eligible officers and other employees and directors of and
consultants and advisors to Systems Consulting Company, Inc. (the "Company"),
its parent (if any) and any present or future subsidiaries of the Company
(collectively, "Related Corporations") through providing opportunities to
acquire stock in the Company. As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Sections 424(e) and 424(f) or
successor provisions of the Internal Revenue Code of 1986 as amended from time
to time (the "Code").
2. STRUCTURE OF THE PLAN. The Plan permits the following separate types
of grant:
A. Options may be granted hereunder to purchase shares of common stock of
the Company. These options may meet the requirements of Section 422 of the Code
("Incentive Stock Options" or "ISOs"); or, they may not qualify as ISOs
("Non-Qualified Options"). Both ISOs and Non-Qualified Options are sometimes
referred to hereinafter as "Options".
B. Awards of stock in the Company ("Awards") may be granted.
C. Opportunities to make direct purchases of stock in the Company
("Purchases") may be authorized.
Options, Awards and authorizations to make Purchases are sometimes referred to
hereinafter as "Stock Rights".
3. ADMINISTRATION OF THE PLAN.
A. The Plan shall be administered by the Board of Directors of the Company
(the "Board"). The Board may in its sole discretion grant Options, authorize
Purchases and grant Awards, as provided in the Plan. The Board shall have full
power and authority, subject to the express provisions of the Plan, to construe
and interpret the Plan and all Option agreements, Purchase authorizations and
Award grants thereunder, to establish, amend and rescind such rules and
regulations as it may deem appropriate for the proper administration of the
Plan, to determine in each case the terms and provisions which shall apply to a
particular Option agreement, Purchase authorization, or Award grant, and to make
all other determinations which are, in the Board's judgment, necessary or
desirable for the proper administration of the Plan. The Board may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any
Option agreement, Purchase authorization or Award grant in the manner and to the
extent it shall, in its sole discretion, consider expedient. Decisions of the
Board shall be final and binding on all parties who have an interest in the Plan
or any Option, Purchase, Award, or stock
<PAGE>
issuance thereunder. No director or person acting pursuant to authority
delegated by the Board shall be liable for any action or determination under the
Plan made in good faith.
B. The Board may, to the full extent permitted by and consistent with
applicable law and the Company's By-laws, and subject to Subparagraph D
hereinbelow, delegate any or all of its powers with respect to the
administration of the Plan to a committee (the "Committee") appointed by the
Board. If a Committee has been appointed, all references in this Plan to the
Board shall mean and relate to that Committee.
C. Those provisions of this Plan which make express reference to Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor rule ("Rule 16b-3"), or which are required in order for certain
option transactions to qualify for exemption under Rule 16b-3, shall apply only
to those persons required to file reports under Section 16(a) of the Exchange
Act (a "Reporting Person").
D. If the Company registers any class of equity security under Section 12
of the Exchange Act, the selection of a director or an officer (as the terms
"director" and "officer" are defined for purposes of Rule 16b-3) as a recipient
of an option, the timing of the option grant, the exercise price of the option
and the number of shares subject to the option shall be determined either (i) by
the Board, if all of the Board members are disinterested persons within the
meaning of Rule 16(b)(3), or (ii) by two or more directors having full authority
to act in the matter, each of whom shall be such a disinterested person.
4. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of
the Company or of any Related Corporation. No person who is not such an employee
may be granted an ISO. Non-Qualified Options, Awards, and authorizations to make
Purchases may be granted to any employee, officer or director of, or consultant
or advisor to the Company or any Related Corporation. The granting of any Stock
Right to any individual or entity shall neither entitle that individual or
entity to, nor disqualify him from, participation in any other grant of Stock
Rights.
5. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of common stock of the Company ("Common Stock"),
or shares of Common Stock reacquired by the Company in any manner. The aggregate
number of shares which may be issued under the Plan is 100,000, subject to
adjustment as provided in Paragraph 14. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part, or if the
Company shall reacquire any nonvested shares issued pursuant to Awards or
Purchases, the unpurchased shares subject to such Option, or such nonvested
shares so reacquired shall again be available for grants of Stock Rights under
the Plan.
6. OPTION AGREEMENTS. As a condition to the grant of an Option, each
recipient of an Option shall execute an option agreement in such form not
inconsistent with the Plan as the Board shall approve. These option agreements
may differ among recipients. Each option agreement with respect to an ISO shall
be subject to the provisions of the Plan applicable to ISOs. The Board may, in
its sole discretion, include additional provisions in option agreements,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash
<PAGE>
bonuses, to make, arrange for or guarantee loans or to transfer other property
to optionees upon exercise of options, or such other provisions as shall be
determined by the Board; provided, however, that such additional provisions
shall not be inconsistent with any provision of the Plan and such additional
provisions shall not cause any ISO granted under the Plan to fail to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
7. OPTION EXERCISE PRICE.
A. Subject to Subparagraph 3D of this Plan and Subparagraphs B and C of
this Paragraph 7, the purchase price per share of Common Stock deliverable upon
the exercise of an Option ("exercise price") shall be determined by the Board.
B. In the case of an ISO, the exercise price shall not be less than 100% of
the fair market value of Common Stock, as determined by the Board, at the time
of grant of such option, or less than 110% of such fair market value in the case
of an ISO granted to the owner of stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Related
Corporation (after taking into account the attribution of stock ownership rules
of Section 424(d) of the Code) (a "10% Shareholder").
C. The exercise price of each Non-Qualified Option granted under the Plan
shall in no event be less than the lesser of (i) the book value per share of
Common Stock as of the end of the fiscal year of the Company immediately
preceding the date of grant, or (ii) thirty percent (30%) of the fair market
value per share of Common Stock on the date of grant.
8. CANCELLATION AND NEW GRANT OF OPTIONS, ETC. The Board shall have the
authority to effect, at any time and from time to time, with the consent of the
affected optionees, (i) the cancellation of any or all outstanding Options and
the grant in substitution therefor of new Options covering the same or different
shares of Common Stock and having an exercise price per share which may be lower
or higher than the exercise price per share of the canceled Options, or (ii) the
amendment of the terms of any and all outstanding Options to provide an exercise
price per share which is higher or lower than the then-current exercise price
per share of such outstanding Options.
9. EXERCISE OF OPTIONS.
A. Each Option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing the Option, subject to the provisions of the
Plan. Unless doing so would have the effect of causing an ISO to be treated as a
Non-Qualified Option, the Board may, in its sole discretion, (i) accelerate the
date or dates on which all or any particular Option or Options granted under the
Plan may be exercised or (ii) extend the dates during which all, or any
particular, Option or Options granted under the Plan may be exercised.
B. Options granted under the Plan may provide for payment of the exercise
price by delivery of cash or a check payable to the order of the Company, or, TO
THE EXTENT (IF AT ALL) PROVIDED IN THE OPTION AGREEMENT: (i) by delivery to the
Company of shares of Common Stock of
<PAGE>
the Company already owned by the optionee having a fair market value determined
by the Board to be equal in amount to the exercise price of the Options being
exercised, or (ii) by delivery of a recourse promissory note of the optionee
bearing interest payable not less than annually at the applicable Federal rate
as defined in Section 1274(d) of the Code and otherwise payable on such terms as
are specified by the Board, or (iii) by requesting that the Company withhold
shares of Common Stock of the Company issuable upon exercise of the Options
having a fair market value determined by the Board to be equal in amount to the
exercise price of the Options being exercised, or (iv) by any combination of the
above methods of payment.
10. OPTION PERIOD. Subject to earlier termination under other provisions
of this Plan, each Option and all rights thereunder shall expire on such date as
shall be set forth in the applicable option agreement, except that, in the case
of an ISO, such expiration date shall not be later than ten years after the date
on which the ISO is granted and, in the case of an ISO granted to a 10%
Shareholder as defined in Subparagraph 7B of this Plan, such expiration date
shall not be later than five years after the date on which the ISO is granted.
11. NONTRANSFERABILITY OF OPTIONS. Options shall not be assignable or
transferable by the optionee, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the life of the
optionee, shall be exercisable only by the optionee.
12. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Except as
otherwise provided in Paragraph 10 and Subparagraph 13C with respect to ISOs,
and subject to all other provisions of the Plan, the Board shall determine the
period of time during which an optionee may exercise an Option following (i) the
termination of the optionee's employment or other relationship with the Company
or a Related Corporation or (ii) the death or disability of the optionee. Such
periods shall be set forth in the agreement evidencing the Option.
13. ADDITIONAL ISO REQUIREMENTS. ISOs granted under the Plan are
subject to the minimum exercise price rules set forth in Subparagraph 7B
hereof, the option period rules of Paragraph 10 hereof, and various other
restrictions set forth elsewhere in this Plan. In addition, ISOs granted
under the Plan are subject to the following:
A. Each ISO granted under the Plan shall, at the time of grant, be
specifically designated as such in the option agreement evidencing such Option.
B. In no event shall the aggregate fair market value (determined at
the time an ISO is granted) of Common Stock for which ISOs granted to any
employee are exercisable for the first time by such employee during any calendar
year (under all stock option plans of the Company and any Related Corporation)
exceed One Hundred Thousand Dollars ($100,000); provided, however, that this
Subparagraph B shall have no force or effect if its inclusion in the Plan is not
necessary for Options issued as ISOs to qualify as incentive stock options
within the meaning of Section 422 of the Code.
C. No ISO may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of the ISO,
employed by the Company or a Related Corporation, except that:
<PAGE>
(i) An ISO may be exercised within the period of three (3) months
after the date the optionee ceases to be an employee of the Company and any
Related Corporation (or within such lesser period as may be specified in the
option agreement); provided, however, that the option agreement may designate a
longer exercise period, in which case the exercise after such three-month period
shall be treated as the exercise of a Non-Qualified Option.
(ii) If the optionee dies while in the employ of the Company or a
Related Corporation, or within three (3) months after the optionee ceases to be
such an employee of the Company or a Related Corporation, the ISO may be
exercised by the person to whom it is transferred by will or the laws of descent
and distribution within the period of one (1) year after the date of death (or
within such lesser period as may be specified in the option agreement).
(iii) If the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code) while in the employ of the Company or a Related
Corporation, the ISO may be exercised within the period of one (1) year after
the date the optionee's employment ceases because of such disability (or within
such lesser period as may be specified in the option agreement).
For all purposes of the Plan and any agreement evidencing an Option,
"employment" shall be defined in accordance with the provisions of Treasury
Regulation Section 1.421-7(h) under the Code (or any successor regulations).
Notwithstanding the foregoing provisions, no ISO may be exercised after its
expiration date.
14. ADJUSTMENTS.
A. If, through or as a result of any merger, consolidation, sale of
all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, (i) the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment shall be made in (a) the maximum number
and kind of shares reserved for issuance under the Plan, (b) the number and kind
of shares or other securities subject to any then outstanding Options under the
Plan, and (c) the price for each share subject to any then outstanding Options
under the Plan, without changing the aggregate purchase price as to which such
Options remain exercisable. No fractional shares shall be issued under the Plan
on account of any such adjustments. Notwithstanding the foregoing provisions of
this Subparagraph A, no adjustment shall be made pursuant to this Paragraph 14
if such adjustment would cause any ISO granted under the Plan to fail to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
<PAGE>
B. Any adjustments under this Paragraph 14 shall be made by the Board of
Directors, whose determination as to what adjustments, if any, will be made and
the extent thereof shall be final, binding and conclusive.
15. RIGHTS AS A SHAREHOLDER. The holder of an Option shall have no rights
as a shareholder with respect to any shares covered by the option (including,
without limitation, any voting rights, or any rights to receive dividends or
non-cash distributions with respect to such shares) until the date of issue of a
stock certificate for such shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
A. Except as may otherwise be provided in the applicable option agreement,
in the event of a consolidation or merger or sale of all or substantially all of
the assets of the Company in which outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity, or in the event of the liquidation of the Company, the Board,
or the board of directors of any corporation assuming the obligations of the
Company, shall, in its discretion, take any one or more of the following
actions, as to outstanding Options: (i) provide that such Options shall be
assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), provided, however, that any
such Options substituted for ISOs shall meet the requirements of Section 424(a)
of the Code; (ii) upon written notice to the optionees, provide that any and all
outstanding Options shall become exercisable in full (to the extent not
otherwise so exercisable) as of a specified date or time ("Accelerated Vesting
Date") prior to the consummation of such transaction, and that all unexercised
Options shall terminate as of a specified date or time ("Accelerated Expiration
Date") following the Accelerated Vesting Date unless exercised by the optionee
prior to the Accelerated Expiration Date, provided, however, that optionees
shall be given a reasonable period of time within which to exercise or provide
for the exercise of outstanding Options following such written notice and before
the Accelerated Expiration Date; (iii) in the event of a merger under the terms
of which holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered in the merger
(the "Merger Price"), terminate each outstanding Option in exchange for a
payment, made or provided for by the Company, equal in amount to the excess, if
any, of the Merger Price over the per-share exercise price of each such Option,
times the number of shares of Common Stock subject to such Option; or (iv)
terminate each outstanding Option in exchange for a cash payment equal in amount
to the product of the excess, if any, of the fair market value of a share of
Common Stock over the per-share exercise price of each such Option, times the
number of shares subject to such Option. The Board shall determine the fair
market value of a share of Common Stock for purposes of the foregoing, and the
Board's determination of such fair market value shall be final, binding and
conclusive.
B. The Company may grant Options under the Plan in substitution for Options
held by employees of another corporation who become employees of the Company or
a subsidiary of the corporation as the result of a merger or consolidation of
the employing corporation with the Company or a subsidiary of the Company, or as
a result of the acquisition by the Company or
<PAGE>
one of its subsidiaries of property or stock of the employing corporation. The
Company may direct that substitute Options be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
17. STOCK RESTRICTION AGREEMENT. As a condition to the grant of an
Award or a Purchase authorization under the Plan, the recipient of the Award
or Purchase authorization shall execute an agreement ("Stock Restriction
Agreement") in such form not inconsistent with the Plan as may be approved by
the Board. Stock Restriction Agreements may differ among recipients. Stock
Restriction Agreements may include any provisions the Board determines should
be included and that are not inconsistent with any provision of the Plan.
18. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or in
any option agreement or other agreement or instrument executed pursuant to
the provisions of the Plan shall confer upon any optionee any right with
respect to the continuation of his or her employment by the Company or
interfere in any way with the right of the Company at any time to terminate
such employment or to increase or decrease the compensation of the optionee.
19. OTHER EMPLOYEE BENEFITS. Except as to plans which by their terms
include such amounts as compensation, no amount of compensation deemed to be
received by an employee as a result of the grant or exercise of an Option or
the sale of shares received upon such exercise, or as a result of the grant
of an Award or the authorization or making of a Purchase will constitute
compensation with respect to which any other employee benefits of such
employee are determined, including, without limitation, benefits under any
bonus, pension, profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board.
20. AMENDMENT OF THE PLAN.
A. The Board may at any time, and from time to time, modify or amend the
Plan in any respect, except as otherwise expressly provided in this Plan;
provided, however, that if at any time the approval of the shareholders of the
Company is required under the Code with respect to ISOs, or is required under
Rule 16b-3, the Board may not effect such modification or amendment without such
approval.
B. The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect the optionee's rights under an Option
previously granted. With the consent of the optionee affected, the Board may
amend outstanding option agreements in a manner not inconsistent with the Plan.
The Board shall have the right to amend or modify (i) the terms and provisions
of the Plan and of any outstanding ISO granted under the Plan to the extent
necessary to qualify any or all such Options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options within the meaning of Section 422 of the Code, and (ii)
the terms and provisions of the Plan and of any outstanding Option to the extent
necessary to ensure the qualification of the Plan under Rule 16b-3.
21. INVESTMENT REPRESENTATIONS. The Board may require any person to
whom an Option is granted, as a condition of exercising such Option, and any
person to whom an Award is granted or a Purchase is authorized, as a
condition thereof, to give written assurances in
<PAGE>
substance and form satisfactory to the Board to the effect that such person is
acquiring the Common Stock subject to the Option, Award or Purchase for such
person's own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws, or with covenants or representations made by
the Company in connection with any public offering of its Common Stock.
22. COMPLIANCE WITH SECURITIES LAWS. Each Option shall be subject to
the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject to such
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any other
condition is necessary as a condition of, or in connection with, the issuance
or purchase of shares thereunder, such Option may not be exercised, in whole
or in part, unless such listing, registration, qualification, consent or
approval, or satisfaction of such condition shall have been effected or
obtained on conditions acceptable to the Board. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
23. WITHHOLDING. The Company shall have the right to deduct from
payments of any kind otherwise due to the optionee any federal, state or
local taxes of any kind required by law to be withheld with respect to any
shares issued upon exercise of Options under the Plan or upon the grant of an
Award, the making of a Purchase of Common Stock for less than its fair market
value, the making of a Disqualifying Disposition (as defined in Paragraph
24), or the vesting of restricted Common Stock acquired pursuant to a Stock
Right. The Board in its sole discretion may condition the exercise of an
Option, the grant of an Award, the making of a Purchase, or the vesting of
restricted shares acquired by exercising a Stock Right on the grantee's
payment of such additional withholding taxes. Subject to the prior approval
of the Company, which may be withheld by the Company in its sole discretion,
the grantee may elect to satisfy such obligations, in whole or in part,
(i) by causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of a Stock Right or (ii) by delivering to the
Company shares of Common Stock already owned by the grantee. The shares so
delivered or withheld shall have a fair market value equal to such
withholding obligation, and shall not be subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements. The fair
market value of the shares used to satisfy such withholding obligation shall
be determined by the Company as of the date that the amount of tax to be
withheld is to be determined. Notwithstanding the foregoing, in the case of a
Reporting Person, no election to use shares for the payment of withholding
taxes shall be effective unless made in compliance with any applicable
requirements of Rule 16b-3 (unless it is intended that the transaction not
qualify for exemption under Rule 16b-3).
24. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition, as hereinafter defined, of
any Common Stock acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such Common Stock
before the later of (a) two (2) years after the date the employee was granted
the
<PAGE>
ISO or (b) one (1) year after the date the employee acquired Common Stock by
exercising the ISO. If the employee has died before such stock is sold, these
holding period requirements do not apply and no Disqualifying Disposition can
occur thereafter.
25. EFFECTIVE DATE AND DURATION OF THE PLAN.
A. The Plan shall become effective when adopted by the Board, but no Stock
Right granted under the Plan shall become exercisable unless and until the Plan
shall have been approved by the Company's shareholders. If such shareholder
approval is not obtained within twelve months after the date of the Board's
adoption of the Plan, Stock Rights previously granted under the Plan shall not
vest and shall terminate and shall be null and void and no Stock Rights shall be
granted thereafter under the Plan. Amendments to the Plan not requiring
shareholder approval shall become effective when adopted by the Board;
amendments requiring shareholder approval shall become effective when adopted by
the Board, but no stock Right granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such stock Right to a particular person) unless
and until such amendment shall have been approved by the Company's shareholders.
If such shareholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Stock Rights granted on or after the date of
such amendment shall terminate and become null and void to the extent that such
amendment was required to enable the Company to grant such Stock Rights to a
particular person. Subject to this limitation, Stock Rights may be granted under
the Plan at any time after the effective date and before the termination date of
the Plan.
B. Unless sooner terminated as provided elsewhere in this Plan, this Plan
shall terminate upon the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board. Stock Rights outstanding
on such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such Stock Rights.
Adopted by the Board of Directors on April 15, 1997.
<PAGE>
================================================================================
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
DATED DECEMBER 30, 1999,
AMONG
SCC TECHNOLOGIES, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
================================================================================
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT dated December 30, 1999,
among SCC TECHNOLOGIES, INC., a Delaware corporation (the "Company"), DBV
Investments, L.P., a Delaware limited partnership, MSD Portfolio L.P. -
Investments, a Delaware limited partnership, Vermeer Investments, LLC, a
Delaware limited liability company, Black Marlin Investments LLC, a Delaware
limited liability company, INSIGHT CAPITAL PARTNERS II, L.P., a Delaware limited
partnership, INSIGHT CAPITAL PARTNERS (CAYMAN) II, L.P., a Cayman Island limited
partnership, INSIGHT CAPITAL PARTNERS III, L.P., a Delaware limited partnership,
INSIGHT CAPITAL PARTNERS III-COINVESTORS, L.P., a Delaware limited partnership,
INSIGHT CAPITAL PARTNERS (CAYMAN) III, L.P., a Cayman Islands limited
partnership, WI SOFTWARE INVESTORS LLC, a Delaware limited liability company,
and IMPRIMIS SB, L.P., a Delaware limited partnership (collectively, the
"Investors"), and Alan Hyman and Mark Tilly (together, Messrs. Hyman and Tilly
are referred to as the "Founders").
PREAMBLE
WHEREAS, Each Investor currently owns (or has the right to acquire through
the conversion of convertible preferred stock) the number of shares of Common
Stock, $0.0001 par value (the "Common Stock"), of the Company set forth opposite
the name of such Investor on Schedule I;
WHEREAS, the Company, certain Investors and the Founders are parties to a
registration rights agreement, dated April 15, 1998 (the "Registration Rights
Agreement"); and
WHEREAS, such parties deem it advisable to amend and restate the
Registration Rights Agreement and to make the non-party Investors parties
thereto.
ACCORDINGLY, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"COMMISSION" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder, all as the same shall be
in effect from time to time.
<PAGE>
"OTHER SHARES" means at any time those shares of Common Stock which do not
constitute Primary Shares or Registrable Shares.
"PRIMARY SHARES" means at any time the authorized but unissued shares of
Common Stock or shares of Common Stock held by the Company in its treasury.
"REGISTRABLE SHARES" means at any time, with respect to any Stockholder,
the shares of Common Stock held by such Stockholder which constitute Restricted
Shares.
"REGISTRATION DATE" means the date upon which the registration statement
pursuant to which the Company shall have initially registered shares of Common
Stock under the Securities Act (not including the registration of shares of
Common Stock pursuant to Form S-8 or similar registration form) for sale to the
public shall have been declared effective.
"RESTRICTED SHARES" means at any time, with respect to any Stockholder, the
shares of Common Stock, any other securities which by their terms are
exercisable or exchangeable for or convertible into Common Stock or other
securities which are so exercisable or convertible and any securities received
in respect thereof, which are held by such Stockholder and which have not
previously been sold to the public pursuant to a registration statement under
the Securities Act or pursuant to Rule 144.
"RULE 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto.
"SECURITIES ACT" means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"STOCKHOLDERS" means the (i) Investors and (ii) any person or entity that
acquires Restricted Shares constituting at least 5% of the issued and
outstanding Common Stock (or Common Stock equivalent).
"TRANSFER" means any disposition of any Restricted Shares or of any
interest therein which constitutes a sale within the meaning of the Securities
Act, other than any disposition pursuant to an effective registration statement
under the Securities Act complying with all applicable state securities and
"blue sky" laws.
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<PAGE>
SECTION 2. REQUIRED REGISTRATION.
At any time after the Registration Date, if the Company shall be requested
by any Investors holding Restricted Shares (based upon Common Stock equivalents)
constituting at least 20% of the then-outstanding Restricted Shares held by all
Investors to effect a registration under the Securities Act of Registrable
Shares in accordance with this Section, then the Company shall promptly give
written notice of such proposed registration to all holders of Restricted Shares
and shall offer to include in such proposed registration any Registrable Shares
requested to be included in such proposed registration by such holders who
respond in writing to the Company's notice within 30 days after delivery of such
notice (which response shall specify the number of Registrable Shares proposed
to be included in such registration). The Company shall promptly use its best
efforts to effect such registration under the Securities Act of the Registrable
Shares which the Company has been so requested to register; PROVIDED, HOWEVER,
that the Company shall not be obligated to effect any registration under the
Securities Act except in accordance with the following provisions:
(a) the Company shall not be obligated to file (i) more than two
registration statements in total or (ii) more than one registration statement
within any consecutive 360-day period, which registration statement(s) were
initiated pursuant to this Section and become effective or which are rescinded
by the Investors without reimbursement referred to in the last paragraph of this
Section;
(b) the Company shall not be obligated to file any registration
statement during any period in which any other registration statement (other
than on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto) pursuant to which Primary Shares are to be or were sold
has been filed and not withdrawn by the Company or has been declared effective
within the prior 90 days;
(c) the Company may delay the filing or effectiveness of any
registration statement for a period not to exceed 180 days after the date of a
request for registration pursuant to this Section 2 if the Company shall furnish
to the Stockholders requesting such registration a certificate signed by the
President of the Company setting forth the reasons why, in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement (provided that the Company may not utilize the right set
forth in this clause (c) more than once in any 12-month period);
4
<PAGE>
(d) with respect to any registration pursuant to this Section, the
Company may include in such registration any Primary Shares or Other Shares;
PROVIDED, HOWEVER, that if the managing underwriter advises the Company that the
inclusion of all Registrable Shares, Primary Shares and Other Shares proposed to
be included in such registration would interfere with the successful marketing
(including pricing) of all such securities, then the number of Registrable
Shares, Primary Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
(i) first, the Registrable Shares held by Investors, and by all
other Stockholders hereafter acquiring Registrable Shares ("Subsequent
Stockholders') and granted by the Company rights to require registration
similar to the rights granted to the Investors under this Section 2, PRO
RATA based upon the number of Restricted Shares (based upon Common Stock
equivalents) owned by each Investor and such other Stockholders at the time
of such registration;
(ii) second, the Primary Shares; and
(iii) third, the Other Shares.
A requested registration under this Section may be rescinded prior to
effectiveness by written notice to the Company by the Investors initiating such
request; such rescinded registration shall not count as a registration statement
initiated pursuant to this Section for purposes of paragraph (a) above if the
Stockholders initiating such request shall have reimbursed the Company for all
out-of-pocket expenses incurred by the Company in connection with such rescinded
registration.
SECTION 3. PIGGYBACK REGISTRATION.
(a) If the Company at any time proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or Form
S-8 promulgated under the Securities Act or any successor forms thereto or other
than in connection with an exchange offer or offering solely to the Company's
stockholders ), it shall promptly give written notice to each Investor of its
intention to so register the Primary Shares or Other Shares and, upon the
written request, given within 30 days after delivery of any such notice by the
Company, of any Investor to include in such registration Registrable Shares held
by such Investor (which request shall specify the number of Registrable Shares
proposed to be included in such registration), the Company shall use its best
efforts to cause all such Registrable Shares to be included in such registration
on the same terms and conditions as the securities otherwise
5
<PAGE>
being sold in such registration; PROVIDED, HOWEVER, that if the managing
underwriter advises the Company that the inclusion of all Registrable Shares or
Other Shares proposed to be included in such registration would interfere with
the successful marketing (including pricing) of the Primary Shares proposed to
be registered by the Company, then the number of Primary Shares, Registrable
Shares and Other Shares proposed to be included in such registration shall be
included in the following order:
(i) first, the Primary Shares;
(ii) second, the Registrable Shares held by the Investors and
Subsequent Stockholders, PRO RATA based upon the number of Restricted Shares
(based upon Common Stock equivalents) owned by each such Stockholder at the time
of such registration; and
(iii) third, the Other Shares.
(b) Each Investor who has requested that Registrable Shares be included in
a registration pursuant to Section 3(a) hereof, shall be bound by the Company's
choice of managing underwriter stated in the Company's notice and to execute an
underwriting agreement with such underwriter that is (i) reasonably satisfactory
to such Investor and (ii) in customary form.
SECTION 4. HOLDBACK AGREEMENT.
If the Company at any time shall register shares of Common Stock under the
Securities Act (including any registration pursuant to Sections 2 or 3) for sale
to the public and the managing underwriter for such registration shall request,
the Investors shall not sell, make any short sale of, grant any option for the
purchase of, or otherwise dispose of any Restricted Shares (other than those
shares of Common Stock included in such registration) without the prior written
consent of the Company for a period designated by the Company in writing to the
Investors, which period shall not begin more than 10 days prior to the
effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the effective
date of such registration statement; PROVIDED that the Investors shall be bound
by this provision only if, and to the extent, the Founders and the executive
officers of the Company owning Common Stock and all other Stockholders whose
Registrable Shares are included in such Registration Statement shall be bound by
such a provision.
6
<PAGE>
SECTION 5. PREPARATION AND FILING.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Shares, the Company shall, as expeditiously as practicable:
(a) use its best efforts to cause a registration statement that registers
such Registrable Shares to become and remain effective for a period of 180 days
or until all of such Registrable Shares have been disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Registrable Shares, a prospectus relating thereto
or any amendments or supplements relating to such a registration statement or
prospectus, to one counsel selected by the holders of a majority of such
Registrable Shares then being registered for sale (the "Selling Stockholders'
Counsel"), copies of all such documents proposed to be filed (it being
understood that such five-business-day period need not apply to successive
drafts of the same document proposed to be filed so long as such successive
drafts are supplied to such counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for at least a
period of 180 days or until all of such Registrable Shares have been disposed of
(if earlier) and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of such Registrable Shares;
(d) notify in writing the Selling Stockholders' Counsel promptly (i) of
the receipt by the Company of any notification with respect to any comments by
the Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) of the receipt by the Company of any notification with respect to
the issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by the Company of any notification with respect to the suspension of
the qualification of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
7
<PAGE>
(e) use its best efforts to register or qualify such Registrable Shares
under such other securities or blue sky laws of such jurisdictions as any seller
of Registrable Shares reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such seller of
Registrable Shares to consummate the disposition in such jurisdictions of the
Registrable Shares owned by such seller; PROVIDED, HOWEVER, that the Company
will not be required to qualify generally to do business, subject itself to
general taxation or consent to general service of process in any jurisdiction
where it would not otherwise be required so to do but for this paragraph (e);
(f) furnish to each seller of such Registrable Shares such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as such seller of Registrable Shares may reasonably request in
order to facilitate the public sale or other disposition of such Registrable
Shares;
(g) use its best efforts to cause such Registrable Shares to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Shares;
(h) notify on a timely basis each seller of such Registrable Shares at any
time when a prospectus relating to such Registrable Shares is required to be
delivered under the Securities Act within the appropriate period mentioned in
paragraph (a) of this Section, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and, at the request
of such seller, prepare and furnish to such seller a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the offerees of such shares, such prospectus
shall not include 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 not misleading in light of the circumstances then existing;
(i) make available for inspection by any seller of such Registrable
Shares, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and
8
<PAGE>
properties of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
(together with the Records, the "Information") reasonably requested by any such
Inspector in connection with such registration statement. Any of the Information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary to avoid
or correct a misstatement or omission in the registration statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (iii) such Information has been made
generally available to the public. The seller of Registrable Shares agrees that
it will, upon learning that disclosure of such Information is sought in a court
of competent jurisdiction, give notice to the Company and allow the Company, at
the Company's expense, to undertake appropriate action to prevent disclosure of
the Information deemed confidential;
(j) use its best efforts to obtain from its independent certified public
accountants "comfort" letters in customary form and at customary times and
covering matters of the type customarily covered by comfort letters;
(k) use its best efforts to obtain from its counsel an opinion or opinions
in customary form;
(l) provide a transfer agent and registrar (which may be the same entity
and which may be the Company) for such Registrable Shares;
(m) issue to any underwriter to which any seller of Registrable Shares may
sell shares in such offering certificates evidencing such Registrable Shares;
(n) list such Registrable Shares on any national securities exchange on
which any shares of the Common Stock are listed or, if the Common Stock is not
listed on a national securities exchange, use its best efforts to qualify such
Registrable Shares for inclusion on the automated quotation system of the
National Association of Securities Dealers, Inc. (the "NASD") or such national
securities exchange as the holders of a majority of such Registrable Shares
shall request;
(o) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its securityholders, as soon
as reasonably practicable, earnings statements (which need not be audited)
covering a period of 12 months
9
<PAGE>
beginning within three months after the effective date of the registration
statement, which earnings statements shall satisfy the provisions of Section
10(a) of the Securities Act; and
(p) use its best efforts to take all other steps necessary to effect the
registration of such Registrable Shares contemplated hereby.
SECTION 6. EXPENSES.
All expenses incurred by the Company in complying with Section 5,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), fees and expenses of complying with
securities and blue sky laws, printing expenses, and reasonable fees and
expenses of the Company's counsel and accountants, and the reasonable fees and
expenses of the Selling Stockholders' Counsel shall be paid by the Company;
PROVIDED, HOWEVER, that all underwriting discounts and selling commissions
applicable to the Registrable Shares, and all fees and expenses of any special
or interim audit for any registration initiated by Stockholders pursuant to
Section 2, shall be borne by the seller or sellers thereof, in proportion to the
number of Registrable Shares sold by such seller or sellers.
SECTION 7. INDEMNIFICATION.
In connection with any registration of any Registrable Shares under the
Securities Act pursuant to this Agreement, the Company shall indemnify and hold
harmless the seller of such Registrable Shares, its officers and directors, each
underwriter, broker or any other person acting on behalf of such seller and each
other person, if any, who controls any of the foregoing persons within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, (or actions in respect thereof) to which any of
the foregoing persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the registration statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, 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 or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, or any violation by the Company of the Securities Act or state
securities or blue
10
<PAGE>
sky laws applicable to the Company and relating to action or inaction required
of the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such seller, such officer
or director, such underwriter, such broker or such other person acting on behalf
of such seller and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
seller or underwriter specifically for use in the preparation thereof.
In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each seller of Registrable Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the preceding paragraph of this Section) the Company, each director
of the Company, each officer of the Company who shall sign such registration
statement, each underwriter, broker or other person acting on behalf of such
seller, each person who controls any of the foregoing persons within the meaning
of the Securities Act and each other seller of Registrable Shares under such
registration statement with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein or otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of any
Registrable Shares, if such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company or such
underwriter through an instrument duly executed by such seller or underwriter
specifically for use in connection with the preparation of such registration
statement, preliminary prospectus, final prospectus, amendment, supplement or
document; PROVIDED, HOWEVER, that the obligation to indemnify will be several,
not joint and several, among such sellers of Registrable Shares, and the maximum
amount of liability in respect of such indemnification shall be in proportion to
and limited to, in the case of each seller of Registrable Shares, an amount
equal to the net proceeds actually received by such seller from the sale of
Registrable Shares effected pursuant to such registration.
The indemnification required by this Section 7 will be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses
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<PAGE>
incurred, subject to prompt refund in the event any such payments are determined
not to have been due and owing hereunder.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it 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 responsible for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof.
The indemnification provided for under this Agreement will remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities.
If the indemnification provided for in this Section is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, claim, damage, liability or action referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such loss, claim, damage or liability as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party 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 indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the sellers of Registrable Shares agree that it would not be just and equitable
if contributions pursuant to this paragraph were determined by PRO RATA
allocation or by any other method of allocation which did not take into account
the equitable considerations referred to herein. The amount paid or payable to
an indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to above shall be deemed to include, subject to the limitation
set forth in the fourth paragraph of this Section
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7, any legal or other expenses reasonably incurred in connection with
investigating or defending the same. Notwithstanding the foregoing, in no event
shall the amount contributed by a seller of Registrable Shares exceed the
aggregate net offering proceeds received by such seller from the sale of its
Registrable Shares.
SECTION 8. UNDERWRITING AGREEMENT.
Notwithstanding the provisions of Sections 4, 5, 6 and 7, to the extent
that the Company and the Stockholders selling Registrable Shares in a proposed
registration shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such Sections addressing such issue or
issues shall be superseded with respect to such registration by such other
agreement.
SECTION 9. INFORMATION BY HOLDER.
Each Stockholder selling Registrable Shares in a proposed registration
shall furnish to the Company such written information regarding such holder and
the distribution proposed by such Stockholder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
SECTION 10. EXCHANGE ACT COMPLIANCE.
From and after the Registration Date or such earlier date as a registration
statement filed by the Company pursuant to the Exchange Act relating to any
class of the Company's securities shall have become effective, the Company shall
comply with all of the reporting requirements of the Exchange Act and with all
other public information reporting requirements of the Commission which are
conditions to the availability of Rule 144 for the sale of the Common Stock. The
Company shall cooperate with each Stockholder in supplying such information as
may be necessary for such Stockholder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of Rule 144.
SECTION 11. NO CONFLICT OF RIGHTS.
The Company represents and warrants to the Stockholders that the
registration rights granted to the Stockholders hereby do not conflict with any
other registration rights granted by
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the Company. The Company shall not, after the date hereof, grant any
registration rights which conflict with or impair the registration rights
granted hereby.
SECTION 12. RESTRICTION ON TRANSFER.
(a) The Restricted Shares shall not be transferable except upon the
conditions specified in this Section, which conditions are intended only to
insure compliance with the provisions of the Securities Act.
(b) Each certificate representing Restricted Shares shall (unless
otherwise permitted by the provisions of paragraph (c) and (d) below) be stamped
or otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN
SECTION 12 OF THE REGISTRATION RIGHTS AGREEMENT DATED DECEMBER 30, 1999,
AMONG SCC TECHNOLOGIES, INC., AND CERTAIN OF ITS SHAREHOLDERS, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
FROM THE SECRETARY OF SCC TECHNOLOGIES, INC."
(c) The holder of any Restricted Shares by acceptance thereof agrees,
prior to any Transfer of any Restricted Shares, to give written notice to the
Company of such holder's intention to effect such Transfer and to comply in all
other respects with the provisions of this Section. Each such notice shall
describe the manner and circumstances of the proposed Transfer. Upon request by
the Company, the holder delivering such notice shall deliver a written opinion,
addressed to the Company, of counsel for the holder of Restricted Shares,
stating that in the opinion of such counsel (which opinion and counsel shall be
reasonably satisfactory to the Company) such proposed Transfer does not involve
a transaction requiring registration or qualification of such Restricted Shares
under the Securities Act or the securities or "blue sky" laws of any state of
the United States. Such holder of Restricted Shares shall be entitled to
Transfer such Restricted Shares in accordance with the terms of the notice
delivered
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<PAGE>
to the Company, if the Company does not reasonably object to such Transfer and
request such opinion within five days after delivery of such notice, or, if it
requests such opinion, does not reasonably object to such Transfer within five
days after delivery of such opinion. Each certificate or other instrument
evidencing the securities issued upon the Transfer of any Restricted Shares (and
each certificate or other instrument evidencing any untransferred balance of
such Registered Shares) shall bear the legend set forth in paragraph (b) above
unless (i) in such opinion of counsel registration of any future Transfer is not
required by the applicable provisions of the Securities Act or (ii) the Company
shall have waived the requirement of such legends.
(d) Notwithstanding the foregoing provisions of this Section, the
restrictions imposed by this Section upon the transferability of any Restricted
Shares shall cease and terminate when (i) any such Restricted Shares are sold or
otherwise disposed of (A) pursuant to an effective registration statement under
the Securities Act or (B) in a transaction contemplated by paragraph (c) above
which does not require that the Restricted Shares so transferred bear the legend
set forth in paragraph (b) hereof, or (ii) the holder of such Restricted Shares
has met the requirements for Transfer of such Restricted Shares under Rule
144(k) under the Securities Act. Whenever the restrictions imposed by this
Section shall terminate, the holder of any Restricted Shares as to which such
restrictions have terminated shall be entitled to receive from the Company,
without expense, a new certificate not bearing the restrictive legend set forth
in paragraph (b) above and not containing any other reference to the
restrictions imposed by this Section.
SECTION 13. TERMINATION.
This Agreement shall terminate and be of no further force or effect on the
date five years following the Registration Date.
SECTION 14. SUCCESSORS AND ASSIGNS.
This Agreement shall bind and inure to the benefit of the Company and the
Stockholders and, subject to Section 15, their respective successors and
assigns.
SECTION 15. ASSIGNMENT.
Each Stockholder may assign its rights hereunder to any of its affiliates
or to any person or entity that through the acquisition of Restricted Shares
from such Stockholder becomes a Stockholder (as defined herein); PROVIDED,
HOWEVER, that such person or entity
15
<PAGE>
shall, as a condition to the effectiveness of such assignment, be required to
execute and deliver to the Company a counterpart to this Agreement agreeing to
be treated as a Stockholder whereupon such person or entity shall have the
benefits of, and shall be subject to the restrictions contained in, this
Agreement with respect to such Restricted Shares.
SECTION 16. ENTIRE AGREEMENT.
This Agreement contains the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior arrangements or
understandings with respect hereto, including without limitation the
Registration Rights Agreement, which shall be of no further force or effect. To
the extent (i) the acquisition of an aggregate of 700,000 shares of Common Stock
by one or more of the Investors from Mark Tilly and Alan Hyman, and/or (ii) the
purchase and sale of the Series C Preferred Stock to any Investors pursuant to
that certain Securities Purchase Agreement of even date herewith, would
otherwise constitute a breach of the Registration Rights Agreement, such breach
is hereby waived.
SECTION 17. NOTICES.
All notices, requests, consents and other communications hereunder to any
party shall be deemed to be sufficient if contained in a written instrument and
shall be deemed to have been duly given when delivered in person, by telecopy,
by nationally-recognized overnight courier, or by first class registered or
certified mail, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
the addressee to the addressor:
if to the Company, to:
SCC Technologies, Inc.
537 Congress Street
Portland, Maine 04101-3353
Fax: (207) 772-8596
Telephone: (207) 774-3244
Attention: President and Legal Department
with a copy to:
Lucash, Gesmer & Updegrove, LLP
16
<PAGE>
40 Broad Street
Boston, MA 02109
Fax: (617) 350-6878
Telephone: (617) 350-6800
Attention: William Contente
if to the Investors, to the applicable address set forth on Schedule I:
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Fax: (312) 701-7711
Telephone: (312) 701-7100
Attention: Edward S. Best
and
O'Sullivan, Graev & Karabell, LLP
30 Rockefeller Plaza - 41st Floor
New York, New York 10112
Fax: (212) 408-2467
Telephone: (212) 408-2400
Attention: John J. Suydam
if to the Founders, to the applicable address set forth on Schedule I;
with a copy to:
Kirkpatrick & Lockhart LLP
75 State Street, Sixth Floor
Boston, Massachusetts 02109
Fax: (617) 951-9019
Telephone: (617) 951-9211
Attention: Stephen L. Palmer, Esq.; and
if to any other Stockholder, at his or its address set forth in the books of the
Company.
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<PAGE>
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the next business day and (c) in the case of mailing, on
the third business day following such mailing if sent by certified mail, return
receipt requested.
SECTION 18. MODIFICATIONS; AMENDMENTS; WAIVERS.
The terms and provisions of this Agreement may not be modified or amended,
except pursuant to a writing signed by the Company and the Stockholders holding
at least 80% of the Restricted Shares (based upon Common Stock equivalents) held
by all Stockholders who are parties to this Agreement.
SECTION 19. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 20. HEADINGS.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
SECTION 21. SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
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<PAGE>
SECTION 22. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York. The Company and Investors
irrevocably consent to the exclusive jurisdiction of the United States federal
and state courts located in New York in any suit or proceeding based on or
arising under this Agreement and irrevocably agree that all claims in respect of
such suit or proceeding may be determined in such courts. The Company and
Investors irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company and Investors further agree
that service of process upon the Company and Investors, respectively, mailed by
first class mail, shall be deemed in every respect effective service of process
upon the Company and Investors, respectively, in any such suit or proceeding.
Nothing herein shall affect the right of the Company or the right of any
Investor to serve process in any other manner permitted by law. The Company and
Investors agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the date first written above.
SCC TECHNOLOGIES, INC.
By: /s/ Philip M. St. Germain
----------------------------
Name: Philip M. St. German
Title: CFO
DBV INVESTMENTS, L.P.
By: DRT Capital, L.L.C., its general partner
By: /s/ Glen Fuhrman
----------------------------
Name: Glen Fuhrman
_ Title: Manager
MSD PORTFOLIO L.P. - INVESTMENTS
By: MSD Capital, L.P., its general partner
By: /s/ Glen Fuhrman
----------------------------
Name: Glenn R. Fuhrman
_ Title: Managing Principal
VERMEER INVESTMENTS, LLC
By: /s/ Glen Fuhrman
----------------------------
Name: Glenn R. Fuhrman
Title: Manager
20
<PAGE>
BLACK MARLIN INVESTMENTS, LLC
By: /s/ John C. Phelan
----------------------------
Name: John C. Phelan
Title: Manager
INSIGHT CAPITAL PARTNERS II, L.P.
By: InSight Venture Associates II, LLC, its
General Partner
By: /s/ Jeffrey L. Horing
----------------------------
Jeffrey L. Horing
Member
INSIGHT CAPITAL PARTNERS (CAYMAN) II, L.P.
By: InSight Venture Associates II, LLC, its
general Partner
By: /s/ Jeffrey L. Horing
----------------------------
Jeffrey L. Horing
Member
INSIGHT CAPITAL PARTNERS III, L.P.
By: Insight Venture Associates III, LLC, its
general partner
By: /s/ Jeffrey L. Horing
----------------------------
Name: Jeffrey L. Horing
Title: Managing Member
21
<PAGE>
INSIGHT CAPITAL PARTNERS III-COINVESTORS, L.P.
By: Insight Venture Associates III, LLC, its
general partners
By: /s/ Jeffrey L. Horing
----------------------------
Name: Jeffrey L. Horing
Title: Managing Member
INSIGHT CAPITAL PARTNERS (CAYMAN) III, L.P.
By: Insight Venture Associates III, LLC, its
general partner
By: /s/ Jeffrey L. Horing
----------------------------
Name: Jeffrey L. Horing
Title: Managing Member
WI SOFTWARE INVESTORS LLC
By: Wexford Management LLC, its Investment Manager
By: /s/ Robert Holtz
----------------------------
Name: Robert Holtz
Title: Principal
IMPRIMIS SB, L.P.
By: Imprimis SB, GP LLC, its
general partner
By: /s/ Robert Holtz
----------------------------
Name: Robert Holtz
22
<PAGE>
Title: V.P.
/s/ Alan Hyman
------------------------------------
Alan Hyman
/s/ Mark Tilly
------------------------------------
Mark Tilly
23
<PAGE>
SCHEDULE I
Number of Common
STOCKHOLDER STOCK EQUIVALENTS
INVESTORS:
DBV Investments, L.P.
MSD Portfolio L.P. - Investments
Vermeer Investments, LLC
Black Marlin Investments, LLC
c/o MSD Capital, L.P.
780 Third Avenue - 43rd Floor
New York, New York 10017-2024
Fax: (212) 303-1622
Telephone: (212) 303-1668
Attention: Marc Lisker
InSight Capital Partners II, L.P.
InSight Capital Partners (Cayman) II, L.P.
InSight Capital Partners III, L.P.
InSight Capital Partners III-CoInvestors, L.P.
InSight Capital Partners (Cayman) III, L.P.
527 Madison Avenue, 10th Floor
New York, New York 10022
Fax: (212) 230-9272
Telephone: (212) 230-9210
Attention: Jeffrey Horing
24
<PAGE>
WI Software Investors LLC
Imprimis SB L.P.
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, CT 06830
Fax: (203) 862-7310
Telephone: (203) 862-7028
Attention: Robert Holtz
FOUNDERS:
Alan Hyman
SCC Technologies, Inc.
537 Congress Street
Suite 500
Portland, ME 04101
TEL: (207) 761-0079
FAX: (207) 772-8597
Mark Tilly
SCC Technologies, Inc.
537 Congress Street
Suite 500
Portland, ME 04101
TEL: (207) 761-0079
FAX: (207) 772-8597
25
\<PAGE>
================================================================================
SCC TECHNOLOGIES, INC.
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
DATED AS OF DECEMBER 30, 1999
================================================================================
1
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of December 30, 1999,
among SCC TECHNOLOGIES, INC., a Delaware corporation (the "Company"), DBV
INVESTMENTS, L.P., a Delaware limited partnership, MSD PORTFOLIO L.P. -
INVESTMENTS, a Delaware limited partnership, VERMEER INVESTMENTS, LLC, a
Delaware limited liability company, BLACK MARLIN INVESTMENTS, LLC, a Delaware
limited liability company, INSIGHT CAPITAL PARTNERS II, L.P., a Delaware limited
partnership, INSIGHT CAPITAL PARTNERS (CAYMAN) II, L.P., a Cayman Island limited
partnership, INSIGHT CAPITAL PARTNERS III, L.P., a Delaware limited partnership,
INSIGHT CAPITAL PARTNERS III-COINVESTORS, L.P., a Delaware limited partnership,
and INSIGHT CAPITAL PARTNERS (CAYMAN) III, L.P., a Cayman Islands limited
partnership, WI SOFTWARE INVESTORS LLC, a Delaware limited liability company,
and IMPRIMIS SB, L.P., a Delaware limited partnership (collectively, the
"Investors"), ALAN HYMAN and MARK TILLY.
PREAMBLE
Certain of the Investors, Alan Hyman, Mark Tilly and the Company are
parties to a Stockholders' Agreement, dated as of April 15, 1998 (the "Original
Agreement"). Such parties desire to amend and restate the Original Agreement as
set forth herein and to add the non-party Investors as parties to this
Agreement.
It is deemed to be in the best interest of the Company and the Stockholders
that provision be made for the continuity and stability of the business and
policies of the Company and its subsidiaries, as the same may exist from time to
time, and, to that end, the Company and the Stockholders desire to set forth
their agreement with respect to the shares of capital stock of the Company owned
by them.
Accordingly, in consideration of the mutual covenants and agreements
contained in this Agreement, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
The following terms have the following meanings:
"AFFILIATE" has the meaning ascribed to it in Rule 12(b)(2) promulgated
under the Securities Exchange Act of 1934, as amended.
"BOARD" means the Board of Directors of the Company.
"EQUITY SECURITIES" means all shares of capital stock of the Company, all
securities convertible into or exchangeable for shares of capital stock of the
Company, and all options,
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<PAGE>
warrants, and other rights to purchase or otherwise acquire from the Company
shares of such capital stock.
"FOUNDER SHARES" means the shares of Common Stock held by the Founders on
the date hereof (after giving effect to the sale by the Founders of certain
shares of Common Stock in connection with the execution hereof), and any shares
of capital stock issued thereon as a stock dividend or upon any stock split or
other subdivision of shares of capital stock.
"FOUNDERS" means Alan Hyman and Mark Tilly.
"FUTURE STOCKHOLDER" means any Person that acquires Equity Securities after
the date hereof and who is a party to this Agreement.
"GROUP" means:
(a) IN THE CASE OF EACH FOUNDER, (i) such Founder, (ii) the other
Founder, (iii) the spouse and lineal descendants of such Founder, and (iv)
all trusts, partnerships or similar entities principally owned by and/or
for the benefit of any of the foregoing;
(b) IN THE CASE OF ANY STOCKHOLDER WHO IS AN INDIVIDUAL, (i) such
Stockholder, (ii) the spouse and lineal descendants of such Stockholder,
and (iii) all trusts, partnerships or similar entities principally owned by
and/or for the benefit of any of the foregoing;
(c) IN THE CASE OF ANY STOCKHOLDER THAT IS A PARTNERSHIP, (i) such
Stockholder, (ii) its limited and general partners, (iii) any Person to
which such Stockholder shall Transfer all or substantially all of its
assets, and (iv) all Affiliates of such Stockholder; and
(d) IN THE CASE OF ANY STOCKHOLDER WHICH IS A CORPORATION OR A
LIMITED LIABILITY COMPANY, (i) such Stockholder, (ii) its stockholders,
(iii) any Person to which such Stockholder shall Transfer all or
substantially all of its assets, and (iv) all Affiliates of such
Stockholder.
"INVESTOR SHARES" means the shares of Series A Preferred Stock, Series B
Preferred stock and Series C Preferred Stock held by the Investors on the date
hereof, any shares of capital stock directly or indirectly issued upon
conversion thereof, and any shares of capital stock issued on any of the
foregoing as a stock dividend or upon any stock split or other subdivision of
shares of capital stock.
"MAJOR STOCKHOLDER" means each Investor (including a member of the Group of
such Investor), each Founder, and each Stockholder that owns at least 5% of any
class or series of capital stock of the Company.
"NEW SECURITIES" means all Equity Securities other than (i) options granted
to officers, directors, consultants, service providers and employees of the
Company or any subsidiary
3
<PAGE>
pursuant to any stock option or stock purchase plan approved by the Board,
and any shares of Common Stock at any time issuable upon the exercise
thereof; (ii) the shares of Common Stock issuable upon conversion of any
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock; (iii) the shares of Common Stock or other equity
securities issuable, directly or indirectly, upon the exercise of any
options, warrants, convertible notes or other rights to acquire equity
securities of the Company which are outstanding on the date hereof; (iv) up
to 29,750 shares of Common Stock (as equitably adjusted for stock
dividends, stock splits, stock combinations and similar events) issuable to
Goulder Investments, Ltd. or assigns upon exercise of that certain warrant
dated May 27, 1997, as amended; (v) up to 59,525 shares of Common Stock (as
equitably adjusted for stock dividends, stock splits, stock combinations
and similar events) issuable to Bayview Ventures or assigns upon exercise
of that certain warrant dated May 27, 1997, as amended; (vi) shares of any
class of capital stock issued on a PRO RATA basis to all holders of such
class as a stock dividend or upon any stock split or other subdivision of
shares of capital stock; and (vii) any shares of Common Stock issued in
connection with any Qualified Public Offering.
"PERSON" shall be construed broadly and shall include an individual, a
partnership, a company, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
any other entity and a governmental entity or any department, agency or
political subdivision thereof.
"PRO RATA AMOUNT" means, with respect to any Stockholder, the quotient
obtained by dividing (i) the number of shares of Common Stock held by such
Stockholder by (ii) the aggregate number of shares of Common Stock outstanding,
assuming in each case the conversion or exchange of all securities by their
terms convertible into or exchangeable for Common Stock and the exercise of all
options to purchase or rights to subscribe for Common Stock or such convertible
or exchangeable securities.
"QUALIFIED PUBLIC OFFERING" means the first underwritten public offering
for the account of the Company of Common Stock pursuant to a registration
statement filed under the Securities Act of 1933 at an offering price per share
of Common Stock to the public of not less than three times the Series C Issue
Price (as such term is defined in the Amended and Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation")) and with
aggregate proceeds (net of underwriting discounts and commissions) to the
Company of not less than $25,000,000.
"SHARES" means the Investor Shares, the Founder Shares, and all Equity
Securities owned or acquired by the Stockholders or any Future Stockholders.
"STOCKHOLDERS" means the Investors, the Founders and any Future
Stockholders.
"TERMINATION DATE" means the date of consummation of any Qualified Public
Offering.
"THIRD PARTY" means, with respect to any Stockholder, any Person that is
not (i) the Company or (ii) a member of the Group of such Stockholder.
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<PAGE>
"TRANSFER" means to sell, transfer, assign, or otherwise dispose of, either
voluntarily or involuntarily and with or without consideration.
"VOTING SHARES" means the shares of capital stock of the Company entitled
to vote for the election of directors.
ARTICLE II
BOARD REPRESENTATION
2.1 BOARD REPRESENTATION.
(a) The Company and the Stockholders shall take such corporate actions as
may be reasonably required to ensure that (i) the number of directors
constituting the Board is at all times six, and (ii) the presence of four
directors is required to constitute a quorum of the Board.
(b) Subject to the terms of this Agreement:
(i) the Investors owning a majority of the Series A Preferred Stock
and Series B Preferred Stock, voting as a class, shall be entitled (A) to
nominate up to two individuals, both of whom may (but need not) be
representatives of the Investors for election to the Board to serve as
directors until their successors are elected and qualify, (B) to nominate
each such successor, and (C) to propose the removal from the Board of any
director nominated under the foregoing clause (A) or (B); PROVIDED,
HOWEVER, that should such Investors, at any time or from time to time,
Transfer 80% or more of their shares of Series A Preferred Stock and Series
B Preferred Stock to Third Parties, the number of directors such Investors
shall be entitled to nominate for election to the Board pursuant to the
foregoing clause (A) shall be reduced to one;
(ii) the Investors owning a majority of the Series C Preferred Stock,
voting as a class, shall be entitled (A) to nominate one individual, who
may (but need not) be a representative of such Investors for election to
the Board to serve as a director until his successor is elected and
qualifies, (B) to nominate each such successor, and (C) to propose the
removal from the Board of any director nominated under the foregoing clause
(A) or (B); PROVIDED, HOWEVER, that should such Investors, at any time or
from time to time, transfer 80% or more of their shares of Series C
Preferred Stock to Third Parties, such Investors shall no longer be
entitled to nominate any person for election to the Board. The Investors
owning a majority of the Series C Preferred Stock initially nominate John
Phelan to serve as a director of the Company;
(iii) the holder(s) of a majority in voting power of all Founder
Shares shall be entitled (A) to nominate each Founder (or such Founder's
identified designee) for election to the Board to serve as directors until
his successor is elected and qualified, (B) to
5
<PAGE>
nominate each such successor, and (C) to propose the removal from the Board
of any director nominated under the foregoing clauses (A) or (B); and
(iv) the Company through the Board shall be entitled (A) to nominate
an unaffiliated individual for election to the Board to serve as a director
until such individual's successor is elected and has qualified, (B) to
nominate an unaffiliated individual as a successor; and (C) to propose
removal from the Board of any director nominated under the foregoing
clauses (A) and (B).
Each nomination or any proposal to remove from the Board any director shall
be made by delivering to the Company a notice signed by the party or parties
entitled to such nomination or proposal. As promptly as practicable, but in any
event within ten (10) days, after delivery of such notice, the Company shall
take or cause to be taken such corporate actions as may be reasonably required
to cause the election or removal proposed in such notice. Such corporate actions
may include calling a meeting or soliciting a written consent of the Board, or
calling a meeting or soliciting a written consent of Stockholders.
2.2 VOTING AGREEMENT.
Each Stockholder shall vote all Voting Shares held by such Stockholder for
the election to the Board of all individuals nominated in accordance with
Section 2.1 and for the removal from the Board of all directors proposed to be
removed in accordance with Section 2.1. Each Stockholder shall use all
reasonable efforts to cause each director originally nominated by such
Stockholder to vote for the election to the Board of all individuals nominated
in accordance with Section 2.1. If the Investors lose their rights to nominate a
person for election to the Board under Sections 2.1(b)(i) or 2.1(b)(ii) due to
the transfer of Investor Shares, any vacancy created by such loss shall be
filled in accordance with the By-laws of the Company as then in effect.
Each Stockholders agrees to vote its securities in favor of any
amendment or action set forth in Section 6.15 of the Securities Purchase
Agreement, dated December 30, 1999, in order to effectuate compliance with the
Small Business Investment Act of 1958 and the regulations issued thereunder as
set forth in 13 CFR 107 and 121, as amended.
2.3 INTERIM DIRECTOR.
The Company shall notify each Stockholder of the occurrence of any vacancy
in any seat of the Board. If the Stockholders entitled to nominate a successor
to fill such vacancy fail to do so within 60 days after delivery of such notice,
such vacancy may be filled in accordance with the By-laws of the Company until a
successor has been nominated and elected to the Board in accordance with
Sections 2.1 and 2.2.
2.4 COMMITTEES; SUBSIDIARIES.
(a) Each Stockholder shall use all reasonable efforts to cause each
director of the Company originally nominated by such Stockholder to take such
corporate actions as may be
6
<PAGE>
reasonably required to ensure that (i) the Board has at all times an executive
committee, a compensation committee, and an audit committee, and (ii) at least
one director nominated under Section 2.1(b)(i) or (ii) who is a representative
of the Investors shall be appointed to each such committee.
(b) The Company and each Stockholder shall take, and each Stockholder
shall use all reasonable efforts to cause each director of the Company
originally nominated by such Stockholder to take, such corporate actions as may
be reasonably required to ensure that the composition of the board of directors
of all direct and indirect subsidiaries of the Company is identical to the
composition of the Board.
2.5 MEETINGS; EXPENSES; COMPENSATION.
(a) The Company shall convene meetings of the Board at least once every
three months. Upon any failure by the Company to convene any meeting required by
this paragraph, a director nominated under Section 2.1(b)(i) or (ii) who is a
representative of the Investors or, if there is no such representative, an
unaffiliated individual so nominated, shall be empowered to convene such
meeting.
(b) The Company shall reimburse each director for his or her reasonable
out-of-pocket expenses incurred in connection with the attendance of meetings of
the Board or the performance of his or her other duties as a director.
Unaffiliated individuals shall be compensated for serving on the Board.
(c) The Company agrees that it shall indemnify each person serving as a
director of the Company to the fullest extent permitted by applicable law and
agrees to cause its certificate of incorporation and by-laws to contain
provisions requiring the Company to indemnify all officers and directors to the
fullest extent permitted by applicable law.
2.6 NEGATIVE COVENANTS.
(a) The following "Major Actions" of the Board shall require a majority
vote of the directors, which majority shall include at least one director
elected pursuant to Section 2.1(b)(i) or, if there is no such person, by at
least two-thirds approval of the Board of Directors.
(i) the issuance by the Company of any New Securities or the
declaration of any dividend or other distribution on Equity Securities;
(ii) the sale of all or a substantial part of the Company, a merger of
the Company, or the sale, lease or other disposition of its assets outside
the ordinary course of business;
(iii) an acquisition by the Company of an interest in any other Person
or business for a consideration in excess of $2,000,000, or any other
material expenditures in excess of $500,000 not included in the annual
operating budget;
7
<PAGE>
(iv) changes in accounting methods or policies and any change in the
Company's auditors;
(v) the pledging of assets, other than for operating purposes in the
normal course of the Company's business; and
(vi) material changes in the Certificate of Incorporation, bylaws or
the list of "Major Actions".
(b) Material changes in the strategic direction of the Company not
envisioned in the business plan provided to the Investors shall require the
approval of the holders of two-thirds (2/3rds) of the outstanding Series C
Preferred Stock.
2.7 TERMINATION.
The agreements set forth in this Article II shall terminate on the
Termination Date.
ARTICLE III
SHARES
3.1 FUTURE STOCKHOLDERS.
The Company shall require each Person that acquires Equity Securities from
the Company entitling them either directly or indirectly to hold more than one
percent (1%) of the Common Stock of the Company (on a fully-diluted basis) after
the date hereof, as a condition to the effectiveness of such acquisition, to
execute a counterpart to this Agreement, agreeing to be treated as a Future
Stockholder, whereupon such Person shall be bound by, and entitled to the
benefits of, the provisions of this Agreement relating to Stockholders;
PROVIDED, HOWEVER, that with respect to officers and employees of the Company
who acquire Common Stock through the exercise of options granted to them
pursuant to any stock option plan of the Company before the date hereof, the
Company shall be required only to make a good faith effort to request that such
officers and employees execute a counterpart to this Agreement.
3.2 LIMITATIONS ON TRANSFERS.
Each Transfer of any Shares by any Stockholder before the Termination Date
shall not become effective unless and until the transferee (unless already
subject to this Agreement) executes and delivers to the Company a counterpart to
this Agreement, agreeing to be treated in the same manner as the transferring
Stockholder. Upon such Transfer and such execution and delivery, the transferee
shall be bound by, and entitled to the benefits of, this Agreement with respect
to the transferred Shares in the same manner as the transferring Stockholder.
Any Transfer of Shares by any Stockholder not in accordance with this paragraph
shall be void.
8
<PAGE>
3.3 RIGHT OF FIRST OFFER.
(a) At any time before the Termination Date, if any Stockholder (the
"Offeror") proposes to Transfer any Shares other than to a member of the Group
of such Stockholder, the Offeror shall, before such Transfer, deliver to the
Company an offer (the "First Offer") to Transfer such Shares upon the terms set
forth in this Section. The First Offer shall state that the Offeror proposes to
Transfer Shares and specify the number of Shares (the "Offered Shares") and the
terms (including purchase price) of the proposed Transfer. The First Offer shall
remain open and irrevocable for a period of 30 days (the "First Acceptance
Period") from the date of its delivery. The Company may accept the First Offer
and purchase all, but not a part, of the Offered Shares by delivering to the
Offeror a notice in writing within the First Acceptance Period.
(b) If the Company shall decline to purchase the Offered Shares pursuant
to the First Offer, the Offeror shall deliver to the Major Stockholders an offer
(the "Second Offer") to Transfer such Shares upon the terms set forth in this
Section. The Second Offer shall state that the Offeror proposes to Transfer
Shares and specify the number of Offered Shares and the terms (including
purchase price) of the proposed Transfer. The Second Offer shall remain open and
irrevocable for a period of 30 days (the "Second Acceptance Period") from the
date of its delivery.
(c) Each Major Stockholder may accept the Second Offer and purchase all,
but not a part, of the Offered Shares by delivering to the Offeror a notice in
writing (the "Acceptance Notice") within the Second Acceptance Period. If more
than one Acceptance Notice is received by the Offeror, the Offered Shares shall
be allocated among the Major Stockholders that delivered an Acceptance Notice
PRO RATA in accordance with their Pro Rata Amounts.
(d) The Transfer of Offered Shares to the Company or, if the Company has
not exercised its rights to purchase the Offered Shares, to the Major
Stockholders to the extent they exercised their rights under this Section, shall
be made on a business day, as designated by the Offeror, not less than 10 and
not more than 30 days after expiration of the First Acceptance Period or the
Second Acceptance Period, as applicable, on those terms and conditions of the
First Offer and the Second Offer not inconsistent with this Section.
(e) If the Company has not exercised its rights to purchase the Offered
Shares and if no Acceptance Notice is received by the Offeror within the Second
Acceptance Period, the Offeror may Transfer the Offered Shares on the terms and
conditions of the First Offer and the Second Offer to any Third Party within 60
days after expiration of the Second Acceptance Period. If such Transfer is not
made within such 60-day period, the restrictions provided for in this Section
shall again become effective.
ARTICLE IV
PREEMPTIVE RIGHT
9
<PAGE>
4.1 PREEMPTIVE RIGHT.
(a) If the Company proposes to offer New Securities to any Person at any
time, the Company shall, before such offer, deliver to the Investors an offer
(the "Offer") to issue to the Investors their pro rata share of such New
Securities such that the Investors may maintain their relative Common Stock
equity position, on an as-converted basis upon the terms set forth in this
Section. The Offer shall state that the Company proposes to issue New Securities
and specify their number and terms (including purchase price). The Offer shall
remain open and irrevocable for a period of 30 days (the "Preemptive Period")
from the date of its delivery.
(b) Each Investor may accept the Offer by delivering to the Company a
notice (the "Purchase Notice") within the Preemptive Period. The Purchase Notice
shall state the number (the "Preemptive Number") of New Securities such Investor
desires to purchase. If the sum of all Preemptive Numbers exceeds the number of
New Securities, the New Securities shall be allocated among the Investors that
delivered a Purchase Notice PRO RATA in accordance with their Pro Rata Amounts;
PROVIDED, HOWEVER, that each Investor shall not be required to purchase more
than his or its Preemptive Number of New Securities.
(c) The issuance of New Securities to the Investors who delivered a
Purchase Notice shall be made on a business day, as designated by the Company,
not less than 10 and not more than 30 days after expiration of the Preemptive
Period on those terms and conditions of the Offer not inconsistent with this
Section.
(d) If the number of New Securities exceeds the sum of all Preemptive
Numbers, the Company may issue such excess or any portion thereof on the terms
and conditions of the Offer to any Person within 90 days after expiration of the
Preemptive Period. If such issuance is not made within such 90-day period, the
restrictions provided for in this Section shall again become effective.
4.2 TERMINATION.
The obligations of the Company under this Article IV shall terminate on the
Termination Date.
ARTICLE V
MISCELLANEOUS
5.1 LEGEND ON STOCK CERTIFICATES.
(a) Each certificate representing shares of capital stock that are subject
to this Agreement shall bear a legend substantially in the following form:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE
10
<PAGE>
RIGHTS OF THE HOLDER OF SUCH SECURITIES IN RESPECT OF THE ELECTION OF
DIRECTORS ARE SUBJECT TO AN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED DECEMBER -, 1999, AMONG SCC TECHNOLOGIES, INC. AND CERTAIN HOLDERS OF
ITS OUTSTANDING CAPITAL STOCK. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF SCC TECHNOLOGIES, INC."
5.2 SEVERABILITY; GOVERNING LAW.
(a) If any provision of this Agreement shall be determined to be illegal
and unenforceable by any court of law, the remaining provisions shall be
severable and enforceable in accordance with their terms.
(b) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York. The Company and Investors
irrevocably consent to the exclusive jurisdiction of the United States federal
and state courts located in New York in any suit or proceeding based on or
arising under this Agreement and irrevocably agree that all claims in respect of
such suit or proceeding may be determined in such courts. The Company and
Investors irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company and Investors further agree
that service of process upon the Company and Investors, respectively, mailed by
first class mail, shall be deemed in every respect effective service of process
upon the Company and Investors, respectively, in any such suit or proceeding.
Nothing herein shall affect the right of the Company or the right of any
Investor to serve process in any other manner permitted by law. The Company and
Investors agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
5.3 ASSIGNMENTS; SUCCESSORS AND ASSIGNS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Except as
provided herein, neither the Company nor any Stockholder shall assign this
Agreement or any rights or obligations hereunder. Notwithstanding the foregoing,
any Investor may assign its rights hereunder to any of its "Affiliates," as that
term is defined under the Securities Exchange Act of 1934, as amended, without
the consent of the Company or to any other person or entity with the consent of
the Company, with such consents not being unreasonably withheld. As a condition
to the effectiveness of such assignment, the proposed assignee shall be required
to execute and deliver to the Company a counterpart to this Agreement agreeing
to be treated as a Investor whereupon such person or entity shall have the
benefits of, and shall be subject to the restrictions contained in, this
Agreement.
11
<PAGE>
(b) THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
5.4 AMENDMENTS.
This Agreement may only be modified or amended by an instrument in writing
signed by the Company, the holders of at least 66-2/3% of the Investor Shares
and the holders of at least 66-2/3% of the Founder Shares. This Section may only
be amended with the consent of all parties to this Agreement.
5.5 NOTICES.
All notices, claims, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or if sent by nationally-recognized overnight courier, by telecopy, or
by registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:
(a) if to the Company:
12
<PAGE>
SCC Technologies, Inc.
537 Congress Street, Suite 500
Portland, Maine 04101-3353
Fax: (207) 772-8596
Telephone: (207) 774-3244
Attention: President and Legal Department
with a copy to:
Lucash, Gesmer & Updegrove, LLP
40 Broad Street
Boston, MA 02109
Fax: (617) 350-6878
Telephone: (617) 350-6800
Attention: William Contente, Esq.
(b) if to the Investors:
DBV Investments, L.P.
MSD Portfolio L.P. - Investments
Vermeer Investments, LLC
Black Marlin Investments LLC
c/o MSD Capital, L.P.
780 Third Avenue - 43rd Floor
New York, New York 10017-2024
Fax: (212) 303-1622
Telephone: (212) 303-1668
Attention: Marc Lisker
and
InSight Capital Partners II, L.P.
InSight Capital Partners (Cayman) II, L.P.
InSight Capital Partners III, L.P.
InSight Capital Partners III-CoInvestors, L.P.
InSight Capital Partners (Cayman) III, L.P.
527 Madison Avenue, 10th Floor
New York, New York 10022
Fax: (212) 230-9722
Telephone: (212) 230-9210
Attention: Jeffrey Horing
and
13
<PAGE>
WI Software Investors LLC
Imprimis SB, L.P.
411 West Putnam Avenue
Greenwich, CT 06830
Fax: (203) 862-7310
Telephone: (203) 862-7028
Attention: Robert Holtz
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Fax:(312) 701-7711
Telephone: (312) 701-7100
Attention: Edward S. Best
and
O'Sullivan, Graev & Karabell, LLP
30 Rockefeller Plaza - 41st Floor
New York, New York 10112
Fax: (212) 728-5950
Telephone: (212) 408-2400
Attention: John J. Suydam
(c) if to the Founders, to the address set forth under the name of such
Founder on Annex I hereto;
with a copy to:
Kirkpatrick & Lockhart LLP
75 State Street, Sixth Floor
Boston, Massachusetts 02109
Fax: (617) 951-9019
Telephone: (617) 951-9211
Attention: Stephen L. Palmer, Esq.
(d) if to any other Stockholder, to the address set forth in the stock
register of the Company;
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, if a business day or if not
delivered on a business day, the next succeeding business day, (b) in the
14
<PAGE>
case of nationally-recognized overnight courier, on the next business day after
the date when sent, (c) in the case of telecopy transmission, when received, if
a business day or if not received on a business day, the next succeeding
business day, and (d) in the case of mailing, on the third business day
following that on which the piece of mail containing such communication is
posted.
5.6 HEADINGS.
The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be a part of this
Agreement.
5.7 NOUNS AND PRONOUNS.
Whenever the context may require, any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms, and the singular form of
names and pronouns shall include the plural and vice versa.
5.8 ENTIRE AGREEMENT; ORIGINAL AGREEMENT.
This Agreement contains the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings with respect to such subject matter, including without limitation
the Original Agreement, which shall have no further force or effect. To the
extent (i) the acquisition of an aggregate of 700,000 shares of Common Stock by
one or more of the Investors from Mark Tilly and Alan Hyman, and/or (ii) the
purchase and sale of the Series C Preferred Stock to any Investors pursuant to
that certain Securities Purchase Agreement of even date herewith, would
otherwise constitute a breach of the Original Agreement, such breach is hereby
waived.
5.9 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Stockholders' Agreement on the date first written above.
SCC TECHNOLOGIES, INC.
By: /s/ Philip M. St. Germain
----------------------------
Name: Philip M. St. Germain
Title: CFO
DBV INVESTMENTS, L.P.
By: DRT Capital, L.L.C., its general partner
By: /s/ Glen R. Fuhrman
----------------------------
Name: Glen R. Fuhrman
Title: Manager
MSD PORTFOLIO L.P. - INVESTMENTS
By: MSD Capital, L.P., its general partner
By: /s/ Glen R. Fuhrman
----------------------------
Name: Glen R. Fuhrman
_ Title: Managing Principal
VERMEER INVESTMENTS, LLC
By: /s/ Glen R. Fuhrman
----------------------------
Name: Glen R. Fuhrman
Title: Manager
BLACK MARLIN INVESTMENTS, LLC
By: /s/ John C. Phelan
----------------------------
Name: John C. Phelan
Title: Manager
16
<PAGE>
INSIGHT CAPITAL PARTNERS II, L.P.
By: Sight Venture Associates II, LLC, its
General Partner
By: /s/ Jeffrey L. Horing
-----------------------------
Jeffrey L. Horing
Member
INSIGHT CAPITAL PARTNERS (CAYMAN) II, L.P.
By: Sight Venture Associates II, LLC, its
general Partner
By: /s/ Jeffrey L. Horing
-----------------------------
Jeffrey L. Horing
Member
INSIGHT CAPITAL PARTNERS III, L.P.
By: Insight Venture Associates III, LLC, its
general partner
By: /s/ Jeffrey L. Horing
-----------------------------
Name: Jeffrey L. Horing
Title: Managing Member
INSIGHT CAPITAL PARTNERS III-COINVESTORS, L.P.
By: Insight Venture Associates III, LLC, its
general partners
By: /s/ Jeffrey L. Horing
-----------------------------
Name: Jeffrey L. Horing
Title: Managing Member
17
<PAGE>
INSIGHT CAPITAL PARTNERS (CAYMAN) III, L.P.
By: Insight Venture Associates III, LLC, its
general partner
By: /s/ Jeffrey L. Horing
-----------------------------
Name: Jeffrey L. Horing
Title: Managing Member
WI SOFTWARE INVESTORS LLC
By: Wexford Management LLC, its Investment
Manager
By: /s/ Robert Holtz
-----------------------------
Name: Robert Holtz
Title: Principal
IMPRIMIS SB, L.P.
By: Imprimis SB, GP LLC, its
general partner
By: /s/ Robert Holtz
-----------------------------
Name: Robert Holtz
Title: V.P.
/s/ Alan Hyman
----------------------------------
Alan Hyman
/s/ Mark Tilly
----------------------------------
Mark Tilly
18
<PAGE>
Exhibit 10.7
- ----------------------------------------------------------------------------
SUBLEASE
between
PXRE CORPORATION
Landlord
and
I-many, Inc.,
Tenant
February 11, 2000
-----------------------------------------------------------------------------
PORTION OF 12TH FLOOR
399 THORNALL STREET
EDISON, NEW JERSEY
<PAGE>
AGREEMENT OF SUBLEASE made as of this 11th day of February 2000,
between PXRE CORPORATION, a New Jersey Limited Partnership, having an office at
399 Thornall Street, Edison, New Jersey (hereinafter referred to as "Landlord")
and I-many, Inc., a Delaware corporation having an office at 537 Congress
Street, Suite 500, Portland, Maine 04101 (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the tenant under the Lease (hereinafter defined),
which Lease demises certain Premises (hereinafter defined) in the Building
(hereinafter defined); and
WHEREAS, Tenant desires to sublet a portion of said Premises, and
Landlord is willing to sublet the same, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, conditions and agreements hereinafter contained, do hereby agree as
follows:
1. DEFINITIONS.
As used herein the following terms shall have the meanings hereinafter
set forth:
"BUILDING" shall mean the building known as 399 Thornall Street,
Edison, New Jersey, which building, together with the real property upon which
it stands, is more fully described in the Lease;
"ESCALATION RENT" shall have the meaning set forth in Section 4 hereof;
"EXPIRATION DATE" shall mean 11:59 p.m. on the last day of the
thirty-sixth (36th) month next following the Sublet Space Commencement Date, or
any earlier date upon which the term of this sublease shall expire or be
canceled or terminated pursuant to any of the conditions or covenants of this
sublease or pursuant to law;
"FIXED RENT" shall mean the amounts set forth in Section 3 hereof;
"LEASE" shall mean that certain lease between Prime Lessor and Landlord
(as "Tenant" thereunder), dated November 1, 1999, demising the Premises in the
Building, as amended by a certain First Amendment to Lease dated
contemporaneously herewith, as the same may be further amended, modified and/or
supplemented at any time subsequent to the date of this sublease;
"LEASE EXPIRATION DATE" shall mean October 31, 2009;
"PREMISES" shall mean the Premises (as defined in the Lease);
"PRIME LESSOR" shall mean THORNALL ASSOCIATES, L.P., and any successor
thereto or assignee thereof;
"SUBLET SPACE" shall mean that portion of the Premises located on the
twelfth (12th) floor of the Building and shown cross-hatched on EXHIBIT "A"
annexed hereto;
"SUBLET SPACE COMMENCEMENT DATE" shall mean the date on which the
Sublet Space is legally demised by Prime Lessor from the balance of the Premises
and Prime Lessor obtains a temporary or permanent certificate of occupancy with
respect to the Sublet Space on Tenant's behalf. The Sublet Space Commencement
Date shall be accelerated for any Tenant Delays, as hereinafter provided.
"TENANT'S SHARE" shall mean, from time to time during the term of this
sublease, the then fraction (expressed as a decimal), the numerator of which
shall be the number of
<PAGE>
rentable square feet of the Sublet Space (presently deemed to be 10,951 rentable
square feet) and the denominator of which shall be the number of rentable square
feet of the Premises (presently deemed to be 24,238 rentable square feet).
2. DEMISE; USE.
(1) Subject to Landlord's receipt of written approval from Prime Lessor
of the subleasing contemplated hereby, Landlord subleases to Tenant, and Tenant
hereby hires and takes from Landlord, the Sublet Space for a term (hereinafter
defined as the "Term") commencing upon the Sublet Space Commencement Date and
expiring upon the Expiration Date, subject to all terms, provisions, covenants
and conditions of the Lease and this sublease.
(2) Tenant shall have the unqualified and unrestricted right to use and
occupy the Sublet Space for executive and general offices and for no other
purpose.
(3) Tenant shall accept the Sublet Space "as is" as of the date hereof;
and Tenant acknowledges that it has retained Prime Lessor to prepare the Sublet
Space for Tenant's occupancy at Tenant's sole cost and expense, as more
particularly provided in Article 9 of this Sublease. Notwithstanding anything to
the contrary contained herein, if the Sublet Space Commencement Date shall not
have occurred by July 1, 2000, such date to be extended day-for-day for the
occurrence of Tenant Delays (as hereinafter defined) or events of FORCE MAJEURE
or other events beyond Landlord's reasonable control (up to a maximum period of
sixty (60) days in the aggregate), then Tenant shall have the right to cancel
this Lease by notice delivered to Landlord no later than July 15, 2000 (or 15
days following such extended Sublet Space Commencement Date). In this Lease
"Tenant Delays" means a delay in the occurrence of the Sublet Space Commencement
date resulting from any of the following causes: (i) a delay by Tenant in
submitting Tenant's Plans or responding to Prime Lessor's requests for
additional information or materials selections; or (ii) Tenant's request for
additional work or additions to Tenant's Work; or (iii) other actions or
omissions of Tenant which cause a delay in the completion of Tenant's Work
including, without limitation, Tenant's failure to pay the cost of Tenant's Work
when due).
3. FIXED RENT; ADDITIONAL RENT.
(1) Tenant covenants and agrees to pay to Landlord during and
throughout the Term of this sublease Fixed Rent at the rate of Two Hundred
Seventy-Three Thousand Seven Hundred Seventy-Five Dollars ($273,775.00) per
annum for each year (pro rated for any portion thereof) of the period from the
Sublet Space Commencement Date to and including the Expiration Date payable in
equal monthly installments of $22,814.58. Tenant shall pay the first month's
Fixed Rent due upon signing. The parties agree to execute within ten (10)
business days of the Sublet Space Commencement Date an amendment to this Lease
confirming the date when the Sublet Space Commencement Date occurred.
(2) Tenant shall pay Fixed Rent in equal monthly installments in
advance, on the fifth (5th) business day prior to the first day of each calendar
month during the Term of this sublease. The monthly installment of Fixed Rent
payable on account of any partial calendar month during the Term of this
sublease, if any, shall be prorated.
(3) All sums of money, other than Fixed Rent, as shall become due and
payable by Tenant to Landlord under this sublease, shall be deemed to be
additional rent, and Landlord shall have the same rights and remedies in the
event of non-payment of additional rent as are available to Landlord for the
non-payment of Fixed Rent. Additional Rent shall include, but not be limited to,
all Escalation Rent and all other costs, fees, expenses and charges due from and
payable by Landlord to Prime Lessor which are attributable to, or arise with
respect to, the Sublet Space. Unless otherwise specified, Tenant shall pay all
Additional Rent and the same shall be due thirty (30) days after notice by
Landlord.
<PAGE>
(4) All Fixed Rent, Escalation Rent and all additional rent and other
sums payable hereunder by Tenant shall be paid without any deduction, offset,
abatement, defense and/or counterclaim whatsoever. All Fixed Rent, Escalation
Rent and all additional rent and other sums payable hereunder shall be paid by
check, drawn on Silicon Valley Bank, or upon a bank which is a member of the New
York Clearing House or any successor thereto, issued directly from Tenant,
without endorsements, to the order of Landlord or such other party as Landlord
may designate in writing.
4. ESCALATION RENT.
(1) In addition to Fixed Rent, Tenant covenants and agrees to pay to
Landlord, from and after the Sublet Space Commencement Date, an amount
("Escalation Rent") equal to Tenant's Share of Tenant's Proportionate Share of
any Increase (as said term is defined in the Lease) in Taxes and Operating
Expenses payable by Landlord (as "Tenant" under the Lease) with respect to each
Year of the Term.
5. ELECTRICITY CHARGE.
(1) Landlord shall furnish such electric energy as Tenant shall
reasonably require for ordinary office uses during the hours of 8:00 a.m.
through 6:00 p.m. Mondays through Fridays (excepting holidays), in an amount not
less (but is not required to be more than) 6 watts demand load per useable
square foot. Tenant shall pay for such electricity at an annual rate of
$16,425.50 (the "Tenant's Electricity Charge") payable in equal monthly
installments of $1,368.87 together with each monthly installment of Fixed Rent
(representing $1.50/rentable square foot). Tenant acknowledges that the public
utility rate schedule used to determine the value of electricity to be furnished
by Landlord to Tenant may increase after the date hereof and in such event, the
Tenant's Electricity Charge shall be increased accordingly and shall be
determined by applying the prevailing local public utility rates, inclusive of
any taxes included in or applicable to such rates and based upon the consumption
of electricity by Tenant provided, however, Tenant shall in no case be liable
for a Tenant's Electricity Charge of less than $1.50 per square foot for
electricity.
(2) Landlord shall have the right at any time and from time to time
during the term to examine and survey the consumption by Tenant of electricity,
including without limitation, examining and surveying, the electrical wiring,
equipment and all lighting fixtures and apparatus consuming electricity in the
demised premises, Tenant's hours of operation and all other factors relevant to
Tenant's consumption of electricity. If, as a result of a survey made pursuant
to this provision, Landlord determines that the value to Tenant of the electric
energy supplied by Landlord (determined by the prevailing local public utility
rates payable by Landlord for electrical service inclusive of all applicable
"demand" and related charges including "fuel adjustment" charges and any taxes
included in or applicable to such rates) has been increased because of increased
use by Tenant or any other act or omission by Tenant, Tenant's failure to
maintain its equipment in good order and repair, Tenant's use of the demised
premises at other than the standard business hours specified in paragraph (a)
above, or if there shall be an increase in charges by the public utility
servicing the Building then in each such event, Tenant's Electricity Charge
shall be increased by an amount equal to such increase in value, effective on a
retroactive basis to the later to occur of: (i) the date of the occurrence of
the event triggering such increase (herein, the "Trigger Date"); or (ii) the
date which is one (1) year prior to the Trigger Date.
(3) In no event shall the provisions of this Article result in any
decreases in the Tenant's Electricity Charge below $1.50 per rentable square
foot.
(4) Landlord shall not be liable or responsible to Tenant for any loss,
damage or expense that Tenant sustains or incurs if either the quantity or
character of electric service is changed or interrupted or is no longer
available or suitable for Tenant's requirements unless due to the gross
negligence or willful misconduct of Landlord.
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(5) Tenant, at its sole cost and expense, shall furnish, install and
replace, as required, all lighting tubes, lamps, bulbs and ballasts required in
the Sublet Space.
6. TENANT'S RIGHTS; PERMITTED USE.
(1) Landlord shall not be obligated to perform any obligation which is
the obligation of Prime Lessor under the Lease and Landlord shall not be liable
to Tenant for Prime Lessor's failure to perform or observe any covenant or
obligation under the Lease; accordingly, Landlord's obligations hereunder are
conditional when such obligations require parallel performance by Prime Lessor.
Without limiting the foregoing, Tenant recognizes and agrees that Landlord shall
not be required to provide or render any of the services or utilities, to make
repairs, replacements, restorations, alterations or improvements or to perform
any of the obligations required of Prime Lessor by the terms of the Lease.
Landlord agrees, however, to use reasonable efforts to enforce its rights
against Prime Lessor under the Lease for the benefit of Tenant upon Tenant's
written request therefor (and to forward to Prime Lessor any notices or requests
for consent as Tenant may reasonably request). Tenant shall promptly reimburse
Landlord for any and all costs which Landlord shall incur in expending such
efforts, and Tenant does hereby indemnify and agree to hold Landlord harmless
from and against any and all claims, liabilities, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by Landlord in expending such efforts. Nothing contained herein shall
require Landlord to institute any suit or action to enforce any such rights;
provided, however, that if Landlord shall elect not to institute a suit or
action to enforce such rights, then, at the request of Tenant, Landlord shall
permit Tenant to institute an action or proceeding against Prime Lessor in the
name of Landlord to enforce Landlord's rights under the Lease which are
applicable to Tenant (and shall cooperate with such reasonable requests of
Tenant as may be necessary to enable Tenant to proceed in Landlord's name),
provided that (i) Tenant shall not then be in default under any of the terms,
covenants or conditions of this sublease, (ii) such action shall be prosecuted
at the sole cost and expense of Tenant and Tenant shall agree to indemnify and
hold Landlord harmless from and against any loss, claims, liabilities, damages,
costs and expenses (including without limitation, reasonable attorneys, fees and
disbursements) incurred or suffered by Landlord in connection with such action
or proceeding; (iii) Tenant shall use counsel approved by Landlord, which
approval shall not be unreasonably withheld or delayed; (iv) Landlord shall
determine, in the reasonable exercise of its judgment, that such suit or action
is not arbitrary or capricious or primarily of nuisance value; and (v) Landlord
shall have first given Prime Lessor a demand and notice of default (it being
agreed that Landlord shall give Prime Lessor such demand and notice of default
within a reasonable time after Tenant shall request that such notice be given)
and Prime Lessor shall have failed to cure such default within the period, if
any, set forth in the Lease for the curing of such default, or if no such period
is provided for, within a reasonable period thereafter (giving due consideration
to the nature of the default). In any instance in which Tenant would have the
right to institute an action or proceeding against Prime Lessor in accordance
with the provisions of this Section in the name of Landlord but for the fact
that Landlord's remedies under the Lease are limited to arbitration in
accordance with the provisions of the Lease, Landlord shall, upon the request of
Tenant, but subject to all of the foregoing provisions of this Section, enforce
Landlord's rights under the Lease for the benefit of Tenant by arbitration in
accordance with the provisions of the Lease, provided that Tenant shall pay to
Landlord, upon demand, all reasonable out-of-pocket costs and expenses incurred
in connection therewith by Landlord.
(2) Tenant acknowledges that the failure of Prime Lessor to provide any
services or comply with any obligations under the Lease shall not entitle Tenant
to any abatement, offset, or reduction in rent payable hereunder; provided,
however, that if and to the extent Landlord receives a rent abatement, offset,
or reduction from Prime Lessor on account of such failure, Tenant shall be
entitled (x) with respect to an abatement or reduction applicable to both the
Sublet Space and the balance of the Premises, to a proportionate abatement,
offset, or reduction of the rents payable by Tenant pursuant to this sublease,
apportioned equitably, after first
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deducting Landlord's reasonable, out-of-pocket costs, if any, in obtaining such
rent abatement or reduction, and (y) with respect to an abatement or reduction
applicable to the Sublet Space only, Tenant shall be entitled to the entire
abatement, offset, or reduction after first deducting Landlord's reasonable
out-of-pocket costs, if any, in obtaining such rent abatement or reduction.
7. INCORPORATED LEASE.
(1) Except as may be inconsistent with the provisions of this sublease,
all of the terms, covenants and conditions of the Lease are hereby made part
hereof with the same force and effect as if fully set forth at length herein as
if the term "Landlord" herein referred to Landlord in the Lease and the term
"Tenant" herein referred to Tenant in the Lease. Wherever the Lease refers to
the "Demised Premises," such references for the purposes hereof shall be deemed
to refer to the Sublet Space. Notwithstanding the foregoing, the parties agree
that the following provisions are not incorporated into this sublease: Article 1
(other than Section 1.07); Section 2.05; Section 3.01; Section 3.03; Article 4;
Article 5 (except that Tenant shall be liable for all Escalation Rent as
provided herein); Sections 6.02 - 6.03; Sections 9.02 and 9.03; Section 14.02;
Sections 15.01 and 15.02; Section 16.01; Article 17; Article 30; Article 43;
Exhibit A; Exhibit B; Exhibit C; Exhibit D; and Exhibit G.
(2) Tenant covenants that Tenant shall not do any act, matter or thing
which will be, result in, or constitute a violation or breach of or a default
under the Lease; it being expressly agreed to by Tenant that any such violation,
breach or default shall constitute a material breach by Tenant of a substantial
obligation under this sublease. Tenant hereby agrees that Tenant shall indemnify
and hold Landlord harmless from and against all claims, liabilities, penalties
and expenses, including, without limitation, reasonable attorneys' fees and
disbursements, arising from or in connection with any default by Tenant in
Tenant's performance of those terms, covenants and conditions of the Lease which
are or shall be applicable to Tenant, as above provided, and all amounts payable
by Tenant to Landlord on account of such indemnity shall be deemed to be
additional rent hereunder and shall be payable upon demand.
(3) This sublease is expressly made subject and subordinate to the
Lease and to all encumbrances and other matters to which the Lease is subject.
In any case where the consent or approval of Prime Lessor shall be required
pursuant to the Lease, Landlord's consent shall also be required hereunder. If,
pursuant to the terms of this sublease, Tenant must obtain the consent or
approval of Landlord, and Landlord must, pursuant to the Lease, obtain the
consent of Prime Lessor or the consent of the holder of any mortgage, superior
lease or other interest to which this sublease or the Lease is subordinate,
Landlord agrees to: (i) promptly forward a copy of Tenant's request for such
consent or approval, together with all relevant documents in Landlord's
possession, to Prime Lessor or the holder of any superior interest and (ii) use
its reasonable efforts to secure any such consent(s) and/or approval(s). If
Prime Lessor or the holder of such superior interest refuses to grant such
consent or approval and, as a result, Landlord withholds its consent to Tenant's
request therefor, such withholding by Landlord shall not be deemed to be an
unreasonable refusal to grant such consent or approval or result in Landlord
having any liability under this Lease; provided, however if Prime Lessor or the
holder of such superior interest is required to grant such consent or approval
or to not reasonably withhold such consent or approval pursuant to the terms of
the Lease, then the rights of Tenant and the obligations of Landlord set forth
in Section 6(a) hereof shall apply. Notwithstanding the foregoing, so long as
Prime Lessor and Tenant shall be the same Person, Tenant may submit Prime
Lessor's consent to Landlord at such time as Tenant requests Landlord's consent
thereto and the granting or withholding of Landlord's consent shall be governed
by all other provisions of this Sublease.
(4) Tenant agrees to be bound, for all purposes of this sublease, by
any modifications or amendments to the Lease, provided that any such
modifications or amendments to the Lease do not discriminate against Tenant or
increase Tenant's obligations under this sublease, shorten the term of this
sublease or decrease Tenant's rights under this sublease or otherwise materially
adversely affect Tenant's rights or obligations under this sublease or permit
this sublease to be canceled or terminated without Tenant's prior written
consent provided, however, that Landlord shall have the right to terminate this
sublease in the event that Landlord
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terminates the Lease in accordance with the provisions of any of Articles 21 or
22 of the Lease or Landlord elects to terminate the Lease pursuant to Article
42.
(5) Tenant agrees that Landlord shall have no liability to Tenant if
the term of this sublease shall terminate by reason of (i) Landlord's Prime
Lessor's or Landlord's exercise of any of their respective rights set forth in
Article 21, 22 or 42 of the Lease or (ii) Tenant's breach of any of the terms,
covenants or conditions of this sublease on Tenant's part to be observed or
performed or (iii) a termination of any ground or underlying leases referred to
in Article 6 of the Lease to which the Lease is subordinate, and all amendments
thereto or by reason of a foreclosure (or deed in lieu of foreclosure) of any of
the mortgages referred to in Article 6 of the Lease. Tenant covenants and agrees
that if, by reason of a default on the part of Landlord, as the tenant under the
Lease, in the performance of any of the terms or provisions of the Lease, or for
any other reason of any nature whatsoever, such lease or the leasehold estate of
the tenant thereunder, is terminated by summary dispossess proceeding or
otherwise, then Tenant will attorn to Prime Lessor, and will recognize Prime
Lessor as Tenant's landlord under this sublease. Tenant covenants and agrees to
execute and deliver, at any time and from time to time, within five (5) days
following a request therefor by Landlord or Prime Lessor, any instrument which
may be reasonably necessary or appropriate to evidence such attornment. If
Landlord shall agree with Prime Lessor to surrender or cancel the Lease (or any
portion thereof, if such portion includes the Sublet Space) or shorten the Term
of the Lease (or any portion thereof, if such portion includes the Sublet Space)
this sublease shall not be affected thereby and shall continue on all of the
same terms and conditions set forth herein, EXCEPT HOWEVER, that Tenant will
attorn to and-recognize Prime Lessor as its direct Landlord to the extent of
such portion of the Lease (or the Term) so surrendered and thereupon, this
sublease, to such extent, shall become a direct Lease between Tenant and Prime
Lessor and Tenant will execute any documents reasonably requested by Prime
Lessor to evidence such attornment.
8. CONDITION OF THE SUBLET SPACE; TENANT'S WORK; LANDLORD'S CONTRIBUTION.
(1) It is understood and agreed that all understandings and agreements
heretofore had between the parties are merged in this sublease, which alone
fully and completely expresses their agreements, and that the same are entered
into after full investigation, neither party relying upon any statement or
representation made by the other and not embodied in this sublease. Tenant
agrees to accept possession of the Demised Premises in "as is" and "where is"
condition as of the date hereof; and Landlord is not required to perform work of
any kind, nature or description to prepare the Sublet Space for Tenant's
occupancy other than to deliver the Sublet Space in "broom clean" condition.
(2) Tenant acknowledges and agrees that any and all alterations,
installations, renovations or other items of work necessary to prepare the
Sublet Space for Tenant's initial occupancy ("Tenant's Work" or "Tenant's
Changes") shall be performed by Prime Lessor on Tenant's behalf, at Tenant's
sole cost and expense as said Tenant's Work is further described in Article 9 of
this Sublease. Without limiting the foregoing, Prime Lessor shall construct
such walls as may be necessary to demise the Sublet Space from the balance of
the Premises and construct a common corridor and all other alterations and
installations required in connection therewith in order to demise the Sublet
Space in compliance with all legal and insurance requirements.
9. TENANT'S CHANGES; RESTORATION.
(1) Subject to the receipt of Landlord's consent, which consent shall
not be unreasonably withheld, Tenant shall have the right to make, cause to be
made or allow to be made during the Term any and all Tenant's Changes (as
defined in the Lease), and improvements in the Sublet Space or any portion of
the Sublet space in accordance with the provisions of Article 12 of the Lease
which are incorporated herein by reference, as the same may be amended from time
to time. Tenant shall also be required to obtain the consent of Prime Lessor to
any Tenant's Changes proposed to be made by Tenant as though Tenant were the
Tenant under the Lease. All of Tenant's Changes (including the initial fit-out
of the Sublet Space) shall be
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performed in compliance with all applicable provisions of the Lease including,
without limitation, Article 3 and Schedule B to the First Amendment to the
Lease.
(2) Tenant agrees to cause Prime Lessor (or, in the alternative, to
cause Landlord to cause Prime Lessor) to perform all Changes and all Tenant's
Work necessary to prepare the Sublet Space for Tenant's initial occupancy in
accordance with the plans and specifications annexed hereto as Exhibit "C".
Without limiting the foregoing, Tenant acknowledges that Tenant will be required
to use Prime Lessor as its contractor in the manner provided by Schedule B to
the First Amendment to Lease, and that Tenant will be required to pay all costs
of the Changes and other work performed by Prime Lessor for and on behalf of
Tenant, without regard to whether such Changes or other work is billed to
Landlord or to Tenant directly by Prime Lessor. Tenant understands that Landlord
has not agreed to incur any costs in connection with any of Tenant's Changes
(including, without limitation, Tenant's initial fit out) and that Tenant will
be required to pay or reimburse to Landlord or to Prime Lessor, as applicable,
the cost of all such work within five (5) business days of being billed by
Landlord or the Prime Lessor as applicable. In furtherance of the foregoing,
Tenant has delivered to Landlord available funds in the sum of $21,000.00
representing approximately 33% of the cost of Tenant's Work as reflected on a
photocopy of a work authorization ("Work Order") dated January 24, 2000,
provided to Tenant contemporaneously herewith (i.e. the total cost of Tenant's
initial fit out is $62,345.00, consisting of $60,890.00 plus $1,455.00 for an
alternate exhaust fan in the telcom room). It is anticipated that the cost of
Tenant's initial fit out will not exceed $62,345.00 ;subject, however, to all
conditions and qualifications set forth in the Work Order. Tenant agrees to pay
all the costs of Tenant's initial fit out. Tenant's failure to make such payment
or reimbursement shall, among other things, constitute a default under this
Sublease and accelerate the Sublet Space Commencement Date one day for each day
of delay in making such payment or reimbursement to Landlord. required by the
Lease.
(3) In the event that Tenant shall make any Tenant's Changes,
decorations or improvements in or to the Sublet Space, Tenant shall secure and
maintain all insurance coverages required by the Lease.
(4) At Landlord's election, Tenant shall be required to demolish all of
Tenant's changes and restore the Sublet Space at the end of the Term to its
condition on the date of this Lease. Notwithstanding anything to the contrary
contained in Article 12 of the Lease, if Landlord requires the Restoration of
all or any part of Tenant's Changes, Landlord shall advise Tenant of such
Restoration requirements at the time Landlord grants its consent to any such
Tenant's Changes. If Landlord fails to require Restoration at the time it grants
such consent, then Restoration shall not be required with respect to such
Tenant's Changes.
10. INSURANCE.
(1) Tenant shall, at its own cost and expense, obtain, maintain and
keep in force during the Term for the benefit of Landlord, Tenant, Prime Lessor
and such other parties as are named in the Lease, commercial general liability
insurance which shall include premises operation, bodily injury, personal
injury, death, independent contractors, products and completed operations, broad
form contractual liability and broad form property damage coverages in a
combined single limit amount of not less than $4,000,000.00 against all claims,
demands or actions with respect to damage, injury or death made by or on behalf
of any person or entity, arising from or related to the conduct and operation of
Tenant's business in, on or about the Sublet Space. Whenever in Landlord's
reasonable judgment, good business practice and changing conditions indicate a
need for additional or different types of insurance coverage, Tenant shall, upon
Landlord's request, promptly obtain such insurance coverage, at Tenant's
expense.
(2) Landlord, Prime Lessor and such other parties as are required to be
named pursuant to the Lease, including, without limitation, Prime Lessor's
agents and any lessor under any ground or underlying lease, shall be named as
additional insureds in said policies and shall be protected against all
liability occasioned by an occurrence insured against. All of said policies
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of insurance shall be: (i) written as "occurrence" policies, (ii) written as
primary policy coverage and not contributing with or in excess of any coverage
which Landlord may carry, and (iii) issued by insurance companies which are
rated not less than "A:XII" in Best's Key Rating Guide or which are otherwise
reasonably satisfactory to Landlord, and which are licensed to do business in
the State of New Jersey. Said policies shall also provide that the insurer will
give Landlord at least thirty (30) days prior written notice of cancellation of
said policy or of any material modification thereof, and shall comply with all
of the provisions of the Lease. Tenant shall deliver to Landlord the policies of
insurance or certificates thereof, together with evidence of the payment of
premiums thereon, prior to the Sublet Space Commencement Date, and shall
thereafter furnish to Landlord, at least twenty (20) days prior to the
expiration of any such policies and any renewals thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
(3) Tenant shall pay all premiums and charges for all of said policies,
and, if Tenant shall fail to make any payment when due or carry any such policy,
Landlord may, but shall not be obligated to, make such payment or carry such
policy, and the amount paid by Landlord, with interest thereon at the maximum
legal rate of interest from the date of such payment or the issuance of such
policy, shall be repaid to Landlord by Tenant on demand, and all such amounts so
repayable, together with such interest, shall be deemed to constitute additional
rent hereunder. Payment by Landlord of any such premium, or the carrying by
Landlord of any such policy, shall not be deemed to waive or release the default
of Tenant with respect thereto.
(4) Notwithstanding anything to the contrary contained in the Lease,
and notwithstanding the limits of insurance specified in this Section, Tenant
agrees to defend, indemnify and hold harmless Landlord, and the agents,
partners, shareholders, directors, officers and employees of Landlord, from and
against all damage, loss, liability, cost and expense (including, without
limitation, engineers', architects' and attorneys' fees and disbursements)
resulting from any of the risks referred to in this Section. Such
indemnification shall operate whether or not Tenant has placed and maintained
the insurance specified in this Section, and whether or not proceeds from such
insurance (such insurance having been placed and maintained) actually are
collectible from one or more of the aforesaid insurance companies; provided,
however, that Tenant shall be relieved of its obligation of indemnity herein pro
tanto of the amount actually recovered by Landlord from one or more of said
insurance companies by reason of injury or damage to or loss sustained on the
Sublet Space.
11. CASUALTY.
(1) If the Sublet Space or any part thereof shall be damaged or
rendered untenantable or if Tenant's means of ingress and egress to and from the
Sublet Space is totally or substantially eliminated (in which case the Sublet
Space shall be deemed to be completely untenantable) by fire or other casualty
and this sublease is not terminated by Landlord or Prime Lessor pursuant to
Section (b) hereof or by reason of a termination of the Lease then: (i) Fixed
Rent and Escalation Rent hereunder shall be abated for such periods, if any, in
respect of which Landlord receives corresponding abatements under the Lease with
respect to the Sublet Space demised by this sublease and (ii) Landlord shall
proceed, promptly and with reasonable diligence, to repair such damage to the
Sublet Space as it is obligated to repair pursuant to Article 21 of the Lease.
For the purposes of this sublease, Landlord's obligation to repair shall include
all repairs to the Sublet Space except in respect of the repair or replacement
of the personal property of Tenant or of improvements to the Sublet Space made
by the Tenant. Tenant's occupancy or re-occupancy of any untenantable portion of
the Sublet Space for the conduct of its business which theretofore was
untenantable by reason of such fire or other casualty shall constitute a
conclusive presumption that such portion of the Sublet Space is no longer
untenantable, and any abatement of Fixed Rent or Escalation Rent applicable to
such portion of the Sublet Space shall cease as of the date of such occupancy or
re-occupancy.
(2) If the Sublet Space or the Building are partially or totally
damaged or destroyed by fire or other casualty, Tenant shall have no right to
terminate this sublease and this sublease shall not be terminated by reason of
such casualty unless the Lease is terminated by
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Landlord or Prime Lessor pursuant to the provisions of the Lease. If the Lease
is terminated pursuant to Article 21 thereof, this sublease shall terminate on
the same date. Landlord shall give Tenant prompt notice of any such termination.
Notwithstanding anything to the contrary contained herein, if the Sublet Space
(or the means of ingress thereto and egress therefrom) shall be completely or
partially destroyed by fire or other casualty so as to render the Sublet Space
unusable by Tenant for a period of more than one hundred eighty (180) days (or
for a period of forty-five (45) days if such fire or other casualty occurs in
the last year of the Term of this Lease), then Tenant shall have the right to
cancel this Lease by written notice to Landlord, which notice shall be delivered
to the Landlord prior to the expiration of the aforementioned one hundred eighty
(180) or forty-five (45) day periods, respectively.
(3) Landlord shall exert all commercially reasonable efforts to restore
the Sublet Space following a casualty in a manner which will not unreasonably
disturb Tenant or interfere with the conduct of Tenant's business in the Sublet
Space. Subject to the preceding sentence, Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from any such damage by fire or other casualty or the
repair thereof. Landlord shall not be obligated to repair any damage to, or
replace, Tenant's Property.
(4) Landlord and Tenant each agree to use diligent efforts to cooperate
with each other and with their respective insurers (and with Prime Lessor and
its insurers) in order to facilitate the collection of all insurance proceeds
(including, without limitation, rent insurance proceeds) applicable to damage
and destruction of the Building or the Sublet Space (as defined herein or in the
Lease) by fire or other casualty.
12. CONDEMNATION.
(1) If the Lease is terminated as a result of any temporary or
permanent taking of all or any portion of the Building, the Premises or the
Sublet Space by condemnation, this sublease shall likewise terminate and Fixed
Rent and Escalation Rent hereunder shall be apportioned as of the date of such
termination.
(2) In the event of any condemnation of all or any part of the
Building, the Premises or the Sublet Space, Prime Lessor and/or Landlord shall
be entitled to receive the entire compensation or award for any such
condemnation. Tenant shall have no claim against Prime Lessor, Landlord or the
condemning authority for the value of any unexpired portion of the Term or for
Tenant's subleasehold interest and Tenant hereby expressly assigns to Prime
Lessor and/or Landlord all of its right, title and interest in and to any such
compensation or award, and also agrees to execute any and all further documents
that may be required in order to facilitate the collection thereof. Nothing
contained in this subsection (b) shall be deemed to prevent Tenant from making a
separate claim in any condemnation proceeding for (i) any moving expenses
incurred by Tenant and (ii) the value of any Tenant's property.
(3) If the temporary use or occupancy of all or any part of the Sublet
Space shall be condemned for any public or quasi-public use or purpose during
the term, this sublease and the Term shall be and remain unaffected by such
condemnation and Tenant shall continue to be responsible for all of its
obligations hereunder (except to the extent prevented from so doing by reason of
such condemnation) and shall continue to pay all Fixed Rent and Escalation Rent
in full. In the event of any such condemnation, Landlord, subject to the terms
of the Lease, shall be entitled to appear, claim, prove and receive the entire
award, which shall be appropriately apportioned between Tenant and Landlord.
(4) The term "condemnation" as used herein shall include a taking for
public use or purpose and any agreement in lieu of or in anticipation of the
exercise of the power of eminent domain entered into by Prime Lessor, a ground
lessor or a mortgagee and any governmental authority authorized to exercise the
power of eminent domain.
13. ASSIGNMENT AND SUBLEASING.
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(1) Except as and to the extent provided in this Section 13, Tenant
shall not, whether voluntarily, involuntarily, or by operation of law or
otherwise (i) assign or otherwise transfer this sublease or the term and estate
hereby granted, (ii) sublet the Sublet Space or any part thereof, or allow the
same to be used, occupied or utilized by anyone other than Tenant and a related
company (as such term is defined in the Lease), or (iii) mortgage, pledge,
encumber or otherwise hypothecate this sublease or the Sublet Space or any part
thereof in any manner whatsoever.
(2) Provided that Tenant is not in default beyond any applicable grace
or cure period under any of the terms, covenants and conditions of this
sublease, Tenant shall have the right to further sublet any portion of the
Sublet Space or to assign its interest in this sublease, subject to all of the
following terms and conditions:
i. Tenant shall have complied with the applicable provisions of
the Lease incorporated herein by reference and shall obtain,
prior to the effective date of the proposed sublease or
assignment, the consent of Prime Lessor to such sublease or
assignment, if required under the terms of the Lease and
Landlord shall not have elected to recapture such portion of
the Sublet Space;
1. Tenant shall obtain the prior written consent of Landlord to
the proposed sublease or assignment, which consent shall not
be unreasonably withheld or delayed by Landlord, provided the
following conditions are satisfied:
(1) Tenant shall have complied with, and be bound by, all
sections of Article 8 of the Lease which are
incorporated herein by reference pursuant to Section
7 of this sublease (it being understood, in each
case, that any reference to a "subtenant" or
"assignee" in those incorporated sections of Article
8 of the Lease shall be deemed to refer to Tenant's
proposed subtenant or assignee); and
(2) the proposed tenant shall not be an "Excluded Person"
(as such term is defined below); and
(3) there shall not be in the aggregate more than two (2)
tenants or occupants (including Tenant) of the Sublet
Space.
2. For the purposes of subparagraph (b) above, the term "Excluded
Person" shall mean: (i) a person whose then principal business
is the sale or issuance of insurance or reinsurance policies,
treaties or agreements; or (ii) any federal, state or local
government entity, agency or instrumentality, school or
employment agency or other person prohibited by the Lease; and
3. Any attempted assignment or subletting made contrary to the
provisions of this Section 13 and shall be null and void. No
consent by Landlord or Prime Lessor to any assignment or
subletting shall in any manner be considered to relieve Tenant
from obtaining Landlord's and Prime Lessor's express written
consent to any further assignment or subletting, if required
under this sublease or under the Lease, respectively.
Notwithstanding anything to the contrary contained in this Article with respect
to assignment and subletting, Landlord's consent shall not be required with
respect to an
10
<PAGE>
assignment and/or subletting to a corporation or other entity which succeeds to
all, or substantially all, of the assets and liabilities of the Tenant; provided
that the net worth of such successor corporation or other entity, computed in
accordance with generally accepted accounting principles and certified by a firm
of certified public accountants to Landlord at the time such corporation or
other entity succeeds to Tenant's interest in this Lease, shall be at least
equal to the net worth of Tenant as of the date of this Lease. Notwithstanding
the foregoing, the consent of Prime Lessor shall be required with respect to any
such sublease or assignment.
14. LANDLORD'S REPRESENTATIONS.
(1) To induce Tenant to enter into this sublease Landlord hereby
represents, warrants and covenants to Tenant that:
1. The Lease is in effect and has not been terminated;
2. The Lease Expiration Date is October 31, 2009;
3. Landlord is a duly formed and validly existing corporation.
This sublease has been duly authorized, executed and delivered
by Landlord and constitutes the legal, valid and binding
obligation of Landlord; and
4. The Lease annexed hereto as EXHIBIT "B" and made a part hereof
is a true and complete copy of the Lease, except as to certain
intentionally omitted provisions, which provisions are
expressly made inapplicable to Tenant and the Sublet Space.
(2) To induce Landlord to enter into this sublease Tenant hereby
represents, warrants and covenants to Landlord that:
1. Tenant is a duly formed and validly existing corporation with
full power and authority to enter into this sublease and to
perform its obligations hereunder in accordance with its
terms; and
2. this sublease has been duly authorized by all necessary
corporate action, executed and delivered by Tenant and
constitutes the legal, valid and binding obligation of Tenant.
15. OCCUPANCY TAX.
If any commercial rent or occupancy tax shall be levied with regard to
the Sublet Space, tenant shall pay the same either to the taxing authority, or,
if appropriate, to Landlord, as additional rent, not less than twenty (20) days
before the due date of each and every such tax payment. In the event that any
such tax payment shall be made by Tenant to Landlord, Landlord shall remit the
amount of such payment to the taxing authority on Tenant's behalf.
16. HOLD OVER.
The parties recognize and agree that the damage to Landlord resulting
from any failure by Tenant to timely surrender possession of the Sublet Space as
aforesaid will be substantial and will exceed the amount of the monthly
installments of the Fixed Rent payable hereunder and will be impossible to
accurately measure. Tenant therefore agrees that if possession of the Sublet
Space is not surrendered to Landlord on the Expiration Date or sooner
termination of the Term, in addition to any other right or remedy Landlord may
have hereunder or at law or in equity, Tenant shall pay to Landlord for each
month and for each portion of any month during which Tenant holds over in the
11
<PAGE>
Sublet Space after the Expiration Date or sooner termination of this sublease, a
sum equal to two times (2x) the aggregate of the portion of the Fixed Rent and
regularly scheduled items of additional rent which were payable hereunder with
respect to the last month of the Term. Nothing herein contained shall be deemed
to permit Tenant to retain possession of the Sublet Space after the Expiration
Date or sooner termination of this sublease and no acceptance by Landlord of
payments from Tenant after the Expiration Date or sooner termination of the Term
shall be deemed to be other than on account of the amount to be paid by Tenant
in accordance with the provisions of this Section, which provisions shall
survive the Expiration Date or sooner termination of this sublease.
Notwithstanding the foregoing, Tenant may hold over subsequent to the Expiration
Date provided that: (x) Prime Lessor shall previously consent in writing to such
holding over by Tenant; and (y) Tenant shall indemnify and hold harmless
Landlord against all claims, damages and losses (including attorneys' fees,
changes and disbursements through all appeals) paid or incurred by Landlord as a
result of Tenant's holding over. This provision shall survive the Expiration
Date or the sooner termination of the Lease.
17. BROKER.
Landlord and Tenant warrant and represent to each other that they have
dealt with no broker in connection with this transaction other than The
Corporate Real Estate Alliance and Dileo Realty Associates, (collectively,
"Broker") and each hereby agrees to indemnify and hold the other harmless from
all costs, expenses (including reasonable attorneys' fees and disbursements) and
liability arising from any breach of the foregoing representation. Landlord and
Tenant shall indemnify and hold each other harmless from all costs, expenses
(including reasonable attorneys' fees and disbursements) and liability arising
from any claim for any commissions or compensation by any broker employed by
Tenant in connection with a further underletting of all or any portion of the
Sublet Space. Landlord shall compensate Broker pursuant to a separate
Compensation Agreement.
18. PRIME LESSOR'S CONSENT.
This sublease shall have no effect until Prime Lessor shall have given
its written consent hereto in accordance with the terms of the Lease. If Prime
Lessor does not give its consent to this sublease, for any reason whatsoever
within thirty (30) days after the date hereof, then either party may elect to
cancel this sublease by giving notice to the other party after the expiration of
said thirty (30) day period, but prior to the giving of said consent by Prime
Lessor to this sublease, Landlord and Tenant each agree to use all reasonable
efforts o obtain such consent. Tenant and Landlord each agree that such party
shall promptly execute and deliver Prime Lessor's consent to this sublease.
19. SECURITY DEPOSIT.
Tenant shall deposit with Landlord the sum of $45,629.16 ("Security
Deposit"), upon Tenant's execution and submission of this Lease. The Security
Deposit shall serve as security for the prompt, full and faithful performance by
Tenant of the terms and provisions of this Lease. If Tenant commits a Default,
or owes any amounts to Landlord upon the expiration of this Lease, Landlord may
use or apply the whole or any part of the Security Deposit for the payment of
Tenant's obligations hereunder. The use or application of the Security Deposit
or any portion thereof shall not prevent Landlord from exercising any other
right or remedy provided hereunder or under any Law and shall not be construed
as liquidated damages. In the event the Security Deposit is reduced by such use
or application, Tenant shall deposit with Landlord within ten (10) days after
notice, an amount sufficient to restore the full amount of the Security Deposit.
Landlord shall not be required to keep the Security Deposit separate from
Landlord's general fund. The Security Deposit shall be deposited in an
interest-bearing account. Landlord shall pay to Tenant all interest accrued on
the Security Deposit, less an annual fee equal to one
12
<PAGE>
percent (1%) of the Security Deposit, within sixty (60) days of the end of any
calendar year upon Landlord's receipt of a written request from Tenant. Any
remaining portion of the Security Deposit shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest in this Lease)
within sixty (60) days after Tenant (or such assignee) has vacated the Premises
in accordance with the Lease. If the Premises shall be expanded at any time, or
if the Term shall be extended at an increased rate of Rent, the Security Deposit
shall thereupon be proportionately increased.
20. MISCELLANEOUS.
(1) All prior understandings and agreements between the parties in
respect of this sublease as merged within this sublease, which alone fully and
completely sets forth the understanding of the parties; and this sublease may
not changed or terminated orally or in any manner other than by an agreement in
writing and signed by the party against whom enforcement of the change or
termination as sought.
(2) Any notice or demand which either party may or must give to the
other hereunder shall be in writing and delivered personally or sent by
registered or certified mail, return receipt requested, addressed as follows:
If to the Tenant:
I-many, Inc.
537 Congress Street
Suite 500,
Portland, Maine 04101
with a copy to:
Lucash, Gesner & Updegrove LLP
40 Broad Street
Boston, MA 02109
Attn: William Contente, Esq.
If to the Landlord:
PXRE Corporation
399 Thornall Street
Edison, NJ
Attn: President
Tel:
Fax:
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attn: Mario J. Suarez
Tel: (212) 309-6920
Fax: (212) 309-6273
Either party, may, by notice in writing, direct that future notices or demands
be sent to a different address.
13
<PAGE>
1. Whenever in the Lease a time is specified for the giving of
any notice or the making of any demand by the Tenant
thereunder, such time is hereby changed (for the purpose of
this sublease only) by adding two (2) business days thereto,
and whenever in the Lease a time is specified for the giving
of any notice or the making of any demand by the Landlord
thereunder, such time is hereby changed (for the purpose of
this sublease only) by subtracting two (2) business days
therefrom. Whenever in the Lease a time is specified within
which the Tenant thereunder must give notice or make a demand
following an event, or within which the Tenant must respond to
any notice, request or demand previously given or made by the
Landlord thereunder, or to comply with any obligation on the
Tenant's part thereunder, such time is hereby changed (for the
purpose of this sublease only) by subtracting two (2) business
days therefrom. Wherever in the Lease a time is specified
within which the Landlord thereunder must give notice or make
a demand following an event, or within which the Landlord must
respond to any notice, request or demand previously given or
made by the Tenant thereunder, such time is hereby changed
(for the purpose of this sublease only) by adding two (2)
business days thereto. It is the purpose and intent of the
foregoing provisions to provide the Landlord under this
sublease with time within which to transmit to the Prime
Lessor any notices or demands received from the Tenant under
this sublease, and to transmit to the Tenant any notices or
demands received from the Prime Lessor. Notwithstanding the
foregoing, any notices required to be delivered by either the
Landlord or the Tenant under the terms of this sublease which
are not notices to or from the Prime Lessor under the Lease
shall be given in the manner, and the times, provided in this
sublease (or in the Lease) without reference to the addition
or subtraction of days as provided in this subsection.
(3) Landlord hereby grants to Tenant the right to utilize Tenant's
Share of the listings on the Building directory to which Landlord is entitled
under the Lease.
(4) The covenants and agreements herein contained shall bind and inure
to the benefit of Landlord and Tenant, and their respective permitted successors
and assigns. The term "Landlord" as used in this sublease means only the tenant
under the Lease, at the time in question, so that if Landlord's interest in the
Lease is assigned, Landlord shall be thereupon released and discharged from all
covenants, conditions and agreements of Landlord hereunder accruing with respect
to the Lease from and after the date of such assignment, but such covenants,
conditions and agreements shall be binding on the assignee until thereafter
assigned.
(5) The paragraph headings appearing herein are for purposes of
convenience only and are not deemed to be part of this sublease.
(6) In the event that any provisions of this sublease shall be held to
be invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this sublease shall be unaffected
thereby.
(7) This sublease shall be governed by, and construed in accordance
with, the laws of the State of New Jersey.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
signatures as of the day and date first above written.
ATTEST: LANDLORD:
PXRE CORPORATION
By: /s/ Anne Massiah By: /s/ Gerald Radke
------------------------------ -------------------------------
Name: Name:
Title: Administrative Assistant Title:
ATTEST: TENANT:
I-many, Inc.
By: /s/ Cheryl O. Tumlin By: /s/ Philip M. St. Germain
------------------------------ -------------------------------
Name: Cheryl O. Tumlin Name: Philip M. St. Germain
Title: Council Title: CFO
15
<PAGE>
EXHIBIT A
SUBLET SPACE
[GRAPHIC OMITTED]
12TH FLOOR PLAN
399 THORNALL STREET
EDISON, NEW JERSEY
<PAGE>
EXHIBIT B
THE LEASE
17
<PAGE>
================================================================================
LEASE AGREEMENT
BETWEEN
THORNALL ASSOCIATES, L.P.,
AS LANDLORD
-AND-
PXRE CORPORATION,
AS TENANT
PREMISES: 399 THORNALL STREET
EDISON, NEW JERSEY
PORTION OF 12TH FLOOR
DATED: NOVEMBER 1, 1999
================================================================================
<PAGE>
INDEX
ARTICLE CAPTION PAGE
------- ------- ----
1 Demised Premises, Term, Rent ................................. 1
2 Use .......................................................... 3
3 Preparation of the Demised Premises .......................... 4
4 When Demised Premises Ready for Occupancy .................... 5
5 Additional Rent .............................................. 6
6 Subordination, Notice to Mortgagees .......................... 12
7 Quiet Enjoyment .............................................. 13
8 Assignment, Mortgaging, Subletting ........................... 13
9 Compliance with Laws and Requirements of Public Authorities .. 16
10 Insurance .................................................... 17
11 Rules and Regulations ........................................ 19
12 Tenants Changes .............................................. 20
13 Tenant's Property ............................................ 22
14 Repairs and Maintenance ...................................... 23
15 Electricity .................................................. 23
16 Heating, Ventilation and Air-Conditioning .................... 25
17 Landlord's Other Services .................................... 25
18 Access, Changes in Building Facilities, Name ................. 27
19 Notices of Accidents ......................................... 28
20 Non-Liability and Indemnification ............................ 29
(i)
<PAGE>
ARTICLE CAPTION PAGE
------- ------- ----
21 Destruction or Damage ....................................... 30
22 Eminent Domain .............................................. 31
23 Surrender ................................................... 33
24 Conditions of Limitation .................................... 33
25 Re-Entry by Landlord ........................................ 35
26 Damages ..................................................... 36
27 Waivers ..................................................... 38
28 No Other Waivers or Modifications ........................... 38
29 Curing Tenant's Defaults .................................... 39
30 Broker ...................................................... 40
31 Notices ..................................................... 40
32 Estoppel Certificate ........................................ 40
33 Arbitration ................................................. 41
34 No Other Representations, Construction, Governing Law ....... 42
35 Security .................................................... 42
36 Parties Bound ............................................... 43
37 Consents .................................................... 43
38 Mortgage Financing - Tenant Cooperation ..................... 44
39 Environmental Compliance .................................... 44
40 Holding Over ................................................ 45
41 Certain Definitions & Constructions ......................... 46
(ii)
<PAGE>
ARTICLE CAPTION PAGE
------- ------- ----
42 Relocation of Tenant ........................................ 46
43 Option to Renew ............................................. 47
EXHIBIT A - Description of Land
EXHIBIT B - Floor Plan
EXHIBIT C - Separate Workletter
EXHIBIT D - Cleaning and Maintenance Specifications
EXHIBIT E - Rules and Regulations
EXHIBIT F - Definitions
EXHIBIT G - Non Disturbance Agreement
(iii)
<PAGE>
LEASE, dated November 1, 1999, between THORNALL ASSOCIATES, L.P., a New
Jersey Limited Partnership, do Alfieri Property Management, having its principal
office located at 399 Thornall Street, P.O. Box 2911, Edison, New Jersey
08818-2911, ("Landlord"), and PXRE CORPORATION, a Delaware Corporation, having
its principal office located at 399 Thornall Street, Edison, New Jersey 08837,
("Tenant").
WITNESSETH:
ARTICLE 1
DEMISED PREMISES, TERM, RENT
1.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the premises hereinafter described, in the building located at 399
Thornall Street, Edison, New Jersey, ("Building") on the parcel of land more
particularly described in Exhibit A ("Land"), for the term hereinafter stated,
for the rents hereinafter reserved and upon and subject to the conditions
(including limitations, restrictions and reservations) and covenants hereinafter
provided. Each party hereby expressly covenants and agrees to observe and
perform all of the condition and covenants herein contained on its part to be
observed and performed.
1.02. The premises hereby leased to Tenant is a portion of the 12th floor
of the Building, as shown on the floor plans annexed hereto as Exhibit B.
Landlord and Tenant have mutually agreed that the premises leased has a rentable
area of 24,238 square feet which includes Tenant's share of the common area.
Said premises, together with all fixtures and equipment which at the
commencement, or during the term of this Lease are thereto attached (except
items not deemed to be included therein and removable by Tenant as provided in
Article 13) constitute the "Demised Premises". Included in the leasing hereby is
Tenant's non-exclusive right, together with other tenants of the Building and of
the building known as 379 Thornall Street, Edison, New Jersey, to use the
lobbies, elevators, sidewalks, public areas, hallways, parking deck, the atrium
area and other public and service areas affecting or serving the Building and
379 Thornall Street.
1.03. The term of this Lease, for which the Demised Premises are hereby
leased, shall commence on a date ("Commencement Date") which shall be (i) the
day on which the Demised Premises are ready for occupancy (as defined in Article
4) or (ii) the day Tenant, or anyone claiming under or through Tenant, first
occupies the Demised Premises for business, whichever occurs earlier, and shall
end at noon on October 31, 2009, which ending date is hereinafter called the
"Expiration Date", or shall end on such earlier date upon which said term may
expire or be canceled or terminated pursuant to any of the conditions or
covenants of this Lease or pursuant to law. Promptly following the Commencement
Date, the Landlord shall notify Tenant in writing of the Commencement Date and
the Expiration Date as determined in accordance with this Section.
1
<PAGE>
1.04. The rents reserved under this Lease, for the term thereof, shall be
and consist of:
(a)
PERIOD FIXED RENT MONTHLY RENT ANNUAL RENT
- ------ ---------- ------------ -----------
YEARS 1-5 $24.00 $48,476.00 $581,712.00
YEARS 6 - 10/31/09 $27.90 $56,353.35 $676,240.20
Said rent shall be payable in advance on the first day of each
and every calendar month during the term of this Lease, and
(b) Additional rent consisting of all such other sums of money as
shall become due from and payable by Tenant to Landlord hereunder (for default
in payment of which Landlord shall have the same remedies as for a default in
payment of fixed rent),
all to be paid to Landlord at its office, or such other place, or to such agent
at such place, as Landlord may designate by notice to Tenant, in lawful money of
the United States of America.
1.05. Tenant shall pay the fixed rent and additional rent herein reserved
promptly as and when the same shall become due and payable, without demand
therefor and without any abatement, deduction or setoff whatsoever.
1.06. If the Commencement Date occurs on a day other than the first day of
a calendar month, the fixed rent for such calendar month shall be prorated and
the balance of the first month's fixed rent theretofore paid shall be credited
against the next monthly installment of fixed rent.
1.07. Late payments of any payment of rent, including monthly rent or any
portion thereof, which is not received within five (5) days after it is due,
will be subject to a late charge equal to five percent (5%) of the unpaid
payment, or $100.00, whichever is greater. This amount is in compensation of
Landlord's additional cost of processing late payments. In addition, any rent
which is not paid when due, including monthly rent, will accrue interest at a
late rate charge of First Union Prime Rate plus 2.5% per annum, as said rate is
reasonably determined by Landlord from published reports, (but in no event in an
amount in excess of the maximum rate allowed by applicable law) from the fifth
(5th) day after it was due until the date on which it is paid in full with
accrued interest. If Tenant is in default of the Lease for failure to pay rent,
in addition to the late charges and interest set forth above, Tenant shall be
charged with all attorney fees in connection with the collection of all sums due
Landlord. Notwithstanding the foregoing, provided Tenant is not in default of
this Lease, Tenant shall have one (1) grace period for each year of the Lease
term where Tenant will not be subject to late charge or interest for any late
payment of rent as set forth above provided Tenant pays the sums due within five
(5) days of written notice therefor.
2
<PAGE>
1.08. Owner and Broker acknowledge that Owner and Tenant (formerly known
as Phoenix Re Corporation) entered into a lease dated May 9, 1994 (the "Other
Lease") for 24,238 rentable square feet on the 14th floor of the Building for a
term of fifteen (15) years commencing October 27, 1994 and expiring on
October 31, 2009.
1.09. Tenant's Expansion Option for 4,000-6,000 rentable square feet on
November 1, 1999 as more fully set forth in Article 44(a) of the Other Lease is
hereby null and void and of no further force or effect.
1.10. Tenant acknowledges that there is currently a tenant of the Building
occupying the Demised Premises. Tenant acknowledges that Landlord's obligation
hereunder to deliver the Demised Premises is conditioned upon Landlord entering
into satisfactory arrangements such tenant to vacate the Demised Premises. Upon
the execution hereof, Landlord agrees to diligently proceed towards entering
into such an arrangement with the tenant occupying the Demised Premises. If
Landlord is unable to enter into an arrangement satisfactory to Landlord, as
Landlord solely determines, for such tenant to vacate the Demised Premises, this
Lease shall be null and void and of no further force or effect.
ARTICLE 2
USE
2.01. Tenant shal1 use and occupy the Demised Premises for executive and
general offices for the transaction of Tenant's business including ancillary
uses consistent with first class office building uses and permitted by law and
for no other purpose.
2.02. The use of the Demised Premises for the purposes specified in
Section 2.01 shall not include, and Tenant shall not use or permit the use of
the Demised Premises or any part thereof, for:
(a) A school of any kind other than for the training of Tenant's
employees;
(b) An employment agency; or
(c) An office for any governmental or quasi governmental bureau,
department, agency, foreign or domestic, including any autonomous governmental
corporation or diplomatic or trade mission.
(d) Any telemarketing activities or other direct selling activities;
or
(e) Any use, including executive and general office use, which
results in a density of a population of more than one person for every 200
rentable square feet.
3
<PAGE>
2.03. Tenant shall obtain and maintain any governmental license or permit,
other than a Certificate of Occupancy and any other permits in connection with
Landlord's Work, which shall be required for the proper and lawful conduct of
Tenant's business in the Demised Premises, or any part thereof. Tenant shall at
all times comply with the terms and conditions of each such license or permit.
2.04. Tenant shall not at any time use or occupy, or do or permit anything
to be done in the Demised Premises, in violation of the Certificate of Occupancy
(or other similar municipal ordinance) governing the use and occupation of the
Demised Premises or for the Building.
2.05. Landlord represents that it shall continue to maintain the Building
as presently used as a first class office building, including such other
ancillary uses as are presently permitted under applicable zoning ordinances, as
well as those uses which are presently lawfully utilized in the atrium or in the
Building known as 379 Thornall Street, Edison, New Jersey. Landlord shall comply
with all licenses and permits required of it to maintain and operate the Demised
Premises and the Building and the atrium area. Landlord represents that there
are existing Certificates of Occupancy to allow occupancy for the purposes
presently used in the Building and the atrium area. Landlord further represents
that Tenant's use, as described in this Article 2, is permitted under the zoning
ordinances, but such occupancy is subject to compliance with applicable codes
respecting the completion of the Demised Premises.
ARTICLE 3
PREPARATION OF THE DEMISED PREMISES
3.01. The Demised Premises shall be completed and prepared for Tenant's
occupancy in the manner, and subject to the terms, conditions and covenants, set
forth in Exhibit C. The facilities, materials, and work so to be furnished,
installed, and performed in the Demised Premises by Landlord at its expense are
hereinafter and in Exhibit C referred to as "Landlord's Work". Such other
installations, materials, and work which may be undertaken by or for the account
of Tenant to equip, decorate, and furnish the Demised Premises for Tenant's
occupancy, commonly called finishing trades work, are hereinafter and in Exhibit
C called "Tenant's Finish Work."
3.02. Landlord and Tenant acknowledge that Tenant shall be obligated to
restore the Demised Premises by the end of the term, including such renewals
thereto, or at any earlier expiration date. For purposes of this Lease, and
specifically without limitation, for purposes of Article 3, Article 13 and
specifically without limitation, Section 13.02, and Article 23, references to
"restoration" or to the obligation of Tenant "to restore", shall mean the
demolition of all of Landlord's Work and Tenant's Finish Work and of all work
thereafter performed by or on behalf of Tenant in connection with Tenant Changes
such that the Demised Premises are delivered to Landlord in the same manner and
in the same condition as existed prior to Landlord's Work or Tenant's Finish
Work as set forth in Exhibit C. If there are any changes to the base Building
systems as a result of Landlord's Work, Tenant's Finish Work or the installation
of the stairway between the 12th and 14th floor, Tenant shall be required to
restore
4
<PAGE>
such base Building systems to their condition prior to the performance of
Landlord's Work, Tenant's Finish Work or the installation of the stairway.
Landlord agrees that Tenant shall have the right, but shall be under no
obligation, to request Landlord to restore the Demised Premises upon written
notice to such effect given not later than sixty (60) days prior to the
expiration of the term. If Tenant requests Landlord to restore the Demised
Premises as aforesaid, then Tenant's restoration obligation shall be limited to
payment of such demolition costs as are specific to Tenant's then constructed
Demised Premises based upon the then applicable labor costs, as may be
escalated, and upon the then applicable garbage hauling costs, as may be
escalated, and the quantities so involved so reduced at Landlord's discretion.
3.03. Landlord agrees at its sole cost to modify the common area lobby of
the 12th floor to a first class condition consistent with Landlord's Building
standard lobbies, such renovation to be performed along with Landlord's Work.
ARTICLE 4
WHEN DEMISED PREMISES READY FOR OCCUPANCY
4.01. The Demised Premises shall be deemed ready for occupancy on the
earliest date on which all of the following conditions have been met:
(a) A Certificate of Occupancy (temporary or final) has been issued
by the applicable governmental authorities, permitting Tenant's use of the
Demised Premises for the purposes for which the same have been leased.
(b) Landlord's Work, and so much of Tenant's Finish Work at Landlord
shall have undertaken in accordance with Exhibit C or by separate letter
agreement, in the Demised Premises have been substantially completed, and same
shall be so deemed notwithstanding the fact that minor or insubstantial details
of construction, mechanical adjustment, or decoration or special Finish Work
requested by Tenant, such as cabinetry remain to be performed, the
non-completion of which does not materially interfere with Tenant's use of the
Demised Premises.
(c) Reasonable means of access and facilities necessary to Tenant's
use and occupancy of the Demised Premises, including corridors, elevators and
stairways, and heating ventilating, air conditioning, sanitary, water, and
electrical facilities, have been installed and are in good operating order and
available to Tenant.
4.02. If making the Demised Premises ready for occupancy shall be delayed
by any act or omission of Tenant or any of its employees, agents or contractors
or any failure (not due to any act or omission of Landlord or any of its
employees, agents or contractors) to plan or execute Tenant's Finish Work
diligently or by reason of Tenant's failure to submit Tenant's plans and
specifications in thc manner set forth in this Lease, the Demised Premises shall
be deemed ready for occupancy on the date when they would have been ready but
for such delay. In order for there to be deemed a delay in Landlord's Work,
Landlord shall within twenty-four (24) hours of the inception of such delay
advise Tenant that a tenant delay has occurred.
5
<PAGE>
4.03. It shall be conclusively presumed that Landlord's Work has been
satisfactorily completed (except for latent defects) as of the Commencement
Date, unless within ninety (90) days after such date Tenant shall give Landlord
notice specifying the respects in which the Demised Premises were not in
satisfactory condition.
4.04. Tenant shall have the right to present Landlord with a written list
of incomplete or defective Landlord's Work or Tenant's Finish Work (the "Punch
List") provided however that Tenant shall provide such Punch List within ninety
(90) days from when Tenant shall have taken actual possession of the Demised
Premises (or any portion thereof) based on inspection with representatives of
Tenant and Landlord present. Landlord shall proceed diligently to complete all
such Punch List items within thirty (30) days after receipt of Tenant's Punch
List and such additional time as may be reasonably required because of the
nature of the defect, unavailability of materials or supplies or other reasons
not subject to Landlord's control.
ARTICLE 5
ADDITIONAL RENT
5.01. For the purpose of Sections 5.01 through 5.03.
(a) "Taxes" shall mean real estate taxes, special and extraordinary
assessments and governmental levies against the Land and Building of which the
Demised Premises (but excluding therefrom that portion of the real estate taxes
directly attributable to improvements made by other tenants in the Building
beyond Landlord's allowances) are a part provided, however, if at any time
during the term of this Lease the method of taxation prevailing at the date of
this Lease shall be altered so that in lieu of or as a substitute for any or all
of the above there shall be assessed, levied or imposed (i) a tax, assessment,
levy, imposition or charge based on the income or rents received from the
Building whether or not wholly or partially as a capital levy or otherwise; or
(ii) a tax, assessment, levy, imposition or charge measured by or based in whole
or in part upon all or any part of the Land and/or Building and imposed upon
Landlord; or (iii) a license fee measured by the rents; or (iv) any other tax,
assessment, levy, imposition, charge or license fee however described or imposed
except as may otherwise be provided herein, then all such taxes, assessments,
levies, impositions, charges or license fees or the part thereof so measured or
based shall be included in the definition of "Taxes." Such determination of
Taxes shall be computed as if Landlord owns no assets other than the Building
and had no income other than from the Building. All Taxes imposed as special
assessments shall be paid in installments whenever permitted or whenever payment
of such installments is financially beneficial to tenants. Excluded from the
definition of Taxes shall be late interest or penalties payable as a result of
Landlord's late payment of Taxes, Landlord's inheritance estate, gift and income
and transfer taxes.
(b) "Base Taxes" shall mean the assessed valuation of the Land and
Building, assuming the Building was 100% occupied, multiplied by the tax rate
for the Tax Year 2000.
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(c) "Tax Year" shall mean each calendar year for which Taxes are
levied by any governmental authority.
(d) "Operational Year" shall mean each calendar year commencing with
calendar year 2001.
(e) "Tenant's Proportionate Share of Increase" shall mean 7.97% of
the increase in Taxes in any Operational Year in excess of the Base Taxes.
Tenant's Proportionate Share of Increase for the first Operational Year shall be
prorated to reflect the actual occupancy by Tenant for said Operational Year.
With respect to the calculation of Tenant's Proportionate Share, in the event
the rentable square footage of the Building is physically increased or
decreased, the Tenant's Proportionate Share shall equally be adjusted based upon
the total rentable square footage of the Building as may be adjusted as compared
to Tenant's rentable square footage.
(f) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase in Taxes for the projected Operational Year
divided by twelve (12) and payable monthly by Tenant to Landlord as additional
rent.
5.02. Commencing with the first Operational Year and thereafter, Tenant
shall pay to Landlord as additional rent for the then Operational Year, Tenant's
Projected Share of Increase in Taxes in equal monthly installments, which
payment shall be made along with the fixed rent.
5.03. After the expiration of each Operational Year, Landlord shall
furnish to Tenant a written statement of the Taxes incurred for such Operational
Year as well as Tenant's Proportionate Share of Increase, if any. If the
statement furnished by Landlord to Tenant pursuant to this Section at the end of
the then Operational Year shall indicate that Tenant's Projected Share of
Increase exceeded Tenant's Proportionate Share of Increase, Landlord shall
either forthwith pay the amount of excess directly to Tenant concurrently with
the statement or, if the excess is less than $1,000.00, credit same against
Tenant's next monthly installment of rent. If such statement furnished by
Landlord to Tenant shall indicate that the Tenant's Proportionate Share of
Increase exceeded Tenant's Projected Share of Increase for the then Operational
Year, Tenant shall forthwith pay the amount of such excess to Landlord within
thirty (30) days of Tenant's receipt of Landlord's statement.
5.04. As used in Sections 5.04 through 5.06:
(a) "Operating Expenses" shall mean any or all expenses incurred by
Landlord in connection with the operation of the Land and Building of which the
Demised Premises are a part, as determined in accordance with sound management
practices in accordance with accounting principals generally used in the
commercial real estate industry consistently applied, including all expenses
incurred as a result of Landlord's compliance with any of its obligations
hereunder other than Landlord's Work and such expenses shall include: (i)
salaries, wages, medical, surgical and general welfare benefits, (including
group life insurance) and
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pension payments of employees of Landlord, but only to the extent the services
of such employees are rendered with respect to the operation and maintenance of
the Building; (ii) social security, unemployment, and payroll taxes, workers'
compensation, disability coverage, uniforms, and dry cleaning for the employees
referred to in Subsection (i); (iii) the cost for the Building and common areas
of all charges for oil, gas, common and public service area electricity
(including, but not limited to, fuel cost adjustments), steam, heat,
ventilation, air-conditioning, heating, and water including any taxes on any
such utilities, but excluding from Operating Expenses the Landlord's cost,
including taxes thereon, of electric energy, other than for heating and
air-conditioning, furnished to the Demised Premises (which electric energy so
furnished shall be paid for by Tenant pursuant to the provisions of Article 15
hereof); (iv) the cost of all premiums and charges for the following insurances:
rent, casualty, liability, fidelity and war risk (if obtainable from the United
States Government all of which premiums and charges shall be commercially
reasonable); (v) the cost of all building and cleaning supplies for the common
areas of the Building and charges for telephone for the Building; (vi) the cost
of all charges for management, window cleaning, security services, if any, and
janitorial services, and any independent contractor performing work included
within the definition of operating expenses; (vii) reasonable legal and
accounting services and other professional fees and disbursements incurred in
connection with the operation and management of the Land and Building (other
than as related to new leases, enforcing Landlord's rights under existing
leases, or sales of the Building, fees and charges for financing, refinancing,
syndications); (viii) general maintenance of the Building and the cost of
maintaining and replacing the landscaping; (ix) maintenance of the common area;
(x) capital expenditures, including the purchase of any item of capital
equipment or the leasing of capital equipment which have the effect of reducing
the expenses which would otherwise be included in Operating Expenses, the costs
of which shall be included in Operating Expenses for the Operational Year in
which the costs are incurred and subsequent Operational Years on a straight-line
basis, to the extent that such items are amortized over the actual life (but not
more than ten (10) years of the expenditure of equipment), with an interest
factor equal to the interest rate at the time or Landlord's having made said
expenditure; and (xi) that portion of the cost of any capital expenditures
incurred in connection with the operation of the Land and Building amortized on
a straight line basis, to the extent that such items are amortized over the
actual life, but not more than ten years, with an interest factor equal to the
interest rate, at the time of Landlord's having made said expenditure.
If during all or part of the Base Year or any Operational Year,
Landlord shall not furnish any particular item(s) of work or service (which
would otherwise constitute an Operating Expense hereunder) to portions of the
Land or Building due to the fact that (i) such portions are not occupied or
leased; (ii) such items of work or service is not required or desired by the
tenant of such portion; (iii) such tenant is itself obtaining and providing such
item of work or service; or (iv) for other reasons, then, for the purposes of
computing Operating Expenses, the amount for such item and for such period shall
be deemed to be increased by an amount equal to the additional costs and
expenses which would reasonably have been incurred during such period by
Landlord if it had at its own expense furnished such item of work or services to
such portion of the Building or such tenant.
Landlord agrees that the sum of all Proportionate Shares of all
tenants of increases in Operating Expenses for any Operational Year shall not
exceed the actual
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increases in Operating Expanses for such Operational Year when the actual
Operating Expenses are so finally determined.
Notwithstanding the foregoing, the following costs and expenses
shall not be included in Operating Expenses:
(1) Executives' salaries (and all related compensation) above the
grade of building manager;
(2) Amounts received by Landlord through proceeds of insurance
except to the extent they are compensation for sums previously included in
Operating Expenses hereunder;
(3) Cost of repairs or replacements incurred by reason of fire or
other casualty or condemnation to the extent Landlord is compensated therefor;
(4) Advertising and promotional expenditures (including "open
houses" or broker's parties);
(5) Costs incurred in performing work or furnishing services for any
tenant (including Tenant), whether at such tenant's or at Landlord's expense, to
the extent that such work or service is in excess of any work or service that
Landlord is obligated to furnish to or for Tenant at Landlord's expense;
(6) Depreciation, except as provided above for permitted capital
expenditures;
(7) Brokerage commissions;
(8) Taxes (as hereinbefore defined);
(9) The cost of electricity (for other than heating and
air-conditioning) furnished to the Demised Premises or any other space leased to
tenants as reasonably estimated by Landlord;
(10) Refinancing costs and mortgage interest and amortization
payments;
(11) Leasing commissions;
(12) Costs of preparing tenantable space for a tenant's initial
occupancy or lease renewal or extension and costs of relocating tenants of the
Building;
(13) Any compensation paid to clerks, attendants or other persons in
commercial concessions operated by Landlord;
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(14) Interest on and amortization of debts, payments of ground rent
and other payments due under ground lease;
(15) Costs for acquisition or leasing of sculpture, paintings or
other objects of art;
(16) The cost of any additions to the square foot area of the
Building above the square foot area of the Building on the Commencement Date;
(17) The cost of any work or services performed or other expenses
incurred in connection with installing, operating and maintaining any specialty
service or facility other than common Building facilities (e.g. a skydeck,
broadcasting facility or any luncheon, athletic or recreational club);
(18) Brokerage commission and legal costs (including attorneys fees
and disbursements) incurred in procuring tenants or renewing leases or in
connection with any mortgaging, financing, refinancing, sale or entering into or
extending or modifying any ground or underlying lease;
(19) Costs incurred in connection with a transfer or disposition of
all or any part of the Building or Land or any interest therein or in Landlord
or any entity comprising Landlord;
(20) Attorney's fees and Court costs in connection with disputes
with tenants of the Building unless such disputes relate to matters which affect
Tenant's (or any other tenant's) use or occupancy, or enjoyment of, the
Building, the Demised Premises or the spare occupied by any such tenant;
(21) The cost of capital expenditures except as expressly permitted
herein;
(22) Any cost represented in an amount paid or allocated to an
affiliate of Landlord to the extent the same is materially in excess of the
amount which would have been paid in the absence of such a relationship (except
that any amount expressly stated in this Lease shall be deemed to be not in
excess);
(23) Costs incurred in the removal, containment, encapsulation,
disposal of or repair or cleaning of areas effected by asbestos or other
substances installed by persons other than Tenant in the Building which must be
removed or treated as required by law;
(24) Any other expenditure which would otherwise be an Operating
Expense to the extent Landlord is reimbursed therefore by condemnation award or
insurance proceeds, or by refund, credit, warranty, service, contract or
otherwise; and
(25) Costs incurred to correct structural defects in the initial
construction of the Building.
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(b) "Operational Year" shall mean each calendar year commencing with
calendar year 2001.
(c) "Base Year" shall mean calendar year 2000.
(d) "Tenant's Proportionate Share of Increase" shall mean 7.97%
(which percentage may be adjusted as described above in Section 5.01(e),
multiplied by the increase in Operating Expenses for the Operational Year over
Operating Expenses for the Base Year. For purposes hereof, the Tenant's
Proportionate Share of Increase has been computed based upon a total square
footage of the Building equal to 304,000 square feet, and a total square footage
of the Demised Premises equal to 24,238 square feet.
(e) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase for the projected Operational Year divided by
twelve (12) and payable monthly by Tenant to Landlord as additional rent which
payment shall be made along with the fixed rent.
5.05. Commencing with the first Operational Year after Landlord shall be
entitled to receive Tenant's Proportionate Share of Increase, Tenant shall pay
to Landlord as additional rent for the then Operational Year, Tenant's Projected
Share of Increase.
5.06. After the expiration of the first Operational Year and for each
Operational Year thereafter, Landlord shall furnish to Tenant a written detailed
statement of the Operating Expenses (certified to be true and correct by the
Chief Operating Officer of Landlord) incurred for such Operational Year which
statement shall set forth Tenant's Proportionate Share of Increase, if any. If
the statement furnished by Landlord to Tenant, pursuant to this Section, at the
end of the then Operational Year shall indicate that Tenant's Projected Share of
Increase exceeded Tenant's Proportionate Share of Increase, Landlord shall
either forthwith pay the amount of excess directly to Tenant concurrently with
the statement or (if such excess is less than $l,000.00) credit same against
tenant's next monthly installment of rent. If such statement furnished by
landlord to Tenant hereunder shall indicate that the Tenant's Proportionate
Share of Increase exceeded Tenant's Projected Share of Increase for the then
Operational Year, Tenant shall forthwith pay the amount of such excess to
Landlord within thirty (30) days of Tenant's receipt of Landlord's statement.
5.07. Every statement given by Landlord pursuant to Sections 5.03 and 5.06
shall be conclusive and binding upon Tenant unless (i) within ninety (90) days
after the receipt of such statement Tenant shall notify Landlord that it
disputes the correctness of the statement, specifying the particular respects in
which the statement is claimed to be incorrect; and (ii) if such dispute shall
not have been settled by agreement, shall submit the dispute to judicial
proceedings within ninety (90) days after receipt of the statement. Within such
90 day period Tenant shall have the right to review, examine and audit
Landlord's books and records for the applicable calendar year which pertain to
the Operating Expenses and which are reasonably required to verify the accuracy
of any component of Landlord's Operating Statements. Landlord shall also provide
such additional reasonable information as is available based upon Tenant's
reasonable request. Landlord's documents shall be made available to Tenant at
Landlord's
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offices in the Building and shall also be available for photocopy. Tenant agrees
that it and its representatives shall conduct a review with complete
confidentiality and shall enter into a reasonable confidentiality agreement with
Landlord respecting the review, examination and audit. Pending the determination
of such dispute by agreement or judicial proceedings as aforesaid, Tenant shall,
within thirty (30) days after receipt of such statement, pay additional rent in
accordance with Landlord's statement and such payment shall be without prejudice
to Tenant's position. If the dispute shall be determined in Tenant's favor,
Landlord shall forthwith pay Tenant the amount of Tenant's overpayment of rents
resulting from compliance with Landlord's statement. If, after judicial
proceeding, it is determined that the Landlord's Operating Statements vary by
more than five percent (5%), then Landlord shall reimburse Tenant for Tenant's
reasonable costs for payment of an auditor or accountant. If Landlord's
statement is confirmed, Tenant shall reimburse Landlord for Landlord's auditor
or accountant.
ARTICLE 6
SUBORDINATION, NOTICE TO MORTGAGEES
6.01. Subject to Section 6.02 hereof, this Lease, and all rights of Tenant
hereunder are and shall be subject and subordinate in all respects to all
mortgages which may now or hereafter affect the Land and/or the Building and/or
any of such leases, whether or not such mortgages 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 mortgages and spreaders and consolidations of such mortgages. This
Section shall be self-operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute and deliver an instrument that Landlord or the holder of any such
mortgage or any of their respective successors in interest may reasonably
request to evidence such subordination. The mortgages to which this Lease is, at
the time referred to, subject and subordinate are hereinafter sometimes called
"superior mortgages" and the holder of a superior mortgage or its successor in
interest at the time referred to is sometimes hereinafter called a "superior
mortgagee."
6.02. Landlord shall make a good faith effort to obtain from the Mortgagee
a Subordination, Non-Disturbance and Attainment Agreement (the "Non-Disturbance
Agreement") in favor of Tenant utilizing such Mortgagee's standard form. Such
Mortgagee's Non-Disturbance Agreement form is attached as Exhibit G. Landlord
agrees, within 120 days of the execution of this Lease and Tenants execution of
Exhibit G, to promptly obtain Mortgagee's approval to execute the
Non-Disturbance Agreement. If Tenant fails to accept the Non-Disturbance
Agreement as described in Exhibit G attached, it shall be considered that
Landlord has satisfied any requirement respecting the existing Mortgagee. As to
any future mortgagee, Landlord agrees that it shall use its best efforts to
obtain a similar Non-Disturbance Agreement which Tenant shall accept as a
condition to a future subordination by Tenant under Section 6.01.
6.03. Landlord represents that the Land and Building are not subject to
any ground, underlying or overriding leases.
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ARTICLE 7
QUIET ENJOYMENT
7.01. So long as Tenant pays all of the fixed rent and additional rent due
hereunder and performs all of Tenant's other obligations hereunder, Tenant and
any person entitled under this Lease to claim through or under Tenant shall
peaceably and quietly have, hold, and enjoy the Demised Premises subject,
nevertheless, to the obligations of this Lease and, as provided in Article 6, to
the superior mortgages.
ARTICLE 8
ASSIGNMENT, MORTGAGING, SUBLETTING
8.01. Neither this Lease, nor the term and estate hereby granted, nor any
part hereof or thereof, nor the interest of Tenant in any sublease, or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, and neither the Demised Premises, nor any part
thereof shall be encumbered in any manner by reason of any act or omission on
the part of Tenant or anyone claiming under or through Tenant or shall be
sublet, or offered or advertised for subletting, or be used or occupied or
permitted to be used or occupied, or utilized for desk space or for mailing
privileges, by anyone other than Tenant or any entity which would be a permitted
subtenant or a permitted assignee under Section 8.06 for any purpose other than
as permitted by this Lease, without the prior written consent of Landlord in
every case, except as expressly otherwise provided in this Article. Landlord's
consent to a sublease or an assignment of the Demised Premises shall not be
unreasonably withheld. Landlord shall not be deemed unreasonable for the
purposes of consent for a sublease or an assignment if Landlord withholds its
consent for any of the following: (i) in Landlord's belief the sublessee or
assignee is known as a non-performing or litigious tenant; (ii) the sublessee's
or assignee's use will burden the parking facilities of the Building; (iii) the
sublessee's or assignee's use will violate any provision of this Lease; (iv) if
such sublessee or assignee is an environmental nuisance; (v) if in Landlord's
reasonable discretion the Landlord does not find that the financial capacity of
the sublessee or assignee is adequate; or (vi) for any other reason which shall
not be unreasonable for Landlord to withhold it's consent.
8.02. If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof be sublet or be used or occupied by anybody
other than Tenant or any permitted subtenant or assignee under Section 8.06,
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
undertenant or occupant. In either event, Landlord may apply the net amount
collected to the rents herein reserved, but no such assignment, underletting,
occupancy or collection shall be deemed a waiver of any of the provisions of
Section 8.01, or the acceptance of the assignee, undertenant or occupants as
Tenant, or a release of Tenant from the further performance by Tenant of
Tenant's obligations under this Lease. The consent by Landlord to assignment,
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mortgaging, underletting 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 underletting or use
or occupancy by others not expressly permitted by this Article.
8.03. The following provisions shall govern in connection with the
subletting of all or a portion of the Demised Premises:
(a) Tenant shall submit in writing to Landlord (i) the name of the
proposed subtenant; (ii) the nature and character of the proposed subtenant's
business, and the intended use to be made of the Demised Premises by the
proposed subtenant; (iii) the terms and conditions of the proposed sublease; and
(iv) such reasonable financial information as Landlord may request regarding the
proposed subtenant.
(b) Within fifteen (15) business days of Landlord's receipt of the
information described in (a) above, Landlord, at Landlord's election may (i)
elect to sublease the Demised Premises directly from Tenant either upon (x) the
same terms and conditions offered to the proposed subtenant or, (y) upon the
same terms and conditions as set forth in this Lease; or (ii) cancel this Lease
as to that portion of the Demised Premises which Tenant desires to sublease, in
which event Tenant agrees to surrender all of its right, title, and interest
hereunder and Landlord may thereafter enter into a direct Lease with the
proposed subtenant or with any other persons as Landlord may desire; or (iii)
consent to the subletting on such terms and conditions as established by
Landlord, including Landlord's participation in any rentals received by Tenant.
Notwithstanding the foregoing, if during the first three (3) years of the Lease
term, Tenant submits a request for a proposed subtenant(s) for less than 12,000
rentable square feet whose subtennancy shall commence during the first three (3)
years of the Lease term, Landlord shall have no right to recapture as set forth
in (i) above and Landlord shall have no right to participate in any rentals as
set forth in (iii) above.
(c) As a condition to Landlord's consent, if given under (b) above,
Landlord shall have obtained consent to such proposed subletting by a superior
mortgagee, provided such superior mortgagee requires consent to the subletting.
(d) In connection with any subletting, Tenant shall not offer the
Demised Premises, or any part thereof, to any other tenant in the Building or
their subsidiaries or affiliates at a rental rate less than the current rental
rate for office buildings in the surrounding area.
8.04. Tenant shall remain fully liable for the performance of all Tenant's
obligations hereunder notwithstanding any subletting provided for herein (except
to Landlord), and without limiting the generality of the foregoing, shall remain
fully responsible and liable to Landlord for all acts and omissions of any
subtenant or anyone claiming under or through any subtenant which shall be in
violation of any of the obligations of this Lease and any such violation shall
be deemed to be a violation by Tenant.
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8.05. Tenant shall not, without the prior written consent of Landlord,
assign this Lease, and the provisions of Section 8.03 with respect to subletting
shall equally apply to any assignment of this Lease. Tenant herein named, or any
immediate or remote successor in interest of Tenant herein named, shall remain
liable jointly and severally (as a primary obligor) with its assignee and all
subsequent assignees for the performance of Tenant's obligations hereunder. In
the event that Tenant hereunder is a corporation (other than one whose shares,
now or in the future, are regularly and publicly traded on a recognized stock
exchange, including over the counter, or is a public company or merges with a
public company), then any substantial change in the ownership of and/or power to
vote the majority of the outstanding capital stock of Tenant, other than by
inheritance or operation of law, shall be deemed an assignment of this Lease and
the provisions with respect to assignment shall be applicable.
8.06. Notwithstanding anything to the contrary contained in this Article
with respect to assignment or subletting, Landlord shall consent to any
assignment and/or subletting (i) to any parent, affiliate or wholly-owned
subsidiary of Tenant (as defined in Rule 240.1 2b-2 under the Securities
Exchange Act of 1934) or (ii) to any corporation or other entity which succeeds
to all or substantially all of the assets and business of Tenant provided the
resulting entity has a financial condition equal to or greater than Tenant's as
of the date hereof. Landlord's consent shall also not be required with respect
to (a) any transfer of corporate shares in or of Tenant which are publicly
traded on a recognized stock exchange or over-the-counter market; (b) any
transfer of corporate shares or other interests, or the creation of additional
corporate shares or other interests, which are not so publicly traded, provided
such transfer or creation is for a good business purpose and not for the sole
purpose transferring this Lease; (c) any sale or transfer of all or
substantially all of the Tenant's assets other than in connection with (ii)
above provided the resulting entity or owner shall have a financial capacity and
net worth equal to or greater than Tenant's as of the date of this Lease; (d)
any transfer of corporate shares or other interests in the Tenant following the
death of any shareholder or other principal. Tenant shall so notify Landlord of
all of the foregoing and provide Landlord such additional reasonable available
information as Landlord reasonably requests or with respect to which Landlord is
entitled.
8.07. Tenant agrees that in connection with each separate request for a
Landlord's consent to a subletting or assignment (including the review of a
statutory or other name change), Tenant shall pay to Landlord the sum of $500.00
representing a reasonable compensation to Landlord for the administration costs
of evaluating and responding to the request.
8.08. Tenant further agrees that it shall not place any signs on the Land
or on the windows located in the Demised Premises indicating that all or any
portion of the Demised Premises are available for subleasing or assignment.
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ARTICLE 9
COMPLIANCE WITH LAWS AND REQUIREMENTS
OF PUBLIC AUTHORITIES
9.01. Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of public authority, and at
its expense shall comply with all laws and requirements of public authorities
which shall, with respect to the Demised Premises or the use and occupation
thereof, or the abatement of any nuisance, impose any violation, order or duty
on Landlord or Tenant, arising from (i) Tenant's specific use (other than
general office use) of the Demised Premises; (ii) the manner of conduct of
Tenant's business or operation of its installation, equipment or other property
therein; (iii) any cause or condition created by or at the instance of Tenant,
other than by Landlord's performance of any work for or on behalf of Tenant; or
(iv) the breach of any of Tenant's obligations hereunder. Furthermore, Tenant
need not comply with any such law or requirement of public authority so long as
Tenant shall be contesting the validity thereof, or the applicability thereof to
the Demised Premises, in accordance with Section 9.02.
Nothing contained herein shall be construed to require Tenant to
make structural alterations to the Building except to the extent that same are
required by reason of Tenant's specific use (other than general office).
Further, Tenant shall have no obligation under this Section 9.01 with respect to
any non-compliance of the Demised Premises or the Building with any law or
requirement of public authority existing on the Commencement Date of this Lease
unless caused by Tenant, its agents, employees and/or invitees. Tenant shall
have no obligation hereunder with respect to any law which requires the removal
and capsulation or abatement of any hazardous materials or substances including
asbestos that are located in the Building on the Commencement Date (unless
placed there by Tenant or its agents) and which on the Commencement Date are
considered hazardous materials or substances requiring removal by any such
public authority. Landlord represents that the Building does not contain any
asbestos or any other toxic materials or environmentally hazardous materials
which are considered such under any applicable building code or BOCA Code at the
time the Building received its initial Certificate of Occupancy. Without any
liability to Tenant, Landlord shall be liable to remove any such toxic
environmentally hazardous material if such representation proves untrue.
9.02. Tenant may, at its expense (and if necessary, in the name of but
without expense to Landlord) contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any law or requirement of public authority, and Landlord shall
cooperate with Tenant in such proceedings provided that:
(a) Tenant shall defend, indemnify, and hold harmless Landlord
against all liability, loss or damage which Landlord shall suffer by reason of
such non-compliance or contest, including reasonable attorney's fees and other
expenses reasonably incurred by Landlord;
(b) Such non-compliance or contest shall not constitute or result in
any violation of any superior mortgage, or, if such superior mortgage shall
permit such non-
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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
(c) Tenant shall keep Landlord advised as to the status of such
proceedings.
9.03. Landlord states that, to the best of its knowledge, the Building
complies with Title III of the Americans with Disabilities Act, (the Act), as
the Act applies to existing structures constituting commercial facilities.
Landlord further states that Landlord's Work, as described in Exhibit C, shall
comply with the Act under Title III for existing structures which are commercial
facilities. If, after the Demised Premises are ready for occupancy in accordance
with Article 4, the Act requires further changes to the Building when occasioned
by any other tenants then such changes shall not be Tenant's responsibility. If,
after the Demised Premises are ready for occupancy, further changes to the
Building, including the Demised Premises, are required by virtue of the Lease
and/or Tenant's specific use and occupancy other than as general office uses,
such changes shall be Tenant's responsibility.
ARTICLE 10
INSURANCE
10.01. Tenant shall not violate, or permit the violation of, any condition
imposed by the all-risk casualty policy issued for the Building and shall not do
anything, or permit anything to be kept, in the Demised Premises which would
increase the fire or other casualty insurance rate on the Building or the
property therein over the rate which would otherwise then be in effect, (unless
Tenant pays the resulting increased amount of premium as provided in Section
10.02) or which would result in insurance companies of good standing refusing to
insure the Building or any of such property in amounts and at normal rates
reasonably satisfactory to Landlord. Tenant shall not be in violation hereof
unless Tenant first receives written notice thereof. However, Tenant shall not
be subject to any liability or obligation under this Article by reason of the
proper use of the Demised Premises for the purposes permitted by Article 2.
10.02. If, by reason of any act or omission on the part of Tenant, the
rate of fire insurance with extended all-risk coverage on the Building or
equipment or other property of Landlord or other tenants shall be higher than it
otherwise would be, Tenant shall reimburse Landlord, on demand, for that part of
the premiums for fire insurance and extended all-risk coverage paid by Landlord
because of such act or omission on the part of Tenant, which sum shall be deemed
to be additional rent and collectible as such. If such increase is attributable
to the acts or omissions of other tenants as well, the additional premiums shall
be allocated among all applicable tenants, including Tenant.
10.03. In the event that any dispute should arise between Landlord and
Tenant concerning insurance rates, a schedule or "make up" of rates for the
Building or the Demised Premises, as the case may be issued by the Fire
Insurance Rating Organization of New Jersey or
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other similar body making rates for fire insurance and extended coverage for the
premises concerned, shall be presumptive evidence of the facts therein stated
and of the several items and charges in the fire insurance rates with extended
coverage then applicable to such premises.
10.04. Tenant shall obtain and keep in full force and effect during the
term of this Lease, at its own cost and expense, Comprehensive General Liability
Insurance, such insurance to afford protection in an amount of not less than
$1,000,000 for injury or death to any one person, $3,000,000 for injury or death
arising out of any one occurrence, and $1,000,000 for damage to property,
protecting and naming the Landlord, Alfieri Property Management as additional
insured and the Tenant as insured against any and all claims for personal
injury, death or property damage occurring in, upon, adjacent, or connected with
the Demised Premises and any part thereof. Tenant shall name such other insureds
associated with the Building as Landlord reasonably requests. Tenant shall pay
all premiums and charges therefor and upon failure to do so Landlord may, but
shall not be obligated to, make payments, and in such latter event the Tenant
agrees to pay the amount thereof to Landlord on demand and said sum shall be
deemed to be additional rent, and in each instance collectible on the first day
of any month following the date of notice to Tenant in the same manner as though
it were rent originally reserved hereunder, together with interest thereon at
the rate of two points in excess of Prime Rate of the First Union. Tenant will
use commercially reasonable efforts to include in such Comprehensive General
Liability Insurance policy a provision to the effect that same will be
non-cancelable, except upon reasonable advance written notice to Landlord.
Original insurance certificates evidencing the foregoing requirement shall be
deposited with Landlord together with any renewals, replacements or endorsements
thereof to the end that said insurance shall be in full force and effect for the
benefit of the Landlord during the term of this Lease.
10.05. Landlord and Tenant agree to use their best efforts to include in
each of its insurance policies a waiver of the insurer's right of subrogation
against the other party or if such waiver shall be unobtainable or unenforceable
(a) an express agreement that such policy shall not be invalidated if the
insured waives or has waived before the casualty, the right of recovery against
any party responsible for a casualty covered by the policy or (b) any other form
of permission for the release of the other party. If such waiver, agreement, or
permission shall not be or shall cease to be obtainable without additional
charge, or at all, the insured party shall so notify the other party after
learning thereof. In such a case, if the other party shall agree in writing to
pay the insurer's additional charge therefor, such waiver agreement or
permission shall, if obtainable, be included in the policy.
10.06. Each party hereby releases the other party with respect to any
claim (including a claim for negligence) which it might otherwise have against
the other party for loss, damage, or destruction with respect to its property
(including rental value or business interruption) occurring during the term of
this Lease.
10.07. The waiver of subrogation or permission for release referred to in
Section 10.05 shall extend to the agents of each party and their employees and,
in the case of Tenant, shall also extend to all other persons and entities
occupying, using or visiting the Demised Premises in accordance with the terms
of this Lease, but only if and to the extent that such waiver or permission can
be obtained without additional charge (unless such party shall pay such
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charge). The releases provided for in Section 10.06 shall likewise extend to
such agents, employees and other persons and entities, if and to the extent that
such waiver or permission is effective as to them. Nothing contained in Section
10.06 shall be deemed to relieve either party of any duty imposed elsewhere in
this Lease to repair, restore or rebuild or to nullify any abatement of rents
provided for elsewhere in this Lease. Except as otherwise provided in Section
10.0.1, nothing contained in Sections 10.05 and 10.06 shall be deemed to impose
upon either party any duty to procure or maintain any of the kinds of insurance
referred to therein or any particular amounts or limits of any such kinds of
insurance. However, each party shall advise the other, upon request, from time
to time (but not more often than once a year) of all of the policies of
insurance it is carrying of any of the kinds referred to in Sections 10.01 and
10.04, and if it shall discontinue any such policy or allow it to lapse, shall
notify the other party thereof with reasonable promptness. The insurance
policies referred to in Sections 10.05 and 10.06 shall be deemed to include
policies procured and maintained by a party for the benefit of its mortgagee or
pledgee.
10.08. Landlord agrees that it shall maintain in full force and effect all
risk insurance in an amount not less than sufficient to avoid co-insurance with
respect to the Building, including the Demised Premises, the Land, and Parking
Deck. Landlord also agrees to carry loss of rent insurance so long as such
insurance may be carried on a commercially reasonable basis. Landlord agrees
that in connection with any such rent insurance, the waiver of subrogation
provision set forth above shall apply as well. Landlord shall also maintain
general public liability insurance, including contractual liability insurance,
in such amounts as are generally carried by owners of first class office
buildings in the Edison, Metro Park, New Jersey area. None of the foregoing
shall relieve Tenant of nor diminish Landlord's rights with respect to Operating
Expenses described in Article 5.
ARTICLE 11
RULES AND REGULATIONS
11.01. Tenant and its employees and agent shall faithfully observe and
comply with the Rules and Regulations annexed hereto as Exhibit E, and such
reasonable changes therein (whether by modification, elimination, or addition)
as Landlord at any time or times hereafter may make and communicate in writing
to Tenant, 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 as originally promulgated or as changed, the provisions of this
Lease shall control.
11.02. Nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to Tenant to enforce the Rules and Regulations
or the terms, covenants, or conditions in any other lease, as against any other
tenant and Landlord shall not be liable to Tenant for violation of the same by
any other tenant or its employees, agents or visitors. However, Landlord shall
not enforce any of the Rules and Regulations in such manner as to discriminate
against Tenant or anyone claiming under or through Tenant.
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ARTICLE 12
TENANT'S CHANGES
12.01. Tenant shall make no changes, alterations, additions,
installations, substitutions, or improvements (hereinafter Collectively called
"changes", and, as applied to changes Provided for in this Article, "Tenant's
Changes") in and to the Demised Premises without the express prior written
consent of Landlord, which consent shall not be unreasonably withheld.
All proposed Tenant's Changes shall be submitted to Landlord for written
consent at least forty five (45) days prior to the date Tenant intends to
commence such changes, such submission to include all plans and specifications
reasonably required for the work to be done, proposed scheduling, and the
estimated cost of completion of Tenant's Changes. If Landlord consents to
Tenant's Changes, Tenant may commence and diligently prosecute to completion
Tenant's Changes, under the direct supervision of Landlord.
Tenant shall pay to Landlord a commercially reasonable supervision fee
(which shall include the cost of review of the proposed Tenant's Changes) equal
to the lesser of the actual cost of the supervision or ten percent (10%) of the
certified cost of completion of Tenant's Changes. Prior to the commencement of
Tenant's Changes, Tenant shall pay to Landlord ten percent (10%) of the
estimated cost of completion (the "Estimated Payment") as additional rent.
Within fifteen (15) days after completion of Tenant's Changes, Tenant shall
furnish Landlord with a statement, certified by an officer or a principal of
Tenant to be accurate and true, of the total cost of completion of Tenant's
Changes (the "Total Cost"). If such certified statement furnished by Tenant
shall indicate that the Estimated Payment exceeded the lesser of the actual cost
of the supervision or ten percent (10%) of the Total Cost, Landlord shall
forthwith either (i) pay the amount of excess directly to Tenant concurrently
with the delivery of the certified statement or (ii) permit Tenant to credit the
amount of such excess against the subsequent payment of rent due hereunder. If
such certified statement furnished by Tenant shall indicate that the lesser of
the actual cost of the supervision or ten percent (10%) of the Total Cost
exceeded Tenant's Estimated Payment, Tenant shall, simultaneously with the
delivery to Landlord of the certified statement, pay the amount of such excess
to Landlord as additional rent.
12.02. Notwithstanding the provisions of Section 12.01, all proposed
Tenant's Changes which shall affect or alter:
(a) The outside appearance or the strength of the Building or of any
of its structural parts; or
(b) Any part of the Building outside of the Demised Premises; or
(c) The mechanical, electrical, sanitary and other service systems
of the Building, or increase the usage of such systems;
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shall be performed only by the Landlord, at a cost to be mutually agreed upon
between Landlord and Tenant, which cost shall be commercially reasonable.
12.03. Tenant, at its expense, shall obtain all necessary governmental
permits and certificates for the commencement and prosecution of Tenant's
Changes and for final approval thereof upon completion, and shall cause Tenant's
Changes to be performed in compliance therewith and with all applicable laws and
requirements of public authorities, and with all applicable requirements of
insurance bodies, and in good and workmanlike manner, using new materials and
equipment at least equal in quality and class to the original installations in
the Building. Tenant's Changes shall be performed in such manner as not to
unreasonably interfere with or delay and (unless Tenant shall indemnify Landlord
therefor to the latter's reasonable satisfaction) as not to impose any
additional expense upon Landlord in the construction, maintenance or operation
of the Building. Throughout the performance of Tenant's Changes, Tenant, at its
expense, shall carry, or cause to be carried, workmen's compensation insurance
in statutory limits and general liability insurance for any occurrence in or
about the Building, in which Landlord and its agents shall be named as parties
insured in such limits as Landlord may reasonably prescribe, with insurers
reasonably satisfactory to Landlord. Tenant shall furnish Landlord with
reasonably satisfactory evidence that such insurance is in effect at or before
the commencement of Tenant's Changes and, on request, at reasonable intervals
thereafter during the continuance of Tenant's Changes. If any of Tenant's
Changes shall involve the removal or any fixtures, equipment or other property
in the Demised Premises which are not Tenant's Property (as defined in Article
13), such fixtures, equipment or other property shall be promptly replaced, at
Tenant's expense, with new fixtures, equipment or other property (as the case
may be) of like utility and at least equal value. In addition, unless Landlord
shall otherwise expressly consent in writing, the Tenant shall deliver such
removed fixtures to Landlord unless Tenant is reusing such fixtures within the
Demised Premises.
12.04. Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from
or otherwise connected with Tenant's Changes which shall be issued by any public
authority having or asserting jurisdiction. Tenant shall defend, indemnify and
save harmless Landlord against any and all mechanic's and other liens filed in
connection with Tenant's Changes, including the liens of any security interest
in, conditional sales of, or chattel mortgages upon, any material, fixtures or
articles so installed in and constituting part of the Demised Premises and,
against all costs, expenses and liabilities incurred in connection with any such
lien, security interest, conditional sale or chattel mortgage or any action or
proceeding brought thereon. Tenant, at its expense, shall bond over or procure
the satisfaction or discharge of all such liens within fifteen (15) days after
Landlord makes written demand therefor. However, nothing herein contained shall
prevent Tenant from contesting, in good faith and at its own expense, any such
notice of violation, provided that Tenant shall comply with the provisions of
Section 9.02.
12.05. Tenant agrees that the exercise of its rights pursuant to the
provisions of this Article 12 shall not be done in a manner which would create
any work stoppage, picketing, labor disruption or dispute or violate Landlord's
union contracts affecting the Land and Building, nor interference with the
business of landlord or any tenant or occupant of the Building.
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12.06. All of Tenant's Changes shall be subject to restoration in the same
manner and subject to the same terms and conditions as described in Section 102.
12.07. None of the provisions of this Article 12 shall apply to Landlord's
Work or Tenant's Finish Work described in Exhibit C.
ARTICLE 13
TENANT'S PROPERTY
13.01. All fixtures, equipment, improvements, and appurtenances attached
to or built into the Demised Premises at the commencement of or during the term
of this Lease, whether or not by or at the expense of Tenant, shall be and
remain a part of the Demised Premises, shall be deemed the property of Landlord
and shall not be removed by Tenant, except as required herein to be restored or
hereinafter in this Article expressly provided.
13.02. All 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 permanent structural damage to the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Demised Premises (all of which are sometimes called "Tenant's
Property"), shall be and shall remain the property of Tenant and shall be
removed by it at any time during the term of this Lease; provided that if any of
Tenant's Property is removed, Tenant shall repair or pay the cost of repairing
any damage to the Demised Premises or to the Building resulting from such
removal. Tenant's trade fixtures shall include movable millwork, such as desks,
workstations, and audio-visual equipment and telecommunications equipment,
except any such removal shall be without permanent structural damage to the
Building as described above.
13.03. At or before the Expiration Date, or the date of an earlier
termination of this Lease, or as promptly as practicable after such an earlier
termination date, Tenant at its expense, shall restore the Demised Premises
subject to the provisions of Section 3.02 and shall remove all Tenant's Property
as described in Section 13.02 above. If Tenant fails to remove its Property
and/or otherwise fails to perform any restoration required of it under this
Lease, then Tenant shall be deemed a hold-over Tenant as contemplated in Article
40.
13.04. Any other items of Tenant's Property (except money, securities, and
other like valuables) 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 the Landlord, be deemed to have been
abandoned, and in such case either may be retained by Landlord as its property
or may be disposed of, without accountability, in such manner as Landlord may
see fit, at Tenant's expense. The foregoing shall not limit Tenant's liability
for failure to restore as required under this Lease.
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ARTICLE 14
REPAIRS AND MAINTENANCE
14.01. Tenant shall take good care of the Demised Premises. Tenant, at its
expense, shall promptly make all repairs, ordinary or extraordinary, interior or
exterior, structural or otherwise in and about the Demised Premises and the
Building, as shall be required by reason of (i) the performance of Tenant's
Finish Work or Tenant's Changes; (ii) the installation, use or operation of
Tenant's Property in the Demised Premises by Tenant, its agents or employees;
(iii) the moving of Tenant's Property in or out of the Building; or (iv) the
misuse or neglect of Tenant or any of its employees, agents, contractors or
invitees; but Tenant shall not be responsible, and Landlord shall be
responsible, for any of such repairs as are required by reason of Landlord's
neglect or other fault in the manner of performing any of Tenant's Finish Work
or Tenant's Changes which may be undertaken by Landlord for Tenant's account or
are otherwise required by reason of neglect or other fault of Landlord or its
employees, agents, or contractors. Except if required by the neglect or other
fault of Landlord or its employees, agents, or contractors, Tenant, at its
expense, shall replace all scratched, damaged or broken doors or other glass in
or 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 lighting fixtures therein.
14.02. Landlord, subject to the provisions of Section 5.04, shall keep and
maintain the Building and its fixtures, appurtenances, systems and facilities
serving the Demised Premises, in good working order, condition, and repair and
shall make with all due diligence all repairs, structural and otherwise,
interior and exterior, as and when needed in or about the Demised Premises,
except for those repairs for which Tenant is responsible pursuant to any other
provisions of this Lease. Landlord states that on the inception of this Lease,
the plumbing, mechanical, electrical, sewerage, fire protection and sprinkler
systems and the HVAC system and the elevators will be in good working order and
shall comply with applicable legal requirements.
14.03. Landlord shall have no liability to Tenant by reason of any
inconvenience, annoyance, interruption, or injury to Tenant's business arising
from Landlord's making any repairs 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 or the Demised Premises, or in or to the fixtures, equipment of
appurtenances of the Building or the Demised Premises, provided that Landlord
shall use due diligence with respect thereto and shall perform such work, except
in case of emergency, at a time reasonably convenient to Tenant and otherwise in
such a manner as will not materially interfere with Tenant's use of the Demised
Premises.
ARTICLE 15
ELECTRICITY
15.01. Landlord shall furnish the electric energy that Tenant shall
require in the Demised Premises. Tenant shall pay to Landlord, as additional
rent, the costs and charges for all electric energy furnished to Tenant at the
Demised Premises, other than the electric energy costs
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and charges for the use and operation of the HVAC system (and all its component
parts) which costs shall be included as Operating Expenses under Article 5.
Additional rent for such electric energy shall be calculated and payable in the
manner hereinafter set forth.
15.02. As part of Landlord's Work as described in Exhibit C, Landlord, at
Tenant's sole cost and expense, shall install an electric meter or sub-meter
which shall measure Tenant's electrical use (other than the electric energy
costs and charges for the use and operation of the base Building HVAC system and
all of its component parts). Tenant shall pay the cost of such use to Landlord
as additional rent, based upon the actual electrical energy usage as measured by
the sub-meter, as if Tenant was a direct independent customer of the utility
company.
15.03. Landlord shall not be liable in any way to Tenant for any failure
or defect in the supply or character of electric energy furnished to the Demised
Premises by reason of any requirement, act, or omission of the public utility
serving the Building with electricity or for any other reason. Landlord shall
furnish and install all replacement lighting tubes, lamps, bulbs, and ballasts
required in the Demised Premises at Tenant's expense at a commercially
reasonable cost.
15.04. 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. Landlord represents that
the electrical capacity of the Demised Premises is sufficient to satisfy the
needs of Tenant for any commercially reasonable use based upon the improvements
contemplated in Exhibit C. Landlord further states that the Landlord shall
provide electricity service to the main distribution electric buss service in
the closet located in the Demised Premises capable of providing seven (7) watts
(electric demand load, exclusive of HVAC) per rentable square feet as a basic
building service. Tenant's use of such electricity service (other than the
electric energy costs and charges for the use and operation of the base Building
HVAC system and all of its component parts) shall be separately metered, as
provided in Section 15.02. All distribution of electricity from this point shall
be the responsibility of Tenant, all at Tenant's sole cost. Any increase in HVAC
equipment or service necessitated by the use of this electric demand load shall
be at the sole coat and expense of Tenant. In order to insure that such capacity
is not exceeded and to avert possible adverse effect upon the Building electric
service, Tenant shall not, without Landlord's prior written consent in each
instance (which shall not be unreasonably withheld), connect any additional
fixtures, appliances, or equipment to the Building electrical distribution
system in excess of +/-7 watts per rentable square foot or make any alteration
or addition to the electric system of the Demised Premises existing on the
Commencement Date, which shall cause the Building's electrical capacity to be
exceeded. Should Landlord grant such consent, all additional risers , HVAC
equipment or other electrical equipment required therefor shall be provided by
Landlord and the cost of installation and maintenance thereof shall be paid by
Tenant upon Landlord's demand. As a condition to granting such consent, Landlord
at Tenant's sole expense, may cause a new survey to be made of the use of
electric energy (other than for Building standard heating and air-conditioning
as described in Exhibit C) in order to calculate the potential additional
electric energy to be made available to Tenant based upon the estimated
additional capacity of such additional risers or other
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equipment. When the amount of such increase is so determined, and the estimated
cost thereof is calculated, the amount of monthly additional rent payable
pursuant to Section 15.02 hereof shall be adjusted to reflect the additional
cost, and shall be payable as therein provided.
ARTICLE 16
HEATING, VENTILATION AND AIR-CONDITIONING
16.01. Landlord, subject to the provisions of Section 5.04, shall maintain
and operate the heating, ventilating, and air-conditioning systems (hereinafter
called "the systems") and shall furnish heat, ventilating, and air conditioning
(hereinafter collectively called "air conditioning service") in the Demised
Premises through the systems, as may be required for comfortable occupancy of
the Demised Premises in accordance with the HVAC specifications incorporated as
Item "1" of Exhibit C from 8:00 A.M. to 6:00 P.M. Monday through Friday except
days observed by the Federal or the state government as legal holidays ("Regular
Hours") throughout the year. Air cooling shall occur from April 15th through
October 15th of each calendar year. If Tenant shall require air-conditioning
service at any other time (hereinafter called "after hours"), Landlord shall
furnish such after hours air-conditioning service upon reasonable advance notice
from Tenant, and Tenant shall pay Landlord's then established charges therefor
on Landlord's demand.
16.02. Use of the Demised Premises, or any part thereof, in a manner
exceeding the design conditions (including occupancy and connected electrical
load) specified in Exhibit C for air-conditioning service in the Demised
Premises, or rearrangement of partitioning which interferes with normal
operation of the air-conditioning in the Demised Premises, may require changes
in the air conditioning system servicing the Demised Premises. Such changes, so
occasioned, shall be made by Landlord, at Tenant's expense, as Tenant's Changes
pursuant to Article 12.
ARTICLE 17
LANDLORD'S OTHER SERVICES
17.01. Landlord, subject to the provisions of Section 5.04, shall provide
public elevator service, passenger and service, by elevators serving the floor
on which the Demised Premises are situated during Regular Hours, and shall have
at least one passenger elevator subject to call at all other times. Landlord
states that except for such instances of temporary use for move in, no elevator
shall be dedicated to the exclusive use of one tenant.
17.02. Landlord, subject to the provisions of Section 5.04, shall cause
the Demised Premises, including the exterior and the interior of the windows
thereof, to be cleaned. Tenant shall pay to Landlord on demand 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 employees
or visitors; (ii) use of portions of the Demised Premises for preparation,
serving or consumption of food or beverages, data processing, or reproducing
operations, private lavatories
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or toilets or other special purpose areas requiring greater or more difficult
cleaning work than office areas (only to the extent of such additional work
performed); (iii) unusual quantity of interior glass surfaces; (iv) non-building
standard materials or finishes installed by Tenant or at its request after the
Commencement Date; and (b) removal from the Demised Premises and the Building of
so much of any refuse and rubbish of Tenant as shall exceed that ordinarily
accumulated daily in the routine of business office occupancy. Landlord, its
cleaning contractor, and their employees shall have after-hours access to the
Demised Premises and the free use of light, power, and water in the Demised
Premises as reasonably required for the purpose of cleaning the Demised Premises
in accordance with Landlord's obligations hereunder. Landlord agrees that it
shall reasonably permit Tenant to designate a locked "or security zone" for the
storage of confidential proprietary information, which will have restricted
access available to Landlord and its agents. To the extent such security zone is
not available to Landlord, Tenant shall be liable for all legal requirements
relating to safety, access, ventilation and maintenance and shall indemnify
Landlord with respect thereto. Access shall be made available to Landlord upon
reasonable notice and during emergencies. Tenant shall maintain the security
zone so as to comply with reasonable requirements of Landlord's insurer.
17.03. Landlord, subject to the provisions of Section 5.04, shall furnish
adequate hot and cold water to each floor of the Building for drinking,
lavatory, and cleaning purposes, together with soap, towels, and toilet tissue
for each lavatory. If Tenant uses water for any other purpose, Landlord, at
Tenant's expense, shall install meters to measure Tenant's consumption of cold
water and/or hot water for such other purposes and/or steam, as the case may be.
Tenant shall pay for the quantities of cold water and hot water shown on such
meters, at Landlord's cost thereof, on the rendition of Landlord's bills
therefor.
17.04. Landlord, at its expense, and at Tenant's request, shall insert
initial listings on the Building directory of the names of Tenant, and the names
of any of their officers and employees, provided that the names so listed shall
not take up more than Tenant's proportionate share of the space on the Building
directory. All reasonable Building directory changes made at Tenant's reasonable
request after the Tenant's initial listings have been placed on the Building
directory shall be made by Landlord at the expense of Tenant, and Tenant agrees
to promptly pay to Landlord as additional rent the cost of such changes within
ten (10) days after Landlord has submitted an invoice therefor.
17.05. Landlord reserves the right, without any liability to Tenant, to
stop service of any of the heating, ventilating, air conditioning, electric,
sanitary, elevator, or other Building systems serving the Demised Premises, or
the rendition of any of the other services required of Landlord under this
Lease, whenever and for so long as may be necessary, by reason of accidents,
emergencies, strikes, or the making of repairs or changes which Landlord is
required by this Lease or by law to make or in good faith deems necessary, by
reason of difficulty in securing proper supplies of fuel, steam, water,
electricity, labor or supplies, or by reason of any other cause beyond
Landlord's reasonable control. Notwithstanding the foregoing, if, as a result of
circumstances beyond Landlord's control, any service, utility or capacity which
Landlord is required to furnish or make available to Tenant under this Lease is
interrupted such that Tenant is unable to utilize the Demised Premises, and such
condition exists for three (3) consecutive business days after written notice
thereof, then commencing from the fourth (4th)
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business day, Tenant shall be entitled to an abatement of fixed rent and
additional rent for each day thereafter that Tenant is unable to utilize the
Demised Premises for the conduct of its business. If the condition exists for
sixty (60) or more consecutive days, then on five (5) business days written
notice, Tenant shall be entitled to terminate this Lease in which event, neither
party shall have any further liability to the other.
17.06. Landlord shall make available for Tenant's use Tenant's
Proportionate Share of parking spaces in common with other tenants of the
Building in the parking area adjacent to the Building. Landlord agrees that
except for payment of common expense charges covered by Article 5, there shall
be no separate fee or cost to Tenant for use of the parking areas. Landlord
states that the parking for the Building and the Building known as 379 Thornall
Street, including the atrium, is contained in a parking structure attached to
both buildings and surface parking area surrounding same and that the parking
spaces are calculated on the basis of four (4) parking spaces per rentable 1,000
square feet of office space.
17.07. The Building and the Demised Premises shall be cleaned in
accordance with the Cleaning and Maintenance Schedule set forth on Exhibit D
annexed hereto and made a part hereof
17.08. Tenant acknowledges that as part of the consideration for this
Lease, and in order not to interfere with the rights of other tenants or other
tenants' quiet enjoyment of the common areas of the Building and otherwise
prevent Landlord from performing its services without causing increases to the
cost of such services, Tenant agrees that it shall not permit its employees to
congregate in hallways or elevators, shall not permit its employees to create an
unsightly condition in or about any passageway from the Building or the common
areas or to the parking lot/deck, with regard to smoking, including the disposal
of cigarettes, in the courtyard and/or outer areas adjacent to the Building and
will otherwise require its employees to act and conduct themselves in the common
areas in such a manner as will not disturb other tenants or the use and
enjoyment by other tenants of the Building.
ARTICLE 18
ACCESS, CHANGES IN BUILDING FACILITIES, NAME
18.01. All walls, windows, and doors bounding the Demised Premises
(including exterior Building .walls, core corridor walls and doors, and any core
corridor entrance), except the inside surfaces thereof, 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 room, ducts, electric or
other utilities, sinks or other Building facilities, and the use thereof as well
as access thereto through the Demised Premises for the purposes of operation,
maintenance, decoration, and repair are reserved to Landlord. The exercise of
Landlord's rights hereunder shall not result in a reduction in the rentable
square footage of the Demised Premises or materially adversely affect Tenant's
use and enjoyment of the Demised Premises.
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18.02. Tenant shall permit Landlord to install, use, and maintain pipes,
ducts, and conduits within the demising walls, bearing columns, and ceilings of
the Demised Premises.
18.03. Landlord or Landlord's agent shall have the right upon reasonable
advanced request to Tenant at the Demised Premises (except in emergency under
clause (ii) hereof) to enter and/or pass through the Demised Premises or any
part thereof, at reasonable times during reasonable hours, (i) to examine the
Demised Premises and to show them to the holders of superior mortgages,
prospective purchasers or mortgagees of the Building as an entirety; and (ii)
for the purpose of making such repairs or changes or doing such repainting in or
to the Demised Premises or its facilities, as may be provided for by this Lease
or as may be mutually agreed upon by the parties or as Landlord may be required
to make by law or in order to repair and maintain said structure or its fixtures
or facilities. Landlord shall be allowed to take all materials into and upon the
Demised Premises that may be required for such repairs, changes, repainting, or
maintenance, without liability to Tenant but Landlord shall not unreasonably
interfere with Tenant's use of the Demised Premises. Landlord shall also have
the right to enter on and/or pass through the Demised Premises, or any part
thereof, at such times as such entry shall be required by circumstances of
emergency affecting the Demised Premises or the Building.
18.04. During the period of six (6) months prior to the Expiration Date,
Landlord may exhibit the Demised Premises to prospective tenants.
18.05. Landlord reserves the right, at any time after completion of the
Building, without incurring any liability to Tenant therefor, to make such
changes in or to the Building and the fixtures and equipment thereof as well as
in or to the street entrances, halls, passages, elevators, escalators, and
stairways thereof, as it may deem necessary or desirable, provided, however,
that such changes shall not reduce the size of the Demised Premises nor
materially adversely alter the character of the Building as a "first-class
commercial office building."
18.06. Landlord may adopt any name for the Building. Landlord reserves the
right to change the name or address of the Building at any time.
ARTICLE 19
NOTICE OF ACCIDENTS
19.01. Landlord and Tenant mutually agree to give notice to the other,
promptly after learning of (i) any accident in or about the Demised Premises for
which Landlord might be liable; (ii) all fires in the Demised Premises; (iii)
all damage to or defects in the Demised Premises, including the fixtures,
equipment, and appurtenances thereof, for the repair of which Landlord might be
responsible; and (iv) all damage to or defects in any parts or appurtenances of
the Building's sanitary, electrical, heating, ventilating, air-conditioning,
elevator, and other systems located in or passing through the Demised Premises
or any part thereof.
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ARTICLE 20
NON-LIABILITY AND INDEMNIFICATION
20.01. Neither Landlord nor any agent or employee of Landlord shall be
liable to Tenant for any injury or damage to Tenant or to any other person or
for any damage to, or loss (by theft or otherwise) of, any property of Tenant or
of any other person, irrespective of the cause of such injury, damage, or loss,
unless caused by or due to the negligence of Landlord, its agents, or employees
without contributory negligence on the part of Tenant. Neither Tenant nor any
agent or employee of Tenant shall be liable to Landlord for any injury or damage
to Landlord or to any property of Landlord or of any other person or damage to
any other person or their property, irrespective of the cause of such injury,
damage, or loss, unless caused by or due to the negligence of Tenant, its
agents, or employees without contributory negligence on the part of Landlord.
20.02. Tenant shall indemnify and save harmless Landlord and its agents
against and from (a) any and all claims (i) arising from (x) the conduct or
management of the Demised Premises or of any business therein, or (y) any work
or thing whatsoever done, or any condition created (other than by Landlord for
Landlord's or Tenant's account) in or about the Demised Premises during the term
of this Lease or during the period of time, if any, prior to the Commencement
Date that Tenant may have been given access to the Demised Premises, or (ii)
arising from any negligent or otherwise wrongful act or omission of Tenant or
any of its subtenants, invitees or licensees or its or their employees, agents,
or contractors, and (b) all costs, expenses, and liabilities incurred in or in
connection with each such claim or action or proceeding brought thereon. In case
any action or proceeding be brought against Landlord by reason of any such
claim, Tenant, upon notice from Landlord, shall resist and defend such action or
proceeding.
20.03. Except as otherwise expressly provided in this Lease, this Lease
and the obligations of Tenant hereunder shall be in no way affected, impaired or
excused because Landlord is unable to fulfill, or is delayed in fulfilling, any
of its obligations under this Lease by reason of strike, other labor trouble,
governmental pre-emption or priorities or other controls in connection with a
national or other public emergency or shortages of fuel supplies or labor
resulting therefrom, or other like cause beyond Landlord's reasonable control.
20.04. Landlord shall indemnify and save Tenant harmless and its agents,
employees and invitees arising from any negligent or other wrongful act or
omission of Landlord or any of its subcontractors, or agents, or employees with
respect to the Building and common areas and all costs, expenses, and
liabilities incurred in connection with each such claim or action or proceeding
brought thereon. In case any action or proceeding be brought against Tenant by
reason of any such claim, Landlord, upon notice from Tenant, shall resist and
defend such action or proceeding.
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ARTICLE 21
DESTRUCTION OR DAMAGE
21.01. If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other cause, then whether or not the
damage or destruction shall have resulted from the fault or neglect of Tenant,
or its employees, agents or visitors (and if this Lease shall not have been
terminated as in this Article hereinafter provided), Landlord shall repair the
damage and restore and rebuild the Building and/or the Demised Premises, at its
expense, with reasonable dispatch after notice to it of the damage or
destruction; provided, however, that Landlord shall not be required to repair or
replace any of the Tenant's Property.
21.02. If the Building or the Demised Premises shall be partially damaged
or partially destroyed by fire or other cause not attributable to the fault or
negligence of Tenant, its agents, or employees, the rents payable hereunder
shall be abated to the extent that the Demised Premises shall have been rendered
untenantable and for the period from the date of such damage or destruction to
the date the damage shall be repaired or restored. If the Demised Premises or a
major part thereof shall be totally (which shall be deemed to include
substantially totally) damaged or destroyed or rendered completely (which shall
be deemed to include substantially completely) untenantable on account of fire
or other cause, the rents shall abate as of the date of the damage or
destruction and until Landlord shall repair, restore, and rebuild the Building
and the Demised Premises, provided, however, that should Tenant reoccupy a
portion of the Demised Premises for the ordinary conduct of its work during the
period of restoration work is taking place and prior to the date that the same
are made completely tenantable, rents allocable to such portion shall be payable
by Tenant from the date of such occupancy.
21.03. If the Building shall be totally damaged or destroyed by fire or
other cause, or if the Building shall be so damaged or destroyed by fire or
other cause (whether or not the Demised Premises are damaged or destroyed) as to
require a reasonably estimated expenditure of more than twenty-five percent
(25%) of the full insurable value of the Building immediately prior to the
casualty, and Landlord elects to terminate all other leases, then in either such
case Landlord may terminate this Lease by giving Tenant notice to such effect
within sixty (60) days after the date of the casualty. In case of any damage or
destruction mentioned in this Article, Tenant may terminate the Lease by notice
to Landlord, if Landlord has not completed the making of the required repairs
and restored and rebuilt the Building and the Demised Premises within twelve
(12) months from the date of such damage or destruction, or within such period
after such date (not exceeding six (6) months) as shall equal the aggregate
period Landlord may have been delayed in doing so by adjustment of insurance,
labor trouble, governmental controls, act of God, or any other cause beyond
Landlord's reasonable control. In connection with any damage, pursuant to this
Section 21.03, if the Building is damaged during the last two (2) years of the
term, then Tenant may cancel this Lease effective as of the date of the casualty
by notifying Landlord within thirty (30) days of the casualty.
21.04. 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 2 of the Demised Premises or of the Building pursuant
to this Article. Landlord shall use
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its best efforts to effect such repair or restoration promptly and in such
manner as not unreasonably to interfere with Tenant's use and occupancy during
such time that Tenant is able to use the Demised Premises during Landlord's
restoration.
21.05. Landlord will not carry insurance of any kind on Tenant's Property,
and, except as provided by law or by reason of its fault or its breach of any of
its obligations hereunder, shall not be obligated to repair any damage thereto
or replace the same; to the extent that Tenant shall maintain insurance on
Tenant's Property, Landlord shall not be obligated to repair any damage thereto
or replace the same.
21.07. The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and any law of the State of New Jersey providing for
such a contingency in the absence of an express agreement, and any other law of
like import, now of hereafter in force, shall have no application in such case.
ARTICLE 22
EMINENT DOMAIN
22.01. If the whole of the Building shall be lawfully taken by
condemnation or in any other manner for any public or quasi-public use of
purpose, this Lease and the term and estate hereby granted shall forthwith
terminate as of the date of vesting of title on such taking (which date is
herein after also referred to as the "date of the taking"), and the rents shall
be prorated and adjusted as of such date.
22.02. If any part of the Building shall be so taken, this Lease shall be
unaffected by such taking, except that Tenant may elect to terminate this Lease
in the event of a permanent partial taking, of or part of the Demised Premises
if the Demised Premises are not be reasonably sufficient for Tenant to continue
feasible operation of its business. Tenant shall give notice of such election to
Landlord not later than thirty (30) days after the date of such taking. Upon the
giving of such notice to Landlord, this Lease shall terminate on the date of
service of notice and the rents apportioned to the part of the Demised Premises
so taken shall be prorated and adjusted as of the date of the taking and the
rents apportioned to the remainder of the Demised Premises shall be prorated and
adjusted as of such termination date. Upon such partial taking and this Lease
continuing in force as to any part of the Demised Premises, the rents
apportioned to the part taken shall be prorated and adjusted as of the date of
taking and from such date the fixed rent shall be reduced to the amount
apportioned to the remainder of the Demised Premises and additional rent shall
be payable pursuant to Article 5 according to the rentable area remaining.
22.03. Except as specifically set forth in Section 22.04, hereof, Landlord
shall be entitled to receive the entire award in any proceeding with respect to
any taking provided for in this Article without deduction therefrom for any
estate vested in Tenant by this Lease, and
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Tenant shall receive no part of such award. Tenant hereby expressly assigns to
Landlord all of its right, title, and interest in or to every such award. Tenant
may claim a condemnation award for the unamortized portion of the cost incurred
by Tenant in connection with any of Tenant's Property installed pursuant to this
Lease. In addition, Tenant may sue the appropriate agency for relocation
expenses.
22.04. If the temporary use or occupancy of all or any part of the Demised
Premises shall be lawfully taken by condemnation or in any other manner for any
public or quasi-public use or purpose during the term of this Lease, Tenant
shall be entitled, except as hereinafter set forth, to receive any award for
such taking up to the aggregate of all fixed rent and additional rent provided
any such reward does not serve to diminish Landlord's award in any respect
whatsoever and, if so awarded, for the taking of 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 remain
responsible for all of its obligations hereunder insofar as such obligations are
not affected by such taking and shall continue to pay in full the fixed rent and
additional rent when due. If the period of temporary use or occupancy of the
Demised Premises (or a part thereof) shall be divided between Landlord and
Tenant so that Tenant shall receive so much thereof as represents the period
prior to the Expiration Date and Landlord shall receive so much thereof as
represents the period subsequent to the Expiration Date. All moneys received by
Tenant as, or as part of, an award for temporary use and occupancy for a period
beyond the date to which the rents hereunder have been paid by Tenant shall be
received, held, and applied by Tenant as a trust fund for payment of the rents
falling due hereunder. Any temporary taking which lasts longer than nine (9)
months shall constitute a permanent taking.
22.05. In the event of any taking of less than the whole of the Building
which does not result in a termination of this Lease, or in the event of a
taking for a temporary use or occupancy of all or any part of the Demised
Premises which does not extend beyond the Expiration Date, Landlord, at its
expense, shall proceed with reasonable diligence to repair, alter, and restore
the remaining parts of the Building and the Demised Premises to substantially
their former condition to the extent that the same may be feasible and so as to
constitute a complete and tenantable Building and Demised Premises provided that
Landlord's liability under this Section 22.05 shall be limited to the net amount
(after deducting all costs and expenses, including, but not limited to, legal
expenses incurred in connection with the eminent domain proceeding) received by
Landlord as an award arising out of such taking. If such taking occurs within
the last three (3) years of the term of this Lease, Landlord shall have the
right to terminate this Lease by giving the Tenant written notice to such effect
within ninety (90) days after such taking, and this Lease shall then expire on
that effective date stated in the notice as if that were the Expiration Date,
but the fixed rent and the additional rent shall be prorated and adjusted as of
the date of such taking. If such taking occurs during the last two (2) years of
the term of this Lease, then Tenant shall have the right to terminate this lease
by giving the Landlord written notice to such effect and the foregoing
provisions of this Section 22.05 shall apply with respect to the Tenant's
notification to terminate.
22.06. Should any part of the Demised Premises be taken to effect
compliance with any law or requirement of public authority other than in the
manner hereinabove provided in
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this Article then, (i) if such compliance is the obligation of Tenant under this
Lease, Tenant shall not be entitled to any diminution or abatement of rent or
other compensation from Landlord therefor, but (ii) if such compliance is the
obligation of Landlord under this Lease, the fixed rent hereunder shall be
reduced and additional rents under Article 5 shall be adjusted in the same
manner as is provided in Section 22.02 according to the reduction in rentable
area of the Demised Premises resulting from such taking.
22.07. Any dispute which may arise between the parties with respect to the
meaning or application of any of the provisions of this Article shall be
determined by arbitration in the manner provided in Article 33.
22.08. Landlord and Tenant agree that any taking limited to the parking
deck and surrounding areas, within the Land, which results in a permanent loss
of twenty percent (20%) of the parking spaces, then such event shall be deemed a
taking under this Article 22.
ARTICLE 23
SURRENDER
23.01. Landlord and Tenant acknowledge that Tenant shall be obligated to
restore the Demised Premises by the end of the term, including such renewals
thereto, or at any earlier expiration date. For purposes of this Lease, and
specifically without limitation, for purposes of Article 3, Article 13 and
specifically without limitation, Section 13.02, and this Article 23, references
to "restoration" or to the obligation of Tenant "to restore", shall mean the
demolition of all of Landlord's Work and Tenant's Finish Work, excluding the
base Building air-conditioning equipment and duct work and sprinkler systems,
and of all work thereafter performed by or on behalf of Tenant in connection
with Tenant Changes such that the Demised Premises are delivered to Landlord in
the same manner and in the same condition as existed prior to Landlord's Work or
Tenant's Finish Work as set forth in Exhibit C. Landlord agrees that Tenant
shall have the right, but shall be under no obligation, to request Landlord to
restore the Demised Premises upon written notice to such effect given not later
than sixty (60) days prior to the expiration of the term. If Tenant requests
Landlord to restore the Demised Premises as aforesaid, then Tenant's restoration
obligation shall be limited to payment of such demolition costs as are specific
to Tenant's then constructed Demised Premises based upon the then applicable
labor costs, as may be escalated, and upon the then applicable garbage hauling
costs, as may be escalated, and the quantities so involved so reduced at
Landlord's discretion. If Tenant fails to perform any restoration required of it
under this Lease on or before the last day of the term of this Lease or upon any
earlier termination, Tenant shall be deemed a hold-over Tenant under Article 40
of this Lease until such time as Tenant has completed such restoration.
ARTICLE 24
CONDITIONS OF LIMITATION
24.01. This Lease and the term and estate hereby granted are subject to
the limitation that whenever Tenant shall make an assignment of the property of
Tenant for the
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benefit of creditors, or shall file a voluntary petition under any bankruptcy or
insolvency law, or an involuntary petition alleging an act of bankruptcy or
insolvency shall be filed against Tenant under any bankruptcy or insolvency law,
or whenever a petition shall be filed by or against Tenant under the
reorganization provisions of the United States Bankruptcy Act or under the
provisions of any law of like imports or whenever a petition shall be filed by
Tenant under the arrangement provisions of any law of like import, whenever a
permanent receiver of Tenant or of or for the property of Tenant shall be
appointed, then Landlord, (a) at any time of receipt of notice of the occurrence
of any such event, or (b) if such event occurs without the acquiescence of
Tenant, at any time after the event continues for sixty (60) days, Landlord may
give Tenant a notice of intention to end the term of this Lease at the
expiration of five (5) days from the date of service of such notice of
intention, and upon the expiration of said five (5) day period this Lease and
the term and estate hereby granted, whether or not the term shall theretofore
have commenced, shall terminate with the same effect as if that day were the
Expiration Date, but Tenant shall remain liable for damages as provided in
Article 26.
24.02. This Lease and the term and estate hereby granted are subject to
the further limitation that:
(a) Whenever Tenant shall default in the payment of installment of
fixed rent, or in the payment of any additional rent or any other charge payable
by Tenant to Landlord, or any day upon which the same ought to be paid, and such
default shall continue for ten (10) days after written notice thereof in the
case of fixed rent, Tenant's monthly Projected Share of Increases in Taxes and
Operating Expenses, and Tenant's monthly electric charge and twenty (20) days in
any other case; or
(b) Whenever Tenant shall do or permit anything to be done, whether
by action or inaction, contrary to any of tenants obligations hereunder, and if
such situation shall continue and shall not be remedied by Tenant within thirty
(30) days after Landlord shall have given to Tenant a written notice specifying
the same, or, in the case of a happening or default which cannot with due
diligence be cured within a period of thirty (30) days and the continuance of
which for the period required for cure will not subject Landlord to risk of
criminal liability or foreclosure of any superior mortgage if Tenant shall not,
(i) within said thirty (30) day period advise Landlord of Tenant's intention to
duly institute all steps necessary to remedy such situation; (ii) duly institute
within said thirty (30) day period, and thereafter diligently prosecute to
completion all steps necessary to remedy the same; (iii) complete such remedy
within such time after the date of giving of said notice to Landlord as shall
reasonably be necessary; or
(c) Whenever any event shall occur or any contingency shall arise
whereby this Lease or the estate hereby granted or the unexpired balance of the
term hereof 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 8; or
(d) Whenever Tenant shall abandon the Demised Premises and not pay
rent (unless as a result of a casualty);
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(e) Whenever Tenant shall be deemed in default of the Other Lease,
then, and in any of the foregoing cases, this Lease and the term and estate
hereby granted, whether or not the term shall theretofore have commenced, shall,
if the Landlord so elects, terminate upon ten (10) days written notice by
Landlord to Tenant of Landlord's election to terminate the Lease and the term
hereof shall expire and come end on the date fixed in such notice, with the same
effect as if that day were the Expiration Date, but Tenant shall remain liable
for the rent and additional rent which subsequently accrues and for damages as
provided in Article 26.
24.03. In addition to any other rights of Tenant set forth in this Lease,
in the event Landlord is in default of its obligations hereof, Tenant shall give
Landlord a written notice of such default and thirty (30) days within which to
cure same, unless the nature of the default precludes cure within thirty (30)
days in which case Landlord shall commence such cure within thirty (30) days and
use its reasonable diligence to complete the cure of such default. If, Landlord
fails to cure such default, Tenant shall have the right to pay such reasonable
sums to cure such default and demand payment by Landlord thereof, or otherwise
seek such relief as Tenant is entitled at law or in equity. Under no
circumstances shall Tenant have the right to reduce its obligations to pay fixed
or additional rent, or otherwise set off any sums against fixed or additional
rent pending a judicial order permitting same or a judgment rendered against
Landlord.
ARTICLE 25
RE-ENTRY BY LANDLORD
25.01. If this Lease shall expire as provided in Article 24, Landlord or
Landlord's agents and employees may immediately or at any time thereafter
re-enter the Demised Premises, or any part thereof, in the name of the whole,
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 persons therefrom, to the end that
Landlord may have, hold, and enjoy the Demised Premises again as and of its
first estate and interest therein. The word "re-enter", as herein used, is not
restricted to its technical legal meaning. In the event of any termination of
this Lease under the provisions of Article 24 or if Landlord shall reenter the
Demised Premises under the provisions of this Article 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 thereupon pay to Landlord the
fixed rent and additional rent payable by Tenant to Landlord up to the time of
such termination of this Lease, or of such recovery of possession or the Demised
Premises by Landlord, as the case may be, and shall also pay to Landlord damages
as provided in Article 26.
25.02. In the event of a breach or threatened breach by Landlord or Tenant
of any of their respective obligations under this Lease, either Landlord or
Tenant, as the case may be, shall also have the right of injunction. The special
remedies hereunder are cumulative and
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are not intended to be exclusive of any other remedies or means of redress to
which the parties may lawfully be entitled at any time.
25.03. If this Lease shall terminate under the provisions of Article 24,
or if Landlord shall re-enter the Demised Premises under the provisions of this
Article, or in the event of any 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 moneys, if any, paid by Tenant to Landlord, whether as
advance rent, security, or otherwise, but such moneys shall be credited by
Landlord against any fixed rent or additional 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 26 or pursuant to law.
ARTICLE 26
DAMAGES
26.01. If this Lease is terminated under the provisions of Article 24, or
if Landlord shall re-enter the Demised Premises under the provisions of Article
25, 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 of any provision of
law by reason of default hereunder on the part of Tenant, Tenant shall pay to
Landlord as damages sums equal to the fixed rent and the additional rent (as
above presumed) payable hereunder 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 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 expenses of reletting, including
altering and preparing the Demised Premises for new tenants, brokers'
commissions, and all other 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 remaining term of this Lease; but
in no event shall Tenant be entitled to receive any excess of such net rents
over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be
entitled in any suit for the collection of damages pursuant to this Subsection
to a credit in respect of any net rents from a reletting, except to the extent
that such net rents are actually received by Landlord. Damages shall also
include the unamortized portion of the cost of Landlord's Work and any brokerage
fees or commissions paid by Landlord. 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 expenses of reletting.
If the Demised Premises or any part thereof to be relet by Landlord
for the unexpired portion of the term of this Lease, or any part thereof, before
presentation of proof of such damages to any court, commission or tribunals the
amount of rent reserved upon such
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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 agrees that it shall exert commercially reasonable efforts
to mitigate damages by attempting to relet the Demised Premises. However, in the
exercise of such efforts, Tenant acknowledges that Landlord shall have no
obligation to Tenant to offer the Demised Premises, or any part thereof, in any
manner, shape, form, or pursuant to any program different from any other space
in any building owned by Landlord in the Metro Park Complex then sought to be
leased by Landlord.
26.02. Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord 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 of this Lease would have expired if it had not been
so terminated under the provisions of Article 24, 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 seek and obtain as liquidated damages by
reason of the termination of this Lease or re-entry on 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 when, and governing the
proceedings in which, such damages are to be proved whether or not such amount
be greater, equal to, or less than any of the sums referred to in Section 26.01.
Except with respect to the amount of fixed rent or Tenant's finally determined
Proportionate Share of Operating Expenses (which shall be governed by Article 5)
any payment by Tenant may be accompanied by a letter from Tenant protesting such
payment or reserving its rights under the Lease with respect to such payment.
Any such protest or reservation be made along with the payment and must be
detailed and specific as to the nature of such protest or reservation. If Tenant
fails to implement litigation proceedings within ninety (90) days of its
reservation or protest, Tenant shall be deemed to have waived its protest and
reservation. If Landlord accepts, or is otherwise as a result of litigation,
required to reimburse or repay Tenant in connection with such reservation or
protest, such reimbursement shall be accompanied by interest at First Union
Prime Plus 2.5% per annum, which shall run from the date of protest through the
date of payment by Landlord.
26.03. In addition to the foregoing and without regard to whether this
Lease is terminated, Tenant shall pay to Landlord upon demand, all costs and
expenses incurred by Landlord, including reasonable attorney's fees, with
respect to any lawsuit instituted or defended or any action taken by Landlord to
enforce all or any of the provisions of this Lease to the extent Landlord is
successful. Landlord agrees that, if, after implementing proceedings or
litigation, Tenant is successful therein, then Landlord shall pay Tenant's
reasonable costs and expenses, including reasonable attorney fees.
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ARTICLE 27
WAIVERS
27.01. Tenant, for Tenant, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds, does hereby waive and
surrender all right and privilege which 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 for the term hereby demised after being
dispossessed or ejected therefrom by process of law or under the terms of this
Lease or after the termination of this Lease as herein provided.
27.02. In the event that Tenant is in arrears in payment of fixed rent or
additional rent hereunder, Tenant waives Tenant's right, if any, to designate
the items against which any payments made by Tenant are to be credited, and
Tenant agrees that Landlord may apply any payment made by Tenant to any items it
sees fit, irrespective of and notwithstanding any designation or request by
Tenant as to the items against which any such payments shall be credited.
27.03. 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, Tenant's use or occupancy of the Demised
Premises, including any claim of injury or damage, or any emergency or other
statutory remedy with respect thereto,
27.04. The provisions in Articles 16 and 17 shall be considered express
agreements governing the services to be furnished by Landlord, and Tenant agrees
that any laws and/or requirements of public authorities, now or hereafter in
force, shall have no application in connection with any enlargement of
Landlord's obligations with respect to such services.
ARTICLE 28
NO OTHER WAIVERS OR MODIFICATIONS
28.01. 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. No executory agreement hereafter made
between Landlord and Tenant shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such executory 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, or termination of effectuation of the
abandonment is sought.
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28.02. Without limiting Section 28.01, the following provisions shall also
apply:
(a) No agreement to accept a surrender of all or any part of the
Demised Premises shall be valid unless in writing and signed by Landlord. The
delivery of keys to an employee of Landlord or of its agent shall not operate as
a termination of this Lease or a surrender of the Demised Premises. If Tenant
shall at any time request Landlord to sublet the Demised Premises for Tenant's
account, Landlord or its agent is authorized to receive said keys for such
purposes without releasing Tenant from any of its obligations under this Lease,
and Tenant hereby releases Landlord from any liability for loss or damage to any
of Tenant's property in connection with such subletting.
(b) The receipt by Landlord or the payment by Tenant of rent with
knowledge of breach of any obligation of this Lease shall not be deemed a waiver
of such breach.
(c) No payment by Tenant or receipt by Landlord of a lesser amount
than the correct fixed rent or additional rent due hereunder 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.
ARTICLE 29
CURING TENANT'S DEFAULTS
29.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, 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 continues after the expiration of (i) ten (10) days
from the date Landlord gives Tenant notice of intention so to do, or (ii) the
applicable grace period provided in Section 24.02 or elsewhere in this Lease for
cure of such default, whichever occurs first.
29.02. Bills, invoices and purchase orders for any and all reasonable
costs, charges, and expenses incurred by Landlord in connection with any such
performance by it for the account of Tenant, including reasonable counsel fees,
involved in collecting or endeavoring to collect the fixed rent or additional
rent or any part thereof, or enforcing or endeavoring to enforce any rights
against Tenant, 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, may be sent by Landlord to Tenant monthly, or
immediately, at Landlord's option, and, shall be due and payable in accordance
with the terms of such bills.
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ARTICLE 30
BROKER
30.01. Landlord and Tenant covenant, warrant, and represent that there was
no broker except THE CORPORATE REAL ESTATE ALLIANCE, ("Broker") instrumental in
consummating this Lease and that no conversations or negotiations were had with
any broker except Broker concerning the renting of the Demised Premises.
Landlord and Tenant agree to hold the other party harmless against any claims
for a brokerage commission arising out of a breach by the other party of the
foregoing representation.
ARTICLE 31
NOTICES
31.01. Any notice, statement, demand, or other communications required or
permitted to be given, rendered, or made by either party to the other, pursuant
to this Lease or pursuant to any applicable law or requirement of public
authority, shall be in writing (whether or not so stated elsewhere in this
Lease) and shall be deemed to have been properly given, rendered or made, if
sent by registered or certified mail, return receipt requested, addressed to the
other party at the address hereinabove set forth (except that after the
Commencement Date, Tenant's address, unless Tenant shall give notice to the
contrary, shall be the Building) and shall be deemed to have been given,
rendered, or made on the date following the date of mailing. Notice may also be
given by facsimile transmittal or overnight mail. If such notice is given by
facsimile transmittal, it shall be deemed received the day it was sent and
overnight mail shall be deemed received the day after it was sent. Either party
may, by notice as aforesaid, designate a different address or addresses for
notices, statements, demands, or other communications intended for it. In the
event of the cessation of any mail delivery for any reason, personal delivery
shall be substituted for the aforedescribed method of serving notices.
ARTICLE 32
ESTOPPEL CERTIFICATE
32.01. Tenant agrees, when requested by Landlord, to execute and deliver
to Landlord 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 modification), certifying the dates
to which the fixed rent and additional rent have been paid, whether any dispute
exists with respect thereto and stating whether or not, to Tenant's best
knowledge, Landlord is in default in performance of any of its obligations under
this Lease, and, if so, specifying each such default of which Tenant may have
knowledge, it being intended that any such statement delivered pursuant hereto
may be relied upon by others. Such statement shall be served upon Landlord by
Tenant within ten (10) days of Landlord's request. Landlord agrees, when
requested by Tenant, to execute and deliver to Tenant within ten (10) days of
Tenant's written request therefor, a statement certifying that this Lease is
unmodified and in full force and
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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 rent have been paid, whether any dispute exists
with respect thereto and stating whether or not, to Landlord's best knowledge,
Tenant is in default in performance of any of its obligations under this Lease,
and, if so, specifying each such default of which Landlord may have knowledge,
it being intended that any such statement delivered pursuant hereto may be
relied upon by others.
ARTICLE 33
ARBITRATION
33.01. The parties hereto shall not be deemed to have agreed to
determination of any dispute arising out of this Lease by arbitration unless
determination in such manner shall have been specifically provided for in this
Lease.
33.02. The party desiring arbitration shall give notice to that effect to
the other party and shall in such notice appoint a person as arbitrator on its
behalf. Within ten (10) days, the other party by notice to the original party
shall appoint a second person as arbitrator on its behalf. If the arbitrators
thus appointed shall appoint a third person, and such three arbitrators shall as
promptly as possible determine such matter, provided, however that:
(a) If the second arbitrator shall not have been appointed as
aforesaid. the first arbitrator shall proceed to determine such matter; and
(b) If the two arbitrators appointed by the parties shall be unable
to agree, within ten (10) days after the appointment of the second arbitrator,
upon the appointment of a third arbitrator, they shall give written notice to
the parties of such failure to agree, and, if the parties fail to agree upon the
selection of such third arbitrator within ten (10) days after the arbitrators
appointed by the parties give notice as aforesaid, then within five (5) days
thereafter either of the parties upon notice to the other party may request such
appointment by the American Arbitration Association (or any organization
successor thereto), or in it absence, refusal, failure, or inability to act, may
apply for a court appointment of such arbitrator.
33.03. Each arbitrator shall be a fit and impartial person who shall have
had at least five years' experience in a calling connected with the matter of
dispute.
33.04. The arbitration shall be conducted, to the extent consistent with
this Article, in accordance with the then prevailing rules of the American
Arbitration Association (or any organization successor thereto). The arbitrators
shall render their decision and award, upon the concurrence of at least two of
their number, within thirty (30) days after the appointment of the third
arbitrator. Such decision and award shall be in writing and shall be final and
conclusive on the parties, and counterpart copies thereof shall be delivered to
each of the parties. In rendering such decision and award, the arbitrators shall
not add to, subtract from, or otherwise modify the provisions of this Lease.
Judgment may be had on the decision and award of the arbitrator(s) so rendered
in any court of competent jurisdiction. Notwithstanding the foregoing, the
parties hereto agree that such judgment of the arbitrator shall not be binding
and may be the
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subject of litigation in the Superior Court of New Jersey if it is alleged that
the arbitrator made a mistake of fact or law.
33.05. Each party shall pay the fees and expenses of the one of the two
original arbitrators appointed by or for such party and the fees and expenses of
the third arbitrator and all other expenses of the arbitration (other than the
fees and disbursement of attorneys or witnesses for each party) shall be borne
by the parties equally.
33.06. Notwithstanding the provisions of this Article, if any delay in
complying with any requirements of this Lease by Tenant might subject Landlord
to any fine or penalty, or to prosecution for a crime, or if it would constitute
a default by Landlord under any mortgage, Landlord may exercise its right under
Article 29, to remedy such default and in such event the sole question to be
determined by the arbitrators under this Article, shall be whether Tenant is
liable for Landlord's cost and expenses of curing such default.
ARTICLE 34
NO OTHER REPRESENTATIONS, CONSTRUCTION, GOVERNING LAW
34.01. 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. It is understood
and agreed that all understandings and agreements heretofore had between the
parties are merged in the Lease, which alone fully and completely express their
agreements and that the same are entered into after ball investigation, neither
party relying upon any statement or representation not embodied in the Lease
made by the other.
34.02. If any of the provisions of this Lease, or the application thereof
to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
34.03. This Lease shall be governed in all respects by the laws of the
State of New Jersey.
ARTICLE 35
SECURITY
INTENTIONALLY DELETED
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ARTICLE 36
PARTIES BOUND
36.01. The obligation of this Lease shall bind and benefit the successors
and assigns of the parties with the same effect as if mentioned in each instance
where a party is named or referred to, except that no violation of the
provisions of Article 8 shall operate to vest any rights in any successor or
assignee of Tenant and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 24.
However, the obligations of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in event of such
transfer said obligations shall thereafter be binding upon each transferee of
the interest of Landlord herein named as such owner or lessee of the Building,
but only with respect to the period ending with a subsequent transfer within the
meaning of this Article.
36.02. If Landlord shall be an individual, joint venture, tenancy in
common, partnership, unincorporated association, or other unincorporated
aggregate of individuals and/or entities or a corporation, Tenant shall look
only to such Landlord's estate and property in the Building (or the proceeds
thereof), all consideration received by Landlord from the sale or the
disposition of any part of Landlord's right, title and interest in the Building,
all available condemnation awards and insurance proceeds not used for
restoration, but subject to the rights of the mortgagee and, where expressly so
provided in this Lease, to offset against the rents payable under this Lease for
the collection of a judgment (or other judicial process) which requires the
payment of money by Landlord in the event of any default by Landlord hereunder.
No other property or assets of such Landlord shall be subject to levy, execution
or other enforcement procedure for the satisfaction of Tenant's remedies under
or with respect to this Lease, the relationship of Landlord and Tenant hereunder
or Tenant's use or occupancy of the Demised Premises. Further, Tenant agrees
that Landlord shall not be liable to Tenant for any special. indirect, or
consequential damages arising out of Landlord's breach of this Lease.
36.03. Landlord agrees that Tenant shall not be liable to Landlord for any
special, indirect or consequential damages arising out of Tenant's breach of
this Lease, however, rents, restoration charges, interest, late charges, fees,
reimbursements, damages incurred by Landlord as a result of Tenant holding over
and other damages provided for in Article 26 shall not be considered special,
indirect or consequential damages.
ARTICLE 37
CONSENTS
37.01. Wherever it is specifically provided in this Lease that a party's
consent is not to be unreasonably withheld, a response to a request for such
consent shall also not be unreasonably delayed. If either Landlord or Tenant
considers that the other had unreasonably withheld or delayed a consent, it
shall so notify the other party within ten (10) days after receipt
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of notice of denial of the requested consent or, in case notice of denial is not
received, within twenty (20) days after making its request for the consent.
ARTICLE 38
MORTGAGE FINANCING - TENANT COOPERATION
38.01. In the event that Landlord desires to seek mortgage financing
secured by the Demised Premises, Tenant agrees to cooperate with Landlord in the
making of any application(s) by Landlord for such financing including the
delivery to Landlord's mortgage broker or mortgagee, of such information as they
shall require with respect to Tenant's occupancy of the Demised Premises,
including, but not limited to the current financial statement of Tenant, but
Tenant shall not be required to deliver such information directly to Landlord,
all of the above to be at no cost and expense of Tenant. In the event that
Landlord's mortgagee shall request changes to the within Lease in order to make
same acceptable to Landlord's mortgagee. Tenant agrees to consent to such
changes, provided such changes shall not affect the term of this Lease nor the
financial obligations of Tenant hereunder nor otherwise adversely affect
Tenant's rights hereunder. The request by such mortgagee for notice of
Landlord's defaults and reasonable opportunity to cure shall not be deemed
adverse.
ARTICLE 39
ENVIRONMENTAL COMPLIANCE
39.01. Tenant shall, at Tenant's sole cost and expense, comply with the
New Jersey Industrial Site Recovery Act and the regulations promulgated
thereunder (referred to as "ISRA") as same relate to Tenant's occupancy of the
Demised Premises, as well as all other state, federal or local environmental
law, ordinance, rule, or regulation either in existence as of the date hereof or
enacted or promulgated after the date of this Lease, that concern the
management, control, discharge, treatment and/or removal of hazardous discharges
or otherwise affecting or affected by Tenant's use and occupancy of the Demised
Premises. Tenant represents that Tenant's SIC number does not subject it to
ISRA. Tenant shall, at Tenant's own expense, make all submissions to, provide
all information to, and comply with all requirements of the Bureau of Industrial
Site Evaluation (the "Bureau") of the New Jersey Department of Environmental
Protection ("NJDEP"). Should the Bureau or any other division of NJDEP, pursuant
to any other environmental law, rule, or regulation, determine that a cleanup
plan be prepared and that a cleanup be undertaken because of any spills or
discharge of hazardous substances or wastes at the Demised Premises which occur
during the term of this Lease and were caused by Tenant or its agents or
contractors, then Tenant shall, at Tenant's own expense prepare and submit the
required plans and financial assurances, and carry out the approved plans. In
the event that Landlord shall have to comply with ISRA by reason of Landlord's
actions, Tenant shall promptly provide all information requested by Landlord for
preparation of non-applicability affidavits or a Negative
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Declaration and shall promptly sign such affidavits when requested by Landlord.
Tenant shall indemnify, defend, and save harmless Landlord from all fines,
suits, procedures, claims, and actions of any kind arising out of or in any way
connected with any spills or discharges of hazardous substances or wastes at the
Demised Premises which occur during the term of this Lease and were caused by
Tenant or its agents or contractors, and from all fines, suits, procedures,
claims, and actions of any kind arising out of Tenant's failure to provide all
information, make all submissions and take all actions required by the Bureau or
any other division of NJDEP. Tenant's obligations and liabilities under this
Paragraph shall continue so long as Landlord remains responsible for any spills
or discharges of hazardous substances or wastes at the Demised Premises which
occur during the term of this Lease and were caused by Tenant or its agents or
contractors. Tenant's failure to abide by the terms of this paragraph shall be
restrainable by injunction. Tenant shall have no responsibility to obtain a
"Negative Declaration" or "Letter of Non-Applicability" from the NJDEP if the
sole reason for obtaining same is in connection with a sale or other disposition
of the real estate by Landlord but Tenant agrees to cooperate with Landlord in
Landlord's effort to obtain same and shall perform at Tenant's expense any clean
up required by reason of Tenant's use and occupancy of the Demised Premises.
ARTICLE 40
HOLDING OVER
40.01. Tenant will have no right to remain in possession of all or part of
the Demised Premises after the expiration of the term. If Tenant remains in
possession of all or any part of the Demised Premises after the expiration of
the Lease, without the express consent of Landlord: (a) such tenancy will be
deemed to be a periodic tenancy from month-to-month only; (b) such tenancy will
not constitute a renewal or extension of this Lease for any further term; and
(c) such tenancy may be terminated by Landlord upon the earlier of (i) thirty
(30) days prior written notice, or (ii) the earliest date permitted by law. In
such event, monthly rent will be increased to an amount equal to one hundred and
twenty five percent (125%) for the first month of holdover, one hundred and
fifty (150%) for the second month of holdover and two hundred percent (200%)
thereafter of the monthly rent payable during the last month of the term, and
any other sums due under this Lease will be payable in the amount and at the
times specified in this Lease. Such month-to-month tenancy will be subject to
every other term, condition, and covenant contained in this Lease. The
provisions of this Section shall not be construed to relieve Tenant from
liability to Landlord for damages resulting from any such holding over, or
preclude Landlord from implementing summary dispossess proceedings. Tenant
further acknowledges that its failure to perform any restoration required of it
under this Lease shall be deemed the same as its remaining in possession of the
Demised Premises after the expiration of the term, subjecting it to hold-over
rent in accordance with this Article 40.
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ARTICLE 41
CERTAIN DEFINITIONS AND CONSTRUCTIONS
41.01. For the purpose of this Lease and all agreements supplemental to
this Lease, unless the context otherwise requires, the definitions set forth in
Exhibit F annexed hereto shall be utilized.
41.02. The various terms which are italicized and defined in other
Articles of this Lease or are defined in Exhibits annexed hereto, shall have the
meanings specified in such other Articles and such Exhibits for all purposes of
this Lease and all agreements supplemental thereto, unless the context shall
otherwise require.
41.03. The submission of this Lease for examination does not constitute a
reservation of, or option for, the Demised Premises, and this Lease becomes
effective as a Lease only upon execution and delivery thereof by Landlord and
Tenant.
41.04. The Article headings in this Lease and the Index prefixed to this
Lease are inserted only as a matter of convenience in reference and are not to
be given any effect whatsoever in construing this Lease.
ARTICLE 42
RELOCATION OF TENANT
42.01. Landlord at its sole expense, on at least sixty (60) days prior
written notice, may require Tenant to move from the Demised Premises to another
location of comparable size and decor in the Building. By written notice to
Landlord served within five (5) days of Tenant's receipt of the relocation
notice, Tenant may elect to terminate this Lease in lieu of relocating to the
other space and shall there upon vacate the Demised Premises within the sixty
(60) day period. In the event of any such relocation, Landlord shall be
responsible for the expenses of preparing and decorating the relocated premises
so that they will be substantially similar to the Demised Premises being
relocated at the time of such relocation. Landlord shall also bear the moving
expenses of the relocation, but reserves the right to move Tenant through its
own personnel. Landlord agrees that its right to relocate Tenant shall be
limited to relocating Tenant to the 15th floor. Landlord shall be responsible
for all costs associated with the closing of the stairwell on the 14th floor and
its relocation between the 14th and 15th floor. Notwithstanding the foregoing,
Landlord shall be entitled to rescind its notice of relocation within forty-five
(45) days of its having forwarded to Tenant the notice of relocation or within
forty-eight (48) hours of Tenant having properly elected to terminate this
Lease. In the event Landlord rescinds the notice as aforesaid, this Lease shall
continue in full force and effect.
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ARTICLE 43
OPTION TO RENEW
43.01. Provided that Tenant is not then in default of the terms,
covenants, and provisions of this Lease beyond any applicable notice and grace
period and opportunity to cure, Landlord hereby grants to Tenant the right to
renew the term of this Lease for one (1) additional period of five (5) years
(the "First Renewal Period") commencing on the day after the initial Expiration
Date upon the same terms and conditions as set forth in this Lease other than
the fixed annual rental which shall be the Fair Market Rental of the Demised
Premises at the time of the commencement of the First Renewal Period. Said fixed
annual rental shall be payable in equal monthly installments in advance on the
first day of each and every month of the First Renewal Period. The base year for
calculation of additional rent for increase in taxes and operating expenses for
the First Renewal Period shall be the assessed valuation of the Land and
Building for the Tax Year in which the First Renewal Period shall commence,
multiplied by the tax rate applicable to such period and the Base Year for
Operating Expenses which shall be the first Operational Year in which the First
Renewal Period shall commence. Tenant shall exercise the within Option by giving
written notice to Landlord not later than nine (9) months prior to the initial
Expiration Date, TIME BEING OF THE ESSENCE. If Tenant fails to give such notice,
Tenant will be deemed to have waived such Renewal Option and the provisions of
this Section shall be null and void.
43.02. Provided that Tenant is not then in default of the terms,
covenants, and provisions of this Lease beyond any applicable notice and grace
periods and has exercised its rights under Section 43.01 with respect to the
First Renewal Period, Landlord hereby grants to Tenant the right to renew the
term of this Lease for a second additional period of five (5) years (the "Second
Renewal Period") commencing on the day after the expiration of the First Renewal
Period upon the same terms and conditions as set forth in this Lease other than
the fixed annual rental which shall be the Fair Market Rental of the Demised
Premises at the time of the commencement of the Second Renewal Period. Said
fixed annual rental shall be payable in equal monthly installments in advance on
the first day of each and every month of the Second Renewal Period. The base
year for calculation of additional rent for increase in taxes and operating
expenses for the Second Renewal Period shall be the assessed valuation of the
Land and Building for the Tax Year in which the Second Renewal Period shall
commence, multiplied by the tax rate applicable to such period and the Base Year
for Operating Expenses which shall be the first Operational Year in which the
Second Renewal Period shall commence. Tenant shall exercise the within Option by
giving written notice to Landlord not later than nine (9) months prior to the
expiration of the First Renewal Period, TIME BEING OF THE ESSENCE. If Tenant
fails to give such notice, Tenant will be deemed to have waived such Renewal
Option and the provisions of this Section shall be null and void.
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43.03. Fair Market Value shall mean the rents obtainable for comparable
space in the Metro Park, Edison, New Jersey market area.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as
of the day and year first above written.
WITNESS: LANDLORD:
THORNALL ASSOCIATES, L.P.,
a New Jersey Limited Partnership
/s/ Michael Alfieri
- -------------------------------- --------------------------------
By: Michael Alfieri
Title: Partner
ATTEST: TENANT:
PXRE CORPORATION,
a Delaware Corporation
/s/ Sanford M. Kimmel
- -------------------------------- --------------------------------
By: Sanford M. Kimmel
Title: Senior V.P. & Treasurer
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EXHIBIT A
DESCRIPTION OF LAND
399 THORNALL STREET
ALL that certain tract, lot and parcel of land lying and being in the Township
of Edison, County of Middlesex, and State of New Jersey being more particularly
described as follows:
BEGINNING at a point in the Southeasterly Right-of-Way line of Thornall Street,
distant Southwestwardly 1,234.34 feet from the intersection formed by the
Southeasterly Right-of-Way line of Thornall Street, with the Southwesterly
Right-of-Way line of Wood Avenue South and from said beginning point running
thence:
1. South 43 degrees 27 minutes 01 seconds East along the common line between
lot 2-B-1 and Lot 2-B-4 in Block 676, as shown on the current Township of
Edison Tax Map 919.28 feet to a point; running thence
2. South 55 degrees 02 minutes 33 seconds West, along the common line between
Lot 2-B-4 and Lot 5 in Block 676, as shown on said Tax Map, 134.80 feet to
an angle point; running thence
3. South 31 degrees 14 minutes 31 seconds West, 99.16 feet to a point;
running thence
4. North 53 degrees 23 minutes 59 seconds West, 612.14 feet to a point;
running thence
5. North 36 degrees 36 minutes 01 seconds East, 76.19 feet to a point;
running thence
6. North 53 degrees 23 minutes 59 seconds West 264.80 feet to a point in the
new southeasterly Right-of-Way line of Thornall Street; running thence
7. Northeastwardly along the new southeasterly Right-of-Way line of Thornall
Street, along a curve to the left having a radius of 4,694.00 feet and an
arc length of 42.71 feet to a point of tangency; thence running
8. North 31 degrees 44 minutes 10 seconds East, continuing along said
Right-of-Way line of Thornall Street, 32.06 feet to a point of curvature;
running thence
9. Northeastwardly still along the above mentioned new Right-of-Way line of
Thornall Street, along a curve to the right, having a radius of 894.19
feet, an arch length of 235.66 feet to a point, said point being the point
and place of BEGINNING.
Being also known as Lot 2-B-4 in Block 676 on the current Tax Map of the
Township of Edison, Middlesex County, New Jersey.
Subject to easements, restrictions, and covenants of record and such state of
facts as an accurate survey may reveal.
1A
<PAGE>
EXHIBIT B
FLOOR PLAN
SEE ATTACHED
1B
<PAGE>
[GRAPHIC OMITTED]
EXHIBIT B
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TENANT PLACEMENT PLANS APPROVED
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[LOGO] PROJECT METRO 111 ORWG
12TH FLOOR PLAN
----------------------------------------------- TP-1
JOB NO. 10/5/99
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<PAGE>
EXHIBIT C
SEPARATE WORKLETTER
1C
<PAGE>
THORNALL ASSOCIATES, AS LANDLORD
PXRE CORPORATION, AS TENANT
EXHIBIT C
LANDLORD'S WORK
1. HVAC - Perimeter baseboard electric heat, central high velocity fan system
which utilizes a minimum of 10% to a maximum of 100% fresh air to maintain
no less than 68 degrees interior at zero degrees exterior, with a 15-mile
per hour wind. Air-cooling shall maintain no more than 78 degrees F dry
bulb with approximately 50% relative humidity when the outdoor conditions
are 91 degrees F dry bulb. The above heating and cooling standard is for
normal office use only which shall be deemed to be one person for every
200 square feet in any given or confined area which shall not include
areas with special HVAC requirements such as computer rooms, conference
rooms, cafeterias, high density or excessive heat producing equipment.
Perimeter baseboard electric heat is used during winter operations and an
air cooling system is utilized during summer operations.
2. Window covering - one (1) building-standard venetian blind per window.
3. Landlord shall complete the interior of the Demised Premises in accordance
with space plans and specifications that shall be supplied by the Tenant.
The location of the space is shown in Exhibit B, dated October 5, 1999.
4. Landlord shall permit Tenant and/or its agents or labor to enter the
Premises prior to the Commencement Date of the Lease upon prior reasonable
written request from Tenant, at a time designated by Landlord consistent
with Landlord's construction schedule in order to install telephone
outlets, data lines and computer equipment for the Computer Room. The
foregoing right to enter prior to the Commencement Date, however, is
conditioned upon Tenant's not interfering with Landlord's labor. If at any
time such entry shall cause disharmony, interference, or union disputes of
any nature whatsoever, or if Landlord shall, in Landlord's sole reasonable
judgment, determine that such entry, such work and the continuance thereof
shall interfere with, hamper or prevent Landlord from proceeding with the
completion of the Demised Premises at the earliest possible date, then
this right of entry may be withdrawn by Landlord immediately upon written
notice to Tenant but shall be reinstated as soon as Landlord deems
Tenant's re-entry practicable. Such entry shall be at Tenant's sole risk.
In the event that Tenant's agents or labor incur any charges from
Landlord, including but not limited to, charges for clean-up costs
necessitated by Tenant's entry, such charges shall be deemed an obligation
of Tenant and shall be collectible as additional rent pursuant to the
Lease. Landlord shall have no liability for any furnishings, equipment or
other items placed in the Demised Premises and Tenant shall indemnify,
defend and hold Landlord harmless for any damage, loss or expense caused
by it or its contractors or agents. Tenant shall also provide evidence of
insurance in accordance with the Lease and evidence of Worker's
Compensation Insurance to
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protect Landlord and Tenant during the period of Tenant's entry prior to
the Commencement Date.
5. At any time after substantial completion of Landlord's Work, Landlord,
upon reasonable notice to Tenant, may enter the Demised Premises, at such
times as shall be reasonably acceptable to Landlord and Tenant, to
complete unfinished details of Landlord's Work and entry by Landlord, its
agents, servants, employees or contractors for such purpose shall not
constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any abatement of rent, or relieve Tenant from any of its
obligations under this Lease, or impose any liability upon Landlord or its
agents.
6. Tenant further agrees that if an elevator lobby or corridor is included in
Tenant's Demised Premises or if by virtue of the size and configuration of
Tenant's Demised Premises, other tenants of the Building when in the
lobby, elevator or corridor can see into Tenant's Demised Premises through
a demising wall by a glass window, the Landlord shall have the sole and
final decision as to the color and design of all paint, wall coverings and
floor coverings so visible from the lobby, elevator or corridor.
7. The Tenant shall provide the Landlord with a complete set of architectural
and engineering documents to bid and for construction of the Tenant
fit-out. These shall be submitted to the Landlord on or before November
30, 1999. Delivery after November 30, 1999 shall constitute a Tenant
Delay, to the extent Landlord's Work is actually delayed. The Landlord
shall have the right to review and approve these drawings.
8. The Landlord shall provide the Tenant with $23.00 per rentable square foot
for the Tenant's improvements. This allowance shall be used in connection
with the cost of Landlord's Work and for no other purpose of readying the
Demised Premises for occupancy, such as telephone, furniture, or computer
systems.
9. For any costs above the Landlord's Work, the Tenant shall pay the Landlord
a 33% payment with the return of the work authorization to proceed, a 33%
payment thirty (30) days after receipt of the building permit, a 29%
payment upon Landlord's return of a Certificate of Occupancy and a final
5% payment upon Landlord's completion of the punchlist items. The
punchlist shall be delivered by the Tenant to the Landlord within ten
business days after the issuance of a Certificate of Occupancy. The
punchlist items shall be limited to the scope and the extent of the
initial construction fit-out work contained in the construction documents
as provided by the Tenant to the Landlord per Paragraph 7 of Exhibit "C"
above. After notice by the Landlord to the Tenant that the punchlist items
are complete, then the Tenant shall pay the final 5% to the Landlord.
<PAGE>
-3-
10. The Landlord shall bid out all the trades to duly qualified
subcontractors. The Tenant may make recommendations to the Landlord for
qualified subcontractors, but the Landlord shall have the final choice as
to which subcontractors are qualified. The Landlord shall pick the low
bidder unless the Landlord and Tenant agree upon a higher bidder. The
final cost for the entire job shall include:
o General conditions as defined in Division B10.00 of R. S. Means
Construction Cost Data, as applicable to the Tenant's fit-out
project
o All of the subcontractors' bids
o All demolition work shall be performed by the Landlord
o Overhead at 13% of the general conditions and the subcontractors'
bids above
o Profit at 10% of all the items listed above
o Architectural fees, if any
o All charges associated with the review of mechanical, electrical,
sprinkler, plumbing and structural engineering documents, if any
11. The Tenant shall be responsible for the telephone and computer
installation. The Landlord shall coordinate the timing of these items with
the Tenant. The Landlord shall not charge any overhead fees or profit for
such coordination work.
12. All changes to Landlord's Work requested by Tenant shall be in writing.
Landlord shall advise Tenant before accepting the change, of the cost
thereof or, if applicable, the savings and the delay in the substantial
completion, if any, caused by the change and, for any major changes to
Landlord's Work, any additional restoration requirements, if any. Tenant
shall have five (5) days from receipt of this information from Landlord to
advise Landlord to proceed with the change or to withdraw the request.
Tenant shall pay the cost of the change order within thirty (30) days
after receipt of Landlord's invoice with respect to such change if there
shall be an increased cost to Landlord as a result thereof.
13. The Landlord shall provide seven (7) watts per rentable square foot for
the Tenant's electric in the suite, exclusive of HVAC.
14. The Tenant shall have the option to install a stairwell between the 12th
and 14th Floors, subject to the review and approval by the Landlord of its
location and for approval by the Landlord of the architectural and
engineering drawings for the stairwell, which location has been approved
by Landlord as set forth in the plan, titled PL-1A, dated July 15, 1999.
15. The Landlord will provide a location for the supplemental HVAC outside the
building.
<PAGE>
EXHIBIT D
CLEANING AND MAINTENANCE SPECIFICATIONS
Landlord will provide building standard cleaning services to the tenant area and
the ground floor lobby area in accordance with the following specifications:
NIGHTLY
1. GENERAL CLEANING
a. Empty all waste and recycling receptacles, removing waste and
recycling material to designated central location for disposal.
b. Empty and damp wipe clean all ashtrays. Screen and clean all sand
urns, wipe exterior of sand urns.
c. Wash and disinfect all water coolers and drinking fountains.
d. Wipe clean fingermarks, smudges, etc. from all doors, security
desks, wall surfaces, furniture system trim, fixtures, cabinets,
files, conference tables, chairs, partition glass, flat ledges,
heating units, baseboards, blinds and window ledges.
e. Replace plastic liners in all waste-disposal cans.
f. Hand brush and/or vacuum all upholstered furniture, including
furniture system fabric panels.
g. Doors: Wash and wipe clean all kick panels, push/pull areas.
h. Wash and disinfect all public telephones.
i. Wipe down mail chute and mail depository nightly.
j. Clean all Tenant's interior stairways.
2. FLOORS
Group A - Ceramic tile, marble, terrazzo.
1D
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Group B - Linotile, asphalt, koroseal, plastic vinyl, rubber, wood,
cork, or other types of floors and base.
a. All floors in Group A to be swept and wet-mopped. Move light
furniture, planters and equipment other than desks and files.
b. All floors in Group B to be dry mopped, using a "dustdown"
preparation, and spots to be removed by wet process.
c. Main lobby to be machine buffed nightly.
3. VACUUMING
a. Vacuum all rugs and carpeted areas, moving light furniture and
office equipment other than desks and file cabinets. Spot clean to
remove soluble spots which safely respond to standard spotting
procedures without risk of injury to color or fabric.
4. WASHROOMS AND TOILETS
a. Sweep, mop, rinse, and dry floors. Polish mirrors, chrome plumbing
and bright-work. Clean enameled surfaces.
b. Wash and disinfect basins, urinals, and bowls using scouring powder
to remove stains, making certain to clean undersides of rims of
urinals and bowls.
c. Wash and disinfect both sides of all toilet seats.
d. Supply and service all toilet tissue, soap, towels, and sanitary
napkins. Sanitary napkins will be supplied in coin operated
dispensers.
e. All wastepaper cans and all receptacles are to be emptied and new
plastic liners installed.
f. Hand dust and wash clean all partitions, tile walls, dispensers, and
receptacles in lavatories and vanity area.
g. Empty and clean sanitary disposal receptacles and install new
plastic liners.
5. ELEVATORS
2D
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a. Clean the floor in accordance with specifications outlined above
based upon the type of flooring installed. The doors, metal wall
surfaces, wood wall surfaces ceiling and fixtures shall be dusted.
6. GLASS
a. Clean both sides of all lobby glass, building entrance doors, upper
lobby glass, furniture system partition glass and interior wall
glass.
7. STAIRWELLS
a. Check all stairwells and landings nightly throughout entire demised
area, and keep in clean condition. All stairways and landings will
be dry mopped nightly. Railings, ledges, and equipment will be
dusted nightly.
WEEKLY
8. GENERAL CLEANING
a. Hand dust all office equipment, furniture, fixtures, including
paneling, shelving, window sills and mullions, telephones and all
flat surfaces with a treated cloth or yarn duster.
9. FLOORS
a. Floors in Group B will be wet mopped weekly.
10. WASHROOMS AND TOILETS
a. Wash down walls in washrooms and stalls, from trim to floor.
11. ELEVATORS
a. The doors, surfaces and fixtures shall be damp wiped. The floors
shall be stripped, waxed, and machine buffed weekly.
12. STAIRWAYS
a. These areas shall be stripped, waxed and buffed weekly. This will be
governed by the amount of wear due to weather and other conditions.
13. MAIN LOBBY
3D
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a. Clean walls with damp cloth and dust weekly.
MONTHLY
14. FLOORS
a. Waxing, buffing, stripping or machine scrubbing of the floors in
Group A and B.
15. HIGH DUSTING
a. Dust all closet shelving and wash all closet floors, when
accessible.
QUARTERLY
16. GLASS
a. Clean inside of windows.
17. HIGH DUSTING
a. Damp dust all pictures, charts, graphs, light fixtures, etc., not
reached in nightly cleaning.
b. Dust clean all vertical surfaces such as walls, partitions, doors,
door bucks and other surfaces not reached in nightly cleaning.
c. Damp dust air conditioning diffusers, wall grills, door louvers,
registers and venetian blinds.
SEMI ANNUALLY
18. GLASS
a. Clean all doors and exterior side of exterior windows.
ANNUALLY
19. HIGH DUSTING
a. Dust interior and exterior of tight fixtures.
4D
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MISCELLANEOUS
a. On completion of work, all slop sinks are to be thoroughly cleaned,
and cleaning equipment to be stored neatly in designated locations.
b. All cleaning services except those performed by day porters, window
cleaners, and matrons are to be performed nightly, five nights per
week. No Saturday. Sunday or Building holiday service to be
provided. In no event shall performance of any cleaning service
interfere with Tenant's normal business operation.
c. The Contractor or Landlord is to furnish all necessary approved
cleaning materials, implements, and machinery for the satisfactory
completion of the work. This includes scaffolding, vacuum machines,
scrubbing machines, etc.
d. Contractor shall furnish proof of liability and property damage
insurance reasonably acceptable to Landlord, and Workman's
Compensation Insurance in amounts required under the laws of New
Jersey.
e. Tenant will be charged for cleaning services in excess of the
specifications outlined above.
f. Tenant will be charged for the incremental cost to clean any areas
of the Demised Premises used for special purposes requiring more
difficult cleaning work than office areas including, but not limited
to, private toilets and showers, dining areas, cafeteria, kitchen,
etc.
5D
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EXHIBIT E
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators, and
escalators of the Building are limited to ingress to and egress from the
tenants' demised premises for the tenants and their employees, licensees, and
invitees, and no tenant shall use or permit the use of the entrances, corridors,
escalators, or elevators for any other purpose. No tenant shall invite to the
tenant's demised premises, or permit the visit of, persons in such numbers or
under such conditions as to interfere with the use and enjoyment of any of the
plazas, entrances, corridors, escalators, elevators, and other facilities of the
Building by other tenants. Fire exits and stairways are for emergency use only,
and they shall not be used for any other purpose by the tenants, their
employees, licensees, or invitees. No tenant shall encumber or obstruct, or
permit the encumbrance or obstruction of any of the sidewalks, plazas,
entrances, corridors, escalators, elevators, fire exits, or stairways of the
Building. The Landlord reserves the right to control and operate the public
portions of the Building and the public facilities, as well as facilities
furnished for the common use of the tenants, in such manner as it deems best for
the benefit of the tenants generally.
2. The Landlord may refuse admission to the Building outside of ordinary
business hours to any person not having a pass issued by the Landlord or the
tenant whose demised premises are to be entered or not otherwise properly
identified, and may require all persons admitted to or leaving the Building
outside of ordinary business hours to register. Any person whose presence in the
Building at any time shall, in the judgment of the Landlord, be prejudicial to
the safety, character, reputation, and interests of the Building or of its
tenants may be denied access to the Building or may be ejected therefrom. In
case of invasion, riot, public excitement, or other commotion, the Landlord may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the tenants and protection of
property of the Building. The Landlord may require any person leaving the
Building with any package or other object to exhibit a pass from the tenant from
whose premises the packaging or object is being removed, but the establishment
and enforcement of such requirement shall not impose any responsibilities on the
Landlord for the protection of any tenant against the removal of property from
the premises of the tenant. The Landlord shall in no way be liable to any tenant
for damages or loss arising from the admission, exclusion, or ejection of any
person to or from the tenant's premises or the Building under the provisions of
this rule. Canvassing, soliciting, or peddling in the Building is prohibited,
and every tenant shall cooperate to prevent the same.
3. No tenant shall obtain or accept for use in its demised premises ice,
food for on premises preparation other than warming, beverage towel, barbering,
boot blackening, floor polishing, lighting maintenance, cleaning, or other
similar services from any persons not authorized by the Landlord in writing to
furnish such services, provided that the charges for such services by persons
authorized by the Landlord are not excessive and where appropriate and
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consonant with the security and proper operation of the Building sufficient
persons are so authorized for the same service to provide tenants with a
reasonably competitive selection. Such services shall be furnished only at such
hours, in such places within the Tenant's Demised Premises and under such
reasonable regulations as may be fixed by the Landlord. Tenant may have a coffee
service, subject to Landlord's approval, and a kitchen for the use of its
employees commensurate with normal office use.
4. The cost of repairing any damage to the public portions of the Building
or the public facilities or to any facilities used in common with other tenants,
caused by a tenant or the employees, licensees, or invitees of the tenant shall
be paid by such tenant.
5. No lettering, sign, advertisement, notice or object shall be displayed
in or on the windows or doors, or on the outside of any tenant's demised
premises, or at any point inside any tenant's premises where the same might be
visible outside of such demised premises, except that the name of the tenant
may be displayed on the entrance door of the tenant's demised premises, and in
the elevator lobbies of the floors which are occupied entirely by any tenant,
subject to the approval of the Landlord as to the size, color, and style of such
display. The inscription of the name of the tenant on the door of the tenant's
demised premises shall be done by the Landlord at the expense of the tenant.
6. No awnings or other projections over or around the windows shall be
installed by any tenant, and only such window blinds as are supplied or
permitted by the Landlord shall be used in a tenant's demised premises.
Linoleum, tile, or other floor covering shall be laid in a tenant's demised
premises only in a manner approved by the Landlord.
7. The Landlord shall have the right to prescribe the weight and position
of safes and other objects of excessive weight, and no safe or other object
whose weight exceeds the lawful load for the area upon which it would stand
shall be brought into or kept upon a tenant's demised premises. If, in the
judgment of the Landlord, it is necessary to distribute the concentrated weight
of any heavy object, the work involved in such distribution shall be done at the
expense of the tenant and in such manner as the Landlord shall determine. The
moving of safes and other heavy objects shall take place only outside of
ordinary business hours upon the same upon previous notice to the Landlord, and
the persons employed to move the same in and out of the Building shall be
reasonably acceptable to the Landlord and if so required by law, shall hold a
Master Rigger's license. Freight, furniture, business equipment, merchandise,
and bulky matter of any description shall be delivered to and removed from the
demised premises only in the freight elevators and through the service entrances
and corridors, and only during hours and in a manner approved by the Landlord.
Arrangements will be made by the Landlord with any tenant for moving large
quantities of furniture and equipment into or out of the Building.
8. No machines or mechanical equipment of any kind other than typewriters
and other ordinary portable business machines. may be installed or operated in
any tenant's demised premises without Landlord's prior written consent, and in
no case (even where the same are of a type so accepted or as so consented to by
Landlord) shall any machines or mechanical equipment be so placed or operated as
to disturb other tenants; but machines and mechanical
2E
<PAGE>
equipment which may be permitted to be installed and used in a tenants demised
premises shall be so equipped, installed and maintained by such tenant as to
prevent any disturbing noise, vibration, or electrical or other interference
from being transmitted from such premises to any other area of the Building.
9. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of the Landlord might disturb other tenants
in the building, shall be made or permitted by any tenant, and no cooking shall
be done in the tenant's demised premises, except as expressly approved by the
Landlord. Nothing shall be done or permitted in any tenants' demised premises,
and nothing shall be brought into or kept in any tenants' demised premises,
which would impair or interfere with any of the Building services or the proper
and economic heating, cleaning, or other servicing of the Building or the
demised premises, or the use of enjoyment by any other tenant of any other
demised premises, nor shall there be installed by any tenant any ventilating,
air conditioning, electrical or other equipment of any kind which, in the
judgment of the Landlord, might cause any such impairment or interference. No
dangerous, inflammable, combustible, or explosive object or material shall be
brought into the building by any tenant or with the permission of any tenant.
Any cuspidors or similar containers or receptacles used in any tenants' demised
premises shall be cared for and cleaned by and at the expense of the tenant.
10. No acids, vapors, or other materials shall be discharged or permitted
to be discharged into the waste lines, vents or flues of the Building which may
damage them. The water and wash closets and other plumbing fixtures in or
serving any tenant's premises shall not be used for any purpose other than the
purposes for which they were designed or constructed, and no sweepings, rubbish,
rags, acids or other foreign substances shall be deposited therein.
11. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows in any tenants' demised premises and no lock on any door
therein shall be changed or altered in any respect. Additional keys for a
tenant's demised premises and toilet rooms shall be procured only from the
Landlord, which may make a reasonable charge therefor. Upon the termination of a
tenant's lease, all keys of the tenant's demised premises and toilet rooms shall
be delivered to the Landlord.
12. All entrance doors in each tenants' demised premises shall be left
locked, and all windows shall be left closed by the tenant when the tenant's
demised premises are not in use. Entrance doors shall not be left open at any
time.
13. Hand trucks not equipped with rubber tires and side guards shall not
be used within the Building.
14. All windows in each tenant's demised premises shall be kept closed and
all blinds therein above the ground floor shall be lowered when and as
reasonably required because of the position of the sun, during the operation of
the Building air conditioning system to cool or ventilate the tenant's demised
premises.
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EXHIBIT F
DEFINITIONS
(a) The term "mortgage" shall mean an indenture of mortgage and deed of
trust to a trustee to secure an issue of bonds, and the term "mortgagee" shall
mean such a trustee.
(b) The terms "include," "including," and "such as" shall each be
construed as if followed by the phrase "without being limited to."
(c) References to Landlord as having no liability to Tenant or being
without liability to Tenant, shall mean the Tenant is not entitled to terminate
this Lease, or to claim actual or constructive eviction, partial or total, or to
receive any abatement or diminution of rent, or to be relieved in any manner of
any of its other obligations hereunder, or to be compensated
(d) The term laws and/or requirements of public authorities and words of
like import shall mean laws and ordinances of any or all of the Federal, state,
city, county, and borough governments and rules, regulations, orders and/or
directives of any or all departments, subdivisions, bureaus, agencies, or office
thereof, or of any other governmental, public, or quasipublic authorities,
having jurisdiction in the premises, and/or the direction of any public officer
pursuant to law.
(e) The term requirements of insurance bodies and words of like import
shall mean rules, regulations, orders, and other requirements of the New Jersey
Board of Fire Underwriters and/or similar body performing the same or similar
functions and having jurisdiction or cognizance of the Building and/or the
Demised Premises.
(f) The term repair shall be deemed to include restoration and replacement
as may be necessary to achieve and/or maintain good working order and condition.
(g) Reference to termination of this Lease includes expiration or earlier
termination of the term of this Lease or cancellation of this Lease pursuant to
any of the provisions of this Lease or to law. Upon a termination of this Lease,
the term and estate granted by this Lease shall end at noon of the date of
termination as if such date were the date of expiration of the term of this
Lease and neither party shall have any further obligation or liability to the
other after such termination (i) except as shall be expressly provided for in
this Lease, or (ii) except for such obligation as by its nature or under the
circumstances can only be, or by the provisions of this Lease, may be performed
after such termination and, in any event, unless expressly otherwise provided in
this Lease, any liability for a payment which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this Lease.
<PAGE>
EXHIBIT G
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this __ day of _______,
199__, by and among _______________________________________ ("Tenant") and NEW
YORK LIFE INSURANCE COMPANY, a New York mutual insurance company [NEW YORK LIFE
INSURANCE AND ANNUITY CORPORATION, a Delaware corporation] ("Lender"), whose
principal address is 51 Madison Avenue, New York, New York, and THORNALL
ASSOCIATES, L.P. ("Landlord").
RECITALS:
A. Lender has made a mortgage loan (the "Loan") to Landlord in the amount
of $36,000,000 secured by a mortgage (the "Mortgage") on the real property
legally described in Exhibit "A" attached hereto (the "Premises");
B. Tenant is the present lessee under a lease dated _____________________
made by Landlord demising a portion of the Premises and other property (said
lease and all amendments thereto being referred to as the "Lease");
C. The Loan terms require that Tenant subordinate the Lease and its
interest in the Premises in all respects to the lien of the Mortgage and that
Tenant attorn to Lender; and
D. In return, Lender is agreeable to not disturbing Tenant's possession of
the portion of the Premises covered by the Lease (the "Demised Premises"), so
long as Tenant is not in default under the Lease.
NOW THEREFORE, in consideration for the mutual covenants contained herein
and other consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENTS:
1. Subordination. The Lease, and the rights of Tenant in, to and under the
Lease and the Demised Premises, are hereby subjected and subordinated to the
lien of the Mortgage and to any modification, reinstatement, extension,
supplement, consolidation or replacement thereof as well as any advances or
re-advances with interest thereon and to any mortgages or deeds trust on the
Premises which may hereafter be held by Lender.
<PAGE>
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2. Tenant Not to be Disturbed. In the event it should become necessary to
foreclose the Mortgage or Lender should otherwise come into possession of title
to the Premises, Lender will not join Tenant in summary or foreclosure
proceedings unless required by law in order to obtain jurisdiction, but in such
event no judgment foreclosing the Lease will be sought, and Lender will not
disturb the use and occupancy of Tenant under the Lease so long as Tenant is not
in default under any of the terms, covenants or conditions of the Lease and has
not prepaid the rent except monthly in advance as provided by the terms of the
Lease.
3. Tenant to Attorn to Lender. Tenant agrees that in the event any
proceedings are brought for foreclosure of the Mortgage, it will attorn to the
purchaser as the landlord under the Lease. The purchaser by virtue of such
foreclosure shall be deemed to have assumed and agreed to be bound, as
substitute landlord, by the terms and conditions of the Lease until the resale
or other disposition of its interest by such purchaser, except that such
assumption shall not be deemed of itself an acknowledgment by such purchaser of
the validity of any then existing claims of Tenant against any prior landlord
(including Landlord). All rights and obligations under the Lease shall continue
as though such foreclosure proceedings had not been brought, except as
aforesaid. Tenant agrees to execute and deliver to any such purchaser such
further assurance and other documents, including a new lease upon the same terms
and conditions of the Lease, confirming the foregoing as such purchaser may
reasonably request. Tenant waives the provisions (i) contained in the Lease or
any other agreement relating thereto and (ii) of any statute or rule of law now
or hereafter in effect which may give or purport to give it any right or
election to terminate or otherwise adversely affect the Lease and the
obligations of Tenant thereunder by reason of any foreclosure proceeding.
4. Limitations. Notwithstanding the foregoing, neither Lender nor such
other purchaser shall in any event be:
(a) liable for any act or omission of any prior landlord (including
Landlord);
(b) obligated to cure any defaults of any prior landlord (including
Landlord) which occurred prior to the time that Lender or such other purchaser
succeeded to the interest of such prior landlord under the Lease;
(c) subject to any offsets or defenses which Tenant may be entitled to
assert against any prior landlord (including landlord);
(d) bound by any payment of rent or additional rent by Tenant to any prior
landlord (including Landlord) for more than one month in advance;
(e) bound by any amendment or modification of the Lease made without the
written consent of Lender or such other purchaser; or
<PAGE>
-3-
(f) liable or responsible for, or with respect to, the retention,
application and/or return to Tenant of any security deposit paid to any prior
landlord (including Landlord), whether or not still held by such prior landlord,
unless and until Lender or such other purchaser has actually received for its
own account as landlord the full amount of such security deposit.
5. Acknowledgment of Assignment of Lease and Rent. Tenant acknowledges
that it has notice that the Lease and the rent and all other sums due thereunder
have been assigned or are to be assigned to Lender as security for the Loan
secured by the Mortgage. In the event that Lender notifies Tenant of a default
under the Mortgage and demands that Tenant pay its rent and all other sums due
under the Lease to Lender, Tenant agrees that it will honor such demand and pay
its rent and all other sums due under the Lease directly to Lender or as
otherwise required pursuant to such notice.
6. Limited Liability. Tenant acknowledges that in all events, the
liability of Lender and any purchaser shall be limited and restricted to their
interest in the Premises and shall in no event exceed such interest.
7. Lender's Right to Notice of Default and Motion to Cure: Tenant will
give written notice to Lender of any default by Landlord under the Lease by
mailing a copy of the same by certified mail, postage prepaid, addressed as
follows (or to such other address as may be specified from time to time by
Lender to Tenant):
To Lender: New York Life Insurance Company
[New York Life Insurance and Annuity Corporation]
51 Madison Avenue
New York, NY 10010
Attn: Senior Vice President
Mortgage Finance Department
Upon such notice, Lender shall be permitted and shall have the option, in its
sole and absolute discretion, to cure any such default during the period of time
during which the Landlord would be permitted to cure such default, but in any
event, Lender shall have a period of thirty (30) days after the receipt of such
notification to cure such default, provided, however, that in the event Lender
is unable to cure the default by exercise of reasonable diligence within such 30
day period, Lender shall have such additional period of time as may be
reasonably required to remedy such default with reasonable dispatch.
Tenant waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give it any right or election to terminate
or otherwise adversely affect the Lease and the obligations of Tenant thereunder
in connection with any foreclosure proceedings.
<PAGE>
-4-
8. Successors and Assigns. The provisions of this Agreement are binding
upon and shall inure to the benefit of the heirs, successors and assigns of the
parties hereof.
IN WITNESS WHEREOF, the parties hereto have executed these presents the
day and year first above written;
WITNESSED: TENANT:
______________________________________
_______________________________ By:___________________________________
Name:_________________________________
_______________________________ Title:________________________________
LENDER:
NEW YORK LIFE INSURANCE COMPANY
[NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION]
_______________________________ By:___________________________________
Name:_________________________________
Title:________________________________
_______________________________
The terms of the above Agreement are hereby consented, agreed to and
acknowledged.
LANDLORD:
THORNALL ASSOCIATES, L.P.
_______________________________ By:___________________________________
Name: Michael Alfieri
_______________________________ Title: Partner
<PAGE>
EXHIBIT C
Tenant's Plans and Specifications
18
<PAGE>
Exhibit 10.8
LEASE AGREEMENT
BETWEEN
METRO FOUR ASSOCIATES LIMITED PARTNERSHIP,
AS LANDLORD
-AND-
SYSTEMS CONSULTING COMPANY, INC.,
AS TENANT
PREMISES: 379 THORNALL STREET EDISON, NEW JERSEY
PORTION OF 7TH FLOOR
DATED: SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX
ARTICLE CAPTION PAGE
1 Demised Premises, Term, Rent ................................... 1
2 Use ............................................................ 3
3 Preparation of the Demised Premises ............................ 3
4 When Demised Premises Ready for Occupancy ...................... 4
5 Additional Rent ................................................ 5
6 Subordination, Notice to Lessors and Mortgagees ................ 9
7 Quiet Enjoyment ................................................ 10
8 Assignment, Mortgaging, Subletting ............................. 10
9 Compliance with Laws and Requirements of Public Authorities .... 12
10 Insurance ...................................................... 13
11 Rules and Regulations .......................................... 15
12 Tenant's Changes ............................................... 15
13 Tenant's Property .............................................. 18
14 Repairs and Maintenance ........................................ 19
15 Electricity .................................................... 20
16 Heating, Ventilation and Air-Conditioning ...................... 21
17 Landlord's Other Services ...................................... 22
18 Access, Changes in Building Facilities, Name ................... 24
19 Notices of Accidents ........................................... 25
20 Non-Liability and Indemnification .............................. 25
(i)
<PAGE>
ARTICLE CAPTION PAGE
21 Destruction or Damage .......................................... 26
22 Eminent Domain ................................................. 28
23 Surrender ...................................................... 29
24 Conditions of Limitation ....................................... 30
25 Re-Entry by Landlord ........................................... 32
26 Damages ........................................................ 32
27 Waivers ........................................................ 34
28 No Other Waivers or Modifications .............................. 35
29 Curing Tenant's Defaults ....................................... 35
30 Broker ......................................................... 36
31 Notices ........................................................ 36
32 Estoppel Certificate ........................................... 37
33 Arbitration .................................................... 37
34 No Other Representations, Construction, Governing Law .......... 38
35 Security ....................................................... 39
36 Parties Bound .................................................. 39
37 Consents ....................................................... 40
38 Mortgage Financing - Tenant Cooperation ........................ 40
39 Environmental Compliance ....................................... 41
40 Holding Over ................................................... 42
41 Certain Definitions & Constructions ............................ 42
(ii)
<PAGE>
ARTICLE CAPTION PAGE
42 Relocation of Tenant ........................................... 42
43 Option to Renew ................................................ 42
44 Option to Recapture and Redesign the Common Area ............... 44
EXHIBIT A - Description of Land
EXHIBIT B - Floor Plan
EXHIBIT C - Separate Workletter
EXHIBIT D - Cleaning and Maintenance Specifications
EXHIBIT E - Rules and Regulations
EXHIBIT F - Definitions
EXHIBIT G - Non-Disturbance Agreement
(iii)
<PAGE>
LEASE, dated September 30, 1998, between METRO FOUR ASSOCIATES LIMITED
PARTNERSHIP, a New Jersey Limited Partnership, c/o Alfieri Property Management,
having its principal office located at 399 Thornall Street, P.O. Box 2911,
Edison, New Jersey 08818-2911, ("Landlord"), and SYSTEMS CONSULTING COMPANY,
INC., a Delaware Corporation, having its principal office located at 537
Congress Street, Portland, Maine 04101, ("Tenant").
WITNESSETH:
ARTICLE 1
DEMISED PREMISES, TERM, RENT
1.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the premises hereinafter described, in the building located at 379
Thornall Street, Edison, New Jersey ("Building") on the parcel of land more
particularly described in Exhibit A ("Land"), for the term hereinafter stated,
for the rents hereinafter reserved and upon and subject to the conditions
(including limitations, restrictions and reservations) and covenants hereinafter
provided. Each party hereby expressly covenants and agrees to observe and
perform all of the conditions and covenants herein contained on its part to be
observed and performed.
1.02. The premises hereby leased to Tenant is a portion of the 7th
floor of the Building, as shown on the floor plans annexed hereto as Exhibit B.
Said premises, together with all fixtures and equipment which at the
commencement, or during the term of this Lease are thereto attached (except
items not deemed to be included therein and removable by Tenant as provided in
Article 13) constitute the "Demised Premises". Landlord and Tenant have mutually
agreed that the Demised Premises leased has a rentable area of 6,002 square
feet, and such rentable square footage of the Demised Premises is comprised of
the usable square footage of the Demised Premises plus a common area add-on
factor which common area add-on factor incorporates Tenant's non-exclusive
right, together with other tenants of the Building and the building known as 399
Thornall Street, Edison, New Jersey, to use the lobbies, elevators, sidewalks,
public areas, hallways, parking deck, the atrium area and other public and
service areas affecting the Building and 399 Thornall Street. The common area
add-on factor does not incorporate any of the common areas in the definition of
the Demised Premises.
1.03. The term of this Lease, for which the Demised Premises are
hereby leased, shall commence on a date ("Commencement Date") which shall be (i)
the day on which the Demised Premises are ready for occupancy (as defined in
Article 4) or (ii) the day Tenant, or anyone claiming under or through Tenant,
first occupies the Demised Premises for business, whichever occurs earlier, and
shall end at noon on the last day of the calendar month in which occurs the day
preceding the fifth (5th) anniversary of the Commencement Date, which ending
date is hereinafter called the "Expiration Date", or shall end on such earlier
date upon which said term may expire or be canceled or terminated pursuant to
any of the conditions or covenants of
1
<PAGE>
this Lease or pursuant to law. Promptly following the Commencement Date, the
Landlord shall notify Tenant in writing of the Commencement Date and the
Expiration Date as determined in accordance with this Section. In the event
Landlord does not deliver the Demised Premises on or before six (6) months from
the execution date hereof Tenant may terminate this Lease upon two (2) weeks
notice unless Landlord has completed the Demised Premises within such two (2)
week period.
1.04. The rents reserved under this Lease, for the term thereof,
shall be and consist of
(a) Fixed rent of $150,050.00 per year, (calculated on the
basis of $25.00/sq. ft. for 6,002 sq. ft. of rentable area) which shall be
payable in equal monthly installments of $12,504.17 in advance on the first day
of each and every calendar month during the term of this Lease, (except Tenant
shall pay, upon execution and delivery of this Lease by Tenant, the sum of
$12,504.17 to be applied against the first monthly installment or installments
of fixed rent becoming due under this Lease) and
(b) Additional rent consisting of all such other sums of money
as shall become due from and payable by Tenant to Landlord hereunder (for
default in payment of which Landlord shall have the same remedies as for a
default in payment of fixed rent),
all to be paid to Landlord at its office, or such other place, or to such agent
at such place, as Landlord may designate by notice to Tenant, in lawful money of
the United States of America.
1.05. Tenant shall pay the fixed rent and additional rent herein
reserved promptly as and when the same shall become due and payable, without
demand therefor and without any abatement, deduction or setoff whatsoever other
than such abatements, deductions or setoffs allowed under this Lease.
1.06. If the Commencement Date occurs on a day other than the first
day of a calendar month, the fixed rent for such calendar month shall be
prorated and the balance of the first month's fixed rent theretofore paid shall
be credited against the next monthly installment of fixed rent.
1.07. Late payments of any payment of rent, including monthly rent
or any portion thereof, which is not received within ten (10) days after it is
due, will be subject to a late charge equal to five percent (5%) of the unpaid
payment, or $100.00, whichever is greater. This amount is in compensation of
Landlord's additional cost of processing late payments. In addition, any rent
which is not paid when due, including monthly rent, will accrue interest at a
late rate charge of First Union Prime Rate plus three percent (3%) per annum, as
said rate is reasonably determined by Landlord from published reports, (but in
no event in an amount in excess of the maximum rate allowed by applicable law)
from the date on which it was due until the date on which it is paid in full
with accrued interest. If Tenant is in default of the Lease for failure to pay
rent, in addition to the late charges and interest set forth above, Tenant shall
be charged with all attorney fees in connection with the collection of all sums
due Landlord.
2
<PAGE>
ARTICLE 2
USE
2.01. Tenant shall use and occupy the Demised Premises for executive
and general offices for the transaction of Tenant's business and for no other
purpose.
2.02. The use of the Demised Premises for the purposes specified in
Section 2.01 shall not include, and Tenant shall not use or permit the use of
the Demised Premises or any part thereof, for:
(a) A school of any kind other than for the training of
Tenant's employees;
(b) An employment agency; or
(c) An office for any governmental or quasi governmental
bureau, department, agency, foreign or domestic, including any autonomous
governmental corporation or diplomatic or trade mission.
(d) Any telemarketing activities or other direct selling
activities, however, Landlord recognizes that Tenant is currently in the
business of designing and selling software and intends to use the Demised
Premises for sales and training activities including telesales to promote the
business of the company which are permitted uses provided such usage does not
violate (e) below; or
(e) Any use, including executive and general office use, which
results in a density of a population of more than one person for every 250
square feet.
2.03. 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 and if failure to
secure such license or permit would in any way affect Landlord, Tenant, at its
expense, shall submit the same to inspection by Landlord. Tenant shall at all
times comply with the terms and conditions of each such license or permit.
2.04. Tenant shall not at any time use or occupy, or do or permit
anything to be done in the Demised Premises, in violation of the Certificate of
Occupancy (or other similar municipal ordinance) governing the use and
occupation of the Demised Premises or for the Building.
ARTICLE 3
PREPARATION OF THE DEMISED PREMISES
3.01. The Demised Premises shall be completed and prepared for
Tenant's occupancy in the manner, and subject to the terms, conditions and
covenants, set forth in Exhibit
3
<PAGE>
C. The facilities, materials, and work so to be furnished, installed, and
performed in the Demised Premises by Landlord at its expense are hereinafter and
in Exhibit C referred to as "Landlord's Work". Such other installations,
materials, and work which may be undertaken by or for the account of Tenant to
equip, decorate, and furnish the Demised Premises for Tenant's occupancy,
commonly called finishing trades work, are hereinafter and in Exhibit C called
"Tenant's Finish Work." After review and completion of the final construction
drawings, Landlord reserves the right to notify Tenant of any restoration Tenant
shall be responsible for upon the termination of this Lease. In any event,
Tenant shall remove from the Demised Premises all equipment comprising Tenant's
Voice, Data and Security Systems, including associated outlets, wires, wiring
trays and other equipment, materials and facilities, whether located in the
ceiling, floor and/or walls which in any way relates, pertains to, constitutes
or is connected with Tenant's Voice, Data and/or Security Systems and regardless
of whether Landlord or Tenant installed and/or paid for the installation of such
systems.
ARTICLE 4
WHEN DEMISED PREMISES READY FOR OCCUPANCY
4.01. The Demised Premises shall be deemed ready for occupancy on
the earliest date on which all of the following conditions have been met:
(a) A Certificate of Occupancy (temporary or final) has been
issued by the applicable governmental authorities, permitting Tenant's use of
the Demised Premises for the purposes for which the same have been leased. If a
temporary Certificate of Occupancy is obtained, Landlord shall still be
obligated to promptly obtain and furnish to Tenant a permanent Certificate of
Occupancy.
(b) Landlord's Work, and so much of Tenant's Finish Work as
Landlord shall have undertaken in accordance with Exhibit C or by separate
letter agreement, in the Demised Premises have been substantially completed, and
same shall be so deemed notwithstanding the fact that minor or insubstantial
details of construction, mechanical adjustment, or decoration or special Finish
Work requested by Tenant, such as cabinetry remain to be performed, the
non-completion of which does not materially interfere with Tenant's use of the
Demised Premises.
(c) Reasonable means of access and facilities necessary to
Tenant's use and occupancy of the Demised Premises, including corridors,
elevators and stairways, and heating ventilating, air conditioning, sanitary,
water, and electrical facilities, have been installed and are in reasonably good
operating order and available to Tenant.
4.02. If making the Demised Premises ready for occupancy shall be
delayed by any act or omission of Tenant or any of its employees, agents or
contractors or any failure (not due to any act or omission of Landlord or any of
its employees, agents or contractors) to plan or execute Tenant's Finish Work
diligently or by reason of Tenant's failure to submit Tenant's plans and
specifications in the manner set forth in this Lease, the Demised Premises shall
be deemed ready for occupancy on the date when they would have been ready but
for such delay.
4
<PAGE>
4.03. If and when Tenant shall take actual possession of the Demised
Premises, it shall be conclusively presumed that the same were in satisfactory
condition (except for latent defects) as of the date of such taking of
possession, unless within ninety (90) days after such date Tenant shall give
Landlord notice specifying the respects in which the Demised Premises were not
in satisfactory condition.
ARTICLE 5
ADDITIONAL RENT
5.01. For the purpose of Sections 5.01 through 5.03.
(a) "Taxes" shall mean real estate taxes, special and
extraordinary assessments and governmental levies against the Land and Building
of which the Demised Premises (but excluding therefrom that portion of the real
estate taxes directly attributable to improvements made by other tenants in the
Building beyond Landlord's allowances) are a part provided, however, if at any
time during the term of this Lease the method of taxation prevailing at the date
of this Lease shall be altered so that in lieu of or as an addition to, or as a
substitute for any or all of the above there shall be assessed, levied or
imposed (i) a tax, assessment, levy, imposition or charge based on the income or
rents received therefrom whether or not wholly or partially as a capital levy or
otherwise; or (ii) a tax, assessment, levy, imposition or charge measured by or
based in whole or in part upon all or any part of the Land and/or Building and
imposed upon Landlord; or (iii) a license fee measured by the rents; or (iv) any
other tax, assessment, levy, imposition, charge or license fee however described
or imposed, then all such taxes, assessments, levies, impositions, charges or
license fees or the part thereof so measured or based shall be included in the
definition of "Taxes." Tenant shall pay to Landlord directly that portion of any
real estate taxes directly attributable to improvements made by Tenant beyond
Landlord's allowances (hereinafter referred to as "Tenant's Direct Tax
Payment").
(b) "Base Taxes" shall mean the assessed valuation of the Land
and Building as finally determined following completion of construction and
issuance of an initial Certificate of Occupancy for any portion of the Building
(or such equivalent certification if Certificates of Occupancy are not to be
used), multiplied by the tax rate for the Tax Year 1999.
(c) "Tax Year" shall mean each calendar year for which Taxes
are levied by any governmental authority.
(d) "Operational Year" shall mean each calendar year
commencing with calendar year 2000.
(e) "Tenant's Proportionate Share of Increase" shall mean
1.88% multiplied by the increase in Taxes in any Operational Year in excess of
the Base Taxes. Tenant's Proportionate Share of Increase for the first
Operational Year shall be prorated to reflect the actual occupancy by Tenant for
said Operational Year.
5
<PAGE>
(f) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase in Taxes for the projected Operational Year
divided by twelve (12) and payable monthly by Tenant to Landlord as additional
rent.
5.02. Commencing with the first Operational Year and thereafter,
Tenant shall pay to Landlord as additional rent for the then Operational Year,
Tenant's Projected Share of Increase in Taxes in equal monthly installments.
5.03. After the expiration of each Operational Year, Landlord shall
furnish to Tenant a written statement of the Taxes incurred for such Operational
Year as well as Tenant's Proportionate Share of Increase, if any. If the
statement furnished by Landlord to Tenant pursuant to this Section at the end of
the then Operational Year shall indicate that Tenant's Projected Share of
Increase exceeded Tenant's Proportionate Share of Increase, Landlord shall
either pay the amount of excess directly to Tenant within twenty (20) days of
Tenant's receipt of the statement or credit same against Tenant's next monthly
installment of rent. If such statement furnished by Landlord to Tenant shall
indicate that the Tenant's Proportionate Share of Increase exceeded Tenant's
Projected Share of Increase for the then Operational Year, Tenant shall pay,
within twenty (20) days after receipt of such statement, the amount of such
excess to Landlord.
Commencing with the first Operational Year, Tenant shall pay to
Landlord in equal monthly installments together with its payment of fixed rent
one-twelfth (1/12) of Tenant's Direct Tax Payment.
5.04. As used in Sections 5.04 through 5.06:
(a) "Operating Expenses" shall mean any or all expenses
incurred by Landlord in connection with the operation of the Land and Building
of which the Demised Premises are a part, including all expenses incurred as a
result of Landlord's compliance with any of its obligations hereunder other than
Landlord's Work and such expenses shall include: (i) salaries, wages, medical,
surgical and general welfare benefits, (including group life insurance) and
pension payments of employees of Landlord engaged in the operation and
maintenance of the Building; (ii) social security, unemployment, and payroll
taxes, workers' compensation, disability coverage, uniforms, and dry cleaning
for the employees referred to in Subsection (i); (iii) the cost for the Building
and common areas of all charges for oil, gas, electricity (including, but not
limited to, fuel cost adjustments), steam, heat, ventilation, air-conditioning,
heating, and water including any taxes on any such utilities, but excluding from
Operating Expenses the Landlord's cost, including taxes thereon, of electric
energy, other than for heating and air-conditioning, furnished to the Demised
Premises (which electric energy so furnished shall be paid for by Tenant
pursuant to the provisions of Article 15 hereof); (iv) the cost of all premiums
and charges for the following insurances: rent, casualty, liability, fidelity
and war risk (if obtainable from the United States Government); (v) the cost of
all building and cleaning supplies for the common areas of the Building and
charges for telephone for the Building; (vi) the cost of all charges for
management, window cleaning, security services, if any, and janitorial services,
and any independent contractor performing work included within the definition of
operating expenses; (vii) legal and accounting services and other professional
fees and disbursements incurred in connection with the operation and management
of the Land and Building (other than as related to new leases, enforcing
6
<PAGE>
Landlord's rights under existing leases, or sales of the Building); (viii)
general maintenance of the Building and the cost of maintaining and replacing
the landscaping; (ix) maintenance of the common area; and (x) the cost of only
those capital expenditures, including the purchase of any item of capital
equipment or the leasing of capital equipment which have the effect of reducing
the expenses which would otherwise be included in Operating Expenses, which
costs shall be included in Operating Expenses for the Operational Year in which
the costs are incurred and subsequent Operational Years on a straight-line
basis, to the extent that such items are amortized over such period of time as
Landlord reasonably estimates, with an interest factor equal to the interest
rate at the time of Landlord's having made said expenditure.
If during all or part of any Base Year or Operational
Year, Landlord shall not furnish any particular item(s) of work or service
(which would otherwise constitute an Operating Expense hereunder) to portions of
the Building due to the fact that (i) such portions are not occupied or leased;
(ii) such items of work or service is not required or desired by the tenant of
such portion; (iii) such tenant is itself obtaining and providing such item of
work or service; or (iv) for other reasons, then, for the purposes of computing
Operating Expenses, the amount for such item and for such period shall be deemed
to be increased by an amount equal to the additional costs and expenses which
would reasonably have been incurred during such period by Landlord if it had at
its own expense furnished such item of work or services to such portion of the
Building or such tenant.
Notwithstanding the foregoing, the following costs and
expenses shall not be included in Operating Expenses:
(1) Executives' salaries above the grade of building
manager;
(2) Amounts received by Landlord through proceeds of
insurance except to the extent they are compensation for sums previously
included in Operating Expenses hereunder;
(3) Cost of repairs or replacements incurred by reason
of fire or other casualty or condemnation to the extent Landlord is compensated
therefor or would have been compensated if Landlord had carried insurance
required under this Lease;
(4) Advertising and promotional expenditures;
(5) Costs incurred in performing work or furnishing
services for any tenant (including Tenant), whether at such tenant's or
Landlord's expense, to the extent that such work or service is in excess of any
work or service that Landlord is obligated to furnish to tenant at Landlord's
expense;
(6) Depreciation, except as provided above;
(7) Brokerage commissions;
(8) Taxes (as hereinbefore defined);
7
<PAGE>
(9) The cost of electricity (for other than heating and
air-conditioning) furnished to the Demised Premises or any other space leased to
tenants as reasonably estimated by Landlord; and
(10) Refinancing costs and mortgage interest and
amortization payments.
(b) "Operational Year" shall mean each calendar year
commencing with calendar year 2000.
(c) "Base Year" shall mean calendar year 1999.
(d) "Tenant's Proportionate Share of Increase" shall mean
1.88% multiplied by the increase in Operating Expenses for the Operational Year
over Operating Expenses for the Base Year. For purposes hereof the Tenant's
Proportionate Share of Increase has been computed based upon a total square
footage of the Building equal to 320,000 square feet, and a total square footage
of the Demised Premises equal to 6,002 square feet.
(e) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase for the projected Operational Year divided by
twelve (12) and payable monthly by Tenant to Landlord as additional rent.
5.05. Commencing with the first Operational Year after Landlord
shall be entitled to receive Tenant's Proportionate Share of Increase, Tenant
shall pay to Landlord as additional rent for the then Operational Year, Tenant's
Projected Share of Increase.
5.06. As soon as practicable, after the expiration of the first
Operational Year and, as soon as practicable for each Operational Year
thereafter, Landlord shall furnish to Tenant a written detailed statement of the
Operating Expenses (certified to be true and correct by Landlord) incurred for
such Operational Year which statement shall set forth Tenant's Proportionate
Share of Increase, if any. If the statement furnished by Landlord to Tenant,
pursuant to this Section, at the end of the then Operational Year shall indicate
that Tenant's Projected Share of Increase exceeded Tenant's Proportionate Share
of Increase, Landlord shall either forthwith pay the amount of excess directly
to Tenant concurrently with the statement or credit same against Tenant's next
monthly installment of rent. If such statement furnished by Landlord to Tenant
hereunder shall indicate that the Tenant's Proportionate Share of Increase
exceeded Tenant's Projected Share of Increase for the then Operational Year,
Tenant shall forthwith pay the amount of such excess to Landlord.
5.07. Every statement given by Landlord pursuant to Sections 5.03
and 5.06 shall be conclusive and binding upon Tenant unless (i) within ninety
(90) days after the receipt of such statement Tenant shall notify Landlord that
it disputes the correctness of the statement, specifying the particular respects
in which the statement is claimed to be incorrect; and (ii) if such dispute
shall not have been settled by agreement, shall submit the dispute to judicial
proceedings within ninety (90) days after receipt of the statement. Within such
90 day period Tenant shall
8
<PAGE>
have the right to review, examine and audit Landlord's books and records for the
applicable calendar year. Tenant agrees that it and its representatives shall
conduct a review with complete confidentiality and shall enter into a reasonable
confidentiality agreement with Landlord respecting the review, examination and
audit. Pending the determination of such dispute by agreement or judicial
proceedings as aforesaid, Tenant shall, within thirty (30) days after receipt of
such statement, pay additional rent in accordance with Landlord's statement and
such payment shall be without prejudice to Tenant's position. If the dispute
shall be determined in Tenant's favor, Landlord shall forthwith pay Tenant the
amount of Tenant's overpayment of rents resulting from compliance with
Landlord's statement. If after judicial proceeding it is determined that
Landlord's Operating Statements vary by more than five percent (5%), then
Landlord shall reimburse Tenant for Tenant's reasonable costs for payment of an
auditor or accountant. If the variance proves less than three (3%) greater than
Landlord's records, Tenant shall reimburse Landlord for Landlord's auditor or
accountant.
ARTICLE 6
SUBORDINATION, NOTICE TO LESSORS AND MORTGAGEES
6.01. This Lease, and all rights of Tenant hereunder are and shall
be subject and subordinate in all respects to all mortgages which may now or
hereafter affect the Land and/or the Building, whether or not such mortgages
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 mortgages and spreaders and consolidations
of such mortgages. This Section shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver an instrument that
Landlord, the lessor of any such lease or the holder of any such mortgage or any
of their respective successors in interest may reasonably request to evidence
such subordination. The mortgages to which this Lease is, at the time referred
to, subject and subordinate are hereinafter sometimes called "superior
mortgages" and the holder of a superior mortgage or its successor in interest at
the time referred to is sometimes hereinafter called a "superior mortgagee."
6.02. Landlord shall make a good faith effort to obtain from the
existing Mortgagee a Subordination, Non-Disturbance and Attornment Agreement
(the "Non-Disturbance Agreement") in favor of Tenant utilizing such Mortgagee's
standard form. With respect to the existing mortgage, such Mortgagee's
Non-Disturbance Agreement form is attached as Exhibit G. If Tenant fails to
accept the Non-Disturbance Agreement as described in Exhibit G attached, it
shall be considered that Landlord has satisfied any requirement respecting the
existing Mortgagee. As to any future mortgagee, Landlord agrees that it shall
use its best efforts to obtain a similar Non-Disturbance Agreement which Tenant
shall accept as a condition to a future subordination by Tenant under Section
6.01.
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ARTICLE 7
QUIET ENJOYMENT
7.01. So long as Tenant pays all of the fixed rent and additional
rent due hereunder and performs all of Tenant's other obligations hereunder,
Tenant shall peaceably and quietly have, hold, and enjoy the Demised Premises
subject, nevertheless, to the obligations of this Lease and, as provided in
Article 6, to the superior leases and the superior mortgages.
ARTICLE 8
ASSIGNMENT, MORTGAGING, SUBLETTING
8.01. Neither this Lease, nor the term and estate hereby granted,
nor any part hereof or thereof nor the interest of Tenant in any sublease, or
the rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, and neither the Demised Premises, nor any part
thereof shall be encumbered in any manner by reason of any act or omission on
the part of Tenant or anyone claiming under or through Tenant or shall be
sublet, or offered or advertised for subletting, or be used or occupied or
permitted to be used or occupied, or utilized for desk space or for mailing
privileges, by anyone other than Tenant or for any purpose other than as
permitted by this Lease, without the prior written consent of Landlord in every
case, except as expressly otherwise provided in this Article. Landlord's consent
to a sublease or an assignment of the Demised Premises shall not be unreasonably
withheld. Landlord shall not be deemed unreasonable for the purposes of consent
for a sublease or an assignment if, including but not limited to, Landlord
withholds its consent for any of the following: (i) in Landlord's belief the
sublessee or assignee is known as a non-performing or litigious tenant; (ii) the
sublessee's or assignee's use will burden the parking facilities of the
Building; (iii) the sublessee's or assignee's use will violate any provision of
this Lease; (iv) if such sublessee or assignee is an environmental nuisance; or
(v) if in Landlord discretion the Landlord does not find that the net worth of
such corporation or other entity at the time of the proposed sublease or
assignment is sufficient to support Tenant's obligations under this Lease.
8.02. If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof be sublet or be 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 undertenant or occupant. In either event, Landlord may
apply the net amount collected to the rents herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
any of the provisions of Section 8.01, or the acceptance of the assignee,
undertenant or occupants as Tenant, or a release of Tenant from the further
performance by Tenant of Tenant's obligations under this Lease. The consent by
Landlord to assignment, mortgaging, underletting 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
underletting or use or occupancy by others not expressly permitted by this
Article.
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8.03. The following provisions shall govern in connection with the
subletting of all or a portion of the Demised Premises:
(a) Tenant shall submit in writing to Landlord (i) the name of
the proposed subtenant; (ii) the nature and character of the proposed
subtenant's business, and the intended use to be made of the Demised Premises by
the proposed subtenant; (iii) the terms and conditions of the proposed sublease;
and (iv) such reasonable financial information as Landlord may request regarding
the proposed subtenant.
(b) Within thirty (30) days of Landlord's receipt of the
information described in (a) above, Landlord, at Landlord's election may (i)
elect to sublease the Demised Premises directly from Tenant either upon (x) the
same terms and conditions offered to the proposed subtenant or, (y) upon the
same terms and conditions as set forth in this Lease; or (ii) cancel this Lease
as to that portion of the Demised Premises which Tenant desires to sublease, in
which event Tenant agrees to surrender all of its right, title, and interest
hereunder; or (iii) consent to the subletting on such terms and conditions as
established by Landlord, including Landlord's participation in any rentals
received by Tenant.
(c) As a condition to Landlord's consent, if given under (b)
above, Landlord shall have obtained consent to such proposed subletting by a
superior lessor and/or superior mortgagee, provided such superior lessor and/or
superior mortgagee requires consent to the subletting.
(d) In connection with any subletting, Tenant shall not offer
the Demised Premises, or any part thereof to any other tenant in the Building or
their subsidiaries or affiliates at a rental rate less than the current rental
rate for substantially similar office buildings in the surrounding area.
8.04. Tenant shall remain fully liable for the performance of all
Tenant's obligations hereunder notwithstanding any subletting provided for
herein (except to Landlord), and without limiting the generality of the
foregoing, shall remain fully responsible and liable to Landlord for all acts
and omissions of any subtenant or anyone claiming under or through any subtenant
which shall be in violation of any of the obligations of this Lease and any such
violation shall be deemed to be a violation by Tenant.
8.05. Tenant shall not, without the prior written consent of
Landlord, assign this Lease, and the provisions of Section 8.03 with respect to
subletting shall equally apply to any assignment of this Lease. Tenant herein
named, or any immediate or remote successor in interest of Tenant herein named,
shall remain liable jointly and severally (as a primary obligor) with its
assignee and all subsequent assignees for the performance of Tenant's
obligations hereunder.
8.06. Notwithstanding anything to the contrary contained in this
Article with respect to assignment or subletting, Landlord shall consent to any
assignment and/or subletting (i) to any parent, affiliate or wholly-owned
subsidiary of Tenant (as defined in Rule 240. 12b-2 under the Securities
Exchange Act of 1934) or (ii) to any corporation or other entity which succeeds
to all or substantially all of the assets and business of Tenant.
<PAGE>
8.07. Tenant agrees that in connection with each separate request
for a Landlord's consent to a subletting or assignment, Tenant shall pay to
Landlord the sum of $500.00 representing a reasonable compensation to Landlord
for the administration costs of evaluating and responding to the request.
8.08. Tenant further agrees that it shall not place any signs on the
Land or on the windows located in the Demised Premises indicating that all or
any portion of the Demised Premises are available for subleasing or assignment.
ARTICLE 9
COMPLIANCE WITH LAWS AND REQUIREMENTS
OF PUBLIC AUTHORITIES
9.01. Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of public authority, and at
its expense shall comply with all laws and requirements of public authorities
which shall, with respect to the Demised Premises or the use and occupation
thereof or the abatement of any nuisance, impose any violation, order or duty on
Landlord or Tenant, arising from (i) Tenant's use of the Demised Premises; (ii)
the manner of conduct of Tenant's business or operation of its installation,
equipment or other property therein; (iii) any cause or condition created by or
at the instance of Tenant, other than by Landlord's performance of any work for
or on behalf of Tenant; or (iv) the breach of any of Tenant's obligations
hereunder. Furthermore, Tenant need not comply with any such law or requirement
of public authority so long as Tenant shall be contesting the validity thereof,
or the applicability thereof to the Demised Premises, in accordance with Section
9.02.
Nothing contained herein shall be construed to require Tenant
to make structural alterations to the Building except to the extent that same
are required by reason of Tenant's specific use (other than general office).
9.02. Tenant may, at its expense (and if necessary, in the name of
but without expense to Landlord) contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any law or requirement of public authority, and Landlord shall
cooperate with Tenant in such proceedings provided that:
(a) Tenant shall defend, indemnify, and hold harmless Landlord
against all liability, loss or damage which Landlord shall suffer by reason of
such non-compliance or contest, including reasonable attorney's fees and other
expenses reasonably incurred by Landlord;
(b) Such non-compliance or contest shall not constitute or
result in any violation of any superior lease or superior mortgage, or, if such
superior lease and/or supenor 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
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(c) Tenant shall keep Landlord advised as to the status of
such proceedings.
9.03. Landlord states that, to the best of its knowledge, the
Building complies with Title III of the Americans with Disabilities Act, (the
Act), as the Act applies to existing structures constituting commercial
facilities. Landlord further states that Landlord's Work, as described in
Exhibit C, shall comply with the Act under Title III for existing structures
which are commercial facilities. If, after the Demised Premises are ready for
occupancy in accordance with Article 4, the Act requires further changes to the
Building when occasioned by any other tenant, then such changes shall not be
Tenant's responsibility. If, after the Demised Premises are ready for occupancy,
further changes to the Building, including the Demised Premises, are required by
virtue of the Lease and/or Tenant's use and occupancy, such changes shall be
Tenant's responsibility.
ARTICLE 10
INSURANCE
10.01. Tenant shall not violate, or permit the violation of, any
condition imposed by the all-risk casualty policy issued for the Building and
shall not do anything, or permit anything to be kept, in the Demised Premises
which would increase the fire or other casualty insurance rate on the Building
or the property therein over the rate which would otherwise then be in effect,
(unless Tenant pays the resulting increased amount of premium as provided in
Section 10.02) or which would result in insurance companies of good standing
refusing to insure the Building or any of such property in amounts and at normal
rates reasonably satisfactory to Landlord. However, Tenant shall not be subject
to any liability or obligation under this Article by reason of the proper use of
the Demised Premises for the purposes permitted by Article 2.
10.02. If, by reason of any act or omission on the part of Tenant,
the rate of fire insurance with extended all-risk coverage on the Building or
equipment or other property of Landlord or other tenants shall be higher than it
otherwise would be, Tenant shall reimburse Landlord, on demand, for that part of
the premiums for fire insurance and extended all-risk coverage paid by Landlord
because of such act or omission on the part of Tenant, which sum shall be deemed
to be additional rent and collectible as such.
10.03. In the event that any dispute should arise between Landlord
and Tenant concerning insurance rates, a schedule or "make up" of rates for the
Building or the Demised Premises, as the case may be, issued by the Fire
Insurance Rating Organization of New Jersey or other similar body making rates
for fire insurance and extended coverage for the premises concerned, shall be
presumptive evidence of the facts therein stated and of the several items and
charges in the fire insurance rates with extended coverage then applicable to
such premises.
10.04. Tenant shall obtain and keep in full force and effect during
the term of this Lease, at its own cost and expense, Comprehensive General
Liability Insurance, such insurance to afford protection in an amount of not
less than $1,000,000 for injury or death to any one person, $3,000,000 for
injury or death arising out of any one occurrence, and $1,000,000 for damage to
property, protecting and naming the Landlord, Alfieri Property Management and
the
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Tenant as insured against any and all claims for personal injury, death or
property damage occurring in, upon, adjacent, or connected with the Demised
Premises and any part thereof. Tenant shall name such other insureds associated
with the Building as Landlord reasonably requests. Tenant shall pay all premiums
and charges therefor and upon failure to do so Landlord may, but shall not be
obligated to, make payments, and in such latter event the Tenant agrees to pay
the amount thereof to Landlord on demand and said sum shall be deemed to be
additional rent, and in each instance collectible on the first day of any month
following the date of notice to Tenant in the same manner as though it were rent
originally reserved hereunder, together with interest thereon at the rate of
three points in excess of Prime Rate of the First Union. Tenant will use its
best efforts to include in such Comprehensive General Liability Insurance policy
a provision to the effect that same will be non-cancelable, except upon
reasonable advance written notice to Landlord. The original insurance policies
or appropriate certificates shall be deposited with Landlord together with any
renewals, replacements or endorsements to the end that said insurance shall be
in full force and effect for the benefit of the Landlord during the term of this
Lease. In the event Tenant shall fail to procure and place such insurance, the
Landlord may, but shall not be obligated to, procure and place same, in which
event the amount of the premium paid shall be refunded by Tenant to Landlord
upon demand and shall in each instance be collectible on the first day of the
month or any subsequent month following the date of payment by Landlord, in the
same manner as though said sums were additional rent reserved hereunder together
with interest thereon at the rate of three points in excess of the Prime Rate of
the First Union.
10.05. Landlord and Tenant agree to use their best efforts to
include in each of its insurance policies a waiver of the insurer's right of
subrogation against the other party or if such waiver shall be unobtainable or
unenforceable (a) an express agreement that such policy shall not be invalidated
if the insured waives or has waived before the casualty, the right of recovery
against any party responsible for a casualty covered by the policy or (b) any
other form of permission for the release of the other party. If such waiver,
agreement, or permission shall not be or shall cease to be obtainable without
additional charge, or at all, the insured party shall so notify the other party
after learning thereof. In such a case, if the other party shall agree in
writing to pay the insurer's additional charge therefor, such waiver
agreement or permission shall, if obtainable, be included in the policy.
10.06. Each party hereby releases the other party with respect to
any claim (including a claim for negligence) which it might otherwise have
against the other party for loss, damage, or destruction with respect to its
property (including rental value or business interruption) occurring during the
term of this Lease to the extent to which it is insured under a policy or
policies containing a waiver of subrogation or permission to release liability
or naming the other party as an additional insured, as provided in Sections
10.04 and 10.05. If notwithstanding the recovery of insurance proceeds by either
party for loss, damage or destruction of its property (or rental value or
business interruption) the other party is liable to the first party with respect
thereto or is obligated under this Lease to make replacement, repair, or
restoration or payment, then provided that the first party's right of full
recovery under its insurance policies is not thereby prejudiced or otherwise
adversely affected, the amount of the net proceeds of the first party's
insurance against such loss, damage or destruction shall be offset against the
second party's liability to the first party thereof or shall be made available
to the second party to pay for replacement, repair, or restoration, as the case
may be.
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10.07. The waiver of subrogation or permission for release referred
to in Section 10.05 shall extend to the agents of each party and their employees
and, in the case of Tenant, shall also extend to all other persons and entities
occupying, using or visiting the Demised Premises in accordance with the terms
of this Lease, but only if and to the extent that such waiver or permission can
be obtained without additional charge (unless such party shall pay such charge).
The releases provided for in Section 10.06 shall likewise extend to such agents,
employees and other persons and entities, if and to the extent that such waiver
or permission is effective as to them. Nothing contained in Section 10.06 shall
be deemed to relieve either party of any duty imposed elsewhere in this Lease to
repair, restore or rebuild or to nullify any abatement of rents provided for
elsewhere in this Lease. Except as otherwise provided in Section 10.04, nothing
contained in Sections 10.05 and 10.06 shall be deemed to impose upon either
party any duty to procure or maintain any of the kinds of insurance referred to
therein or any particular amounts or limits of any such kinds of insurance.
However, each party shall advise the other, upon request, from time to time (but
not more often than once a year) of all of the policies of insurance it is
carrying of any of the kinds referred to in Sections 10.01 and 10.04, and if it
shall discontinue any such policy or allow it to lapse, shall notify the other
party thereof with reasonable promptness. The insurance policies referred to in
Sections 10.05 and 10.06 shall be deemed to include policies procured and
maintained by a party for the benefit of its lessor, mortgagee, or pledgee.
ARTICLE 11
RULES AND REGULATIONS
11 .01. Tenant and its employees and agent shall faithfully observe
and comply with the Rules and Regulations annexed hereto as Exhibit E, and such
reasonable changes therein (whether by modification, elimination, or addition)
as Landlord at any time or times hereafter may make and communicate in writing
to Tenant, 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 as originally promulgated or as changed, the provisions of this
Lease shall control.
11.02. Nothing contained in this Lease shall be construed to impose
upon Landlord any duty or obligation to Tenant to enforce the Rules and
Regulations or the terms, covenants, or conditions in any other lease, as
against any other tenant and Landlord shall not be liable to Tenant for
violation of the same by any other tenant or its employees, agents or visitors.
However, Landlord shall not enforce any of the Rules and Regulations in such
manner as to discriminate against Tenant or anyone claiming under or through
Tenant.
ARTICLE 12
TENANT'S CHANGES
12.01. Tenant shall make no changes, alterations, additions,
installations, substitutions, or improvements (hereinafter Collectively called
"changes", and, as applied to changes Provided for in this Article, "Tenant's
Changes") in and to the Demised Premises without
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the express prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed provided the Tenant is not in default of this
Lease.
All proposed Tenant's Changes shall be submitted to Landlord for
written consent at least sixty (60) days prior to the date Tenant intends to
commence such changes, such submission to include all plans and specifications
for the work to be done, proposed scheduling, and the estimated cost of
completion of Tenant's Changes. If Landlord consents to Tenant's Changes, Tenant
may commence and diligently prosecute to completion Tenant's Changes, under the
direct supervision of Landlord. Upon request by Tenant, at the time Landlord
gives its consent to the Tenant Changes, Landlord shall provide Tenant with the
estimated cost of the supervision fee as set forth below.
Tenant shall pay to Landlord a supervision fee (which shall include
the cost of review of the proposed Tenant's Changes) equal to the lesser of the
actual cost of the supervision or ten percent (10%) of the certified cost of
completion of Tenant's Changes. Prior to the commencement of Tenant's Changes,
Tenant shall pay to Landlord ten percent (10%) of the estimated cost of
completion (the "Estimated Payment") as additional rent. Within fifteen (15)
days after completion of Tenant's Changes, Tenant shall furnish Landlord with a
statement, certified by an officer or a principal of Tenant to be accurate and
true, of the total cost of completion of Tenant's Changes (the "Total Cost"). If
such certified statement furnished by Tenant shall indicate that the Estimated
Payment exceeded the lesser of the actual cost of the supervision or ten percent
(10%) of the Total Cost, Landlord shall forthwith either (i) pay the amount of
excess directly to Tenant concurrently with the delivery of the certified
statement or (ii) permit Tenant to credit the amount of such excess against the
subsequent payment of rent due hereunder. If such certified statement furnished
by Tenant shall indicate that the lesser of the actual cost of the supervision
or ten percent (10%) of the Total Cost exceeded Tenant's Estimated Payment,
Tenant shall, simultaneously with the delivery to Landlord of the certified
statement, pay the amount of such excess to Landlord as additional rent. Tenant
shall not be obligated to pay Landlord a supervision fee if Landlord, or one of
its affiliates, is the contractor for the Tenant Changes (any supervision fees
shall be included in the price of the work).
12.02. Notwithstanding the provisions of Section 12.01, all proposed
Tenant's Changes which shall affect or alter:
(a) The outside appearance or the strength of the Building or
of any of its structural parts; or
(b) Any part of the Building outside of the Demised Premises;
or
(c) The mechanical, electrical, sanitary and other service
systems of the Building, or increase the usage of such systems;
shall be performed only by the Landlord, at a cost to be mutually agreed upon
between Landlord and Tenant.
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12.03. Tenant, at its expense, shall obtain all necessary
governmental permits and certificates for the commencement and prosecution of
Tenant's Changes and for final approval thereof upon completion, and shall cause
Tenant's Changes to be performed in compliance therewith and with all applicable
laws and requirements of public authorities, and with all applicable
requirements of insurance bodies, and in good and workmanlike manner, using
materials and equipment at least equal in quality and class to the original
installations in the Building. Tenant's Changes shall be performed in such
manner as not to unreasonably interfere with or delay and (unless Tenant shall
indemnify Landlord therefor to the latter's reasonable satisfaction) as not to
impose any additional expense upon Landlord in the construction, maintenance or
operation of the Building. Throughout the performance of Tenant's Changes,
Tenant, at its expense, shall carry, or cause to be carried, workmen's
compensation insurance in statutory limits and general liability insurance for
any occurrence in or about the Building, in which Landlord and its agents shall
be named as parties insured in such limits as Landlord may reasonably prescribe,
with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord
with reasonably satisfactory evidence that such insurance is in effect at or
before the commencement of Tenant's Changes and, on request, at reasonable
intervals thereafter during the continuance of Tenant's Changes. If any of
Tenant's Changes shall involve the removal of any fixtures, equipment or other
property in the Demised Premises which are not Tenant's Property (as defined in
Article 13), such fixtures, equipment or other property shall be promptly
replaced, at Tenant's expense, with new fixtures, equipment or other property
(as the case may be) of like utility and at least equal value. In addition,
unless Landlord shall otherwise expressly consent in writing, the Tenant shall
deliver such removed fixtures to Landlord.
12.04. Tenant, at its expense, and with diligence and dispatch,
shall procure the cancellation or discharge of all notices of violation arising
from or otherwise connected with Tenant's Changes which shall be issued by any
public authority having or asserting jurisdiction. Tenant shall defend,
indemnify and save harmless Landlord against any and all mechanic's and other
liens filed in connection with Tenant's Changes, including the liens of any
security interest in, conditional sales of or chattel mortgages upon, any
material, fixtures or articles so installed in and constituting part of the
Demised Premises and, against all costs, expenses and liabilities incurred in
connection with any such lien, security interest, conditional sale or chattel
mortgage or any action or proceeding brought thereon. Tenant, at its expense,
shall procure the satisfaction or discharge of all such liens within fifteen
(15) days after Landlord makes written demand therefor. However, nothing herein
contained shall prevent Tenant from contesting, in good faith and at its own
expense, any such notice of violation, provided that Tenant shall comply with
the provisions of Section 9.02.
12.05. Tenant agrees that the exercise of its rights pursuant to the
provisions of this Article 12 shall not be done in a manner which would create
any work stoppage, picketing, labor disruption or dispute or violate Landlord's
union contracts affecting the Land and Building, nor interference with the
business of Landlord or any tenant or occupant of the Building.
12.06. If Landlord requires restoration of all or any part of
Tenant's Changes, Landlord shall advise Tenant of such restoration requirement
at the time Landlord gives its consent to any Tenant Changes. If Landlord fails
to require restoration at the time it gives such consent, then restoration shall
not otherwise be required with respect to such Tenant's Changes.
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ARTICLE 13
TENANT'S PROPERTY
13.01. All fixtures, equipment, improvements, and appurtenances
attached to or built into the Demised Premises at the commencement of or during
the term of this Lease, whether or not by or at the expense of Tenant, shall be
and remain a part of the Demised Premises, shall be deemed the property of
Landlord and shall not be removed by Tenant, except as hereinafter in this
Article expressly provided.
13.02. All 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 permanent structural damage to the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Demised Premises (all of which are sometimes called "Tenant's
Property"), shall be and shall remain the property of Tenant and may be removed
by it at any time during the term of this Lease; provided that if any of
Tenant's Property is removed, Tenant shall repair or pay the cost of repairing
any damage to the Demised Premises or to the Building resulting from such
removal. 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, and shall not be
considered Tenant's Property.
13.03. At or before the Expiration Date, or the date of an earlier
termination of this Lease, or as promptly as practicable after such an earlier
termination date, Tenant at its expense, shall remove from the Demised Premises
all of Tenant's Property except such items thereof as Tenant shall have
expressly agreed in writing with Landlord were to remain and to become the
property of Landlord, and, if requested by Landlord, all items of work done by
or on behalf of Tenant, in accordance with Article 12, after the Commencement
Date shall be removed by Tenant and Tenant shall repair any damage to the
Demised Premises or the Building resulting from such removal. If Tenant fails to
remove its Property and/or otherwise fails to perform any restoration required
of it under this Lease, then Tenant shall be deemed a hold-over Tenant as
contemplated in Article 40. Ninety (90) days prior to the Expiration Date of
this Lease, at the request of Tenant, Landlord shall walk through the Demised
Premises with Tenant and create a punchlist of all restoration which shall be
required to be completed by Tenant by the Expiration Date. Thereafter, Tenant
may request a written estimate from Landlord for the cost of all restoration
required pursuant to this Lease. Failure by Landlord and Tenant to walk through
the Demised Premises or failure by Landlord to provide an estimate of the cost
of the restoration required as set forth above shall not relieve Tenant of any
restoration obligations otherwise required pursuant to this Lease. In lieu of
restoring the Demised Premises as required pursuant to this Lease, Tenant may,
at its option, pay Landlord, prior to the Expiration Date of the Lease, the cost
of such restoration as set forth in Landlord's estimate. Landlord and Tenant
acknowledge that Landlord, prior to the Expiration Date, will notify Tenant of
its restoration obligations and, as a result, notwithstanding the ninety (90)
day time period set forth above, it shall be Tenant's obligation to ensure that
Tenant has enough time after the Landlord and Tenant walk through the
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Demised Premises, if Tenant will be performing such restoration prior to the
Expiration Date of the Lease. If Tenant fails remove its Property and/or fails
to perform any restoration required of it under this Lease and/or fails to pay
Landlord for the cost of any restoration required on or before the last day of
the term of this Lease or upon any earlier termination, Tenant shall be deemed a
hold-over Tenant under Article 40 of this Lease until such time as Tenant has
completed such restoration.
13.04. Any other items of Tenant's Property (except money,
securities, and other like valuables) 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 the Landlord, be deemed to have
been abandoned, and in such case either may be retained by Landlord as its
property or may be disposed of without accountability, in such manner as
Landlord may see fit, at Tenant's expense.
ARTICLE 14
REPAIRS AND MAINTENANCE
14.01. Tenant shall take good care of the Demised Premises. Tenant,
at its expense, shall promptly make all repairs, ordinary or extraordinary,
interior or exterior, structural or otherwise in and about the Demised Premises
and the Building, as shall be required by reason of (i) the performance of
Tenant's Finish Work or Tenant's Changes; (ii) the installation, use or
operation of Tenant's Property in the Demised Premises by Tenant, its agents or
employees; (iii) the moving of Tenant's Property in or out of the Building; or
(iv) the misuse or neglect of Tenant or any of its employees, agents,
contractors or invitees; but Tenant shall not be responsible, and Landlord shall
be responsible, for any of such repairs as are required by reason of Landlord's
neglect or other fault in the manner of performing any of Tenant's Finish Work
or Tenant's Changes which may be undertaken by Landlord for Tenant's account or
are otherwise required by reason of neglect or other fault of Landlord or its
employees, agents, or contractors. Except if required by the neglect or other
fault of Landlord or its employees, agents, or contractors or as a result of
reasonable wear and tear, Tenant, at its expense, shall replace all damaged or
broken doors or other glass in or 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
lighting fixtures therein.
14.02. Landlord, subject to the provisions of Section 5.04, shall
keep and maintain the Building and its fixtures, appurtenances, systems and
facilities serving the Demised Premises, in good working order, condition, and
repair and shall make with all due diligence all repairs, structural and
otherwise, interior and exterior, as and when needed in or about the Demised
Premises, except for those repairs for which Tenant is responsible pursuant to
any other provisions of this Lease.
14.03. Landlord shall have no liability to Tenant by reason of any
inconvenience, annoyance, interruption, or injury to Tenant's business arising
from Landlord's making any repairs 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 or the Demised Premises, or in or to the fixtures, equipment of
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appurtenances of the Building or the Demised Premises, unless Landlord or any of
its employees, agents or contractors was negligent in making such repairs or
changes and provided that Landlord shall use due diligence with respect thereto
and shall perform such work, except in case of emergency, at a time reasonably
convenient to Tenant and otherwise in such a manner as will not materially
interfere with Tenant's use of the Demised Premises.
ARTICLE 15
ELECTRICITY
15.01. Landlord shall furnish the electric energy that Tenant shall
require in the Demised Premises. Tenant shall pay to Landlord, as additional
rent, the costs and charges for all electric energy furnished to Tenant at the
Demised Premises. Additional rent for such electric energy shall be calculated
and payable in the manner hereinafter set forth.
15.02. Within a reasonable time after the commencement of the term
of this Lease, subsequent to Tenant's having taken occupancy of the Demised
Premises and having installed and commenced the use of Tenant's electrical
equipment, Landlord, at Tenant's sole expense, shall cause a survey to be made
by a reputable independent electrical engineer or similar agency of the
estimated use of electric energy (other than for Building standard heat and air
conditioning as described in Exhibit C) to the Demised Premises, and shall
compute the cost thereof for the quantity so determined at prevailing retail
rates. Tenant shall pay Landlord the cost of such electric energy, as so
calculated, on a monthly basis, as additional rent, together with its payment of
fixed rent.
Until such time as Landlord shall complete the aforedescribed
survey, Tenant shall pay to Landlord, each and every month, as additional rent,
for and on account of Tenant's electrical consumption, the sum of $625.21 to be
applied against Tenant's obligations hereunder. Upon completion of the survey,
there shall be an adjustment for the period from the Commencement Date through
the date that the results of the survey shall be effectuated as shall be
required. Landlord shall have the right, at any time, during the term of this
Lease, to cause the Demised Premises to be resurveyed. In the event that such
resurvey shall indicate increased electrical consumption by Tenant at the
Demised Premises, there shall be an adjustment in the amount paid by Tenant to
Landlord for Tenant's electrical consumption in accordance with the resurvey as
well as an adjustment retroactive to the date Landlord establishes Tenant's
increase in electrical consumption in excess of the consumption established by
the prior survey.
Landlord shall submit to Tenant the results of any electrical
survey and the same shall be deemed binding upon Tenant unless Tenant shall
object to same within ninety (90) days of the date that Landlord shall furnish
Tenant with the results of the survey. In the event that Landlord and Tenant
cannot agree upon the results of a survey the same shall be submitted to
arbitration in accordance with Article 33, provided, however, until such time as
the arbitration shall have been concluded, the results of Landlord's survey
shall be utilized for the purposes of determining Tenant's electrical
consumption with an appropriate adjustment to be made based upon the results of
the arbitration.
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15.03. Landlord shall not be liable in any way to Tenant for any
failure or defect in the supply or character of electric energy furnished to the
Demised Premises by reason of any requirement, act, or omission of the public
utility serving the Building with electricity or for any other reason not
attributable to Landlord's negligence or willful misconduct. Landlord shall
furnish and install all replacement lighting tubes, lamps, bulbs, and ballasts
required in the Demised Premises at Tenant's expense.
15.04. 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 electric service, Tenant shall not, without Landlord's prior written
consent in each instance (which shall not be unreasonably withheld), connect any
additional fixtures, appliances, or equipment which would materially affect the
electrical capacity of the Demised Premises, to the Building electrical
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, HVAC equipment or other electrical
equipment required therefor shall be provided by Landlord and the cost of
installation and maintenance thereof shall be paid by Tenant upon Landlord's
demand. As a condition to granting such consent, Landlord, at Tenant's sole
expense, may cause a new survey to be made of the use of electric energy (other
than for Building standard heating and air-conditioning as described in Exhibit
C) in order to calculate the potential additional electric energy to be made
available to Tenant based upon the estimated additional capacity of such
additional risers or other equipment. When the amount of such increase is so
determined, and the estimated cost thereof is calculated, the amount of monthly
additional rent payable pursuant to Section 15.02 hereof shall be adjusted to
reflect the additional cost, and shall be payable as therein provided.
15.05. If the public utility rate schedule for the supply of
electric current to the Building shall be increased during the term of this
Lease, the additional rent payable pursuant to Section .15.02 hereof shall be
equitably adjusted to reflect the resulting increase in Landlord's cost of
furnishing electric service to the Demised Premises effective as of the date of
any increase. Landlord and Tenant agree that the rate charged to Tenant for
electricity shall not be greater than the rate Tenant would have paid had the
Demised Premises been separately metered.
15.06. Tenant agrees within three (3) months from the Commencement
Date to submit to Landlord a list of fixtures and equipment utilizing electric
current including, but not limited to, copying machines, computers and word
processing equipment and equipment of a similar nature. On the first day of each
calendar year thereafter, Tenant shall submit to Landlord a statement indicating
any substantial changes in the list previously supplied as same may be updated
by the required annual statements.
ARTICLE 16
HEATING, VENTILATION AND AIR-CONDITIONING
16.01. Landlord, subject to the provisions of Section 5.04, shall
maintain and operate the heating, ventilating, and air-conditioning systems
(hereinafter called "the systems")
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and shall furnish heat, ventilating, and air conditioning (hereinafter
collectively called "air conditioning service") in the Demised Premises through
the systems, in compliance with the performance specifications set forth in
Exhibit C, as may be required for comfortable occupancy of the Demised Premises
from 8:00 A.M. to 6:00 P.M. Monday through Friday except days observed by the
Federal or the state government as legal holidays ("Regular Hours") throughout
the year. If Tenant shall require air-conditioning service at any other time
(hereinafter called "after hours"), Landlord shall furnish such after hours
air-conditioning service upon reasonable advance notice from Tenant, and Tenant
shall pay Landlord's then established charges therefor on Landlord's demand.
16.02. Use of the Demised Premises, or any part thereof in a manner
exceeding the design conditions (including occupancy and connected electrical
load) specified in Exhibit C for air-conditioning service in the Demised
Premises, or rearrangement of partitioning which interferes with normal
operation of the air-conditioning in the Demised Premises, may require changes
in the air-conditioning system servicing the Demised Premises. Such changes, so
occasioned, shall be made by Landlord, at Tenant's expense, as Tenant's Changes
pursuant to Article 12.
ARTICLE 17
LANDLORD'S OTHER SERVICES
17.01. Landlord, subject to the provisions of Section 5.04, shall
provide public elevator service, passenger and service, by elevators serving the
floor on which the Demised Premises are situated during Regular Hours, and shall
have at least one passenger elevator subject to call at all other times.
17.02. Landlord, subject to the provisions of Section 5.04, shall
cause the Demised Premises, including the exterior and the interior of the
windows thereof to be cleaned. Tenant shall pay to Landlord on demand 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 employees
or visitors; (ii) use of portions of the Demised Premises for preparation,
serving or consumption of food or beverages, data processing, or reproducing
operations, private lavatories or toilets or other special purpose areas
requiring greater or more difficult cleaning work than office areas; (iii)
unusual quantity of interior glass surfaces; (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 so much of any refuse and rubbish
of Tenant as shall exceed that ordinarily accumulated daily in the routine of
business office occupancy. Landlord, its cleaning contractor, and their
employees shall have after-hours access to the Demised Premises and the free use
of light, power, and water in the Demised Premises as reasonably required for
the purpose of cleaning the Demised Premises in accordance with Landlord's
obligations hereunder.
17.03. Landlord, subject to the provisions of Section 5.04, shall
furnish adequate hot and cold water to each floor of the Building for drinking,
lavatory, and cleaning purposes, together with soap, towels, and toilet tissue
for each lavatory. If Tenant uses water for any other purpose, Landlord, at
Tenant's expense, shall install meters to measure Tenant's consumption of
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cold water and/or hot water for such other purposes and/or steam, as the case
may be. Tenant shall pay for the quantities of cold water and hot water shown on
such meters, at Landlord's cost thereof on the rendition of Landlord's bills
therefor,
17.04. Landlord, at its expense, and at Tenant's request, shall
insert initial listings on the Building directory of the names of Tenant, and
the names of any of their officers and employees, provided that the names so
listed shall not take up more than Tenant's proportionate share of the space on
the Building directory. All Building directory changes made at Tenant's request
after the Tenant's initial listings have been placed on the Building directory
shall be made by Landlord at the expense of Tenant, and Tenant agrees to
promptly pay to Landlord as additional rent the cost of such changes within ten
(10) days after Landlord has submitted an invoice therefor.
17.05. Landlord reserves the right, without any liability to Tenant,
to stop service of any of the heating, ventilating, air conditioning, electric,
sanitary, elevator, or other Building systems serving the Demised Premises, or
the rendition of any of the other services required of Landlord under this
Lease, whenever and for so long as may be necessary, by reason of accidents,
emergencies, strikes, or the making of repairs or changes which Landlord is
required by this Lease or by law to make or in good faith deems necessary, by
reason of difficulty in securing proper supplies of fuel, steam, water,
electricity, labor or supplies, or by reason of any other cause beyond
Landlord's reasonable control.
17.06. Landlord shall make available for Tenant's use Tenant's
Proportionate Share of parking spaces in common with other tenants of the
Building in the parking area adjacent to the Building.
17.07. The Building and the Demised Premises shall be cleaned in
accordance with the Cleaning and Maintenance Schedule set forth on Exhibit D
annexed hereto and made a part hereof.
17.08. Tenant acknowledges that as part of the consideration for
this Lease, and in order not to interfere with the rights of other tenants or
other tenants' quiet enjoyment of the common areas of the Building and otherwise
prevent Landlord from performing its services without causing increases to the
cost of such services, Tenant agrees that it shall not permit its employees to
congregate in hallways or elevators, shall not permit its employees to create an
unsightly condition in or about any passageway from the Building or the common
areas or to the parking lot/deck, with regard to smoking, including the disposal
of cigarettes, in the courtyard and/or outer areas adjacent to the Building and
will otherwise require its employees to act and conduct themselves in the common
areas in such a manner as will not disturb other tenants or the use and
enjoyment by other tenants of the Building.
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ARTICLE 18
ACCESS, CHANGES IN BUILDING FACILITIES, NAME
18.01. All walls, windows, and doors bounding the Demised Premises
(including exterior Building walls, core corridor walls and doors, and any core
corridor entrance), except the inside surfaces thereof, 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 room, ducts, electric or
other utilities, sinks or other Building facilities, and the use thereof as well
as access thereto through the Demised Premises for the purposes of operation,
maintenance, decoration, and repair are reserved to Landlord.
18.02. Tenant shall permit Landlord to install, use, and maintain
pipes, ducts, and conduits within the demising walls, bearing columns, and
ceilings of the Demised Premises.
18.03. Landlord or Landlord's agent shall have the right upon
request (except in emergency under clause (ii) hereof) to enter and/or pass
through the Demised Premises or any part thereof at reasonable times during
reasonable hours, (i) to examine the Demised Premises and to show them to the
fee owners, lessors of superior leases, holders of superior mortgages, or
prospective purchasers, mortgagees, or lessees of the Building as an entirety;
and (ii) for the purpose of making such repairs or changes or doing such
repainting in or to the Demised Premises or its facilities, as may be provided
for by this Lease or as may be mutually agreed upon by the parties or as
Landlord may be required to make by law or in order to repair and maintain said
structure or its fixtures or facilities. Landlord shall be allowed to take all
materials into and upon the Demised Premises that may be required for such
repairs, changes, repainting, or maintenance, without liability to Tenant but
Landlord shall not unreasonably interfere with Tenant's use of the Demised
Premises. Landlord shall also have the right to enter on and/or pass through the
Demised Premises, or any part thereof, at such times as such entry shall be
required by circumstances of emergency affecting the Demised Premises or the
Building.
18.04. During the period of six (6) months prior to the Expiration
Date, Landlord may exhibit the Demised Premises to prospective tenants. Landlord
shall provide Tenant with reasonable prior verbal notice of its intent to
exhibit the Demised Premises.
18.05. Landlord reserves the right, at any time after completion of
the Building, without incurring any liability to Tenant therefor, to make such
changes in or to the Building and the fixtures and equipment thereof as well as
in or to the street entrances, halls, passages, elevators, escalators, and
stairways thereof as it may deem necessary or desirable, provided, however, that
such changes shall not reduce the size of the Demised Premises or unreasonably
interfere with Tenant's use of the Demised Premises.
18.06. Landlord may adopt any name for the Building. Landlord
reserves the right to change the name or address of the Building at any time.
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ARTICLE 19
NOTICE OF ACCIDENTS
19.01. Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of (i) any accident in or about the Demised Premises for which
Landlord might be liable; (ii) all fires in the Demised Premises; (iii) all
damage to or defects in the Demised Premises, including the fixtures, equipment,
and appurtenances thereof for the repair of which Landlord might be responsible;
and (iv) all damage to or defects in any parts or appurtenances of the
Building's sanitary, electrical, heating, ventilating, air-conditioning,
elevator, and other systems located in or passing through the Demised Premises
or any part thereof.
ARTICLE 20
NON-LIABILITY AND INDEMNIFICATION
20.01. Neither Landlord nor any agent or employee of Landlord shall
be liable to Tenant for any injury or damage to Tenant or to any other person or
for any damage to, or loss (by theft or otherwise) of any property of Tenant or
of any other person, irrespective of the cause of such injury, damage, or loss,
unless caused by or due to the negligence of Landlord, its agents, or employees
without contributory negligence on the part of Tenant.
20.02. Tenant shall indemnify and save harmless Landlord and its
agents against and from (a) any and all claims (i) arising from (x) the conduct
or management of the Demised Premises or of any business therein, or (y) any
work or thing whatsoever done, or any condition created (other than by Landlord
for Landlord's or Tenant's account) in or about the Demised Premises during the
term of this Lease or during the period of time, if any, prior to the
Commencement Date that Tenant may have been given access to the Demised
Premises, or (ii) arising from any negligent or otherwise wrongful act or
omission of Tenant or any of its subtenants, invitees or licensees or its or
their employees, agents, or contractors, and (b) all costs, expenses, and
liabilities incurred in or in connection with each such claim or action or
proceeding brought thereon. In case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord, shall
resist and defend such action or proceeding.
20.03. Except as otherwise expressly provided in this Lease, this
Lease and the obligations of Tenant hereunder shall be in no way affected,
impaired or excused because Landlord is unable to fulfill, or is delayed in
fulfilling, any of its obligations under this Lease by reason of strike, other
labor trouble, governmental pre-emption or priorities or other controls in
connection with a national or other public emergency or shortages of fuel
supplies or labor resulting therefrom, or other like cause beyond Landlord's
reasonable control.
20.04. Landlord shall indemnify and save harmless Tenant and its
agents against and from (a) any and all claims (i) arising from (x) the conduct
or management of the Building or of any business therein, or (y) any work or
thing whatsoever done, or any condition created (other than by Tenant for
Landlord's or Tenant's account) in or about the Building or the Demised Premises
during the term of this Lease or during the period of time, if any, prior to the
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Commencement Date, or (ii) arising from any negligent or otherwise wrongful act
or omission of Landlord or any of its subtenants, invitees or licensees or its
or their employees, agents, or contractors, and (b) all costs, expenses, and
liabilities incurred in or in connection with each such claim or action or
proceeding brought thereon. In case any action or proceeding be brought against
Tenant by reason of any such claim, Landlord, upon notice from Tenant, shall
resist and defend such action or proceeding.
ARTICLE 21
DESTRUCTION OR DAMAGE
21.01. If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other cause, then whether or not the
damage or destruction shall have resulted from the fault or neglect of Tenant,
or its employees, agents or visitors (and if this Lease shall not have been
terminated as in this Article hereinafter provided), Landlord shall repair the
damage and restore and rebuild the Building and/or the Demised Premises to
substantially the condition thereof at the time of such damage, at its expense,
with reasonable dispatch after notice to it of the damage or destruction;
provided, however, that Landlord shall not be required to repair or replace any
of the Tenant's Property. Any restoration of the Building or the Demised
Premises shall be altered to the extent necessary to comply with current laws
and applicable codes.
21.02. If the Building or the Demised Premises shall be partially
damaged or partially destroyed by fire or other cause not attributable to the
fault or negligence of Tenant, its agents, or employees, the rents payable
hereunder shall be abated to the extent that the Demised Premises shall have
been rendered untenantable and for the period from the date of such damage or
destruction to the date the damage shall be repaired or restored; provided,
however, if the damage shall be attributable to the fault or negligence of
Tenant, its agents or employees, then rent shall continue but shall be reduced
by any amounts received by Landlord pursuant to Landlord's coverage for business
interruption and/or rent insurance attributable to the Demised Premises. If the
Demised Premises or a major part thereof shall be totally (which shall be deemed
to include substantially totally) damaged or destroyed or rendered completely
(which shall be deemed to include substantially completely) untenantable on
account of fire or other cause, the rents shall abate as of the date of the
damage or destruction and until Landlord shall repair, restore, and rebuild the
Building and the Demised Premises, provided, however, that should Tenant
reoccupy a portion of the Demised Premises during the period of restoration work
is taking place and prior to the date that the same are made completely
tenantable, rents allocable to such portion shall be payable by Tenant from the
date of such occupancy.
21.03. If the Building or the Demised Premises shall be totally
damaged or destroyed by fire or other cause, or if the Building shall be so
damaged or destroyed by fire or other cause (whether or not the Demised Premises
are damaged or destroyed) as to require a reasonably estimated expenditure of
more than twenty-five percent (25%) of the full insurable value of the Building
immediately prior to the casualty then in either such case Landlord may
terminate this Lease by giving Tenant notice to such effect within ninety (90)
days after the date of the casualty. If the Building or the Demised Premises
shall be destroyed by fire or other
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casualty so as to render the Demised Premises unusable by Tenant, Landlord shall
deliver to Tenant, as soon as feasible, a written estimate from Landlord's
contractor of the time within which substantial restoration of the Demised
Premises (i.e., substantial completion of the Demised Premises or the portions
thereof in which Landlord has an insurable interest) will occur. If said
contractor reasonably estimates the time as more than six (6) months from the
date Landlord receives all permits necessary to restore the Demised Premises,
Tenant shall have the right to terminate this Lease by written notice to
Landlord within thirty (30) days of Tenant's receipt of the contractor's written
statement otherwise this Lease will remain in full force and effect unless
Landlord elects to demolish the Building. In case of any damage or destruction
mentioned in this Article, Tenant may terminate the Lease by notice to Landlord,
if Landlord has not completed the making of the required repairs and restored
and rebuilt the Building and the Demised Premises within eight (8) months from
the date of such damage or destruction, or within such period after such date
(not exceeding three (3) months) as shall equal the aggregate period Landlord
may have been delayed in doing so by adjustment of insurance, labor trouble,
governmental controls, act of God, or any other cause beyond Landlord's
reasonable control.
21.04. 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. Landlord shall use its best efforts to effect such
repair or restoration promptly and in such manner as not unreasonably to
interfere with Tenant's use and occupancy during such time that Tenant is able
to use the Demised Premises during Landlord's restoration.
21.05. Notwithstanding any of the foregoing provisions of this
Article, if Landlord or the lessor of any superior lease or the holder of any
superior mortgage shall be unable to collect all of the insurance proceeds
(including rent insurance proceeds) applicable to damage or destruction of the
Demised Premises or the Building by fire or other cause, by reason of some
action or inaction on the part of Tenant or any of its employees, agents or
contractors in connection with the processing of any claim, then, without
prejudice to any other remedies which may be available against Tenant, there
shall be no abatement of Tenant's rents.
21.06. Landlord will not carry insurance of any kind on Tenant's
Property, and, except as provided by law or by reason of its fault or its breach
of any of its obligations hereunder, shall not be obligated to repair any damage
thereto or replace the same; to the extent that Tenant shall maintain insurance
on Tenant's Property, Landlord shall not be obligated to repair any damage
thereto or replace the same.
21.07. The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and any law of the State of New Jersey providing for
such a contingency in the absence of an express agreement, and any other law of
like import, now of hereafter in force, shall have no application in such case.
21.08. If the Demised Premises and/or access thereto become
partially or totally damaged or destroyed by any casualty not insured against,
then Landlord shall have the right to terminate this Lease upon giving the
Tenant thirty (30) days notice and upon the expiration of said
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thirty (30) day notice period this Lease shall terminate as if such termination
date were the Expiration Date.
ARTICLE 22
EMINENT DOMAIN
22.01. If the whole of the Building shall be lawfully taken by
condemnation or in any other manner for any public or quasi-public use of
purpose, this Lease and the term and estate hereby granted shall forthwith
terminate as of the date of vesting of title on such taking (which date is
herein after also referred to as the "date of the taking"), and the rents shall
be prorated and adjusted as of such date.
22.02. If any part of the Building shall be so taken, this Lease
shall be unaffected by such taking, except that Tenant may elect to terminate
this Lease in the event of a partial taking, if the area of the Demised Premises
shall not be reasonably sufficient for Tenant to continue feasible operation of
its business. Tenant shall give notice of such election to Landlord not later
than thirty (30) days after the date of such taking. Upon the giving of such
notice to Landlord, this Lease shall terminate on the date of service of notice
and the rents apportioned to the part of the Demised Premises so taken shall be
prorated and adjusted as of the date of the taking and the rents apportioned to
the remainder of the Demised Premises shall be prorated and adjusted as of such
termination date. Upon such partial taking and this Lease continuing in force as
to any part of the Demised Premises, the rents apportioned to the part taken
shall be prorated and adjusted as of the date of taking and from such date the
fixed rent shall be reduced to the amount apportioned to the remainder of the
Demised Premises and additional rent shall be payable pursuant to Article 5
according to the rentable area remaining.
22.03. Except as specifically set forth in Section 22.04. hereof,
Landlord shall be entitled to receive the entire award in any proceeding with
respect to any taking provided for in this Article without deduction therefrom
for any estate vested in Tenant by this Lease, and Tenant shall receive no part
of such award. Tenant hereby expressly assigns to Landlord all of its right,
title, and interest in or to every such award.
22.04. If the temporary use or occupancy of all or any part of the
Demised Premises shall be lawfully taken by condemnation or in any other manner
for any public or quasi-public use or purpose during the term of this Lease,
Tenant shall be entitled, except as hereinafter set forth, to receive any award
which does not serve to diminish Landlord's award in any respect and, if so
awarded, for the taking of 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 remain
responsible for all of its obligations hereunder insofar as such obligations are
not affected by such taking and shall continue to pay in full the fixed rent and
additional rent when due. If the period of temporary use or occupancy of the
Demised Premises (or a part thereof) shall be divided between Landlord and
Tenant so that Tenant shall receive so much thereof as represents the period
prior to the Expiration Date and Landlord shall receive so much thereof as
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represents the period subsequent to the Expiration Date. All moneys received by
Tenant as, or as part of, an award for temporary use and occupancy for a period
beyond the date to which the rents hereunder have been paid by Tenant shall be
received, held, and applied by Tenant as a trust fund for payment of the rents
falling due hereunder.
22.05. In the event of any taking of less than the whole of the
Building which does not result in a termination of this Lease, or in the event
of a taking for a temporary use or occupancy of all or any part of the Demised
Premises which does not extend beyond the Expiration Date, Landlord, at its
expense, shall proceed with reasonable diligence to repair, alter, and restore
the remaining parts of the Building and the Demised Premises to substantially
their former condition to the extent that the same may be feasible and so as to
constitute a complete and tenantable Building and Demised Premises provided that
Landlord's liability under this Section 22.05 shall be limited to the net amount
(after deducting all costs and expenses, including, but not limited to, legal
expenses incurred in connection with the eminent domain proceeding) received by
Landlord as an award arising out of such taking. If such taking occurs within
the last three (3) years of the term of this Lease, Landlord shall have the
right to terminate this Lease by giving the Tenant written notice to such effect
within ninety (90) days after such taking, and this Lease shall then expire on
that effective date stated in the notice as if that were the Expiration Date,
but the fixed rent and the additional rent shall be prorated and adjusted as of
the date of such taking.
22.06. Should any part of the Demised Premises be taken to effect
compliance with any law or requirement of public authority other than in the
manner hereinabove provided in this Article then, (i) if such compliance is the
obligation of Tenant under this Lease, Tenant shall not be entitled to any
diminution or abatement of rent or other compensation from Landlord therefor,
but (ii) if such compliance is the obligation of Landlord under this Lease, the
fixed rent hereunder shall be reduced and additional rents under Article 5 shall
be adjusted in the same manner as is provided in Section 22.02 according to the
reduction in rentable area of the Demised Premises resulting from such taking.
22.07. Any dispute which may arise between the parties with respect
to the meaning or application of any of the provisions of this Article shall be
determined by arbitration in the manner provided in Article 33.
ARTICLE 23
SURRENDER
23.01. On the last day of the term of this Lease, or upon any
earlier termination of this Lease, or upon any re-entry by Landlord upon the
Demised Premises pursuant to Article 25 herein, Tenant shall quit and surrender
the Demised Premises to Landlord in good order, condition, and repair, except
for ordinary wear and tear and damage by fire or casualty and such other damage
or destruction as Landlord is required to repair or restore under this Lease,
and Tenant shall remove all of Tenant's Property therefrom except as otherwise
expressly provided in this Lease. At the time of surrender, or earlier
termination of this Lease, the Demised Premises shall be in the same state as
existed as of the completion of Landlord's Work and the completion
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of Tenant's Finish Work. Any Tenant Changes, alterations or improvements, all of
which must be done in accordance with Article 12 shall be removed, except as may
otherwise have been provided by Landlord at the time it exercised its consent in
connection with such Tenant Changes pursuant to Article 12. With respect to
Landlord's Work set forth in Exhibit C, after review and completion of the final
construction drawings, Landlord reserves the right to notify Tenant of any
restoration Tenant shall be responsible for upon the termination of this Lease.
If Tenant fails to perform any restoration required of it under this Lease on or
before the last day of the term of this Lease or upon any earlier termination,
Tenant shall be deemed a hold-over Tenant under Article 40 of this Lease until
such time as Tenant has completed such restoration. Ninety (90) days prior to
the Expiration Date of this Lease, at the request of Tenant, Landlord shall walk
through the Demised Premises with Tenant and create a punchlist of all
restoration which shall be required to be completed by Tenant by the Expiration
Date. Thereafter, Tenant may request a written estimate from Landlord for the
cost of all restoration required pursuant to this Lease. Failure by Landlord and
Tenant to walk through the Demised Premises or failure by Landlord to provide an
estimate of the cost of the restoration required as set forth above shall not
relieve Tenant of any restoration obligations otherwise required pursuant to
this Lease. In lieu of restoring the Demised Premises as required pursuant to
this Lease, Tenant may, at its option, pay Landlord, prior to the Expiration
Date of the Lease, the cost of such restoration as set forth in Landlord's
estimate. Landlord and Tenant acknowledge that Landlord, prior to the Expiration
Date, will notify Tenant of its restoration obligations and, as a result,
notwithstanding the ninety (90) day time period set forth above, it shall be
Tenant's obligation to ensure that Tenant has enough time after the Landlord and
Tenant walk through the Demised Premises, if Tenant will be performing such
restoration prior to the Expiration Date of the Lease. If Tenant fails remove
its Property and/or fails to perform any restoration required of it under this
Lease and/or fails to pay Landlord for the cost of any restoration required on
or before the last day of the term of this Lease or upon any earlier
termination, Tenant shall be deemed a hold-over Tenant under Article 40 of this
Lease until such time as Tenant has completed such restoration.
ARTICLE 24
CONDITIONS OF LIMITATION
24.01. This Lease and the term and estate hereby granted are subject
to the limitation that whenever Tenant shall make an assignment of the property
of Tenant for the benefit of creditors, or shall file a voluntary petition under
any bankruptcy or insolvency law, or an involuntary petition alleging an act of
bankruptcy or insolvency shall be filed against Tenant under any bankruptcy or
insolvency law, or whenever a petition shall be filed by or against Tenant under
the reorganization provisions of the United States Bankruptcy Act or under the
provisions of any law of like imports or whenever a petition shall be filed by
Tenant under the arrangement provisions of any law of like import, whenever a
permanent receiver of Tenant or of or for the property of Tenant shall be
appointed, then Landlord, (a) at any time of receipt of notice of the occurrence
of any such event, or (b) if such event occurs without the acquiescence of
Tenant, at any time after the event continues for thirty (30) days, Landlord may
give Tenant a notice of intention to end the term of this Lease at the
expiration of five (5) days from the date of service of such notice of
intention, and upon the expiration of said five (5) day period this Lease and
the term and estate hereby granted, whether or not the term shall theretofore
have commenced, shall
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terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 26.
24.02. This Lease and the term and estate hereby granted are subject
to the further limitation that:
(a) Whenever Tenant shall default in the payment of
installment of fixed rent, or in the payment of any additional rent or any other
charge payable by Tenant to Landlord, or any day upon which the same ought to be
paid, and such default shall continue for five (5) days after written notice
thereof; or
(b) Whenever Tenant shall do or permit anything to be done,
whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Tenant within thirty (30) days after Landlord shall have given to Tenant a
written notice specifying the same, or, in the case of a happening or default
which cannot with due diligence be cured within a period of thirty (30) days and
the continuance of which for the period required for cure will not subject
Landlord to risk of criminal liability or termination of any superior Lease or
foreclosure of any superior mortgage if Tenant shall not, (i) within said thirty
(30) day period advise Landlord of Tenant's intention to duly institute all
steps necessary to remedy such situation; (ii) duly institute within said thirty
(30) day period, and thereafter diligently prosecute to completion all steps
necessary to remedy the same; (iii) complete such remedy within such time after
the date of giving of said notice to Landlord as shall reasonably be necessary;
or
(c) Whenever any event shall occur or any contingency shall
arise whereby this Lease or the estate hereby granted or the unexpired balance
of the term hereof 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 8; or
(d) Whenever Tenant shall abandon the Demised Premises (unless
as a result of a casualty) and fail to pay rent, or
(e) If Tenant shall default in the timely payment of rent or
additional rent and any such default shall continue to be repeated for a total
of four (4) months in any period of twelve (12) months, then, notwithstanding
that such defaults shall have each been cured within the applicable period, any
similar default shall be deemed to be deliberate and Landlord may thereafter
serve a notice of termination upon Tenant without affording to Tenant
opportunity to cure such default;
then, and in any of the foregoing cases, this Lease and the term and estate
hereby granted, whether or not the term shall theretofore have commenced, shall,
if the Landlord so elects, terminate upon ten (10) days written notice by
Landlord to Tenant of Landlord's election to terminate the Lease and the term
hereof shall expire and come end on the date fixed in such notice, with the same
effect as if that day were the Expiration Date, but Tenant shall remain liable
for the rent and additional rent which subsequently accrues and for damages as
provided in Article 26.
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ARTICLE 25
RE-ENTRY BY LANDLORD
25.01. If Tenant shall default in the payment of any installment of
fixed rent, or of any installment of additional rent, on any date upon which the
same ought to be paid and if such default shall continue for five (5) days after
written notice thereof, or if this Lease shall expire as provided in Article 24,
Landlord or Landlord's agents and employees may immediately or at any time
thereafter re-enter the Demised Premises, or any part thereof, in the name of
the whole, either by summary dispossess proceedings or by any suitable action or
proceeding at law, or by force or otherwise, without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may remove any
persons therefrom, to the end that Landlord may have, hold, and enjoy the
Demised Premises again as and of its first estate and interest therein. The word
"re-enter", as herein used, is not restricted to its technical legal meaning. In
the event of any termination of this Lease under the provisions of Article 24 or
if Landlord shall re-enter the Demised Premises under the provisions of this
Article 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 thereupon
pay to Landlord the fixed rent and additional rent payable by Tenant to Landlord
up to the time of such termination of this Lease, or of such recovery of
possession or the Demised Premises by Landlord, as the case may be, and shall
also pay to Landlord damages as provided in Article 26.
25.02. In the event of a breach or threatened breach by Landlord or
Tenant of any of their respective obligations under this Lease, either Landlord
or Tenant, as the case may be, shall also have the right of injunction. The
special remedies hereunder are cumulative and are not intended to be exclusive
of any other remedies or means of redress to which the parties may lawfully be
entitled at any time.
25.03. If this Lease shall terminate under the provisions of Article
24, or if Landlord shall re-enter the Demised Premises under the provisions of
this Article, or in the event of any 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 moneys, if any, paid by Tenant to Landlord,
whether as advance rent, security, or otherwise, but such moneys shall be
credited by Landlord against any fixed rent or additional 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 26 or pursuant to law.
ARTICLE 26
DAMAGES
26,01. If this Lease is terminated under the provisions of Article
24, or if Landlord shall re-enter the Demised Premises under the provisions of
Article 25, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other
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proceeding or action of any provision of law by reason of default hereunder on
the part of Tenant, Tenant shall pay to Landlord as damages, at the election of
Landlord, either
(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 of the excess, if any, of (i) the aggregate of the fixed rent and
the additional rent payable hereunder which would have been payable by Tenant
(conclusively presuming the additional rent to be the same as was payable for
the year immediately preceding such termination) 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, had this Lease not so
terminated or had Landlord not so reentered the Demised Premises, 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 rent (as
above presumed) payable hereunder 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 expenses incurred or paid by
Landlord in terminating this Lease or in reentering the Demised Premises and in
securing possession thereof, as well as the expenses of reletting, including
altering and preparing the Demised Premises for new tenants, brokers'
commissions, and all other 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 remaining term of this Lease; but
in no event shall Tenant be entitled to receive any excess of such net rents
over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be
entitled in any suit for the collection of damages pursuant to this Subsection
to a credit in respect of any net rents from a reletting, except to the extent
that such net rents are actually received by Landlord. Damages shall also
include the unamortized portion of the cost of Landlord's Work and any brokerage
fees or commissions paid by Landlord. 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 expenses of reletting.
If the Demised Premises or any part thereof to be relet by
Landlord for the unexpired portion of the term of this Lease, or any part
thereof, 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.
26.02. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord 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 of this Lease would have expired if
it had not been so terminated under the provisions of Article 24, or under any
provision of law, or had Landlord not re-entered the Demised Premises. Nothing
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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 seek and obtain as
liquidated damages by reason of the termination of this Lease or re-entry on 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 when,
and governing the proceedings in which, such damages are to be proved whether or
not such amount be greater, equal to, or less than any of the sums referred to
in Section 26.01.
26.03. In addition to the foregoing and without regard to whether
this Lease is terminated, Tenant shall pay to Landlord upon demand, all costs
and expenses incurred by Landlord, including reasonable attorney's fees, with
respect to any lawsuit instituted or defended or any action taken by Landlord to
enforce all or any of the provisions of this Lease.
ARTICLE 27
WAIVERS
27.01. Tenant, for Tenant, and on behalf of any and all persons
claiming through or under Tenant, including creditors of all kinds, does hereby
waive and surrender all right and privilege which 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 for the term hereby demised after being
dispossessed or ejected therefrom by process of law or under the terms of this
Lease or after the termination of this Lease as herein provided.
27.02. In the event that Tenant is in arrears in payment of fixed
rent or additional rent hereunder, Tenant waives Tenant's right, if any, to
designate the items against which any payments made by Tenant are to be
credited, and Tenant agrees that Landlord may apply any payments made by Tenant
to any items it sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items against which any such payments shall be
credited.
27.03. 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, Tenant's use or occupancy of the Demised
Premises, including any claim of injury or damage, or any emergency or other
statutory remedy with respect thereto.
27.04. The provisions in Articles 16 and 17 shall be considered
express agreements governing the services to be furnished by Landlord, and
Tenant agrees that any laws and/or requirements of public authorities, now or
hereafter in force, shall have no application in connection with any enlargement
of Landlord's obligations with respect to such services.
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ARTICLE 28
NO OTHER WAIVERS OR MODIFICATIONS
28.01. 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. No executory agreement hereafter made
between Landlord and Tenant shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such executory 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, or termination of effectuation of the
abandonment is sought.
28.02. Without limiting Section 28.01, the following provisions
shall also apply:
(a) No agreement to accept a surrender of all or any part of
the Demised Premises shall be valid unless in writing and signed by Landlord.
The delivery of keys to an employee of Landlord or of its agent shall not
operate as a termination of this Lease or a surrender of the Demised Premises.
If Tenant shall at any time request Landlord to sublet the Demised Premises for
Tenant's account, Landlord or its agent is authorized to receive said keys for
such purposes without releasing Tenant from any of its obligations under this
Lease, and Tenant hereby releases Landlord from any liability for loss or damage
to any of Tenant's property in connection with such subletting.
(b) The receipt by Landlord of rent with knowledge of breach
of any obligation of this Lease shall not be deemed a waiver of such breach.
(c) No payment by Tenant or receipt by Landlord of a lesser
amount than the correct fixed rent or additional rent due hereunder 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.
ARTICLE 29
CURING TENANT'S DEFAULTS
29.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, 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 continues after the expiration of (i) ten (10) days
from the date Landlord gives Tenant notice of intention so to do, or (ii) the
applicable grace
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period provided in Section 24.02 or elsewhere in this Lease for cure of such
default, whichever occurs later.
29.02. Bills, invoices and purchase orders for any and all costs,
charges, and expenses incurred by Landlord in connection with any such
performance by it for the account of Tenant, including reasonable counsel fees,
involved in collecting or endeavoring to collect the fixed rent or additional
rent or any part thereof, or enforcing or endeavoring to enforce any rights
against Tenant, 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, may be sent by Landlord to Tenant monthly, or
immediately, at Landlord's option, and, shall be due and payable in accordance
with the terms of such bills.
ARTICLE 30
BROKER
30.01. Landlord and Tenant each covenants, warrants, and represents
that there was no broker except ALEXANDER SUMMER. ("Broker") instrumental in
consummating this Lease and that no conversations or negotiations were had with
any broker except Broker concerning the renting of the Demised Premises.
Landlord and Tenant each agrees to hold the other harmless against any claims
for a brokerage commission arising out of any conversations or negotiations had
by it with any broker except Broker. Landlord agrees to pay Broker pursuant to a
separate agreement.
ARTICLE 31
NOTICES
31.01. Any notice, statement, demand, or other communications
required or permitted to be given, rendered, or made by either party to the
other, pursuant to this Lease or pursuant to any applicable law or requirement
of public authority, shall be in writing (whether or not so stated elsewhere in
this Lease) and shall be deemed to have been properly given, rendered or made,
if sent by registered or certified mail, return receipt requested, addressed to
the other party at the address hereinabove set forth (except that after the
Commencement Date, Tenant's address, unless Tenant shall give notice to the
contrary, shall be the Building) and shall be deemed to have been given,
rendered, or made on the date following the date of mailing. Notice may also be
given by facsimile transmittal or overnight mail. If such notice is given by
facsimile transmittal, it shall be deemed received the day it was sent and
overnight mail shall be deemed received the day after it was sent. Either party
may, by notice as aforesaid, designate a different address or addresses for
notices, statements, demands, or other communications intended for it. In the
event of the cessation of any mail delivery for any reason, personal delivery
shall be substituted for the aforedescribed method of serving notices.
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ARTICLE 32
ESTOPPEL CERTIFICATE
32.01. Tenant agrees, when requested by Landlord, to execute and
deliver to Landlord 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 rent have been paid, whether any
dispute exists with respect thereto and stating whether or not, to Tenant's best
knowledge, Landlord is in default in performance of any of its obligations under
this Lease, and, if so, specifying each such default of which Tenant may have
knowledge, it being intended that any such statement delivered pursuant hereto
may be relied upon by others. Such statement shall be served upon Landlord by
Tenant within ten (10) days of Landlord's request. If Tenant fails to deliver
such notice, Landlord shall be deemed appointed as Tenant's attorney-in-fact to
prepare and deliver such-notice on behalf of Tenant, and Tenant shall be deemed
bound thereby upon Landlord's furnishing a copy of the notice to Tenant.
ARTICLE 33
ARBITRATION
33.01. The parties hereto shall not be deemed to have agreed to
determination of any dispute arising out of this Lease by arbitration unless
determination in such manner shall have been specifically provided for in this
Lease.
33.02. The party desiring arbitration shall give notice to that
effect to the other party and shall in such notice appoint a person as
arbitrator on its behalf. Within ten (10) days, the other party by notice to the
original party shall appoint a second person as arbitrator on its behalf. The
arbitrators thus appointed shall appoint a third person, and such three
arbitrators shall as promptly as possible determine such matter, provided,
however that:
(a) If the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall proceed to determine such matter; and
(b) If the two arbitrators appointed by the parties shall be
unable to agree, within ten (10) days after the appointment of the second
arbitrator, upon the appointment of a third arbitrator, they shall give written
notice to the parties of such failure to agree, and, if the parties fail to
agree upon the selection of such third arbitrator within ten (10) days after the
arbitrators appointed by the parties give notice as aforesaid, then within five
(5) days thereafter either of the parties upon notice to the other party may
request such appointment by the American Arbitration Association (or any
organization successor thereto), or in it absence, refusal, failure, or
inability to act, may apply for a court appointment of such arbitrator.
33.03. Each arbitrator shall be a fit and impartial person who shall
have had at least five years' experience in a calling connected with the matter
of dispute.
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33.04. The arbitration shall be conducted, to the extent consistent
with this Article, in accordance with the then prevailing rules of the American
Arbitration Association (or any organization successor thereto). The arbitrators
shall render their decision and award, upon the concurrence of at least two of
their number, within thirty (30) days after the appointment of the third
arbitrator. Such decision and award shall be in writing and shall be final and
conclusive on the parties, and counterpart copies thereof shall be delivered to
each of the parties. In rendering such decision and award, the arbitrators shall
not add to, subtract from, or otherwise modify the provisions of this Lease.
Judgment may be had on the decision and award of the arbitrator(s) so rendered
in any court of competent jurisdiction. Notwithstanding the foregoing, the
parties hereto agree that such judgment of the arbitrator shall not be binding
and may be the subject of litigation in the Superior Court of New Jersey if it
is alleged that the arbitrator made a mistake of fact or law.
33.05. Each party shall pay the fees and expenses of the one of the
two original arbitrators appointed by or for such party and the fees and
expenses of the third arbitrator and all other expenses of the arbitration
(other than the fees and disbursement of attorneys or witnesses for each party)
shall be borne by the parties equally.
33.06. Notwithstanding the provisions of this Article, if any delay
in complying with any requirements of this Lease by Tenant might subject
Landlord to any fine or penalty, or to prosecution for a crime, or if it would
constitute a default by Landlord under any mortgage, Landlord may exercise its
right under Article 29, to remedy such default and in such event the sole
question to be determined by the arbitrators under this Article, shall be
whether Tenant is liable for Landlord's cost and expenses of curing such
default.
ARTICLE 34
NO OTHER REPRESENTATIONS, CONSTRUCTION, GOVERNING LAW
34.01. 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. It is
understood and agreed that all understandings and agreements heretofore had
between the parties are merged in the Lease, which alone fully and completely
express their agreements and that the same are entered into after full
investigation, neither party relying upon any statement or representation not
embodied in the Lease made by the other.
34.02. If any of the provisions of this Lease, or the application
thereof to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
34.03. This Lease shall be governed in all respects by the laws of
the State of New Jersey.
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ARTICLE 35
SECURITY
35.01. Tenant shall deposit with Landlord the sum of $25,088.34 upon
the execution of this Lease. Said deposit (sometimes referred to as the
"Security Deposit") shall be held by Landlord as security for the faithful
performance by Tenant of all the terms of the Lease by said Tenant to be
observed and performed. The Security Deposit shall not and may not be mortgaged,
assigned, transferred, or encumbered by Tenant, without the written consent of
Landlord, and any such act on the part of Tenant shall be without force and
effect and shall not be binding upon Landlord. If any of the fixed or additional
rent herein reserved or any other sum payable by Tenant to Landlord shall be
overdue and unpaid, beyond applicable notice and cure periods, or if Landlord
makes payment on behalf of Tenant, or if Tenant shall fail to perform any of the
terms, covenants, and conditions of the Lease, beyond applicable notice an cure
periods, then Landlord may, at its option and without prejudice to any other
remedy which Landlord may have on account thereof, appropriate and apply the
entire Security Deposit or so much thereof as may be necessary to compensate
Landlord toward the payment of fixed or additional rent and any loss or damage
sustained by Landlord due to such breach on the part of Tenant, plus expenses;
and Tenant shall forthwith upon demand restore the Security Deposit to the
original sum deposited. The issuance of a warrant and/or the re-entering of the
Demised Premises by Landlord for any default on the part of Tenant or for any
other reason prior to the expiration of the term shall not be deemed such a
termination of the Lease as to entitle Tenant to the recovery of the Security
Deposit. If Tenant complies with all of the terms, covenants, and conditions of
the Lease and pays all of the fixed and additional rent and all other sums
payable by Tenant to Landlord as they fall due, the Security Deposit shall be
promptly returned in full to Tenant after the expiration of the term of the
Lease and Tenant's satisfaction of all its obligations accruing prior to the
Lease expiration date. In the event of bankruptcy or other creditor-debtor
proceedings against Tenant, the Security Deposit and all other securities shall
be deemed to be applied first to the payment of fixed and additional rent and
other charges due Landlord for all periods prior to the filing of such
proceedings. In the event of sale by Landlord of the Building, Landlord may
deliver the then balance of the Security Deposit to the transferee of Landlord's
interest in the Demised Premises and Landlord shall thereupon be discharged from
any further liability with respect to the Security Deposit and this provision
shall also apply to any subsequent transferees. No holder of a superior mortgage
or a lessor's interest in a superior lease to which the Lease is subordinate
shall be responsible in connection with the Security Deposit, by way of credit
or payment of any fixed or additional rent, or otherwise, unless such mortgagee
or lessor actually shall have received the entire Security Deposit.
ARTICLE 36
PARTIES BOUND
36.01. The obligation of this Lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 8 shall operate to vest any
39
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rights in any successor or assignee of Tenant and that the provisions of this
Article shall not be construed as modifying the conditions of limitation
contained in Article 24. However, the obligations of Landlord under this Lease
shall not be binding upon Landlord herein named with respect to any period
subsequent to the transfer of its interest in the Building as owner or lessee
thereof and in event of such transfer said obligations shall thereafter be
binding upon each transferee of the interest of Landlord herein named as such
owner or lessee of the Building, but only with respect to the period ending with
a subsequent transfer within the meaning of this Article.
36.02. If Landlord shall be an individual, joint venture, tenancy in
common, partnership, unincorporated association, or other unincorporated
aggregate of individuals and/or entities or a corporation, Tenant shall look
only to such Landlord's estate and property in the Building (or the proceeds
thereof) and, where expressly so provided in this Lease, to offset against the
rents payable under this Lease for the collection of a judgment (or other
judicial process) which requires the payment of money by Landlord in the event
of any default by Landlord hereunder. No other property or assets of such
Landlord shall be subject to levy, execution or other enforcement procedure for
the satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder or Tenant's use or occupancy of
the Demised Premises. Further, Tenant agrees that Landlord shall not be liable
to Tenant for any special, indirect, or consequential damages arising out of
Landlord's breach of this Lease.
ARTICLE 37
CONSENTS
37.01. Wherever it is specifically provided in this Lease that a
party's consent is not to be unreasonably withheld, a response to a request for
such consent shall also not be unreasonably delayed. If either Landlord or
Tenant considers that the other had unreasonably withheld or delayed a consent,
it shall so notify the other party within ten (10) days after receipt of notice
of denial of the requested consent or, in case notice of denial is not received,
within twenty (20) days after making its request for the consent.
ARTICLE 38
MORTGAGE FINANCING - TENANT COOPERATION
38.01. In the event that Landlord desires to seek mortgage financing
secured by the Demised Premises, Tenant agrees to cooperate with Landlord in the
making of any application(s) by Landlord for such financing including the
delivery to Landlord's mortgage broker or mortgagee, of such information as they
shall require with respect to Tenant's occupancy of the Demised Premises,
including, but not limited to the current financial statement of Tenant, but
Tenant shall not be required to deliver such information directly to Landlord,
all of the above to be at no cost and expense of Tenant. In the event that
Landlord's mortgagee shall request changes to the within Lease in order to make
same acceptable to Landlord's mortgagee, Tenant
40
<PAGE>
agrees to consent to such changes, provided such changes shall not affect the
term of this Lease nor the financial obligations of Tenant hereunder.
ARTICLE 39
ENVIRONMENTAL COMPLIANCE
39.01. Tenant shall, at Tenant's sole cost and expense, comply with
the New Jersey Industrial Site Recovery Act and the regulations promulgated
thereunder (referred to as "ISRA") as same relate to Tenant's occupancy of the
Demised Premises, as well as all other state, federal or local environmental
law, ordinance, rule, or regulation either in existence as of the date hereof or
enacted or promulgated after the date of this Lease, that concern the
management, control, discharge, treatment and/or removal of hazardous discharges
or otherwise affecting or affected by Tenant's use and occupancy of the Demised
Premises. Tenant represents that Tenant's SIC number does not subject it to
ISRA. Tenant shall, at Tenant's own expense, make all submissions to, provide
all information to, and comply with all requirements of the Bureau of Industrial
Site Evaluation (the "Bureau") of the New Jersey Department of Environmental
Protection ("NJDEP"). Should the Bureau or any other division of NJDEP, pursuant
to any other environmental law, rule, or regulation, determine that a cleanup
plan be prepared and that a cleanup be undertaken because of any spills or
discharge of hazardous substances or wastes at the Demised Premises which occur
during the term of this Lease and were caused by Tenant or its agents or
contractors, then Tenant shall, at Tenant's own expense prepare and submit the
required plans and financial assurances, and carry out the approved plans. In
the event that Landlord shall have to comply with ISRA by reason of Landlord's
actions, Tenant shall promptly provide all information requested by Landlord for
preparation of non-applicability affidavits or a Negative Declaration and shall
promptly sign such affidavits when requested by Landlord. Tenant shall
indemnify, defend, and save harmless Landlord from all fines, suits, procedures,
claims, and actions of any kind arising out of or in any way connected with any
spills or discharges of hazardous substances or wastes at the Demised Premises
which occur during the term of this Lease and were caused by Tenant or its
agents or contractors, and from all fines, suits, procedures, claims, and
actions of any kind arising out of Tenant's failure to provide all information,
make all submissions and take all actions required by the Bureau or any other
division of NJDEP. Tenant's obligations and liabilities under this Paragraph
shall continue so long as Landlord remains responsible for any spills or
discharges of hazardous substances or wastes at the Demised Premises which occur
during the term of this Lease and were caused by Tenant or its agents or
contractors. Tenant's failure to abide by the terms of this paragraph shall be
restrainable by injunction. Tenant shall have no responsibility to obtain a
"Negative Declaration" or "Letter of Non-Applicability" from the NJDEP if the
sole reason for obtaining same is in connection with a sale or other disposition
of the real estate by Landlord but Tenant agrees to cooperate with Landlord in
Landlord's effort to obtain same and shall perform at Tenant's expense any clean
up required by reason of Tenant's use and occupancy of the Demised Premises.
41
<PAGE>
ARTICLE 40
HOLDING OVER
40.01. Tenant will have no right to remain in possession of all or
part of the Demised Premises after the expiration of the term. If Tenant remains
in possession of all or any part of the Demised Premises after the expiration of
the Lease, without the express consent of Landlord: (a) such tenancy will be
deemed to be a periodic tenancy from month-to-month only; (b) such tenancy will
not constitute a renewal or extension of this Lease for any further term; and
(c) such tenancy may be terminated by Landlord upon the earlier of (i) thirty
(30) days prior written notice, or (ii) the earliest date permitted by law. In
such event, monthly rent will be increased to an amount equal to two hundred
percent (200%) of the monthly rent payable during the last month of the term,
and any other sums due under this Lease will be payable in the amount and at the
times specified in this Lease. Such month-to-month tenancy will be subject to
every other term, condition, and covenant contained in this Lease. The
provisions of this Section shall not be construed to relieve Tenant from
liability to Landlord for damages resulting from any such holding over, or
preclude Landlord from implementing summary dispossess proceedings. Tenant
further acknowledges that its failure to perform any restoration required of it
under this Lease shall be deemed the same as its remaining in possession of the
Demised Premises after the expiration of the term, subjecting it to hold-over
rent in accordance with this Article 40.
ARTICLE 41
CERTAIN DEFINITIONS AND CONSTRUCTIONS
41.01. For the purpose of this Lease and all agreements supplemental
to this Lease, unless the context otherwise requires, the definitions set forth
in Exhibit F annexed hereto shall be utilized.
41.02. The various terms which are italicized and defined in other
Articles of this Lease or are defined in Exhibits annexed hereto, shall have the
meanings specified in such other Articles and such Exhibits for all purposes of
this Lease and all agreements supplemental thereto, unless the context shall
otherwise require.
41.03. The submission of this Lease for examination does not
constitute a reservation of, or option for, the Demised Premises, and this Lease
becomes effective as a Lease only upon execution and delivery thereof by
Landlord and Tenant.
41.04. The Article headings in this Lease and the Index prefixed to
this Lease are inserted only as a matter of convenience in reference and are not
to be given any effect whatsoever in construing this Lease.
42
<PAGE>
ARTICLE 42
RELOCATION OF TENANT
42.01. Landlord at its sole expense, on at least sixty (60) days
prior written notice, may require Tenant to move from the Demised Premises to
another location of comparable size and decor in the Building or in the
building(s) commonly known and designated 399 Thornall Street, 499 Thornall
Street, Edison, New Jersey, 70 Wood Avenue South, Iselin, New Jersey or any
future Landlord related properties within the Metro Park Office Complex. By
written notice to Landlord served within five (5) days of Tenant's receipt of
the relocation notice, Tenant may elect to terminate this Lease in lieu of
relocating to the other space and shall there upon vacate the Demised Premises
within the sixty (60) day period. In the event of any such relocation, Landlord
shall be responsible for the expenses of preparing and decorating the relocated
premises so that they will be substantially similar to the Demised Premises
described in Exhibit C. Landlord shall also be responsible for all breakdown,
moving and re-installation of Tenant's then existing furniture, fixtures and
data-processing equipment, and the re-printing of Tenant's then existing
stationary, advertising materials and business cards. This relocation shall be
accomplished in such a manner so as to create the least practicable interference
with Tenant's business operation. Tenant shall not be required to vacate the
Demised Premises until the relocation premises are ready for occupancy as
defined in Article 4. Notwithstanding the foregoing, Landlord shall be entitled
to rescind its notice of relocation within forty-five (45) days of its having
forwarded to Tenant the notice of relocation or within forty-eight (48) hours of
Tenant having properly elected to terminate this Lease. In the event Landlord
rescinds the notice as aforesaid, this Lease shall continue in full force and
effect.
ARTICLE 43
OPTION TO RENEW
43.01. Provided that Tenant is not then in default of the terms,
covenants, and provisions of this Lease, Landlord hereby grants to Tenant the
right to renew the term of this Lease for one (1) additional period of five (5)
years (the "Renewal Period") commencing on the day after the initial Expiration
Date upon the same terms and conditions as set forth in this Lease other than
the fixed annual rental which shall be the Fair Market Rental of the Demised
Premises at the time of the commencement of the Renewal Period, adjusting as
necessary for the lapse of time between the date of Tenant's notification of
intent to exercise its option to renew and the date on which the Renewal Period
is scheduled to commence but in no event shall be less than the fixed rent
during the initial term. Said fixed annual rental shall be payable in equal
monthly installments in advance on the first day of each and every month of the
Renewal Period. The base
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<PAGE>
year for calculation of additional rent for increase in taxes and operating
expenses for the Renewal Period shall be as initially established in this Lease.
Tenant shall exercise the within Option by giving written notice to Landlord not
later than nine (9) months prior to the initial Expiration Date, TIME BEING OF
THE ESSENCE. If Tenant fails to give such notice, Tenant will be deemed to have
waived such Renewal Option and the provisions of this Section shall be null and
void. Fair Market Value shall mean the rents obtainable for comparable space in
the Metro Park, Edison, New Jersey market area.
ARTICLE 44
OPTION TO RECAPTURE AND REDESIGN THE COMMON AREA
44.01. The Landlord, at any time during the term of the Lease, may
recapture a portion of the Demised Premises and redesign the Demised Premises as
set forth in Exhibit C-1 ("Landlord's Improvements"), attached hereto and made a
part hereof. Landlord's Improvements shall include, but not be limited to,
redesigning the elevator lobby and the demising wall of the Demised Premises,
constructing a new Conference Room as described below and as indicated on
Exhibit C-1 and inserting a Building services space as indicated on Exhibit C-1.
The work in the new Alternate Conference Room will include the removing of one
wall, re-carpeting the space using Building standard carpet, painting the walls,
removing one door, re-balancing the HVAC, re-doing the electrical switches for
the overhead lights, re-working the sprinkler system, if required, providing all
architectural documents and obtaining all permits necessary for the construction
of the Alternate Conference Room. Landlord shall give Tenant thirty (30) days
written notice of its desire to perform Landlord's Improvements and Tenant shall
vacate the Building services space and make necessary arrangements, including
moving all of Tenant's Property, in order for Landlord to be able to perform
Landlord's Improvements within such thirty (30) day period. The Landlord shall
use reasonable efforts to coordinate the scheduling of Landlord's Improvements
with the Tenant, however, the Landlord will have the final ability to proceed
with Landlord's Improvements at Landlord's convenience. Landlord will use
reasonable efforts to minimize the disruption from the performance of Landlord's
Improvements but nevertheless, Tenant recognizes that there will be disruptions,
noise and dust associated with the performance of Landlord's Improvements and
that such work shall not constitute a actual or constructive eviction in whole
or in part, or entitle Tenant to any abatement of rent, or relieve Tenant from
any of its obligations under this Lease or impose any liability upon Landlord or
its agents. Tenant acknowledges that the square footage as set forth in this
Lease does not include
44
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the square footage which would be recaptured, so that the square footage of the
Demised Premises shall remain the same in the event Landlord exercises its right
hereunder.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the day and year first above written.
WITNESS: LANDLORD:
METRO FOUR ASSOCIATES
LIMITED PARTNERSHIP,
a New Jersey Limited Partnership
/s/ [ILLEGIBLE] /s/ Dominick Alfieri
- ---------------------------------- ----------------------------------------
By: Dominick Alfieri
Title: General Partner
ATTEST: TENANT:
SYSTEMS CONSULTING COMPANY, INC.,
a Delaware Corporation
/s/ Carol R Potts /s/ Philip St. Germain
- ---------------------------------- ----------------------------------------
By:
Title: CFO
45
<PAGE>
EXHIBIT A
DESCRIPTION OF LAND
379 THORNALL STREET
ALL that certain tract, lot and parcel of land lying and being in the Township
of Edison, County of Middlesex, and State of New Jersey being more particularly
described as follows:
BEGINNING at a point in the new Southeasterly Right-of-Way line of Thornall
Street, distant Southwestwardly 1,544.77 feet from the intersection formed by
the Southeasterly Right-of-Way line of Thornall Street, with the Southwesterly
Right-of-Way line of Wood Avenue South and from said beginning point running:
1. South 53 degrees 23 minutes 59 seconds East, along a new line in Lot 2-B-4
in Block 676, as shown on the current Township of Edison Tax Map, 264.80
feet to a point; running thence
2. South 36 degrees 36 minutes 01 second West, 76.19 feet to a point; running
thence
3. South 53 degrees 23 minutes 59 seconds East, 612.14 feet to a point;
running thence
4. South 31 degrees 14 minutes 31 seconds West, along the common line between
Lots 2-B-4 and 5, in Block 676, as shown on the current Township of Edison
Tax Map, 280.48 feet to a point, running thence
5. North 53 degrees 23 minutes 59 seconds West, along the common line between
Lots 2-B-3 and 2-A, in Block 676, as shown on said Tax Map, 889.65 feet to
a point in the new Southeasterly Right-of-Way line of Thornall Street;
running thence
6. Northeastwardly, along the new Southeasterly Right-of-Way line of Thornall
Street, along a curve to the left having a radius of 4,694.00 feet and an
arc length of 355.79 feet to a point, said point being the point and place
of BEGINNING.
Being also known as Lot 2-B-3 in Block 676, on the current Tax Map of the
Township of Edison, Middlesex County, New Jersey.
Subject to easements, restrictions and covenants of record and such state of
facts as an accurate survey may reveal.
1A
<PAGE>
EXHIBIT B FLOOR PLAN
SEE ATTACHED
1B
<PAGE>
[GRAPHIC OMITTED]
EXHIBIT B
July 8, 1998
- --------------------------------------------------------------------------------
[LOGO] ALFIERI PROJECT: TENANT PLACEMENT PLAN
INVESTMENT BUILDERS METRO IV
379 THORNALL STREET 7TH FLOOR
EDISON, NEW JERSEY
- --------------------------------------------------------------------------------
JOB NO. E:\ACAD\FA\07EXTEN\FAO7TEN.DWG
<PAGE>
EXHIBIT C
SEPARATE WORKLETTER
1C
<PAGE>
ALFIERI PARKWAY ASSOCIATES, AS LANDLORD
SYSTEM CONSULTING COMPANY, INC., AS TENANT
EXHIBIT C
LANDLORD'S WORK
1. HVAC - Perimeter baseboard electric heat, central high velocity fan system
with Barber Coleman mixing boxes. System utilizes a minimum of 10% to a
maximum of 100% fresh air to maintain no less than 68 degrees interior at
zero degrees exterior, with a 15-mile per hour wind. Air cooling shall
maintain no more than 78 degrees F dry bulb with approximately 50%
relative humidity when the outdoor conditions are 91 degrees F dry bulb.
The above standard is for normal office use only which shall be deemed to
be one person for every 200 sq. ft. in any given or confined area which
shall not include areas with special HVAC requirements such as computer
rooms, conference rooms, cafeterias, high density or excessive heat
producing equipment. Perimeter baseboard electric heat is used during
winter operations and an air cooling system is utilized during summer
operations.
One (1) diffuser per 250 sq. ft. of usable area
2. Window covering - one (1) building-standard venetian blind per window.
3. Landlord shall complete the interior of the Demised Premises in accordance
with plans and specifications as noted herein, in Exhibit B, dated July 8,
1998, and Exhibit C-1, dated July 8, 1998. Any additional work not
specifically noted in the foregoing shall be performed by Landlord at
Tenant's sole expense.
4. Landlord shall permit Tenant and/or its agents or labor to enter the
Premises prior to the Commencement Date of the Lease upon prior reasonable
written request from Tenant, at a time designated by Landlord consistent
with Landlord's construction schedule in order to install telephone
outlets and data lines. The foregoing right to enter prior to the
Commencement Date, however, is conditioned upon Tenant's not interfering
with Landlord's labor. If at any time such entry shall cause disharmony,
interference, or union disputes of any nature whatsoever, or if Landlord
shall, in Landlord's sole judgment, determine that such entry, such work
and the continuance thereof shall interfere with, hamper or prevent
Landlord from proceeding with the completion of the Demised Premises at
the earliest possible date, this right of entry may be withdrawn by
Landlord immediately upon written notice to Tenant but shall be reinstated
as soon as Landlord deems Tenant's re-entry practicable. Such entry shall
be at Tenant's sole risk. In the event that Tenant's agents or labor incur
any charges from Landlord, including but not limited to, charges for
clean-up costs necessitated by Tenant's entry, such charges shall be
deemed an obligation of Tenant and shall be collectible as additional rent
pursuant to the Lease. Landlord shall
<PAGE>
have no liability for any furnishings, equipment or other items placed in
the Demised Premises and Tenant shall indemnify, defend and hold Landlord
harmless for any damage, loss or expense caused by it or its contractors
or agents. Tenant must also provide evidence of insurance in accordance
with the Lease and evidence of Worker's Compensation Insurance to protect
Landlord and Tenant during the period of Tenant's entry prior to the
Commencement Date.
5. At any time after substantial completion of Landlord's Work, Landlord,
upon reasonable notice to Tenant, may enter the Demised Premises to
complete unfinished details of Landlord's Work and entry by Landlord, its
agents, servants, employees or contractors for such purpose shall not
constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any abatement of rent, or relieve Tenant from any of its
obligations under this Lease, or impose any liability upon Landlord or its
agents.
6. Tenant further agrees that if an elevator lobby or corridor is included in
Tenant's Demised Premises or if by virtue of the size and configuration of
Tenant's Demised Premises, other tenants of the Building when in the lobby
or corridor can see into Tenant's Demised Premises through a demising
wall, the Landlord shall have the sole and final decision as to the color
and design of all paint, wall coverings and floor coverings so visible
from the lobby or corridor.
7. Tenant shall be responsible for its telecommunications, computer and
systems furniture installation.
8. The workletter will include:
o New 20 oz. building standard carpet.
o Paint the suite.
o Relocate the sprinklers as needed.
o Replace the damaged ceiling tile.
o Repair the ceiling grid as needed.
o General clean up.
o Clean the light fixtures.
o Replace any light bulbs as needed.
o Provide a general clean up.
<PAGE>
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
ALFIERI PROJECT: PROPOSED PLAN FOR SCC, INC.
METRO IV--7TH FLOOR
FAO712L 379 THORNALL STREET
EDISON, NEW JERSEY
- --------------------------------------------------------------------------------
JOB NO. FAI2L SCALE 1/8" = 1' - 0"
- --------------------------------------------------------------------------------
EXHIBIT C-1
July 8, 1998
<PAGE>
July 8, 1998
EXHIBIT D
CLEANING AND MAINTENANCE SPECIFICATIONS
Landlord will provide building standard cleaning services to the tenant area and
the ground floor lobby area in accordance with the following specifications:
NIGHTLY
1. GENERAL CLEANING
a. Empty all waste and recycling receptacles, removing waste and
recycling material to designated central location for disposal.
b. Empty and damp wipe clean all ashtrays. Screen and clean all sand
urns, wipe exterior of sand urns.
c. Wash and disinfect all water coolers and drinking fountains.
d. Wipe clean fingermarks, smudges, etc. from all doors, security
desks, wall surfaces, furniture system trim, fixtures, cabinets,
files, conference tables, chairs, partition glass, flat ledges,
heating units, baseboards, blinds and window ledges.
e. Replace plastic liners in all waste-disposal cans.
f. Hand brush and/or vacuum all upholstered furniture, including
furniture system fabric panels.
g. Doors: Wash and wipe clean all kick panels, push/pull areas.
h. Wash and disinfect all public telephones.
i. Wipe down mail chute and mail depository nightly.
2. FLOORS
Group A - Ceramic tile, marble, terrazzo.
Group B - Linotile, asphalt, koroseal, plastic vinyl, rubber, wood, cork,
or other types of floors and base.
1D
<PAGE>
a. All floors in Group A to be swept and wet-mopped. Move light
furniture, planters and equipment other than desks and files.
b. All floors in Group B to be dry mopped, using a "dustdown"
preparation, and spots to be removed by wet process.
c. Main lobby to be machine buffed nightly.
3. VACUUMING
a. Vacuum all rugs and carpeted areas, moving light furniture and
office equipment other than desks and file cabinets. Spot clean to
remove soluble spots which safely respond to standard spotting
procedures without risk of injury to color or fabric.
4. WASHROOMS AND TOILETS
a. Sweep, mop, rinse, and dry floors. Polish mirrors, chrome plumbing
and bright-work. Clean enameled surfaces.
b. Wash and disinfect basins, urinals, and bowls using scouring powder
to remove stains, making certain to clean undersides of rims of
urinals and bowls.
c. Wash and disinfect both sides of all toilet seats.
d. Supply and service all toilet tissue, soap, towels, and sanitary
napkins. Sanitary napkins will be supplied in coin operated
dispensers.
e. All wastepaper cans and all receptacles are to be emptied and new
plastic liners installed.
f Hand dust and wash clean all partitions, tile walls, dispensers, and
receptacles in lavatories and vanity area.
g. Empty and clean sanitary disposal receptacles and install new
plastic liners.
5. ELEVATORS
a. Clean the floor in accordance with specifications outlined above
based upon the type of flooring installed. The doors, metal wall
surfaces, wood wall surfaces, ceiling and fixtures shall be dusted.
2D
<PAGE>
6. GLASS
a. Clean both sides of all lobby glass, building entrance doors, upper
lobby glass, furniture system partition glass and interior wall
glass.
7. STAIRWELLS
a. Check all stairwells and landings nightly throughout entire demised
area, and keep in clean condition. All stairways and landings will
be dry mopped nightly. Railings, ledges, and equipment will be
dusted nightly.
WEEKLY
8. GENERAL CLEANING
a. Hand dust all office equipment, furniture, fixtures, including
paneling, shelving, window sills and mullions, telephones and all
flat surfaces with a treated cloth or yarn duster.
9. FLOORS
a. Floors in Group B will be wet mopped weekly.
10. WASHROOMS AND TOILETS
a. Wash down walls in washrooms and stalls, from trim to floor.
11. ELEVATORS
a. The doors, surfaces and fixtures shall be damp wiped. The floors
shall be stripped, waxed and machine buffed weekly.
12. STAIRWAYS
a. These areas shall be stripped, waxed and buffed weekly. This will be
governed by the amount of wear due to weather and other conditions.
13. MAIN LOBBY
a. Clean walls with damp cloth and dust weekly.
3D
<PAGE>
MONTHLY
14. FLOORS
a. Waxing, buffing, stripping or machine scrubbing of the floors in
Group A and B.
15. HIGH DUSTING
a. Dust all closet shelving and wash all closet floors, when
accessible.
QUARTERLY
16. GLASS
a. Clean inside of windows.
17. HIGH DUSTING
a. Damp dust all pictures, charts, graphs, light fixtures, etc., not
reached in nightly cleaning.
b. Dust clean all vertical surfaces such as walls, partions, doors,
door bucks and other surfaces not reached in nightly cleaning.
c. Damp dust air conditioning diffusers, wall grills, door louvers,
registers and venetian blinds.
SEMI ANNUALLY
18. GLASS
a. Clean all doors and exterior side of exterior windows.
ANNUALLY
19. HIGH DUSTING
a. Dust interior and exterior of light fixtures.
MISCELLANEOUS
a. On completion of work, all slop sinks are to be thoroughly cleaned,
and cleaning equipment to be stored neatly in designated locations.
4D
<PAGE>
b. All cleaning services except those performed by day porters, window
cleaners, and matrons are to be performed nightly, five nights per
week. No Saturday, Sunday or Building holiday service to be
provided. In no event shall performance of any cleaning service
interfere with Tenant's normal business operation.
c. The Contractor or Landlord is to furnish all necessary approved
cleaning materials, implements, and machinery for the satisfactory
completion of the work. This includes scaffolding, vacuum machines,
scrubbing machines, etc.
d. Contractor shall furnish proof of liability and property damage
insurance reasonably acceptable to Landlord, and Workman's
Compensation Insurance in amounts required under the laws of New
Jersey.
e. Tenant will be charged for cleaning services in excess of the
specifications outlined above.
f. Tenant will be charged for the incremental cost to clean any areas
of the Demised Premises used for special purposes requiring more
difficult cleaning work than office areas including, but not limited
to, private toilets and showers, dining areas, cafeteria, kitchen,
etc.
5D
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators, and
escalators of the Building are limited to ingress to and egress from the
tenants' demised premises for the tenants and their employees, licensees, and
invitees, and no tenant shall use or permit the use of the entrances, corridors,
escalators, or elevators for any other purpose. No tenant shall invite to the
tenant's demised premises, or permit the visit of, persons in such numbers or
under such conditions as to interfere with the use and enjoyment of any of the
plazas, entrances, corridors, escalators, elevators, and other facilities of the
Building by other tenants. Fire exits and stairways are for emergency use only,
and they shall not be used for any other purpose by the tenants, their
employees, licensees, or invitees. No tenant shall encumber or obstruct, or
permit the encumbrance or obstruction of any of the sidewalks, plazas,
entrances, corridors, escalators, elevators, fire exits, or stairways of the
Building. The Landlord reserves the right to control and operate the public
portions of the Building and the public facilities, as well as facilities
furnished for the common use of the tenants, in such manner as it deems best for
the benefit of the tenants generally.
2. The Landlord may refuse admission to the Building outside of
ordinary business hours to any person not having a pass issued by the Landlord
or the tenant whose demised premises are to be entered or not otherwise properly
identified, and may require all persons admitted to or leaving the Building
outside of ordinary business hours to register. Any person whose presence in the
Building at any time shall, in the judgment of the Landlord, be prejudicial to
the safety, character, reputation, and interests of the Building or of its
tenants may be denied access to the Building or may be ejected therefrom. In
case of invasion, riot, public excitement, or other commotion, the Landlord may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the tenants and protection of
property of the Building. The Landlord may require any person leaving the
Building with any package or other object to exhibit a pass from the tenant from
whose premises the packaging or object is being removed, but the establishment
and enforcement of such requirement shall not impose any responsibilities on the
Landlord for the protection of any tenant against the removal of property from
the premises of the tenant. The Landlord shall in no way be liable to any tenant
for damages or loss arising from the admission, exclusion, or ejection of any
person to or from the tenant's premises or the Building under the provisions of
this rule. Canvassing, soliciting, or peddling in the Building is prohibited,
and every tenant shall cooperate to prevent the same.
3. No tenant shall obtain or accept for use in its demised premises
ice, food for on premises preparation other than warming, beverage towel,
barbering, boot blackening, floor polishing, lighting maintenance, cleaning, or
other similar services from any persons not authorized by the Landlord in
writing to furnish such services, provided that the charges for such services by
persons authorized by the Landlord are not excessive and where appropriate and
consonant with the security and proper operation of the Building sufficient
persons are so
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authorized for the same service to provide tenants with a reasonably competitive
selection. Such services shall be furnished only at such hours, in such places
within the Tenant's Demised Premises and under such reasonable regulations as
may be fixed by the Landlord. Tenant may have a coffee service, subject to
Landlord's approval, and a kitchen for the use of its employees commensurate
with normal office use.
4. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees, or invitees of the
tenant shall be paid by such tenant.
5. No lettering, sign, advertisement, notice or object shall be
displayed in or on the windows or doors, or on the outside of any tenant's
demised premises, or at any point inside any tenant's premises where the same
might be visible outside of such demised premises, except that the name of the
tenant may be displayed on the entrance door of the tenant's demised premises,
and in the elevator lobbies of the floors which are occupied entirely by any
tenant, subject to the approval of the Landlord as to the size, color, and style
of such display. The inscription of the name of the tenant on the door of the
tenant's demised premises shall be done by the Landlord at the expense of the
tenant.
6. No awnings or other projections over or around the windows shall
be installed by any tenant, and only such window blinds as are supplied or
permitted by the Landlord shall be used in a tenant's demised premises.
Linoleum, tile, or other floor covering shall be laid in a tenant's demised
premises only in a manner approved by the Landlord.
7. The Landlord shall have the right to prescribe the weight and
position of safes and other objects of excessive weight, and no safe or other
object whose weight exceeds the lawful load for the area upon which it would
stand shall be brought into or kept upon a tenant's demised premises. If, in the
judgment of the Landlord, it is necessary to distribute the concentrated weight
of any heavy object, the work involved in such distribution shall be done at the
expense of the tenant and in such manner as the Landlord shall determine. The
moving of safes and other heavy objects shall take place only outside of
ordinary business hours upon the same upon previous notice to the Landlord, and
the persons employed to move the same in and out of the Building shall be
reasonably acceptable to the Landlord and if so required by law, shall hold a
Master Rigger's license. Freight, furniture, business equipment, merchandise,
and bulky matter of any description shall be delivered to and removed from the
demised premises only in the freight elevators and through the service entrances
and corridors, and only during hours and in a manner approved by the Landlord.
Arrangements will be made by the Landlord with any tenant for moving large
quantities of furniture and equipment into or out of the Building.
8. No machines or mechanical equipment of any kind other than
typewriters and other ordinary portable business machines, may be installed or
operated in any tenant's demised premises without Landlord's prior written
consent, and in no case (even where the same are of a type so accepted or as so
consented to by Landlord) shall any machines or mechanical equipment be so
placed or operated as to disturb other tenants; but machines and mechanical
equipment which may be permitted to be installed and used in a tenant's demised
premises shall be
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so equipped, installed and maintained by such tenant as to prevent any
disturbing noise, vibration, or electrical or other interference from being
transmitted from such premises to any other area of the Building.
9. No noise, including the playing of any musical instruments, radio
or television, which, in the judgment of the Landlord might disturb other
tenants in the building, shall be made or permitted by any tenant, and no
cooking shall be done in the tenant's demised premises, except as expressly
approved by the Landlord. Nothing shall be done or permitted in any tenants'
demised premises, and nothing shall be brought into or kept in any tenants'
demised premises, which would impair or interfere with any of the Building
services or the proper and economic heating, cleaning, or other servicing of the
Building or the demised premises, or the use of enjoyment by any other tenant of
any other demised premises, nor shall there be installed by any tenant any
ventilating, air conditioning, electrical or other equipment of any kind which,
in the judgment of the Landlord, might cause any such impairment or
interference. No dangerous, inflammable, combustible, or explosive object or
material shall be brought into the building by any tenant or with the permission
of any tenant. Any cuspidors or similar containers or receptacles used in any
tenants' demised premises shall be cared for and cleaned by and at the expense
of the tenant.
10. No acids, vapors, or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures in
or serving any tenant's premises shall not be used for any purpose other than
the purposes for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein.
11. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows in any tenants' demised premises and no lock on any
door therein shall be changed or altered in any respect. Additional keys for a
tenant's demised premises and toilet rooms shall be procured only from the
Landlord, which may make a reasonable charge therefor. Upon the termination of a
tenant's lease, all keys of the tenant's demised premises and toilet rooms shall
be delivered to the Landlord.
12. All entrance doors in each tenants' demised premises shall be
left locked, and all windows shall be left closed by the tenant when the
tenant's demised premises are not in use. Entrance doors shall not be left open
at any time.
13. Hand trucks not equipped with rubber tires and side guards shall
not be used within the Building.
14. All windows in each tenant's demised premises shall be kept
closed and all blinds therein above the ground floor shall be lowered when and
as reasonably required because of the position of the sun, during the operation
of the Building air conditioning system to cool or ventilate the tenant's
demised premises.
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15. The Landlord reserves the right to rescind, alter, or waive any
rule or regulation at any time prescribed for the Building when, in its
judgment, it deems it necessary, desirable, or proper for its best interest and
for the best interests of the tenants, and no alteration or waiver of any rule
or regulation in favor of one tenant shall operate as an alteration or waiver in
favor of any other tenant. The Landlord shall not be responsible to any tenant
for the nonobservance or violation by any other tenant of any of the rules and
regulations at any time prescribed by the Building.
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EXHIBIT F
DEFINITIONS
(a) The term "mortgage" shall mean an indenture of mortgage and deed
of trust to a trustee to secure an issue of bonds, and the term "mortgagee"
shall mean such a trustee.
(b) The terms "include," "including," and "such as" shall each be
construed as if followed by the phrase "without being limited to."
(c) References to Landlord as having no liability to Tenant or being
without liability to Tenant, shall mean the Tenant is not entitled to terminate
this Lease, or to claim actual or constructive eviction, partial or total, or to
receive any abatement or diminution of rent, or to be relieved in any manner of
any of its other obligations hereunder, or to be compensated
(d) The term laws and/or requirements of public authorities and
words of like import shall mean laws and ordinances of any or all of the
Federal, state, city, county, and borough governments and rules, regulations,
orders and/or directives of any or all departments, subdivisions, bureaus,
agencies, or office thereof, or of any other governmental, public, or
quasipublic authorities, having jurisdiction in the premises, and/or the
direction of any public officer pursuant to law.
(e) The term requirements of insurance bodies and words of like
import shall mean rules, regulations, orders, and other requirements of the New
Jersey Board of Fire Underwriters and/or similar body performing the same or
similar functions and having jurisdiction or cognizance of the Building and/or
the Demised Premises.
(f) The term repair shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and condition.
(g) Reference to termination of this Lease includes expiration or
earlier termination of the term of this Lease or cancellation of this Lease
pursuant to any of the provisions of this Lease or to law. Upon a termination of
this Lease, the term and estate granted by this Lease shall end at noon of the
date of termination as if such date were the date of expiration of the term of
this Lease and neither party shall have any further obligation or liability to
the other after such termination (i) except as shall be expressly provided for
in this Lease, or (ii) except for such obligation as by its nature or under the
circumstances can only be, or by the provisions of this Lease, may be performed
after such termination and, in any event, unless expressly otherwise provided in
this Lease, any liability for a payment which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this Lease.
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EXHIBIT G
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this _______day of ______,
199_, by and among _________________________________________ ("Tenant") and NEW
YORK LIFE INSURANCE COMPANY, a New York mutual insurance company [NEW YORK LIFE
INSURANCE AND ANNUITY CORPORATION, a Delaware corporation] (" Lender "), whose
principal address is 51 Madison Avenue, New York, New York, and METRO FOUR
ASSOCIATES LIMITED PARTNERSHIP ("Landlord ").
RECITALS:
A. Lender has made a mortgage loan (the " Loan ") to Landlord in the
amount of $40,000,000 secured by a mortgage (the" Mortgage ") on the real
property legally described in Exhibit "A" attached hereto (the " Premises ");
B. Tenant is the present lessee under a lease dated ______________________
made by Landlord demising a portion of the Premises and other property (said
lease and all amendments thereto being referred to as the" Lease ");
C. The Loan terms require that Tenant subordinate the Lease and its
interest in the Premises in all respects to the lien of the Mortgage and that
Tenant attorn to Lender; and
D. In return, Lender is agreeable to not disturbing Tenant's possession of
the portion of the Premises covered by the Lease (the " Demised Premises "), so
long as Tenant is not in default under the Lease.
NOW THEREFORE, in consideration for the mutual covenants contained herein
and other consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENTS:
1. Subordination. The Lease, and the rights of Tenant in, to and under the
Lease and the Demised Premises, are hereby subjected and subordinated to the
lien of the Mortgage and to any modification, reinstatement, extension,
supplement, consolidation or replacement thereof as well as any advances or
re-advances with interest thereon and to any mortgages or deeds trust on the
Premises which may hereafter be held by Lender.
<PAGE>
-2-
2. Tenant Not to be Disturbed. In the event it should become necessary to
foreclose the Mortgage or Lender should otherwise come into possession of title
to the Premises, Lender will not join Tenant in summary or foreclosure
proceedings unless required by law in order to obtain jurisdiction, but in such
event no judgment foreclosing the Lease will be sought, and Lender will not
disturb the use and occupancy of Tenant under the Lease so long as Tenant is not
in default under any of the terms, covenants or conditions of the Lease and has
not prepaid the rent except monthly in advance as provided by the terms of the
Lease.
3. Tenant to Attorn to Lender. Tenant agrees that in the event any
proceedings are brought for foreclosure of the Mortgage, it will attorn to the
purchaser as the landlord under the Lease. The purchaser by virtue of such
foreclosure shall be deemed to have assumed and agreed to be bound, as
substitute landlord, by the terms and conditions of the Lease until the resale
or other disposition of its interest by such purchaser, except that such
assumption shall not be deemed of itself an acknowledgment by such purchaser of
the validity of any then existing claims of Tenant against any prior landlord
(including Landlord). All rights and obligations under the Lease shall continue
as though such foreclosure proceedings had not been brought, except as
aforesaid. Tenant agrees to execute and deliver to any such purchaser such
further assurance and other documents, including a new lease upon the same terms
and conditions of the Lease, confirming the foregoing as such purchaser may
reasonably request. Tenant waives the provisions (i) contained in the Lease or
any other agreement relating thereto and (ii) of any statute or rule of law now
or hereafter in effect which may give or purport to give it any right or
election to terminate or otherwise adversely affect the Lease and the
obligations of Tenant thereunder by reason of any foreclosure proceeding.
4. Limitations. Notwithstanding the foregoing, neither Lender nor such
other purchaser shall in any event be:
(a) liable for any act or omission of any prior landlord (including
Landlord);
(b) obligated to cure any defaults of any prior landlord (including
Landlord) which occurred prior to the time that Lender or such other purchaser
succeeded to the interest of such prior landlord under the Lease;
(c) subject to any offsets or defenses which Tenant may be entitled to
assert against any prior landlord (including landlord);
(d) bound by any payment of rent or additional rent by Tenant to any prior
landlord (including Landlord) for more than one month in advance;
(e) bound by any amendment or modification of the Lease made without the
written consent of Lender or such other purchaser; or
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-3-
(f) liable or responsible for, or with respect to, the retention,
application and/or return to Tenant of any security deposit paid to any prior
landlord (including Landlord), whether or not still held by such prior landlord,
unless and until Lender or such other purchaser has actually received for its
own account as landlord the full amount of such security deposit.
5. Acknowledgment of Assignment of Lease and Rent. Tenant acknowledges
that it has notice that the Lease and the rent and all other sums due thereunder
have been assigned or are to be assigned to Lender as security for the Loan
secured by the Mortgage. In the event that Lender notifies Tenant of a default
under the Mortgage and demands that Tenant pay its rent and all other sums due
under the Lease to Lender, Tenant agrees that it will honor such demand and pay
its rent and all other sums due under the Lease directly to Lender or as
otherwise required pursuant to such notice.
6. Limited Liability. Tenant acknowledges that in all events, the
liability of Lender and any purchaser shall be limited and restricted to their
interest in the Premises and shall in no event exceed such interest.
7. Lender's Right to Notice of Default and Option to Cure: Tenant will
give written notice to Lender of any default by Landlord under the Lease by
mailing a copy of the same by certified mail, postage prepaid, addressed as
follows (or to such other address as may be specified from time to time by
Lender to Tenant):
To Lender: New York Life Insurance Company
[New York Life Insurance and Annuity Corporation]
51 Madison Avenue
New York, NY 10010
Attn: Senior Vice President
Mortgage Finance Department
Upon such notice, Lender shall be permitted and shall have the option, in its
sole and absolute discretion, to cure any such default during the period of time
during which the Landlord would be permitted to cure such default, but in any
event, Lender shall have a period of thirty (30) days after the receipt of such
notification to cure such default, provided, however, that in the event Lender
is unable to cure the default by exercise of reasonable diligence within such 30
day period, Lender shall have such additional period of time as may be
reasonably required to remedy such default with reasonable dispatch.
Tenant waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give it any right or election to terminate
or otherwise adversely affect the Lease and the obligations of Tenant thereunder
in connection with any foreclosure proceedings.
8. Successors and Assigns. The provisions of this Agreement are binding
upon and shall inure to the benefit of the heirs, successors and assigns of the
parties hereof.
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-4-
IN WITNESS WHEREOF, the parties hereto have executed these presents the
day and year first above written;
WITNESSED: TENANT:
- ----------------------------------- ----------------------------------------
By:
- ----------------------------------- ------------------------------------
Name:
----------------------------------
Title:
---------------------------------
LENDER:
NEW YORK LIFE INSURANCE COMPANY [NEW
YORK LIFE INSURANCE AND ANNUITY
CORPORATION]
- ----------------------------------- ----------------------------------------
By:
- ----------------------------------- ------------------------------------
Name:
----------------------------------
Title:
---------------------------------
The terms of the above Agreement are hereby consented, agreed to and
acknowledged.
LANDLORD:
METRO FOUR ASSOCIATES LIMITED
PARTNERSHIP
- ----------------------------------- ----------------------------------------
By:
- ----------------------------------- ------------------------------------
Name: Dominick Alfieri
Title: General Partner
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<PAGE>
Exhibit 10.9
ARTICLE - REFERENCE DATA
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Article:
LANDLORD AND LANDLORD'S ADDRESS:
Lisa Ryan, Jeanne Kubiak &
Roberta Whittier, Trustees for
HEGA REALTY TRUST
c/o Hampstead Hospital
East Road
Hampstead, NH 03841
TENANTS AND TENANT'S ADDRESS:
Systems Consulting Company, Inc.
537 Congress Street, Suite 500
Portland, Maine 04101
883-5052(Mark Tilly @ Home)
761-0079(Work)
SCHEDULED TERM COMMENCEMENT DATE: October 1, 1997
TENANT'S SPACE: 537 Congress Street, Suites 406, Portland, Maine
TERM: Two (2) years and one (1) month
BASE RENT: 10/1/97 - 9/30/98: $795.42/month ($11.50 psf)
10/1/98 - 10/31/99: $830.00/month ($12.00 psf)
OPTION: One (1) - two (2) year option;
11/1/99 - 10/31/00: $864.58/month ($12.50 psf)
11/1/00 - 10/31/01: $899.17/month ($13.00 psf)
SECURITY DEPOSIT: None
RENTABLE FLOOR AREA OF TENANT'S SPACE: Approximately 830 Square Feet
PERMITTED USES: The premises may be used solely by the Tenant for the
sole purpose of carrying on general office uses,
including computer programming and consulting and for no
other use or purpose without the prior written consent
of the Landlord in each instance.
REQUIRED PUBLIC LIABILITY INSURANCE:
Bodily Injury - $1,000,000/1,000,000
Property Damage - $500,000
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ARTICLE II - PREMISES
In consideration of the rent and of the covenants hereinafter contained,
the Landlord does hereby lease to the Tenant, and Tenant hereby leases from the
Landlord certain space, situated on the fourth and fifth floor of the J.B. Brown
Building located at 537 Congress Street, Portland, Maine, which space is more
specifically known as Suites 406 and is hereinafter referred to as the premises.
Said premises shall be used by the Tenant only for those purposes designated in
Article II and for no other purpose or purposes.
ARTICLE III - TERM
3.01 The term of this lease shall commence on October 1, 1997 and shall
terminate on October 31, 1999.
ARTICLE IV - RENT
4.01 The tenant shall pay base rent in equal monthly installments in
advance on the first day of each month during the term hereof, said rent to be
prorated for Portions of a calendar month at the beginning or end of said term,
all payments to be made to the Landlord or to such agent and at such place as
the Landlord shall from time to time in writing designate, the following being
now so designated: DIRIGO MANAGEMENT COMPANY, INC., 45 EXCHANGE STREET.
PORTLAND, MAINE 04101. If Tenant does not pay base rent, supplemental and
additional rents by the 10th of each month, then the Landlord, in its sole
discretion, may charge, in addition to any other remedies it may have, a late
charge for each month or part thereof that the Tenant fails to pay. The late
charge shall be 5% multiplied by the amount unpaid. Any payments made by check
that are returned are subject to a $25.00 service charge.
4.02 No payment by the Tenant or receipt by the Landlord of a lesser
amount than the monthly installments of rent herein stipulated shall be deemed
to be other than on account of the earliest stipulated rent nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and the Landlord may
accept such check for payment without prejudice to the Landlord's right to
recover the balance of such rent or pursue any other remedy in this lease
provided.
ARTICLE V - LANDLORD COVENANTS
5.01 Landlord covenants and agrees that it will without additional charge
furnish the following;
(a) Heating and cooling of the Tenant's space;
(b) Electricity;
(c) Elevator service;
(d) Water for drinking and ordinary sanitary purposes. If the Tenant
requires water for any other purpose, it shall pay for the same and
any sewer charges connected therewith, and shall at its own expense,
install a meter or measuring
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device for said purpose unless the Landlord shall elect to supply
water and invoice the Tenant for the same at the going rate charged
by the utility company supplying the same;
(e) Cleaning and janitor service in the common areas equal in scope,
quality, and frequency to that provided in first class office
buildings in the City of Portland;
(f) Maintenance and repair of the roof, exterior walls, windows,
structure, heating and plumbing systems, and electrical system and
common areas and common facilities of the building as necessary to
maintain them in good order and condition; provided however, that
any such maintenance or repairs made necessary by fault or neglect
of the Tenant or the employees and visitors of the Tenant shall be
at the expense of the Tenant and the Tenant shall pay all costs
thereof;
5.02 The Landlord shall not be liable to anyone for interruption in or
cessation of any service rendered to the premises or building or agreed to by
the terms of this Lease, due to any accident, the making of repairs, labor
difficulties, trouble in obtaining fuel, electricity, service or supplies from
the sources from which they are usually obtained for said building, or any cause
beyond the Landlord's control; excepting the negligence or intentional acts of
the Landlord, its agents or employees, and except to the extent that the
liability of the Landlord is insured by virtue of a general comprehensive
Landlord public liability insurance policy, which the Landlord agrees to
maintain with respect to the building;
ARTICLE VI - TENANT COVENANTS
6.01 The Tenant acknowledges by entry thereupon that said premises are in
good satisfactory order, repair and condition, and covenants during said term;
(a) To pay, when due, all rent and other charges set forth herein;
all charges for trash removal, for telephone, and other
communication systems used at, and supplied to, the premises, and
other utilities not provided by the Landlord; light bulbs and
ballasts after initial installation;
(b) To keep said premises in as good order, repair and condition as
the same are in at the commencement of said term or may be put
thereafter, damage by fire or unavoidable casualty and reasonable
use and wear excepted; and, at the termination of this Lease,
peaceably to yield up said premises and all additions, alterations
and improvements thereto in such good order, repair and condition,
first removing all goods and effects not attached to the premises,
repairing all damage caused by such removal, and leaving the
premises clean and tenantable. If the Landlord in writing permits
the Tenant to leave any such goods and chattels at the premises, and
the Tenant does so, the Tenant shall have no further claims and
rights in such goods and chattels as against the Landlord or those
claiming by, through or under the Landlord;
(c) The Tenant shall not erect or install any sign or other type
display whatsoever, upon the exterior of the building, without the
prior express written consent of the Landlord; and the Landlord
shall have the right to require that the
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<PAGE>
Tenant's sign be of a particular type, size, quality, and style and
that the same be placed and maintained in such location as the
Landlord may designate; and the Tenant shall not use in, on or about
the demised premises any advertising medium which may be heard or
experienced outside thereof, such as flashing lights, flashlights,
loudspeakers, phonograph records, or radio broadcasts without first
having obtained the Landlord's written consent which shall not be
unreasonably withheld;
(d) Not to injure or deface said premises or building; not to permit
on said premises any auction sale, inflammable fluids, chemicals,
nuisance, objectionable odor; not to permit the use of said premises
for any purpose other than set forth herein or any use thereof which
is improper, offensive, contrary to law or ordinance, or liable to
invalidate or increase the premiums for any insurance on the
building or its contents or liable to render necessary any
alterations or additions to the building;
(e) Not to obstruct in any manner any portion of the building not
hereby demised or the sidewalks or approaches to said building or
any inside or outside windows or doors; and to conform to all
reasonable rules and security regulations now or hereafter made by
the Landlord for the care and use of said premises, the building,
its facilities and approaches;
(f) Not to assign this Lease nor make any sublease at any time
without the Landlord's consent which shall not be unreasonably
withheld; provided, however, that in the event of any such
assignment, subletting, or permitted action by the Tenant, the
Tenant shall continue until the end of the term hereof to be fully
obligated to fulfill all of the terms and conditions hereof;
(g) Not to make any alterations, nor to permit the making of any
holes in any part of said building, nor to paint or place any signs,
drapes, curtains, shades, awnings, aerials or flagpoles or the like,
visible from the outside of said premises, that is, from outdoors or
from any corridor or other common area within the building, nor to
permit anyone except the Tenant to use any part of the premises for
desk space or for mailing privileges without on each occasion
obtaining prior written consent of the Landlord;
(h) Not to move any safe, heavy equipment, freight, bulky matter or
heavy fixtures in or out of the building except at such times and in
such manner as the Landlord shall designate after written request
from the Tenant; and to place and maintain business machines and
mechanical equipment in such settings as will most effectively
reduce noise and vibration;
(i) Not to place a load upon any floor of the premises in excess of
50 pounds live load per square foot or in violation of what is
allowed by law;
(j) That the Landlord may enter the premises to install, maintain,
use, repair and replace pipes, ducts, wires, meters and any other
equipment, machinery, apparatus and fixtures in said premises to
serve said premises and to serve other parts of said building;
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(k) To save the Landlord harmless and indemnify as follows; (i) the
Tenant covenants at its sole cost and expense at all times during
the Lease Term to defend and save the Landlord free, harmless and
indemnified from all injury, loss, claims or damage (including
reasonable attorney's fees and expenses) to any person or property
arising from, related to or in connection with the use and occupancy
of the Demised Premises or conduct or operation of the Tenant's
business, except for any loss caused by the negligence or willful
misconduct of the Landlord, its agent or employees; (ii) the Tenant
shall store its property in and shall occupy the Demised Premises
and all other portions of the building at its own risk;
(l) To maintain with responsible companies authorized to do business
in the State of Maine and approved by the Landlord, liability
insurance, with contractual liability endorsement covering the
matters set forth in Subsection 1 above, against all claims, demands
or actions for injury to or death of any one person in an amount of
not less than One Million ($1,000,000) Dollars and for injury to or
death of more than one person in an amount of not less than One
Million ($1,000,000) Dollars and for damage to property in an amount
of not less than Five Hundred Thousand ($500,000) Dollars made by or
on behalf of any person, firm or corporation, arising from, related
to, or connected with the conduct or operation of the Tenant's
business, or caused by acts or omissions of the Tenant or anyone
claiming a right to be on or about the property by reason of
permission granted by the Tenant which is either express or implied,
or by any of the Tenant's officers, agents, servants, suppliers,
employees, or contractors. All insurance provided by the Tenant as
required by this Subsection shall name the Landlord and the lessor
under any underlying or overriding lease as additional insiders as
their interests may appear and shall include the holder of any
mortgage on the fee or on any underlying or overriding leasehold
estate under a standard mortgagee clause to the extent the Landlord
informs the Tenant of the same in writing. On or before the
commencement date, the Tenant shall deliver to the Landlord the
appropriate certificates, together with satisfactory evidence of the
payment of the premiums associated therewith;
(m) To hold all property of the Tenant, including fixtures,
furniture, equipment and the like of the Tenant, or of any other
owner situated at the premises, at the Tenant's own risk, and to pay
when due all taxes assessed during the term of this Lease against
any leasehold interest or personal property of any kind owned or
placed in, upon or about said premises by the Tenant;
(n) Upon reasonable advance notice, to permit the Landlord or its
agents to examine the premises at reasonable times and, if the
Landlord shall so direct, to make any repairs or additions and, at
the Tenant's expense to remove any alterations, additions, signs,
drapes, curtains, shades, awnings, aerials or flagpoles, or the
like, not consented to in writing; and to show the premises to
prospective tenants during the six (6) months preceding the
expiration of this Lease;
(o) To permit the Landlord at any time or times to decorate common
areas, and to make, at its own expense, repairs, alterations,
additions and improvements,
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structural or otherwise, in or to said building or any part thereof,
and during such operations to take into and through said premises or
any part of the building all materials required and to close or
temporarily suspend operation of the entrances, doors, corridors,
elevators or other facilities, Landlord agreeing, however, that it
will carry out such work in a manner which will cause the Tenant a
minimum inconvenience and business interruption;
(p) Not to install any vending machines or food service equipment in
the demised premises without first obtaining the Landlord's prior
written approval, which approval shall not be unreasonably withheld;
except for the Tenant's coffee machine, microwave and refrigerator;
(q) To exercise reasonable efforts to prevent any employee of the
Tenant from violating any covenant or obligation of the Tenant
hereunder;
(r) In the case of any lien attaching by reason of the conduct of
the Tenant to immediately pay and remove the same; this provision
shall not be interpreted as meaning that the Tenant has any
authority or power to permit any lien of any nature or description
to attach to or be placed upon the Landlord's title or interest in
the building, the premises, or any portion thereof;
(s) To keep the premises equipped with all safety appliances
required by law or any public authority because of the use made by
the Tenant of the premises;
(t) That the rights and remedies to which the Landlord may be
entitled under the terms of this Lease are cumulative and are not
intended to be exclusive of any other rights or remedies to which
the Landlord may be properly entitled in case of any breach or
threatened breach by the Tenant of any portion of the Lease;
(u) That acceptance by the Landlord of a lesser sum than the base
rent, supplemental rent or other fees or charges then due shall not
be deemed to be other than on account of the earliest installment of
such rent or other fees or charges due, nor shall any endorsement or
statement on any check or any letter accompanying any check or
payment as rent or other payments be deemed an accord and
satisfaction and the Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such
installment or pursue any other remedy in this Lease. The delivery
of keys to any employee thereof shall not operate as a termination
of this Lease or a surrender of the premises;
(v) To pay Landlord's expenses, including reasonable attorney's
fees, incurred in enforcing any obligation of this Lease which has
not been complied with;
(w) That without limitation of anything elsewhere herein contained,
the Landlord may;
(i) designate and change the name and street address of the
building; provided, however, that the Landlord shall first
give reasonable notice thereof to the Tenant;
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(ii) retain and use in appropriate instances keys to all doors
within and into the premises and to change the locks to the
premises if the Landlord deems it advisable and provides
Tenant with reasonable advance notice and keys to such new
locks. No lock shall be changed by the Tenant without prior
written consent of the Landlord;
(iii) enter upon the premises and exercise any and all of the
Landlord's rights without being deemed guilty of an eviction
or disturbance of the Tenant's use or possession and without
being liable in any manner to the Tenant;
(x) That the Tenant shall not remove any of its fixtures from the
premises at any time that the Tenant is in default under any of the
terms of this Lease (except for white boards and bulletin boards);
(y) In the event the Tenant wishes to provide outside services for
the demised premises over and above those services to be provided
by the Landlord as set forth herein, the Tenant shall first obtain
the prior written approval of the Landlord for the installation
and/or utilization of such services, which approval shall not be
unreasonably withheld or delayed. "Outside services" shall include
but shall not be limited to cleaning and moving services, security
services, catering services and the like. In the event the Landlord
approves the installation and/or utilization of such services, such
installation and utilization shall be at the Tenant's sole cost,
risk and expense.
ARTICLE VII - SUBORDINATION
7.01 The Tenant agrees that, at the election of the Landlord, that this
Lease shall be subject and subordinate to the lien of any mortgage which may now
hereafter be placed on, encumber, or affect the real property of which the
premises are a part and to all renewals, modifications, consolidations, and
replacements. When requested to do so by the Landlord, the Tenant agrees to
execute, acknowledge, and deliver to the Landlord an instrument, in proper form
for recording, wherein the Tenant agrees to and does subordinate this Lease to
the lien of the mortgages above mentioned.
The Landlord agrees to use its best efforts to promptly obtain from each
and every mortgagee of the premises a non-disturbance agreement whereby the
mortgagee shall agree that, should the mortgagee assume the management
responsibility for the premises, the mortgagee will permit the Tenant to
continue to operate under this Lease.
ARTICLE VIII - CASUALTY DAMAGE AND EMINENT DOMAIN
8.01 If at any time during the lease term the premises shall be damaged
or destroyed by fire or other casualty, then the Landlord shall have the
election to terminate this Lease or to repair and reconstruct the premises to
the condition thereof immediately prior to such damage or destruction. Unless
such fire or other casualty shall have been caused by the negligence of the
Tenant, its agents, employees, or invites, rent shall abate proportionately
during the period and to the extent that the premises are unfit for the use by
the Tenant in the ordinary conduct of its permitted uses hereunder. If the
Landlord has elected to repair and restore the premises,
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this Lease shall continue in full force and effect and such repairs will be made
within a period of thirty (30) days. If the Landlord fails to complete such
repairs within thirty days of such fire or other casualty, the Tenant may
terminate this Lease, without any further liability hereunder, by written notice
to the Landlord.
8.02 If the whole or any part of the demised premises shall be acquired
or condemned by eminent domain for any public or quasipublic use or purpose,
then and in that event, the term of this Lease shall cease and terminate from
the date of title vesting in such proceedings and the Tenant shall have no claim
against the Landlord for the value of any unexpired term of said lease and the
Tenant shall not be entitled to any part of any award that may be made for such
taking.
ARTICLE IX - TENANT DEFAULT
9.01 The Tenant shall have thirty (30) days after written notice
requesting compliance is received from the Landlord to cure any default under
this Lease; provided that, notwithstanding the above, the Tenant shall have five
(5) days after the due date thereof (without any written notice requirement) to
cure any default in the payment of rent. If the Tenant shall abandon or vacate
said premises before the end of the term of this Lease, or shall suffer the rent
to be in arrears, or default under any of the terms or conditions of this Lease,
the Landlord may, at his option, forthwith cancel this Lease or he may enter the
premises as the agent of the Tenant, by force or otherwise, without being liable
in any way therefor, and relet the premises with or without any furniture that
may be therein, as the agent of the Tenant, at such price and upon such terms
and for such duration of time as the Landlord may determine, and receive the
rent therefor, applying the same to the payment of the rent due by these
presents, and if the full rental herein provided shall not be realized by the
Landlord in such reletting, the said Tenant shall pay any deficiency; or the
Landlord, at his option, may declare the entire rent for the balance of the term
hereof due and payable forthwith.
ARTICLE X - LANDLORD SELF-HELP
If the Tenant shall default in the performance or observance of any
agreement or condition in this Lease contained on its part to be performed or
observed, other than an obligation to pay money, and shall not cure such default
as provided herein, the Landlord may, at its option, without waiving any claim
for damages for breach of this Lease, at any time thereafter, cure such default
for account of the Tenant, any amount paid or any liability incurred by the
Landlord in so doing shall be deemed paid or incurred for the account of the
Tenant, and the Tenant agrees to reimburse the Landlord thereof.
ARTICLE XI - LANDLORD DEFAULT
The Landlord shall in no event be in default in the performance of any of
his obligations hereunder unless and until the Landlord shall have failed to
perform such obligations within thirty (30) days or such additional time as is
reasonably required to correct any such default after notice by the Tenant to
the Landlord properly specifying wherein the Landlord has failed to perform any
such obligation.
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ARTICLE XII - NOTICES
Any notice from the Landlord to the Tenant or from the Tenant to the
Landlord shall be deemed duly served if mailed by Certified Mail addressed, if
to the Tenant, at said premises after the term of this Lease has commenced and,
prior to that time, at Tenant's address or if to the Landlord, at the place from
time to time established for the payment of rent, and the customary Certified
Mail receipt shall be conclusive evidence of such service.
ARTICLE XIII - SUCCESSORS AND ASSIGNS
The covenants and agreements of the Landlord and the Tenant shall run
with the land and be binding upon and inure to the benefit of them and their
respective heirs, executors, administrators, successors and assigns.
ARTICLE XIV - HOLDOVER
In the event that the Tenant shall continue in occupancy of the Leased
Premises after the expiration of the term of this Lease or any earlier
termination thereof, such occupancy shall not be deemed to extend or renew the
term of this Lease, but, at the option of the Landlord, such occupancy shall
continue as a tenancy at will from month to month upon the covenants, provisions
and conditions herein contained and at 150% of the Base Rent and 150% of the
additional rent in effect during the last lease year of the term, prorated and
payable for the period of such occupancy. Except as specifically set forth
herein, this Article shall not be construed as giving the Tenant any right to
hold over after the expiration of the term hereof.
ARTICLE XV - QUIET ENJOYMENT
The Landlord covenants and agrees with the Tenant that so long as the
Tenant pays the rent and observes and performs all the terms, covenants and
conditions on the Tenant's part to be observed and performed, the Tenant may
peaceably and quietly have, hold, occupy and enjoy the demised premises and all
appurtenances thereto without hinderance or molestation.
ARTICLE XVI - LIMITATION OF LIABILITY
The Tenant agrees to look solely to the Landlord's interest in the
building and the Landlord's insurance for recovery of any judgment from the
Landlord; it being agreed that the Landlord is not personally liable for any
such judgment.
ARTICLE XVII - LANDLORD'S WORK
17.01 The Landlord will construct the leased premises as described on
Exhibit B. Any Tenant work shall be performed by the Tenant at its own cost and
expense. Tenant's work may be performed only by contractors or subcontractors
approved in advance by the Landlord; such approval shall not be unreasonably
withheld. All Tenant's work shall be performed in a thoroughly first-class
workmanlike manner.
17.02 The Tenant shall have access to the premises before the
commencement date of the lease term, provided, however, that the Tenant assumes
any risks attendant on its entry into the leased premises before the completion
thereof, as though this Lease were in effect.
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ARTICLE XVIII - MISCELLANEOUS
18.01 If the Tenant is more than one person or party, then the Tenant's
obligations shall be joint and several. Unless repugnant to the context,
"Landlord" and "Tenant" mean the person or persons, natural or corporate, named
above as the Landlord and the Tenant respectively, and their respective heirs,
executors, administrators, successors and assigns.
18.02 The Landlord and the Tenant agree that this Lease shall not be
recordable. The Landlord and the Tenant shall enter into an agreement in
recordable form, setting forth the actual commencement and termination dates of
this Lease.
18.03 If any provision of this Lease or its application to any person or
circumstances shall to any extent be invalid or unenforceable, the remainder of
this Lease or the application of such provision to persons or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby and each provision of this Lease shall be valid and enforceable
to the fullest extent permitted by law.
18.04 All alterations, decorations, partitions, installations, carpeting,
additions or improvement upon the demised premises, made by either party,
including, but not limited to, all paneling, decorations, partitions, railings,
and the like, affixed to the realty shall, unless the Landlord elects otherwise,
become the property of the Landlord and shall remain at the premisses upon, at
the end of the Lease Term. In the event the Landlord shall so elect, then such
alterations, decorations, installations additions or improvements made by the
Tenant upon the demised premises as the Landlord shall designate, shall be
removed by the Tenant and the Tenant shall restore the demised premises to its
original condition at the Tenant's sole expense at or prior to the Expiration
Date or such other earlier termination of this Lease.
18.05 The Tenant shall deposit $00.00 with the Landlord at the signing of
this Lease, which deposit may at the Landlord's sole option be used to cure any
default hereunder by the Tenant, including costs for damage to the leased
premises or missing items, and the Tenant agrees to immediately reimburse the
Landlord for any such sum so applied from the deposit. SAID DEPOSIT SHALL NOT BE
USED AS THE RENT FOR THE FINAL MONTH OF THE TERM. The Landlord agrees to refund
to the Tenant the deposit, less sums expended in accordance with the Lease,
within 7 days of the termination of the lease.
18.06 The submission of this Lease or a summary of some of or all of its
provisions for examination by the Tenant does not constitute a reservation of or
option for the premises or an offer to lease said premises.
ARTICLE XIX - NO HAZARDOUS MATERIALS
19.01 Tenant agrees it shall not cause or permit to occur any violation
of any federal, state or local law, ordinance or regulation now or hereafter
enacted, related to environmental conditions on, under or about the Demised
Premises or arising from Tenant's use or occupancy of the Demised Premises,
including but not limited to soil and groundwater conditions. It is further
agreed Tenant shall not permit the use, generation, release, manufacture,
refining, production, processing, storage, or disposal of any hazardous
substances on, under or about the Demised Premises or the transportation to or
from the Demised Premises of any hazardous substance.
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Tenant further agrees it shall indemnify, defend and hold harmless,
Landlord, the manager of the property and their respective officers, directors,
beneficiaries, shareholders, patrons, agents and employees from all fines,
suits, procedures, claims and actions of every kind and costs associated
therewith (including attorneys' and consultants' fees) arising out of or in any
way connected with any deposit, spill, discharge or other release of hazardous
substances by the Tenant that occurs during the term of this Lease at or from
the Demised Premises or which is caused by Tenant at any time from Tenant's use
or occupancy of the Demised Premises or from Tenant's failure to provide all
information, make all submissions and take all steps required by all authorities
under the laws and all other environmental laws. Tenant's obligations and
liabilities under this Article (XIX) shall survive the expiration of this Lease.
ARTICLE XX - ESTOPPEL CERTIFICATES
20.01 Landlord and Tenant agree, at any time and from time to time, upon
not less than five (5) business days' prior written request by the other, to
execute, acknowledge and deliver to the requesting party a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same are in full force and effect as
modified and stating the modifications), that to the knowledge of such party no
uncured defaults exist hereunder (or if any such defaults exist, specifying the
same), and the dates to which the rents and other charges due hereunder have
been paid in advance, if any, it being intended that any such statement
delivered pursuant to this Article may be relied upon by any prospective
purchase or mortgagee of, or assignee of any mortgage upon, the building.
Executed this 25 day of September, 1997.
WITNESS: BY:
/s/ Peter S. Skapinsky
- -------------------- ------------------------------------
Landlord: Peter S. Skapinsky
Authorized Agent for HEGA Realty Trust
- -------------------- ------------------------------------
Tenant: Systems Consulting Company, Inc.
By Mark C. Tilly, Its /s/ Mark C. Tilly
-----------------
Executive Vice President
/s/ Alan Hyman
- -------------------- ------------------------------------
Tenant: Systems Consulting Company, Inc.
By Alan Hyman, Its
--------------------
Chairman
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EXHIBIT A
RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or used
for any purpose other than for ingress to and egress from the demised
premises and for delivery of merchandise and equipment in a prompt and
efficient manner, using elevators and passageways designated for such
delivery by Landlord. There shall not be used in any space, or in public
hall of the building, either by any Tenant or by jobbers or others in the
delivery or receipt of merchandise, any hand trucks, except those equipped
with rubber tires and sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and
no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting
from the violation of this rule shall be borne by the Tenant who, or whose
clerks, agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window
of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any
of the corridors or halls, elevators, or out of the doors or windows or
stairways of the building, and Tenant shall not use, keep or permit to be
used or kept any foul or noxious gas or substance in the demised premises,
or permit or suffer the demised premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the
building by reason of noise, odors and/or vibrations, or interfere in any
way with other tenants or those having business therein, nor shall any
animals or birds be kept in or about the building. Smoking or carrying
lighted cigars or cigarettes in the elevators of the building is
prohibited.
4. No curtains, blinds, shades, or screens other than those furnished by
Landlord shall be attached to, hung in or used in connection with any
window or door of the Premises without the prior written consent of
Landlord.
5. No advertisement, notice or other lettering shall be exhibited, inscribed,
painted or affixed by any Tenant on any part of the outside of the demised
premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Landlord, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the
foregoing by any Tenant, Landlord may remove same without any liability,
and may charge the expense incurred by such removal to Tenant or Tenants
violating this rule. Interior signs on doors and directory tablet shall be
inscribed, painted or affixed for each Tenant by Landlord at the expense
of such Tenant, and shall be of a size, color and style acceptable to
Landlord.
6. No boring, butting or stringing of wires shall be permitted, except with
the prior written consent of Landlord, and as Landlord may direct. No
Tenant shall lay linoleum, or other similar floor covering, so that the
same shall come in direct contact with the floor of the demised premises,
and, if linoleum or other similar floor covering is desired to be used
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in interlining of builder's deadening felt shall be first affixed to the
floor, by a paste or other material, soluble in water, the use of cement
or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
tenancy, restore to Landlord all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such Tenant, and in the
event of the loss of any keys, so furnished, such Tenant shall pay to
Landlord the cost thereof.
8. Freight, furniture, business equipment, safes, merchandise and bulky
matter of any description shall be delivered to and removed from the
premises only on the freight elevators and through the service entrances
and corridors, and only during hours and in a manner approved by Landlord.
Landlord reserves the right to inspect all freight to be brought into the
building and to exclude from the building all freight which violates any
of these Rules and Regulations of the Lease of which these Rules and
Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.
10. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the
building or its desirability as building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinuing such
advertising.
11. Tenant shall not bring or permit any odors of cooking or other processes,
or any unusual or other objectionable odors to permeate in or emanate from
the demised premises.
12. Tenant shall comply with all security measures from time to time
established by Landlord for the Building.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and any other
means of entry to the Premises closed and secured.
14. Tenant shall not install and operate machinery or any mechanical devices
of a nature not directly related to Tenant's ordinary use of the Premises
without the written permission of Landlord.
15. No person or contractor not employed or approved by Landlord shall be used
to perform window washing, cleaning, repair or other work in the Premises.
16. No vending machines other than those furnished by the Landlord are to be
placed in any hallways or building common areas.
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EXHIBIT B - LANDLORD'S WORK
Reopening of the doorway between suites 404 & 406.
EXHIBIT C - OPTIONS
At any time during which the Tenant is not in default under this Lease,
the Tenant shall have one (1) option to renew this for an additional term of two
(2) years by giving the Landlord written notice of its election to do so at
least six (6) months before the date the original Lease term expires. The
annual/monthly rent payable during the option term shall be at the rates shown
on page 1, Article I.
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Exhibit 10.10
ARTICLE I - REFERENCE DATA
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Article:
LANDLORD AND LANDLORD'S ADDRESS:
Lisa Ryan, Jeanne Kubiak &
Roberta Whittier, Trustees for
HEGA REALTY TRUST
c/o Hampstead Hospital
East Road
Hampstead, NH 03841
TENANTS AND TENANT'S ADDRESS:
Systems Consulting Company, Inc.
537 Congress Street, Suite 500
Portland, Maine 04101
883-5052 (Mark @ Home)
761-0079 (Work)
SCHEDULED TERM COMMENCEMENT DATE: November 1,1996
TENANT'S SPACE: 537 Congress Street, Suites 500, 501 & 404, Portland, Maine
TERM: Three (3) Years
OPTION: One (1) - two (2) year option at;
Year 4: $10.50 per sq. ft. or $20,117.13/month
Year 5: $11.00 per sq. ft. or $21,075.08/month
BASE RENT: Year 1: $6.00 per sq. ft. or $11,495.50/month
Year 2: $8.18 per sq. ft. or $15,672.20/month
Year 3: $10.18 per sq. ft. or $19,504.03/month
SECURITY DEPOSIT: $600.00 (Received $175.00 on 9/1/89)
RENTABLE FLOOR AREA OF TENANT'S SPACE: Approximately 22,991 Square Feet
PERMITTED USES: The premises may be used solely by the Tenant for the sole
purpose of carrying on general office uses, including
computer programming and consulting and for no other use or
purpose without the prior written consent of the Landlord
in each instance.
REOUIRED PUBLIC LIABILITY INSURANCE:
Bodily Injury - $1,000,000/1,000,000
Property Damage - $500,000
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ARTICLE II - PREMISES
In consideration of the rent and of the covenants hereinafter contained,
the Landlord does hereby lease to the Tenant, and Tenant hereby leases from the
Landlord certain space, situated on the fourth and fifth floor of the J.B. Brown
Building located at 537 Congress Street, Portland, Maine, which space is more
specifically known as Suites 500, 501 and 404 and is hereinafter referred to as
the premises. Said premises shall be used by the Tenant only for those purposes
designated in Article I and for no other purpose or purposes.
ARTICLE III - TERM
3.01 The term of this lease shall commence on November 1, 1996 and shall
terminate three (3) years thereafter.
ARTICLE IV - RENT
4.01 The tenant shall pay base rent in equal monthly installments in
advance on the first day of each month during the term hereof, said rent to be
prorated for portions of a calendar month at the beginning or end of said term,
all payments to be made to the Landlord or to such agent and at such place as
the Landlord shall from time to time in writing designate, the following being
now so designated: DIRIGO MANAGEMENT COMPANY. INC., 45 EXCHANGE STREET.
PORTLAND, MAINE 04101. If Tenant does not pay base rent, supplemental and
additional rents, other fees and charges due pursuant to the terms of this
Lease, then the Landlord, in its sole discretion, may charge, in addition to any
other remedies it may have, a late charge for each month or part thereof that
the Tenant fails to pay the amount due after the due date. The late charge shall
be one-twelfth (1/12) of the annual prime rate at Casco Northern Bank existing
at the time that the late charge is to be assessed multiplied by the amount
unpaid. Any payments made by check that are returned are subject to a $25.00
service charge.
4.02 No payment by the Tenant or receipt by the Landlord of a lesser
amount than the monthly installments of rent herein stipulated shall be deemed
to be other than on account of the earliest stipulated rent nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and the Landlord may
accept such check for payment without prejudice to the Landlord's right to
recover the balance of such rent or pursue any other remedy in this lease
provided.
ARTICLE V - LANDLORD COVENANTS
5.01 Landlord covenants and agrees that it will without additional charge
furnish the following;
(a) Heating and cooling of the Tenant's space;
(b) Elevator service;
(c) Water for drinking and ordinary sanitary purposes. If the
Tenant requires water for any other purpose, it shall pay for the
same and any sewer charges
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connected therewith, and shall at its own expense, install a meter
or measuring device for said purpose unless the Landlord shall
elect to supply water and invoice the Tenant for the same at the
going rate charged by the utility company supplying the same;
(d) Cleaning and janitor service in the common areas equal in
scope, quality, and frequency to that provided in first class
office buildings in the City of Portland;
(e) Maintenance and repair of the roof, exterior walls, windows,
structure, heating and plumbing systems, and electrical system and
common areas and common facilities of the building as necessary to
maintain them in good order and condition; provided however, that
any such maintenance or repairs made necessary by fault or neglect
of the Tenant or the employees and visitors of the Tenant shall be
at the expense of the Tenant and the Tenant shall pay all costs
thereof;
(f) Snow removal
5.02 The Landlord shall not be liable to anyone for interruption in or
cessation of any service rendered to the premises or building or agreed to by
the terms of this Lease, due to any accident, the making of repairs, labor
difficulties, trouble in obtaining fuel, electricity, service or supplies from
the sources from which they are usually obtained for said building, or any cause
beyond the Landlord's control; excepting the negligence or intentional acts of
the Landlord, its agents or employees, and except to the extent that the
liability of the Landlord is insured by virtue of a general comprehensive
Landlord public liability insurance policy, which the Landlord agrees to
maintain with respect to the building;
ARTICLE VI - TENANT COVENANTS
6.01 The Tenant acknowledges by entry thereupon that said premises are in
good satisfactory order, repair and condition, and covenants during said term;
(a) To pay, when due, all rent and other charges set forth herein;
electricity for Tenant's lights and plugs, all charges for trash
removal, for telephone, and other communication systems used at,
and supplied to, the premises, and other utilities not provided by
the Landlord; light bulbs and ballasts after initial installation;
(b) To keep said premises in as good order, repair and condition
as the same are in at the commencement of said term or may be put
thereafter, damage by fire or unavoidable casualty and reasonable
use and wear excepted; and, at the termination of this Lease,
peaceably to yield up said premises and all additions, alterations
and improvements thereto in such good order, repair and condition,
first removing all goods and effects not attached to the premises,
repairing all damage caused by such removal, and leaving the
premises clean and tenantable. If the Landlord in writing permits
the Tenant to leave any such goods and chattels at the premises,
and the Tenant does so, the Tenant shall have no further claims
and rights in such goods and chattels as against the Landlord or
those claiming by, through or under the Landlord;
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(c) The Tenant shall not erect or install any sign or other type
display whatsoever, upon the exterior of the building, without the
prior express written consent of the Landlord; and the Landlord
shall have the right to require that the Tenant's sign be of a
particular type, size, quality, and style and that the same be
placed and maintained in such location as the Landlord may
designate; and the Tenant shall not use in, on or about the
demised premises any advertising medium which may be heard or
experienced outside thereof, such as flashing lights, flashlights,
loudspeakers, phonograph records, or radio broadcasts without
first having obtained the Landlord's written consent which shall
not be unreasonably withheld;
(d) Not to injure or deface said premises or building; not to
permit on said premises any auction sale, inflammable fluids,
chemicals, nuisance, objectionable odor; not to permit the use of
said premises for any purpose other than set forth herein or any
use thereof which is improper, offensive, contrary to law or
ordinance, or liable to invalidate or increase the premiums for
any insurance on the building or its contents or liable to render
necessary any alterations or additions to the building;
(e) Not to obstruct in any manner any portion of the building not
hereby demised or the sidewalks or approaches to said building or
any inside or outside windows or doors; and to conform to all
reasonable rules and security regulations now or hereafter made by
the Landlord for the care and use of said premises, the building,
its facilities and approaches;
(f) Not to assign this Lease nor make any sublease at any time
without the Landlord's consent which shall not be unreasonably
withheld; provided, however, that in the event of any such
assignment, subletting, or permitted action by the Tenant, the
Tenant shall continue until the end of the term hereof to be fully
obligated to fulfill all of the terms and conditions hereof;
(g) Not to make any alterations, nor to permit the making of any
holes in any part of said building, nor to paint or place any
signs, drapes, curtains, shades, awnings, aerials or flagpoles or
the like, visible from the outside of said premises, that is, from
outdoors or from any corridor or other common area within the
building, nor to permit anyone except the Tenant to use any part
of the premises for desk space or for mailing privileges without
on each occasion obtaining prior written consent of the Landlord;
(h) Not to move any safe, heavy equipment, freight, bulky matter
or heavy fixtures in or out of the building except at such times
and in such manner as the Landlord shall designate after written
request from the Tenant; and to place and maintain business
machines and mechanical equipment in such settings as will most
effectively reduce noise and vibration;
(i) Not to place a load upon any floor of the premises in excess
of 50 pounds live load per square foot or in violation of what is
allowed by law;
(j) That the Landlord may enter the premises to install, maintain,
use, repair and
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replace pipes, ducts, wires, meters and any other equipment,
machinery, apparatus and fixtures in said premises to serve said
premises and to serve other parts of said building;
(k) To save the Landlord harmless and indemnify as follows; (i)
the Tenant covenants at its sole cost and expense at all times
during the Lease Term to defend and save the Landlord free,
harmless and indemnified from all injury, loss, claims or damage
(including reasonable attorney's fees and expenses) to any person
or property arising from, related to or in connection with the use
and occupancy of the Demised Premises or conduct or operation of
the Tenant's business, except for any loss caused by the
negligence or willful misconduct of the Landlord, its agent or
employees; (ii) the Tenant shall store its property in and shall
occupy the Demised Premises and all other portions of the building
at its own risk;
(l) To maintain with responsible companies authorized to do
business in the State of Maine and approved by the Landlord,
liability insurance, with contractual liability endorsement
covering the matters set forth in Subsection 1 above, against all
claims, demands or actions for injury to or death of any one
person in an amount of not less than One Million ($1,000,000)
Dollars and for injury to or death of more than one person in an
amount of not less than One Million ($1,000,000) Dollars and for
damage to property in an amount of not less than Five Hundred
Thousand ($500,000) Dollars made by or on behalf of any person,
firm or corporation, arising from, related to, or connected with
the conduct or operation of the Tenant's business, or caused by
acts or omissions of the Tenant or anyone claiming a right to be
on or about the property by reason of permission granted by the
Tenant which is either express or implied, or by any of the
Tenant's officers, agents, servants, suppliers, employees, or
contractors. All insurance provided by the Tenant as required by
this Subsection shall name the Landlord and the lessor under any
underlying or overriding lease as additional insureds as their
interests may appear and shall include the holder of any mortgage
on the fee or on any underlying or overriding leasehold estate
under a standard mortgagee clause to the extent the Landlord
informs the Tenant of the same in writing. On or before the
commencement date, the Tenant shall deliver to the Landlord the
original insurance policy or policies, or appropriate
certificates, together with satisfactory evidence of the payment
of the premiums associated therewith;
(m) To hold all property of the Tenant, including fixtures,
furniture, equipment and the like of the Tenant, or of any other
owner situated at the premises, at the Tenant's own risk, and to
pay when due all taxes assessed during the term of this Lease
against any leasehold interest or personal property of any kind
owned or placed in, upon or about said premises by the Tenant;
(n) Upon reasonable advance notice, to permit the Landlord or its
agents to examine the premises at reasonable times and, if the
Landlord shall so direct, to make any repairs or additions and, at
the Tenant's expense to remove any alterations, additions, signs,
drapes, curtains, shades, awnings, aerials or flagpoles, or the
like, not consented to in writing; and to show the premises to
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prospective tenants during the six (6) months preceding the expiration of
this Lease;
(o) To permit the Landlord at any time or times to decorate common areas,
and to make, at its own expense, repairs, alterations, additions and
improvements, structural or otherwise, in or to said building or any part
thereof, and during such operations to take into and through said
premises or any part of the building all materials required and to close
or temporarily suspend operation of the entrances, doors, corridors,
elevators or other facilities, Landlord agreeing, however, that it will
carry out such work in a manner which will cause the Tenant a minimum
inconvenience and business interruption;
(p) Not to install any vending machines or food service equipment in the
demised premises without first obtaining the Landlord's prior written
approval, which approval shall not be unreasonably withheld; except for
the Tenant's coffee machine, microwave and refrigerator;
(q) To exercise reasonable efforts to prevent any employee of the Tenant
from violating any covenant or obligation of the Tenant hereunder;
(r) In the case of any lien attaching by reason of the conduct of the
Tenant to immediately pay and remove the same; this provision shall not
be interpreted as meaning that the Tenant has any authority or power to
permit any lien of any nature or description to attach to or be placed
upon the Landlord's title or interest in the building, the premises, or
any portion thereof;
(s) To keep the premises equipped with all safety appliances required by
law or any public authority because of the use made by the Tenant of the
premises;
(t) That the rights and remedies to which the Landlord may be entitled
under the terms of this Lease are cumulative and are not intended to be
exclusive of any other rights or remedies to which the Landlord may be
properly entitled in case of any breach or threatened breach by the
Tenant of any portion of the Lease;
(u) That acceptance by the Landlord of a lesser sum than the base rent,
supplemental rent or other fees or charges then due shall not be deemed
to be other than on account of the earliest installment of such rent or
other fees or charges due, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent or other
payments be deemed an accord and satisfaction and the Landlord may accept
such check or payment without prejudice to Landlord's right to recover
the balance of such installment or pursue any other remedy in this Lease.
The delivery of keys to any employee thereof shall not operate as a
termination of this Lease or a surrender of the premises;
(v) To pay Landlord's expenses, including reasonable attorney's fees,
incurred in enforcing any obligation of this Lease which has not been
complied with;
(w) That without limitation of anything elsewhere herein contained, the
Landlord
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may;
(i) designate and change the name and street address of the
building; provided, however, that the Landlord shall first give
reasonable notice thereof to the Tenant;
(ii) retain and use in appropriate instances keys to all doors
within and into the premises and to change the locks to the
premises if the Landlord deems it advisable and provides Tenant
with reasonable advance notice and keys to such new locks. No lock
shall be changed by the Tenant without prior written consent of
the Landlord;
(iii) enter upon the premises and exercise any and all of the
Landlord's rights without being deemed guilty of an eviction or
disturbance of the Tenant's use or possession and without being
liable in any manner to the Tenant;
(x) That the Tenant shall not remove any of its fixtures from the
premises at any time that the Tenant is in default under any of the terms
of this Lease (except for white boards and bulletin boards);
(y) In the event the Tenant wishes to provide outside services for the
demised premises over and above those services to be provided by the
Landlord as set forth herein, the Tenant shall first obtain the prior
written approval of the Landlord for the installation and/or utilization
of such services, which approval shall not be unreasonably withheld or
delayed. "Outside services" shall include but shall not be limited to
cleaning and moving services, security services, catering services and
the like. In the event the Landlord approves the installation and/or
utilization of such services, such installation and utilization shall be
at the Tenant's sole cost, risk and expense.
ARTICLE VII - SUBORDINATION
7.01 The Tenant agrees that, at the election of the Landlord, that this
Lease shall be subject and subordinate to the lien of any mortgage which may now
hereafter be placed on, encumber, or affect the real property of which the
premises are a part and to all renewals, modifications, consolidations, and
replacements. When requested to do so by the Landlord, the Tenant agrees to
execute, acknowledge, and deliver to the Landlord an instrument, in proper form
for recording, wherein the Tenant agrees to and does subordinate this Lease to
the lien of the mortgages above mentioned.
The Landlord agrees to use its best efforts to promptly obtain from each
and every mortgagee of the premises a non-disturbance agreement whereby the
mortgagee shall agree that, should the mortgagee assume the management
responsibility for the premises, the mortgagee will permit the Tenant to
continue to operate under this Lease.
ARTICLE VIII - CASUALTY DAMAGE AND EMINENT DOMAIN
8.01 If at any time during the lease term the premises shall be damaged
or destroyed by
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fire or other casualty, then the Landlord shall have the election to terminate
this Lease or to repair and reconstruct the premises to the condition thereof
immediately prior to such damage or destruction. Unless such fire or other
casualty shall have been caused by the negligence of the Tenant, its agents,
employees, or invites, rent shall abate proportionately during the period and to
the extent that the premises are unfit for the use by the Tenant in the ordinary
conduct of its permitted uses hereunder. If the Landlord has elected to repair
and restore the premises, this Lease shall continue in full force and effect and
such repairs will be made within a period of thirty (30) days. If the Landlord
fails to complete such repairs within thirty days of such fire or other
casualty, the Tenant may terminate this Lease, without any further liability
hereunder, by written notice to the Landlord.
8.02 If the whole or any part of the demised premises shall be acquired
or condemned by eminent domain for any public or quasipublic use or purpose,
then and in that event, the term of this Lease shall cease and terminate from
the date of title vesting in such proceedings and the Tenant shall have no claim
against the Landlord for the value of any unexpired term of said lease and the
Tenant shall not be entitled to any part of any award that may be made for such
taking.
ARTICLE IX - TENANT DEFAULT
9.01 The Tenant shall have thirty (30) days after written notice
requesting compliance is received from the Landlord to cure any default under
this Lease; provided that, notwithstanding the above, the Tenant shall have five
(5) days after the due date thereof (without any written notice requirement) to
cure any default in the payment of rent. If the Tenant shall abandon or vacate
said premises before the end of the term of this Lease, or shall suffer the rent
to be in arrears, or default under any of the terms or conditions of this Lease,
the Landlord may, at his option, forthwith cancel this Lease or he may enter the
premises as the agent of the Tenant, by force or otherwise, without being liable
in any way therefor, and relet the premises with or without any furniture that
may be therein, as the agent of the Tenant, at such price and upon such terms
and for such duration of time as the Landlord may determine, and receive the
rent therefor, applying the same to the payment of the rent due by these
presents, and if the full rental herein provided shall not be realized by the
Landlord in such reletting, the said Tenant shall pay any deficiency; or the
Landlord, at his option, may declare the entire rent for the balance of the term
hereof due and payable forthwith.
ARTICLE X - LANDLORD SELF-HELP
If the Tenant shall default in the performance or observance of any
agreement or condition in this Lease contained on its part to be performed or
observed, other than an obligation to pay money, and shall not cure such default
as provided herein, the Landlord may, at its option, without waiving any claim
for damages for breach of this Lease, at any time thereafter, cure such default
for account of the Tenant, any amount paid or any liability incurred by the
Landlord in so doing shall be deemed paid or incurred for the account of the
Tenant, and the Tenant agrees to reimburse the Landlord thereof.
ARTICLE XI - LANDLORD DEFAULT
The Landlord shall in no event be in default in the performance of any of
his obligations hereunder unless and until the Landlord shall have failed to
perform such obligations within
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thirty (30) days or such additional time as is reasonably required to correct
any such default after notice by the Tenant to the Landlord properly specifying
wherein the Landlord has failed to perform any such obligation.
ARTICLE XII - NOTICES
Any notice from the Landlord to the Tenant or from the Tenant to the
Landlord shall be deemed duly served if mailed by Certified Mail addressed, if
to the Tenant, at said premises after the term of this Lease has commenced and,
prior to that time, at Tenant's address or if to the Landlord, at the place from
time to time established for the payment of rent, and the customary Certified
Mail receipt shall be conclusive evidence of such service.
ARTICLE XIII - SUCCESSORS AND ASSIGNS
The covenants and agreements of the Landlord and the Tenant shall run
with the land and be binding upon and inure to the benefit of them and their
respective heirs, executors, administrators, successors and assigns.
ARTICLE XIV - HOLDOVER
If the Tenant fails to vacate the premises at the termination of this
Lease, then the terms of this Lease including all provisions for rent and other
charges and fees shall be applicable during said holdover period, but this
provision shall not be interpreted as consent or permission by the Landlord for
the Tenant to holdover at the termination of this Lease and terms of this
holdover provision shall not preclude the Landlord from recovering any other
damages which it incurs as a result of Tenant's failure to vacate the premises
at the termination of this Lease.
ARTICLE XV - QUIET ENJOYMENT
The Landlord covenants and agrees with the Tenant that so long as the
Tenant pays the rent and observes and performs all the terms, covenants and
conditions on the Tenant's part to be observed and performed, the Tenant may
peaceably and quietly have, hold, occupy and enjoy the demised premises and all
appurtenances thereto without hinderance or molestation.
ARTICLE XVI - LIMITATION OF LIABILITY
The Tenant agrees to look solely to the Landlord's interest in the
building and the Landlord's insurance for recovery of any judgment from the
Landlord; it being agreed that the Landlord is not personally liable for any
such judgment.
ARTICLE XVII - LANDLORD'S WORK
17.01 The Landlord will construct the leased premises as described on
Exhibit B. Any Tenant work shall be performed by the Tenant at its own cost and
expense. Tenant's work may be performed only by contractors or subcontractors
approved in advance by the Landlord; such approval shall not be unreasonably
withheld. All Tenant's work shall be performed in a thoroughly first-class
workmanlike manner.
17.02 The Tenant shall have access to the premises before the
commencement date of
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the lease term, provided, however, that the Tenant assumes any risks attendant
on its entry into the leased premises before the completion thereof, as though
this Lease were in effect.
ARTICLE XVIII - MISCELLANEOUS
18.01 If the Tenant is more than one person or party, then the Tenant's
obligations shall be joint and several. Unless repugnant to the context,
"Landlord" and "Tenant" mean the person or persons, natural or corporate, named
above as the Landlord and the Tenant respectively, and their respective heirs,
executors, administrators, successors and assigns.
18.02 The Landlord and the Tenant agree that this Lease shall not be
recordable. The Landlord and the Tenant shall enter into an agreement in
recordable form, setting forth the actual commencement and termination dates of
this Lease.
18.03 If any provision of this Lease or its application to any person or
circumstances shall to any extent be invalid or unenforceable, the remainder of
this Lease or the application of such provision to persons or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby and each provision of this Lease shall be valid and enforceable
to the fullest extent permitted by law.
18.04 All alterations, decorations, partitions, installations, carpeting,
additions or improvement upon the demised premises, made by either party,
including, but not limited to, all paneling, decorations, partitions, railings,
and the like, affixed to the realty shall, unless the Landlord elects otherwise,
become the property of the Landlord and shall remain at the premisses upon, at
the end of the Lease Term. In the event the Landlord shall so elect, then such
alterations, decorations, installations additions or improvements made by the
Tenant upon the demised premises as the Landlord shall designate, shall be
removed by the Tenant and the Tenant shall restore the demised premises to its
original condition at the Tenant's sole expense at or prior to the Expiration
Date or such other earlier termination of this Lease.
18.05 The Tenant shall deposit $600.00 with the Landlord at the signing
of this Lease, which deposit may at the Landlord's sole option be used to cure
any default hereunder by the Tenant, including costs for damage to the leased
premises or missing items, and the Tenant agrees to immediately reimburse the
Landlord for any such sum so applied from the deposit. SAID DEPOSIT SHALL NOT BE
USED AS THE RENT FOR THE FINAL MONTH OF THE TERM. The Landlord agrees to refund
to the Tenant the deposit, less sums expended in accordance with the Lease,
within 7 days of the termination of the lease.
18.06 The submission of this Lease or a summary of some of or all of its
provisions for examination by the Tenant does not constitute a reservation of or
option for the premises or an offer to lease said premises.
ARTICLE XIX - NO HAZARDOUS MATERIALS
19.01 Tenant agrees it shall not cause or permit to occur any violation
of any federal, state or local law, ordinance or regulation now or hereafter
enacted, related to environmental conditions on, under or about the Demised
Premises or arising from Tenant's use or occupancy of the Demised Premises,
including but not limited to soil and groundwater conditions. It is further
agreed Tenant shall not permit the use, generation, release, manufacture,
refining,
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production, processing, storage, or disposal of any hazardous substances on,
under or about the Demised Premises or the transportation to or from the
Demised Premises of any hazardous substance.
Tenant further agrees it shall indemnify, defend and hold harmless,
Landlord, the manager of the property and their respective officers, directors,
beneficiaries, shareholders, patrons, agents and employees from all fines,
suits, procedures, claims and actions of every kind and costs associated
therewith (including attorneys' and consultants' fees) arising out of or in any
way connected with any deposit, spill, discharge or other release of hazardous
substances by the Tenant that occurs during the term of this Lease at or from
the Demised Premises or which is caused by Tenant at any time from Tenant's use
or occupancy of the Demised Premises or from Tenant's failure to provide all
information, make all submissions and take all steps required by all authorities
under the laws and all other environmental laws. Tenant's obligations and
liabilities under this Article (XIX) shall survive the expiration of this Lease.
ARTICLE XX - ESTOPPEL CERTIFICATES
20.01 Landlord and Tenant agree, at any time and from time to time, upon
not less than five (5) business days' prior written request by the other, to
execute, acknowledge and deliver to the requesting party a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same are in full force and effect as
modified and stating the modifications), that to the knowledge of such party no
uncured defaults exist hereunder (or if any such defaults exist, specifying the
same), and the dates to which the rents and other charges due hereunder have
been paid in advance, if any, it being intended that any such statement
delivered pursuant to this Article may be relied upon by any prospective
purchase or mortgagee of, or assignee of any mortgage upon, the building.
Executed this 24 day of May, 1996.
WITNESS: BY:
Carol R. Potts /s/ Peter S. Shapinsky
- ----------------- -------------------------------
Landlord: Peter S. Shapinsky
Authorized Agent for HEGA Realty Trust
Carol R. Potts /s/ Mark C. Tilly
- ----------------- -------------------------------
Tenant: Systems Consulting Company, Inc.
By Mark C. Tilly, Its Treasurer
Carol R. Potts /s/ Alan Hyman
- ----------------- -------------------------------
Tenant: Systems Consulting Company, Inc.
By Alan Hyman, Its President
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EXHIBIT A
RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or used
for any purpose other than for ingress to and egress from the demised
premises and for delivery of merchandise and equipment in a prompt and
efficient manner, using elevators and passageways designated for such
delivery by Landlord. There shall not be used in any space, or in public
hall of the building, either by any Tenant or by jobbers or others in the
delivery or receipt of merchandise, any hand trucks, except those
equipped with rubber tires and sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be
deposited therein, and the expense of any breakage, stoppage, or damage
resulting from the violation of this rule shall be borne by the Tenant
who, or whose clerks, agents, employees or visitors, shall have caused
it.
3. No carpet, rug or other article shall be hung or shaken out of any window
of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any
of the corridors or halls, elevators, or out of the doors or windows or
stairways of the building, and Tenant shall not use, keep or permit to be
used or kept any foul or noxious gas or substance in the demised
premises, or permit or suffer the demised premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants of
the building by reason of noise, odors and/or vibrations, or interfere in
any way with other tenants or those having business therein, nor shall
any animals or birds be kept in or about the building. Smoking or
carrying lighted cigars or cigarettes in the elevators of the building is
prohibited.
4. No curtains, blinds, shades, or screens other than those furnished by
Landlord shall be attached to, hung in or used in connection with any
window or door of the Premises without the prior written consent of
Landlord.
5. No advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of
the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without
the prior written consent of Landlord, except that the name of Tenant may
appear on the entrance door of the premises. In the event of the
violation of the foregoing by any Tenant, Landlord may remove same
without any liability, and may charge the expense incurred by such
removal to Tenant or Tenants violating this rule. Interior signs on doors
and directory tablet shall be inscribed, painted or affixed for each
Tenant by Landlord at the expense of such Tenant, and shall be of a size,
color and style acceptable to Landlord.
6. No boring, butting or stringing of wires shall be permitted, except with
the prior written consent of Landlord, and as Landlord may direct. No
Tenant shall lay linoleum, or other similar floor covering, so that the
same shall come in direct contact with the floor of the demised premises,
and, if linoleum or other similar floor covering is desired to be used
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in interlining of builder's deadening felt shall be first affixed to the
floor, by a paste or other material, soluble in water, the use of cement
or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
tenancy, restore to Landlord all keys of stores, offices and toilet
rooms, either furnished to, or otherwise procured by, such Tenant, and in
the event of the loss of any keys, so furnished, such Tenant shall pay to
Landlord the cost thereof.
8. Freight, furniture, business equipment, safes, merchandise and bulky
matter of any description shall be delivered to and removed from the
premises only on the freight elevators and through the service entrances
and corridors, and only during hours and in a manner approved by
Landlord. Landlord reserves the right to inspect all freight to be
brought into the building and to exclude from the building all freight
which violates any of these Rules and Regulations of the Lease of which
these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
10. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the
building or its desirability as building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinuing such
advertising.
11. Tenant shall not bring or permit any odors of cooking or other processes,
or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
12. Tenant shall comply with all security measures from time to time
established by Landlord for the Building.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and any other
means of entry to the Premises closed and secured.
14. Tenant shall not install and operate machinery or any mechanical devices
of a nature not directly related to Tenant's ordinary use of the Premises
without the written permission of Landlord.
15. No person or contractor not employed or approved by Landlord shall be
used to perform window washing, cleaning, repair or other work in the
Premises.
16. No vending machines other than those furnished by the Landlord are to be
placed in any hallways or building common areas.
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EXHIBIT B - LANDLORD'S WORK
1. The Landlord agrees to a maximum allowance of $5,000 to cover any and all
costs associated with connecting suites 500 and 501. These costs may
include but are not limited to, demolition, carpentry, painting,
electrical, lighting, flooring, HVAC, and ceilings. Any costs above the
$5,000 Landlord allowance shall be the sole responsibility of the Tenant.
EXHIBIT C - OPTIONS
At any time during which the Tenant is not in default under this Lease,
the Tenant shall have one (1) option to renew this for an additional term of two
(2) years by giving the Landlord written notice of its election to do so at
least six (6) months before the date the original Lease term expires. The
annual/monthly rent payable during the option term shall be at the rates shown
on page 1, Article I.
EXHIBIT D - PARKING
The Tenant shall have the right during the term of this Lease or any of
the option period that has been exercised, to utilize twelve (12) parking spaces
located in the Tolman Place Parking Lot for an additional charge of $55.00 per
parking space per month. This monthly charge is subject to change from time to
time but any increase will not exceed 10% per year.
In addition, the Tenant shall have the right during the term of this
Lease or any of the option period that has been exercised, to utilize the
parking spaces located in the Gateway Parking Garage that are currently leased
on a monthly basis by the Landlord. All costs associated with the rental of
these spaces at the Gateway Garage are the sole responsibility of the Tenant.
The Tenant acknowledges that the Landlord does not control these Gateway Garage
parking spaces and may be asked by the Owners of the Gateway Garage to vacate at
anytime. In this event, the landlord shall not be obligated to secure additional
parking for the Tenant.
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<PAGE>
Exhibit 10.11
FIRST AMENDMENT OF LEASE
This First Amendment of Lease made this 8 day of February, 1999 by and between
the HEGA Realty Trust, with an address of c/o Dirigo Management Company, One
City Center, Portland, Maine ("Landlord"), and Systems Consulting Company, Inc.
having a mailing address of 537 Congress Street, Suite 500, Portland, Maine
04101 ("Tenant").
WHEREAS, Landlord and Tenant entered into a lease dated May 24, 1996 (the
"Lease") with respect to Tenant's occupancy of 22,991 square feet known as
Suites 500, 501, and 404 (the Premises") located at 537 Congress Street,
Portland, Maine; and
WHEREAS, the parties hereto desire to lease additional space in the building at
537 Congress Street (Suite 533 located at 533 Congress Street); and
NOW THEREFORE, for valuable consideration the receipt and sufficiency of which
the parties hereby acknowledge, the parties agree effective March 1, 1999, the
Lease shall amended as follows:
1. In Article I, TERM, the following words shall be added; "For suite 533
only, the term shall commence March 1, 1999 and it shall terminate on
October 31, 1999 (8 months)."
2. In Article I, TENANT'S SPACE, the following words shall be added; "Suite
533 Congress Street containing approximately 5,265 rentable square feet of
space and the Tenant may also have access and use of the basement area
from 3/1/99 to 10/31/99."
3. In Article I, BASE RENT, the following words shall be added; "For suite
533 only, the Base Rent shall be:
3/1/99 -- 10/31/99: $3,510.00 Per Month ($8.00 psf)"
4. In Article I, RENTABLE FLOOR AREA OF TENANT'S SPACE, the following words
shall be added; "For suite 533, the rentable floor area is 5,265 square
feet"
5. In Article V, LANDLORD COVENANTS, the following words shall be added; "For
suite 533 only, heating and cooling of the Tenant's space is the Tenant's
responsibility and therefore is deleted."
6. In Article VI, TENANT COVENANTS, the following words shall be added; "For
suite 533 only, the Tenant agrees to pay for all charges for electricity
supplied to the leased premises used for lighting, heating, ventilating
and air conditioning (HVAC)."
Except as otherwise expressly amended, modified and provided for in this
Amendment, all of the terms and conditions of said Lease are hereby ratified and
shall be deemed to be incorporated herein and made a part hereto and shall
continue full force and effect. This document contains all the agreements of the
parties with respect to the subject matter thereof and supersedes all prior
dealing between them with respect to such subject matters.
1
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals in two
counterpart copies, each of which counter copy shall be deemed an originals for
all purposes, as of the date and year above written.
LANDLORD: HEGA REALTY TRUST
/s/ [ILLEGIBLE] /s/ Peter S. Skapinsky 2/8/99
- --------------------------- ------------------------------------
Witness Peter S. Skapinsky Date
Authorized Agent for HEGA Realty Trust
/s/ Cheryl O. Tumlin 2/25/99
- --------------------------- ------------------------------------
Witness Systems Consulting Company Date
By: /s/ Philip M. St. Germain
---------------------------
Its: CFO Philip M. St. Germain
--------------------------
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Exhibit 10.12
SECOND AMENDMENT OF LEASE
This Second Amendment of Lease made this 27th day of May, 1999 by and between
the HEGA Realty Trust, with an address of c/o Dirigo Management Company, One
City Center, Portland, Maine, 04101 ("Landlord"), and Systems Consulting
Company, Inc. having a mailing address of 537 Congress Street, Suite 500,
Portland, Maine 04101 ("Tenant").
WHEREAS, Landlord and Tenant entered into a lease dated May 24, 1996 (the
"Original Lease") with respect to Tenant's occupancy of 22,991 square feet known
as Suites 500, 501, and 404 (the Premises") located at 537 Congress Street,
Portland, Maine; and
WHEREAS, Suite 533 located at 533 Congress Street consisting of 5,265 square
feet has also been leased as described in "First Amendment of Lease"
(collectively, with the Original Lease, the "Lease"); and
WHEREAS, Landlord and Tenant entered into a lease dated September 25, 1997 (the
"Second Lease"), with respect to Tenant's occupancy of 830 square feet known as
Suite 406 located at 537 Congress Street, Portland, Maine, and the term of the
Second Lease ends concurrently with the Original Lease; and
WHEREAS, the parties hereto desire to extend the term of the Lease by one year
for Suites 500, 501, 404, and 533 in the building at 537 Congress Street and to
include in Tenant's Space under such extended term of the Lease, Suite 406 in
the building at 537 Congress;
NOW THEREFORE, for valuable consideration the receipt and sufficiency of which
the parties hereby acknowledge, the parties agree effective November 1, 1999,
the Lease shall be amended as follows:
1. In Article I, TERM, the following words shall be substituted;
"(a) Four (4) Years with respect to all space under the Original
Lease;
(b) For the term commencing March 1, 1999, terminating on
October 31, 2000 with respect to Suite 533; and
(c) For the term commencing November 1, 1999, terminating October
31, 2000 with respect to Suite 406."
2. In Article I, TENANT'S SPACE, the following words shall be substituted;
"Suites 500, 501, 404, 406 and 533 (Tenant also has access and use
of the basement area from 3/1/99 to 10/31/00)"
3. In Article I, BASE RENT, the following words shall be substituted;
"11/1/96 -- 10/31/97: $11,495.50 per month ($6.00 psf)
11/1/97 -- 10/31/98: $15,672.20 per month ($8.18 psf)
11/1/98 -- 2/28/99: $19,504.03 per month ($10.18 psf)
1
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3/1/99 -- 10/31/99: $23,014.03 per month ($9.77 psf)
11/1/99 -- 10/31/00: $26,073.21 per month ($10.76 psf)"
4. In Article I, RENTABLE FLOOR AREA OF TENANT'S SPACE, the following words
shall be added; "Approximately 29,086 square feet"
5. In Article V, LANDLORD COVENANTS, the following words shall be substituted
in paragraph (a) "Heating and cooling for suites 500, 501, and 404, for
the term ending October 31, 2000; Commencing November 1, 1999, heating and
cooling of the Tenant's Space shall be the Tenant's responsibility as
provided in Article VI below."
6. In Article VI, TENANT COVENANTS, the following words shall be added to the
end of paragraph (a); "Commencing November 1, 1999, for suites 500, 501,
404, 406 and 533, the Tenant agrees to pay for all charges for electricity
supplied to the leased premises used for lighting, heating, ventilating
and air conditioning (HVAC)."
Except as otherwise expressly amended, modified and provided for in this
Amendment, all of the terms and conditions of said Lease are hereby ratified and
shall be deemed to be incorporated herein and made a part hereto and shall
continue full force and effect. This document contains all the agreements of the
parties with respect to the subject matter thereof and supersedes all prior
dealing between them with respect to such subject matters.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals in two
counterpart copies, each of which counter copy shall be deemed an originals for
all purposes, as of the date and year above written
/s/ [ILLEGIBLE] /s/ Peter S. Skapinsky 5/27/99
- ------------------------------- --------------------------------------
Witness LANDLORD: HEGA REALTY TRUST Date
By: Peter S. Skapinsky
Authorized Agent for HEGA Realty Trust
/s/ Cheryl O. Tumlin /s/ Philip M. St. Germain 5/27/99
- ------------------------------- --------------------------------------
Witness Systems Consulting Company Date
By: Philip M. St. Germain
Its: Chief Financial Officer
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<PAGE>
Exhibit 10.13
July 27, 1999
Mr. A. Leigh Powell
8 Coronet Terrace
Burlington, NJ 08016
Dear Leigh:
This letter is intended to confirm certain changes to your employment with
Systems Consulting Company/ Systems Technologies, Inc. that have been
unanimously approved by the directors of the companies.
Effective July 27, 1999, you have been elected to the position of President and
Chief Executive Officer of SCC and SCC Technologies. You hold these positions as
an employee at will, terminable by either you or SCC by written notice to the
other. You agree to provide SCC with at least [90] days prior written notice of
any termination of employment by you.
Your current salary of $200,000 per year will be maintained until December 31,
1999 at which time the board of directors will review your compensation package
for 2000.
You can earn a bonus up to $100,000 in cash, exclusive of any options that may
be granted to you as a participant in the Company's 1999 company wide bonus plan
that may be approved by the directors. This bonus will be determined by the
board of directors based on its assessment of your overall performance with
specific focus in the following areas:
1. Achieving Company wide revenue objectives
2. Achieving operating profits from the core business
3. Hiring of a chief operating officer or such other key executive as
needed to assist you in supervising sales, marketing, professional
services and development.
4. Having a functional operating web site in a timely fashion.
5. Closing a private placement.
6. Developing, through new hires, training or reassignment, a first
rate management team.
7. Showing a significant increase in sales pipeline growth
You have been granted incentive stock options to purchase an additional 200,000
shares of common stock at an exercise price of $7.50 a share. These options have
been granted pursuant to the Company's 1997 Stock Plan and are not subject to
acceleration, notwithstanding any prior agreements to the contrary. These
options, and any other options currently outstanding, satisfy any outstanding
obligations of the Company to issue equity to you.
<PAGE>
SCC will pay up to $20,000 relocation expenses if you move from your current
residence to a site in the Edison, New Jersey area. If you are required to
relocate elsewhere, SCC will pay up to $50,000 for usual and customary moving
expenses.
Your employment with the Company may be terminated immediately providing written
notice of termination upon the happening of any one of the following events:
1. Dishonesty detrimental to the best interests of the Company
2. Willful disloyalty to the Company
3. Participation in any fraud
4. Breach of nondisclosure
5. Your disability due to illness or accident resulting in an inability
to perform your duties for a continuing period in excess of one
hundred twenty days.
6. Your death
If the Company terminates your services for other than for the causes set forth
in subsections 1. through 5. above, you shall be entitled to receive your then
salary until the first to occur of (i) completion of six months following the
date of termination, or (ii) your commencing employment with any other employer.
If the Company terminates your employment for disability pursuant to subsection
5 above, you shall be entitled to receive your then salary until the first to
occur of (i) completion of one year following the date of termination, or (ii)
your commencing employment with any other employer.
The Company will require any person, group, company or other legal entity which
mergers of consolidates with the Company or purchases all or substantially all
of the Company's assets to expressly assume and agree to perform the terms of
this agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.
Kindly indicate your acceptance and agreement with the terms set forth in this
letter by signing below and returning a copy of this letter to me..
Sincerely,
/s/ Peter Sobiloff
Peter Sobiloff
Chairman of the Board of Directors
Accepted and agreed ________________________________
A. Leigh Powell
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
AGREEMENT effective this 23rd day of Dec, 1997 (the "Effective Date"), by
and between Systems Consulting Company, Inc., with offices at 537 Congress
Street, Portland, Maine 04101 (the "Company"), and Philip St. Germain, an
individual residing at 35 Dutton Road; Sudbury, MA 01776 ("St. Germain").
The parties agree to the following terms of employment of St. Germain by
the Company as Chief Financial Officer.
1. Definitions.
1.1 "Annual Total Compensation" shall mean total cash compensation paid to
St. Germain under Sections 3.1 (salary) and 3.2 (bonus) in the twelve (12) month
period immediately preceding the date on which the Annual Total Compensation is
being measured.
1.2 "Business of the Company" shall mean (i) all business of the Company,
whether presently or hereafter conducted by the Company at any time during the
term of this Agreement, and (ii) any business in which the Company is
contemplating becoming involved, provided the Company has devoted substantial
resources to such business.
1.3 "Disability" shall mean the inability of St. Germain due to illness or
accident to perform the duties to be performed by him pursuant to this Agreement
for a continuing period in excess of One Hundred Eighty (180) days interrupted
by return or returns to full-time employment of not more than ten (10) days
each.
1.4 "Sale of the Company" shall mean (i) any sale of substantially all of
the assets of the Company to an unaffiliated third party; (ii) any merger,
consolidation or other transaction of the Company in which the stockholders of
the company immediately prior to such transaction do not represent a controlling
interest in the resulting company or business entity; or (iii) any sale or
issuance of stock of the Company, in a single transaction or a series of related
transactions, whereby the stockholders of the Company immediately prior to the
initial such transaction(s) do not represent a controlling interest in the
Company after such subsequent transaction(s).
<PAGE>
2. Position and Responsibilities. During the term of his employment under this
Agreement, St. Germain agrees to undertake such activities on behalf of the
Company, in his capacity as Chief Financial Officer, as the President of the
Company may from time to time request, and St. Germain shall exercise such
powers and perform such duties in relation to the business and affairs of the
Company as may from time to time be vested in him or requested by the President
of the Company. Unless otherwise instructed by the Board of Directors of the
Company, St. Germain shall at all times report to the President of the Company.
St. Germain agrees to devote substantially all of his business time, attention
and services to the diligent, faithful and competent discharge of such duties
for the successful operation of the Company's business.
3. Salary, Bonus, Securities and Other Benefits. During the term of St.
Germain's employment under this Agreement, the Company shall pay St. Germain the
following compensation:
3.1 Salary. In consideration of the services to be rendered by St. Germain
to the Company in his capacity as Chief Financial Officer, the Company will pay
St. Germain a salary of $125,000 for the first year of this Agreement and a
minimum salary of $140,000 per year for each succeeding year of this Agreement.
Such salary shall be payable in conformity with the Company's customary
practices for executive compensation as such practices shall be established or
modified from time to time. Salary payments shall be subject to all applicable
federal and state withholding, payroll and other taxes.
3.2 Bonus. By April 30, 1998, St. Germain shall receive a bonus of $50,000
so long as sufficient finds are available to the Company. For each succeeding
year of this Agreement, St. Germain shall be eligible to receive a bonus based
upon his successfully achieving the mutually agreed upon goals and objectives
established between St. Germain and the President of the Company. If the goals
and objectives are only partially achieved, St. Germain may receive a bonus as
determined by the President of the Company.
2
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3.3 Stock Options. St. Germain shall be granted Incentive Stock Options as
set forth below in Section 3.3.1 pursuant to the Company's standard Incentive
Stock Option Agreement, a copy of which is attached hereto as Exhibit A. Without
limitation, St. Germain's Incentive Stock Option Agreement(s) shall provide
that, immediately upon exercise of any options, St. Germain shall become party
to the stockholders' agreement, a copy of which is attached hereto as Exhibit B.
3.3.1 Grant. On the Effective Date, St. Germain shall be granted
Incentive Stock Options to purchase Two Thousand Five Hundred (2,500) shares of
the Company's common stock, $.01 par value per share ("Common Stock"), at a
price of $75 per share. These options shall vest as follows: 20% after one year
from the date of grant and one and two-thirds percent of the total shares
subject to the option for each completed calendar month of employment, up to a
maximum of one hundred percent of such shares.
3.3.2 Acceleration. Any and all unvested options shall immediately
vest on a Sale of the Company.
3.4 Fringe Benefits. The Company shall provide St. Germain with such
benefits, including health insurance, life insurance, disability insurance and
vacation, on the same basis as it makes such benefits available to all other
executive management-level employees.
3.5 Expenses.
3.5.1 Temporary Living Expenses. The Company will reimburse St.
Germain for reasonable temporary living expenses, including but not limited to
lodging, meals, utilities and transportation, while located in the Portland,
Maine area during the term of this Agreement, if he shall present an itemized
written account in accordance with the Company's policies.
3.5.2 Future Expenses. It is understood that St. Germain will from
time to time incur reasonable expenses in conjunction with his employment with
the Company. The Company will reimburse St. Germain for any such reasonable
expenses if he shall present an itemized written account in accordance with the
Company's policies.
3
<PAGE>
4. Inventions and Nondisclosure. In connection with his employment by the
Company pursuant to the terms of this Agreement, St. Germain shall execute the
Inventions and Nondisclosure Agreement attached hereto as Exhibit C, the terms
and conditions of which are incorporated herein by reference. As a material
inducement to the Company entering into this Agreement, St. Germain covenants
and agrees that he shall not, at any time during or following the term of this
Agreement, directly or indirectly divulge or disclose for any purpose whatsoever
any confidential information that has been obtained by or disclosed to him as a
result of his employment with the Company. St. Germain agrees that the
provisions of this Article 4 survive the termination of this Agreement.
5. Covenant Not To Compete and To Protect Confidential Information.
5.1 Confidential Information. St. Germain understands that during his
employment with Company he may become acquainted with certain trade secrets and
other confidential and proprietary information belonging to Company which may
now, or in the future, be used by it in connection with its business. Such
information includes but is not limited to methods and processes for servicing
of products, customer lists, prospect lists, pricing data, and sale of products.
St. Germain further understands that because of the confidential nature of this
relationship, he is legally bound not to use this type of information for his
own benefit nor to disclose it to third parties to compete directly or
indirectly with Company. Furthermore, he expressly agrees that he will not so
use such information for his own benefit nor disclose it to others either during
his employment by Company or after the termination of his employment with
Company or at any time after the termination of this Agreement.
5.2 Special Value of Services and Disclosure of Information. St. Germain
acknowledges that the service he is to render as an employee are of a special
and unusual character with a unique value to Company, the loss of which cannot
adequately be compensated by damages in an action at law. In view of the unique
value to Company of the services of St. Germain for which Company has contracted
hereunder, because of the confidential information to be obtained by or
disclosed to St. Germain, as hereinabove set
4
<PAGE>
forth, and as a material inducement to Company to enter into this Agreement, St.
Germain covenants and agrees to bind himself to the provisions of this Agreement
and more specifically the provisions of Articles 4 and 5 hereof.
5.3 Noncompetition. St Germain agrees that, so long as he is receiving
compensation under this Agreement (the "Non-competition period), he will not,
absent the prior written approval of the Company, and for a period of twelve
(12) months after termination of his employment, regardless of the cause of
termination or the status of this Agreement, directly or indirectly, anywhere
the Company does business, engage in any business or perform any service which
conflicts with the financial or business interests of the Company or have any
interest, whether as a proprietor, partner, employee, stockholder, principal,
agent, consultant, director, officer, or in any other capacity or manner
whatsoever, in any enterprise that shall so engage; provided, however, that St.
Germain shall not be restricted from owning not more than five percent (5%) of
the outstanding equity in any corporation whose stock is listed on a recognized
public exchange. St. Germain understands and covenants that this restriction is
potentially of a world wide geographic scope and St. Germain agrees and
covenants that this scope is reasonable in light of the nature of the Company's
business and the compensation established under this Agreement.
5.4 Customers and Employees Protected. In furtherance of the foregoing and
not in limitation thereof, during the Non-competition Period, St. Germain shall
not, directly or indirectly, solicit or service in any way, on behalf of himself
or on behalf of or in conjunction with others, any customer or prospective
customer who has made purchases from or been solicited or serviced by the
Company within one (1) year prior to the termination of St. Germain's
employment. The previous sentence does not apply to any solicitation or service
not in competition with the "Business of the Company" as defined herein. During
the Non-competition Period, St. Germain will not seek to persuade any employee
of the Company, to discontinue employment with the Company or to become employed
in any business directly or indirectly competitive with the Business of the
Company.
5
<PAGE>
5.5 The Company to Have Full Benefit. If St. Germain violates the
restrictive Covenants of Article 5 and the Company brings action for injunctive
or other relief, the Company shall not, as a result of the time involved in
obtaining the relief, be deprived of the benefit of the full term of the
restrictive covenants. Accordingly, the restrictive covenant shall be deemed to
have the duration specified in Article 5, as the case may be, computed from the
date the relief is granted but reduced by the time between the period when the
restriction began to run and the date of the first violation of the covenant by
St. Germain. St. Germain further agrees that if he violates the restrictive
covenants of Article 5 and the Company brings action for injunctive or other
relief, further payments of compensation to him shall cease and the Company
shall be entitled to recover any compensation paid to St. Germain after the date
of the violation.
5.6 Partial Enforcement. If any arbitrator shall determine that the
duration or geographical limit of any restriction contained in the Article 5 is
unenforceable, it is the intention of the parties that the restrictive covenants
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render them valid and enforceable.
5.7 Termination Upon Cessation of Business or Bankruptcy. Article 5 shall
terminate in the event that the Company ceases to engage in business as a going
concern, other than by reason of a Sale of the Company.
5.8 Notwithstanding anything in this Agreement, St. Germain agrees that
the provisions of this Article 5 shall survive the termination of this
Agreement.
6. Remedies of the Company. As an employee of the Company, St. Germain may have
access to customer lists, client files, trade secrets, and other confidential
information of the Company. Therefore, St. Germain acknowledges that
notwithstanding the fact that to St. Germain's employment is terminable at will
upon notice as provided in Section 7.3.1, the restrictions contained in Article
5 of this Agreement and in the Inventions and Nondisclosure Agreement represent
reasonable and necessary protection of the legitimate interests of the
6
<PAGE>
Company, that any violation of these restrictions would cause substantial injury
to the Company, and that the Company would have not entered into this Agreement
with St. Germain without receiving the additional consideration offered by St.
Germain in binding himself to these restrictions. In the event of any violation
of these restrictions, the Company shall be entitled to preliminary and
permanent injunctive relief, in addition to any other remedy.
7. Term and Termination.
7.1 Term. Unless earlier terminated pursuant to its terms, and subject to
Section 9, the term of this Agreement shall be three (3) years from the
Effective Date, except as modified in Paragraph 3. Articles 4 and 5 survive the
termination of this Agreement, do not terminate upon the termination of this
Agreement, regardless of reason, and only terminate according to their express
terms, if any.
7.2 Termination by St. Germain. St. Germain may terminate this Agreement
at any time on ninety (90) days written notice to the Company, specifying the
date of termination.
7.3 Termination by the Company.
7.3.1 Without Cause, Death or Disability.
(A) This Agreement may be terminated by the Company at any
time, for any reason, on thirty (30) days written notice to St. Germain
specifying the date of termination.
(B) This Agreement shall automatically terminate upon St.
Germain's death or disability.
7.3.2 For Cause. The Company may terminate this Agreement upon the
happening of any one of the following events:
(A) Continuing inattention to, or neglect of, the duties to be
performed by St. Germain, which inattention is not the result of illness or
accident, after written notice and a reasonable opportunity to cure said
performance;
(B) Willful disloyalty to the Company;
7
<PAGE>
(C) Participation in any fraud;
(D) Imparting any confidential information in violation of
this Agreement; or
(E) Any breach of Articles 4 or 5 of this Agreement.
8. Compensation upon termination.
8.1 Pursuant to Sections 7.2, 7.3.1(B) and Sections 7.3.2. If this
Agreement is terminated after the first year of the Agreement, then upon
termination of this Agreement by St. Germain pursuant to Section 7.2, or
termination of this Agreement by the Company pursuant to Sections 7.3.2, St.
Germain shall be entitled to any salary accrued to him as of the date of
termination pursuant to Section 3.1, and to a pro-rated bonus, pursuant to
Section 3.2, for the portion of the then-current fiscal year during which St.
Germain performed services hereunder. The Company's good faith determination of
amounts due under this Section shall be final and binding, subject to
arbitration under Paragraph 11.
8.2 Pursuant to Section 7.3.1(A). If this Agreement is terminated by the
Company pursuant to Section 7.3.1(A), St. Germain shall be entitled to severance
equal to his Annual Total Compensation at the time of termination determined
pursuant to Section 3.1 payable in twelve equal monthly installments beginning
with the first of the month following said termination. St. Germain shall also
be entitled to receive one additional year of vesting of any previously granted
options under Article 3.
8.3 St. Germain's Obligations Upon Termination. Upon termination of St.
Germain's employment by Company or at any other time at Company's request, St.
Germain shall promptly deliver to Company all files, correspondence, letters,
notes, notebooks, reports, drawings, formulas, computer programs, and any other
similar documents, memoranda, customer lists, phone lists, or "Rolodex" type
materials and any copies thereof relating in any way to Company's business and
any way obtained by St. Germain, directly or indirectly, during his employment
by Company which are in St. Germain's possession or under the
8
<PAGE>
control of St. Germain. St. Germain shall not make or retain any copies of the
foregoing upon termination and shall so represent to Company in writing at
termination of his employment.
9. Sale of the Company. In the event that St. Germain is terminated by the
Company without cause and within six (6) months of such termination, the Company
is sold to or merged with another Company, then all of St. Germain's unvested
options shall become immediately vested at the time of such sale or merger.
10. Consent and Waiver by Third Parties. St. Germain hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties as to enable him to accept employment with the Company on the terms and
conditions set forth herein and to execute and perform this Agreement without
being in conflict with any other agreement, obligation or understanding with any
such third party. St. Germain represents that he is not bound by any agreement
or any other existing or previous business relationship that conflicts with, or
may conflict with, the performance of his obligations hereunder or prevent the
full performance of his duties and obligations hereunder.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Maine and shall be deemed to
be performed in Maine. Any dispute under this agreement shall be settled by
binding arbitration to be held in Portland, Maine pursuant to the then
prevailing Commercial Arbitration Rules of the American Arbitration Association.
12. Severability. In case any one or more of the provisions contained in this
Agreement or the other agreements executed in connection herewith for any reason
shall be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or such other agreements, but this
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<PAGE>
Agreement or the such other agreements, as the case may be, shall be construed
as if such invalid, illegal or unenforceable provisions had never been contained
herein or therein.
13. Waivers and Modifications. This Agreement may be modified, and the rights,
remedies and obligations contained in any provision hereof may be waived, only
in accordance with this Section 13. No waiver by either party of any breach by
the other or any provision hereof shall be deemed to be a waiver of any later or
other breach thereof or as a waiver of any other provision of this Agreement.
This Agreement and any Exhibit sets forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged orally or by any course of dealing
between the parties, but only by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.
14. Assignment. St. Germain acknowledges that the services to be rendered by him
are unique and personal in nature. Accordingly, St. Germain may not assign any
of his rights or delegate any of his duties or obligations under this Agreement.
The rights and obligations of the Company under this Agreement shall inure to
the benefit of, and shall be binding upon, the successors and assigns of the
Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written as an instrument under seal.
SYSTEMS CONSULTING COMPANY, INC.
By: /s/ Mark Tilly /s/ Philip St. Germain
------------------------- -------------------------
Philip St. Germain
Title:
----------------------
10
<PAGE>
Exhibit 10.15
December 26, 1998
[LOGO]
SCC
Systems Consulting Company, Inc.
Suite 500
537 Congress Street,
Portland, Maine 04101
V: 207-774-3244
F: 207-772-8597
www.sccme.com
Mr. Steven Hirschfeld
Six Beth Court
Randolph, NJ 07869
Dear Steve:
This letter supercedes in its entirety that certain offer of
employment dated
December 24, 1998, which offer is of no further force or effect.
This letter confirms our offer of employment as Vice President -
Life Sciences Sales with Systems Consulting Company, Inc., (SCC) at
an annual base salary of $180,000. You will report directly to
Gerald O'Connell, CEO. You will be responsible for building and
directing the sales team that will sell SCC's products to
Pharmaceutical, Medical & Surgical Companies (collectively "life
sciences companies"), as well as Consumer Goods business units
within those Life Sciences Companies, worldwide. Your start date
will be January 11, 1999. You will spend a week in February in New
Employee Orientation.
Your 1999 bonus and commission plan is outlined below:
Bonus -- paid quarterly Q1 - $15,000 Guaranteed. (Q1 revenue
objective is $2,500,000
Q2 - $15,000 Guaranteed. (Q2 revenue
objective is $2,500,000
Q3 - $10,000 based on achieving revenues
of $2,500,000.
Q4 - $10,000 based on achieving revenues
of $ 3,000,000.
Notes: the Q1 and Q2 bonuses will be
paid early, as discussed earlier with
Gerry O'Connell. This will be paid with
your first regular payroll upon joining
the company. These bonuses are upon
reasonable and mutually agreed upon
goals, at this point believed to $10.5
Million in annual license revenues.
Commission 0.5% on first $4.0 million of license
revenues (up to $20,000)
1.0% on second $4.0 million of license
revenues (up to $40,00
1.5% on third $4.0 million of license
revenues (up to $60,000
1.75% on all license revenues in excess
of $12.0 million.
<PAGE>
Overachieve Bonus Upon license revenues under your
direction reaching $12.0 million, you
will receive a bonus of $30,000.
Additionally, up license revenues under
your direction reaching $15.0 million in
1999, you will receive an additional
$40,000.
Note: Here and in all other references
to license revenues, we are defining
revenues as recognized revenues.
Draw For the first six months of your
employment, you will receive a
non-recoverable draw against commissions
of $2,000 per month. Thereafter, you
will receive a recoverable draw against
commissions of $2,000 per month.
Options You will receive 200,000 incentive stock
options at the current exercise price of
$3.79 per share, vesting 25% annually
from your date of hire.
In the event of sale of the company or
its substantial assets, merger with
another company, and/or change of
control of the company, 50% of all then
non-vested options will vest at that
time, and the remainder of non-vested
options will accelerate to fully vest
within 12 months of such event, provided
that if the Board of Directors should
determine, upon receipt of a written
opinion of the Company's independent
public accountants, that giving effect
to this provision for acceleration would
preclude accounting for any proposed
business combination of the Company with
another entity as a pooling of
interests, and the Board otherwise
desires to approve such a proposed
business combination which requires as a
condition to the closing of such
transaction that it be accounted for as
a pooling of interests, then this
acceleration provision shall be null and
void.
You will also be given the opportunity
to earn incremental stock options, based
on performance, as part of each annual
compensation plan to be defined by Gerry
O'Connell.
<PAGE>
Severance In the event that you are terminated
other than for cause (cause being
defined as dishonesty or criminal
activity) in the first twenty-four
months of your employment with SCC its
successor, successors or assigns you
will receive a severance package equal
to twelve months of your base pay (at
the time of the severance) together with
all accrued bonuses and commissions. If
you are terminated after twenty-four
months of service, you will receive six
months severance equal to your base pay
(at that time) and any accrued bonuses
and commissions.
The above severance will also be paid
upon your resignation following a change
of control or management which alters
your duties or responsibilities or
compensation, or renders working
conditions unreasonable.
Car Allowance You will receive a $500 monthly car
allowance and the typical IRS rate of
$.16 per mile for employees with a car
allowance.
SCC will provide written performance evaluations semi-annually.
Enclosed for your review is information regarding the Immigration Reform and
Control Act of 1986. Upon accepting a position with SCC, the I-9 Form must be
completed to verify identity and employment eligibility as required by law. You
will be asked to complete an I-9 on your first day of employment with SCC.
Please bring the appropriate documentation with you at that time. You are also
required to sign SCC's standard Nondisclosure, Developments and Noncompete
Agreement as a condition of your employment.
By signing this letter, you are representing to SCC that you are not subject to
any agreement, which precludes you from accepting this offer.
Please sign and return this letter at your earliest convenience. We believe you
will find great satisfaction and personal growth with SCC and we look forward to
working with you.
<PAGE>
Sincerely,
/s/ Philip M. St. Germain 12/26/98
- -------------------------------- ------------
Philip M. St. Germain, CFO Date
Accepted,
/s/ Steven Hirschfeld 12/26/98
- -------------------------------- ------------
Steven Hirschfeld Date
<PAGE>
Exhibit 10.16
January 6, 1998
[LOGO]
SCC
Systems Consulting Company, Inc.
537 Congress Street, Suite 500
Portland, Maine 04101
V: 207-774-3244
F: 207-772-8597
www.sccme.com
Mr. Thomas Mucher
6405 Dunmoor Drive
Plano, TX 75093
Dear Tom:
This letter will confirm our offer of Vice President - Professional
Services with Systems Consulting Company, Inc. at an annual base
salary of $147,000 beginning on or about February 9, 1998.
You will be eligible for a base performance bonus in 1998 of $25,000
for achieving recognized training and consulting revenues of $1.5
million in 1998. Additionally you will receive a further 1998 bonus
equal to three percent (3.0%) of recognized training and consulting
revenues in excess of $1.5 million. Your initial year's bonus shall
be paid quarterly in arrears as follows: 10% of the bonus within 45
days after the end of the first quarter; 20% within 45 days after
the end of the second quarter; 30% within 45 days after the end of
the third quarter and 40% within 45 days after the end of the fourth
quarter. In each succeeding year, you shall be eligible to receive a
bonus based upon your successfully achieving goals and objectives
mutually established between you and the President of the Company.
In addition, you will receive options to purchase 2,400 shares of
pre-split SCC common stock pursuant to the 1997 Stock Plan, a copy
of which is attached, at the current exercise price of $75.00 per
share. (As you may know, the exercise price must be based on fair
market value at the time of grant. If you are unable to join the
Company at your current estimated start date, the exercise price may
have to be increased, a matter over which we have no control).
In the event that SCC is acquired or merges with another company,
you shall be entitled to a fifty percent (50%) acceleration in the
remaining number of options granted to you once you have been
employed by SCC
<PAGE>
for twelve months.
SCC will pay the usual and customary moving expenses incurred by you
in relocating from Plano, Texas to the Portland, Maine area in such
a fashion as to negate any tax impact. As soon as practicable, you
will need to provide SCC with an estimate of all of your estimated
moving expenses for purposes of establishing a mutually agreeable
budget amount.
Enclosed for your review is information regarding the Immigration
Reform and Control Act of 1986. Upon accepting a position at SCC,
the I-9 Form must be completed to verify identity and employment
eligibility as required by law. You will be asked to complete an I-9
Form on your first day of employment at SCC. Please bring the
appropriate documentation with you at that time.
This Agreement may be terminated by either party upon thirty days
written notice. If SCC terminates this Agreement before August 15,
1998, you shall be entitled to receive a severance of continued
compensation for six months following termination which includes
salary, accrued bonuses and benefits. In the event that you are
terminated on or after August 16, 1998 and prior to February 15,
1999, you will receive a severance of six months compensation and
the vesting of your options will accelerate by twelve months from
the date of termination.
No provision herein is to be construed as a guaranty of continued
employment and all employees are viewed as at will employees. Any
contrary agreement must be in writing and must be signed by the
President of SCC. Moreover, this letter does not create any such
contrary agreement.
This offer is contingent upon certain conditions including your
agreement to and execution of SCC's standard non-competition and
confidential information agreement, a copy of which is included
herein, the execution of the enclosed Trade Secret Disclosure as
well as a satisfactory review of any references which you have
supplied.
Finally, by signing this letter you are representing to SCC that you
are not subject to any agreement which precludes you from accepting
this offer.
2
<PAGE>
I would appreciate your signing and returning the enclosed copy to
this letter at your earliest convenience. We believe you will find
great satisfaction and personal growth with SCC and we look forward
to working with you.
Sincerely,
/s/ Philip M. St. Germain
Philip M. St. Germain
Chief Financial Officer
Accepted /s/ Thomas Mucher Date 1/7/98
------------------ ----------
Thomas Mucher
cc: Alan Hyman
Mark Tilly
offermucher
3
<PAGE>
EXHIBIT 10.17
[LOGO] SCC
Optimizing Incentive-Driven Processes
5th Floor
537 Congress Street
Portland, Maine 04101
V: 207-774-3244
F: 207-772-8597
www.scc.com
July 23, 1999
Terry Nicholson
12433 Nicholas Lane
St. Louis, MO 63131
Dear Terry,
This letter confirms our offer of a full-time position as Vice
President of Business Development with Systems Consulting Company,
Inc. (SCC), at an annual salary of $160,000 beginning on or before
September 1, 1999. You will report directly to A. Leigh Powell, our
Chief Operating Officer. This offer is contingent upon a
satisfactory review of any references that you have supplied. Our
next New Employee Orientation Program will take place the week of
August 23, 1999 from 8:00 a.m. to 5:00 p.m. daily in our Portland,
Maine office.
You will receive options to purchase 30,000 shares of SCC common
stock pursuant to the 1997 Stock Plan at the current exercise price
of $7.50 per share. (As you may know, the exercise price must be
based on fair market value at the time of grant. If you are unable
to join the Company at your current estimated start date, the
exercise price may have to be increased, a matter over which we have
no control.) In addition to the 30,000 shares of SCC common stock
that you are able to purchase you will have the ability to earn
20,000 more based upon individual performance goals to be defined by
A. Leigh Powell. An annual bonus of 35% of your base salary will be
offered, but not guaranteed, based upon company performance. SCC
will reimburse you for reasonable expenses associated with your
office space in the St. Louis area and will also reimburse you for a
personal computer and any necessary software that you will need to
perform your job at SCC.
Enclosed for your review is information regarding the Immigration
Reform and Control Act of 1986 and a W-4 form for you to complete.
Upon accepting a position with SCC, the I-9 Form must be completed
to verify identity and employment eligibility as required by law.
You will be asked to complete the I-9 on your first day of
employment with SCC. Please bring appropriate documentation with you
at that time.
No provision herein is to be construed as a guaranty of continued
employment and all employees are employed at will. Any contrary
agreement must be in writing and must be signed by the Chief
Operating Officer of SCC. Moreover, this letter does not create any
such contrary agreement.
This offer of employment is contingent upon certain conditions
including your agreement to and execution of SCC's standard
Nondisclosure, Developments and Noncompete Agreement, included with
this letter, as well as a satisfactory review of any references
which you have supplied. Please sign and return to us in the
enclosed envelope the Nondisclosure. Developments and Noncompete
Agreement prior to beginning your employment with us.
<PAGE>
Finally, by signing this letter, you are representing to SCC that
you are not subject to any agreement that precludes you from
accepting this offer.
Please sign and return the Nondisclosure. Developments and
Noncompete Agreement, this letter and your completed WA form at your
earliest convenience. We believe you will find great satisfaction
and personal growth with SCC and we look forward to working with
you.
Sincerely,
/s/ Philip St. Germain/ RRB
Philip St. Germain
Chief Financial Officer
Enclosures
Accepted /s/ Terry Nicholson Date 7-28-99
--------------------- -----------
Terry Nicholson
<PAGE>
Exhibit 10.18
SYSTEMS CONSULTING COMPANY, INC.
EMPLOYMENT AGREEMENT
AGREEMENT made this 27th day of April, 1998, by and between Systems Consulting
Company, Inc., Massachusetts corporation with principal offices 537 Congress
Street, Portland, Maine (the "Company"), and Gerald O'Connell, residing at 1608
Sunnybrook Lane, N.W., Unit E 208, Palm Bay, Florida ("Executive").
The parties hereto, intending to be legally bound hereby, agree upon the
following terms of employment of Executive by the Company.
1. Position and Responsibilities.
(a) Services. During the term of this Agreement, Executive agrees to
undertake such activities on behalf of the Company as the Board of
Directors from time to time request, and Executive shall exercise such
powers and perform such duties in relation to the business and affairs of
the Company as may from time to time be vested in him or requested by the
Board of Directors of the Company. Executive shall at all times report to,
and his activities shall at all times be subject to the direction and
control of, the Board of Directors of the Company. Executive agrees to
devote substantially all of his business time, attention and services to
the diligent, faithful and competent discharge of such duties for the
successful operation of the Company's business.
(b) Officer and Director Nomination. Upon Executive's execution of
this Agreement, he shall be elected by the Board of Directors of the
Company as its President and Chief Executive Officer, to serve until the
next annual meeting of the stockholders or until his earlier resignation
or removal. Thereafter, for so long as he is employed by the Company
during the term of this Agreement, the Board of Directors of the Company
shall continue to elect Executive as President and Chief Executive
Officer, and Executive shall accept such positions and diligently perform
his duties thereunder.
2. Compensation. Salary, Bonuses and Other Benefits. For so long as he is
employed during the term of this Agreement, the Company shall pay Executive the
following compensation, including the following annual salary and other fringe
benefits:
(a) Salary. In consideration of the services to be rendered by
Executive to the Company, the Company will pay Executive a salary of
Nineteen Thousand One Hundred Sixty Six Dollars and sixty seven cents
($19,166.67) per month. Such salary shall be payable in conformity with
the Company's customary practices for executive compensation as such
practices shall be established or modified from time to time. Salary
payments shall be subject to all applicable federal and state withholding,
payroll and other taxes. The Board of Directors of
<PAGE>
the Company may authorize additional compensation by way of salary, bonus
or otherwise as it deems appropriate, during the term of this Agreement.
(b) Bonuses. Executive shall be eligible to participate in the
Company's bonus program as set forth in Exhibit A attached hereto.
Executive understands that said program is subject to final determination
regarding the formulas used for the calculation of all bonuses and
approval by the Board of Directors at the next regularly scheduled meeting
set for April 29, 1998. To the extent that any bonus is made available
pursuant to the Company's bonus plan, Executive shall be entitled to a
frill year's bonus, and not a pro rated bonus as set forth in Section 10
thereof.
(c) Equity Participation. Executive shall have the right to purchase
a total of Four hundred ninety-five thousand four hundred fifty (495,450)
shares of restricted Common Stock, $0.0001 par value, of SCC Technologies,
Inc. (the parent company of the Company), at a price of $3.00 per share.
Such restricted shares shall be issued pursuant to a Restricted Stock
Purchase Agreement substantially in the form attached hereto as Exhibit B.
(d) Fringe Benefits. the Company shall provide Executive with such
medical, life insurance and other benefits, if any, as it makes available
to all other management-level employees. In the event the employment of
Executive is terminated, he shall be paid for all accrued and unused
vacation time.
(e) Expenses. It is understood that Executive will from time to time
incur reasonable expenses in conjunction with his employment, the Company
will reimburse him for any such expenses if he shall present an itemized
written account in accordance with the Company's policies.
(f) Board Review. After the first year of this Agreement, the Board
of Directors will review Executive's total compensation package hereunder
and make any changes, including changes to the base salary, fringe
benefits, and bonuses which the Board and Executive mutually determine to
be warranted.
3. Nondisclosure, Noncompetition, and Inventions. In connection with his
employment by the Company pursuant to the terms of this Agreement, Executive
shall execute the Nondisclosure, Noncompetition, and Developments Agreement
attached hereto as Exhibit C, the terms and conditions of which are incorporated
herein by reference.
4. Term and Termination. The term of this Agreement shall be from the Effective
Date through April 26, 2001, and shall continue thereafter until terminated at
any time by either party giving written notice to the other party specifying the
date of termination; provided that this agreement and Executive's employment by
the Company may be
2
<PAGE>
terminated immediately by the Company providing written notice of termination to
Executive upon the happening of any one of the following events:
(a) Dishonesty by Executive detrimental to the best interests of the
Company or any of its affiliates;
(b) Willful disloyalty to the Company;
(c) Participation in any fraud;
(d) Breach of the nondisclosure provisions of the Agreement attached
hereto as Exhibit C;
(e) The Disability (as defined below) of Executive;
(f) The death of Executive; or
(g) Continuing inattention to, or neglect of, the duties to be
performed by Executive, which inattention is not the result of illness or
accident, or any other material violation of this Agreement, which
continues after written notice to Executive specifying the alleged
inattention to or neglect of duties or such other violation.
5. Compensation upon termination. Upon termination of Executive's employment
during the term of this agreement:
(a) Executive shall be entitled to receive the salary set forth in
Subparagraph 2(a) and payment for vacation, accrued but unpaid as of the
date of termination.
(b) If the Company terminates Executive's employment, other than for
the causes set forth in subsections (a) through (d) or (g) of Paragraph 4,
the Company shall pay Executive as additional compensation for services
rendered hereunder an amount equal to six times Executive's then-current
monthly salary provided that in the event that Executive, after diligent
search, is unable to obtain employment as senior executive of a company on
or prior to the date six months following termination, the Company shall
pay to Executive an additional amount, equal to Executive's then-current
monthly salary, for each month in which Executive, after diligent search,
is unable to obtain employment as senior executive of a company; provided
that notwithstanding anything to the contrary set forth in this Agreement,
the maximum amount to be paid pursuant to this subsection (b) of Paragraph
5 shall be an amount equal to twelve (12) times Executive's then-current
monthly salary.
(c) If the Company terminates Executive's employment for Disability
pursuant to subsections (e) of Paragraph 4, the Company shall pay
Executive as additional compensation for services rendered hereunder an
amount equal to six times Executive's then-current monthly salary.
(d) The compensation and benefits provided above have been
negotiated with the Company and shall be deemed to fully satisfy any
notice requirements
3
<PAGE>
which may be required by any jurisdiction. This Paragraph 5 constitutes
Executive's only rights to compensation, benefits, damages, or other
remedies arising out of the termination of his employment.
6. Definitions. For the purpose of this Agreement, the following definitions
shall apply:
"Business of the Company" shall mean all business of the Company,
whether presently or hereafter conducted or contemplated by the Company at
any time during the term of this Agreement.
"Disability" shall mean inability of Executive due to illness or
accident to perform the duties to be performed by him pursuant to this
Agreement for a continuing period in excess of One Hundred Eighty (180)
days interrupted by return or returns to full-time employment of not more
than ten (10) days each.
"Effective Date" shall mean April 27, 1998.
7. Consent and Waiver by Third Parties. Executive hereby represents and warrants
that he has obtained all necessary waivers and/or consents from third parties as
to enable him to accept employment with the Company on the terms and conditions
set forth herein and to execute and perform this Agreement without being in
conflict with any other agreement, obligation or understanding with any such
third party. Executive represents that he is not bound by any agreement or any
other existing or previous business relationship which conflicts with, or may
conflict with, the performance of his obligations hereunder or prevent the full
performance of his duties and obligations hereunder.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Maine and shall be deemed to
be performed in Maine. The parties consent to the exclusive jurisdiction of the
courts of Maine and the federal courts sitting in Maine for the resolution of
any dispute with respect to this Agreement.
9. Severability. In case any one or more of the provisions contained in this
Agreement or the other agreements executed in connection herewith for any reason
shall be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or such other agreements, but this Agreement or the such other
agreements, as the case may be, shall be construed as if such invalid, illegal
or unenforceable provisions had never been contained herein or therein.
10. Waivers and Modifications. This Agreement may be modified, and the rights,
remedies and obligations contained in any provision hereof may be waived, only
in accordance with this Paragraph 10. No waiver by either party of any breach by
the other or any provision hereof shall be deemed to be a waiver of any later or
other breach
4
<PAGE>
thereof or as a waiver of any other provision of this Agreement. This Agreement
and any Schedule or Exhibit set forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged orally or by any course of dealing
between the parties, but only by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.
11. Assignment. The Company will require any person, group, company or other
legal entity which merges or consolidates with the Company or purchases all or
substantially all of the Company's assets ( a "Successor") to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall entitle Executive to the benefits
listed in Paragraph 5 of this Agreement, subject to the terms and conditions
therein.
The assumption of the Agreement by a Successor pursuant to the provisions of
this Paragraph 11 shall not be a termination of Executive's employment
notwithstanding the fact that as a result of such assumption Executive may be
required to become an employee of the Successor (or a designated affiliate of
Successor) in place of being an employee of Company.
In particular and without limitation of the foregoing, it is anticipated that
upon the merger of the Company with its parent corporation, SCC Technologies,
Inc. (the "Parent'), Executive will become an employee of the Parent and this
Agreement will be assumed and performed by the Parent.
12. Miscellaneous. As a condition of Executive's employment, Executive will
provide proof of having successfully passed a medical exam within the past 180
days.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written as an instrument under seal.
SYSTEMS CONSULTING COMPANY, INC.
By: /s/ Alan Hyman /s/ Gerald O'Connell
------------------------- ------------------------------
Name: Alan Hyman Name: Gerald O'Connell
Title: Chairman
5
<PAGE>
Exhibit 10.19
FORM OF INDEMNIFICATION AGREEMENT
This Agreement is made as of the ____ day of __________ 2000, by and
between I-many, Inc., a Delaware corporation (the "Corporation), and
________________ ("Indemnitee"), a director or officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers the most capable persons available, and
WHEREAS, the substantial increase in corporate litigation subjects
directors and officers to expensive litigation risks at the same time that the
availability of directors' and officers' liability insurance has been severely
limited, and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its directors and officers so as to provide them with
the maximum possible protection permitted by law, and
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Certificate of Incorporation and insurance as adequate in the
present circumstances, and may not be willing to serve as a director or officer
without adequate protection, and
WHEREAS, the Corporation desires Indemnitee to serve as a director or
officer of the Corporation.
NOW THEREFORE, the Corporation and Indemnitee do hereby agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as
a director or officer of the Corporation for so long as he is duly elected or
appointed or until such time as he tenders his resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit, or proceeding, whether brought by or in the right of the
Corporation or otherwise and whether of a civil, criminal, administrative or
investigative nature, and any appeal therefrom.
(b) The term "Corporate Status" shall mean the status of a person
who is or was a director or officer of the Corporation, or is or was serving, or
has agreed to serve, at the request of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(c) The term "Expenses" shall include, without limitation,
attorneys' fees, retainers, court costs, transcript costs, fees of experts,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees and other disbursements or
<PAGE>
expenses of the types customarily incurred in connection with investigations,
judicial or administrative proceedings or appeals, but shall not include the
amount of judgments, fines or penalties against Indemnitee or amounts paid in
settlement in connection with such matters.
(d) References to "other enterprise" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Agreement.
3. Indemnification in Third-Party Proceedings. The Corporation shall
indemnify Indemnitee in accordance with the provisions of this Paragraph 3 if
Indemnitee was or is a party to or threatened to be made a party to or otherwise
involved in any Proceeding (other than a Proceeding by or in the right of the
Corporation to procure a judgment in its favor) by reason of his Corporate
Status or by reason of any action alleged to have been taken or omitted in
connection therewith, against all Expenses, judgments, fines, penalties and
amounts paid in settlement actually and reasonably incurred by Indemnitee or on
his behalf in connection with such Proceeding, if Indemnitee acted in good faith
and in a manner which he reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to of any criminal
Proceeding, had no reasonable cause to believe that his conduct was unlawful.
The termination of any Proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere, or its equivalent, shall not, of itself, create
a presumption that Indemnitee did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal Proceeding, had reasonable cause
to believe that his conduct was unlawful.
4. Indemnification in Proceedings by or in the Right of the Corporation.
The Corporation shall indemnify Indemnitee in accordance with the provisions of
this Paragraph 4 if Indemnitee is a party to or threatened to be made a party to
or otherwise involved in any Proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of his Corporate Status or by reason
of any action alleged to have been taken or omitted in connection therewith,
against all Expenses and, to the extent permitted by law, amounts paid in
settlement actually and reasonably incurred by Indemnitee or on his behalf in
connection with such Proceeding, if he acted in good faith and in a manner which
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made under this Paragraph 4
in respect of any claim, issue, or matter as to which Indemnitee shall have been
adjudged to be liable to the Corporation, unless and only to the extent that the
Court of Chancery of Delaware shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as
the Court of Chancery shall deem proper.
5. Exceptions to Right of Indemnification. Notwithstanding anything to the
contrary in this Agreement, except as set forth in Paragraph 10, the Corporation
shall not indemnify the
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Indemnitee in connection with a Proceeding (or part thereof) initiated by the
Indemnitee unless the initiation thereof was approved by the Board of Directors
of the Corporation. Notwithstanding anything to the contrary in this Agreement,
the Corporation shall not indemnify the Indemnitee to the extent the Indemnitee
is reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to the Indemnitee and the Indemnitee is
subsequently reimbursed from the proceeds of insurance, the Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
6. Indemnification of Expenses of Successful Party. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee has been
successful, on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against all Expenses incurred by him or on his behalf in connection therewith.
Without limiting the foregoing, if any Proceeding or any claim, issue or matter
therein is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to the Indemnitee,
(ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a
plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that
the Indemnitee did not act in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
7. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any Proceeding for which indemnity will or could be
sought by him and provide the Corporation with a copy of any summons, citation,
subpoena, complaint, indictment, information or other document relating to such
Proceeding with which he is served. With respect to any Proceeding of which the
Corporation is so notified, the Corporation will be entitled to participate
therein at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to the Indemnitee. After
notice from the Corporation to the Indemnitee of its election so to assume such
defense, the Corporation shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with such
claim, other than as provided below in this Paragraph 7. The Indemnitee shall
have the right to employ his own counsel in connection with such claim, but the
fees and expenses of such counsel incurred after notice from the Corporation of
its assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Agreement. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
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8. Advancement of Expenses. Subject to the provisions of Paragraph 9
below, in the event that the Corporation does not assume the defense pursuant to
Paragraph 7 of this Agreement of any Proceeding to which Indemnitee was or is a
party or is threatened to be made a party by reason of his Corporate Status or
by reason of any action alleged to have been taken or omitted in connection
therewith and of which the Corporation receives notice under this Agreement, any
Expenses incurred by the Indemnitee in defending such Proceeding shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
however, that the payment of such Expenses incurred by the Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Agreement.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make repayment.
9. Procedure for Indemnification. In order to obtain indemnification or
advancement of Expenses pursuant to Paragraphs 3, 4, 6 or 8 of this Agreement,
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification or advancement of Expenses. Any such
indemnification or advancement of Expenses shall be made promptly, and in any
event within 60 days after receipt by the Corporation of the written request of
the Indemnitee, unless with respect to requests under Paragraphs 3, 4 or 8 the
Corporation determines within such 60-day period that such Indemnitee did not
meet the applicable standard of conduct set forth in Paragraph 3 or 4, as the
case may be. Such determination shall be made in each instance by (a) a majority
vote of the directors of the Corporation consisting of persons who are not at
that time parties to the Proceeding ("disinterested directors"), whether or not
a quorum, (b) a majority vote of a quorum of the outstanding shares of stock of
all classes entitled to vote for directors, voting as a single class, which
quorum shall consist of stockholders who are not at that time parties to the
Proceeding, (c) independent legal counsel (who may, to the extent permitted by
applicable law, be regular legal counsel to the Corporation), or (d) a court of
competent jurisdiction.
10. Remedies. The right to indemnification or advancement of Expenses as
provided by this Agreement shall be enforceable by the Indemnitee in any court
of competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within the 60-day period referred to
above in Paragraph 9. Unless otherwise required by law, the burden of proving
that indemnification is not appropriate shall be on the Corporation. Neither the
failure of the Corporation to have made a determination prior to the
commencement of such action that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Paragraph 9 that Indemnitee has not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that Indemnitee has not met the applicable standard of
conduct. Indemnitee's expenses (of the type described in the definition of
"Expenses" in Paragraph 2(c)) reasonably incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such Proceeding shall also be indemnified by the Corporation.
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11. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Corporation for some or a portion of
the Expenses, judgments, fines, penalties or amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any
Proceeding but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify Indemnitee for the portion of such Expenses, judgments,
fines, penalties or amounts paid in settlement to which Indemnitee is entitled.
12. Subrogation. In the event of any payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to enforce
such rights.
13. Term of Agreement. This Agreement shall continue until and terminate
upon the later of (a) six years after the date that Indemnitee shall have ceased
to serve as a director or officer of the Corporation or, at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (b) the final
termination of all Proceedings pending on the date set forth in clause (a) in
respect of which Indemnitee is granted rights of indemnification or advancement
of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
Paragraph 10 of this Agreement relating thereto.
14. Indemnification Hereunder Not Exclusive. The indemnification and
advancement of Expenses provided by this Agreement shall not be deemed exclusive
of any other rights to which Indemnitee may be entitled under the Certification
of Incorporation, the By-Laws, any agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of Delaware, any other law
(common or statutory), or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office for the Corporation.
Nothing contained in this Agreement shall be deemed to prohibit the Corporation
from purchasing and maintaining insurance, at its expense, to protect itself or
the Indemnitee against any expense, liability or loss incurred by it or him in
any such capacity, or arising out of his status as such, whether or not the
Indemnitee would be indemnified against such expense, liability or loss under
this Agreement; provided that the Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement or otherwise.
15. No Special Rights. Nothing herein shall confer upon Indemnitee any
right to continue to serve as an officer or director of the Corporation for any
period of time or at any particular rate of compensation.
16. Savings Clause. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments,
fines, penalties and amounts paid in settlement with respect to any Proceeding
to the full extent permitted by any applicable portion of this
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Agreement that shall not have been invalidated and to the fullest extent
permitted by applicable law.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
18. Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of the
estate, heirs, executors, administrators and personal representatives of
Indemnitee.
19. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
20. Modification and Waiver. This Agreement may be amended from time to
time to reflect changes in Delaware law or for other reasons. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof nor shall any such waiver constitute a continuing waiver.
21. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given (i) when
delivered by hand or (ii) if mailed by certified or registered mail with postage
prepaid, on the third day after the date on which it is so mailed:
(a) if to the Indemnitee, to:
(b) if to the Corporation, to: I-many, Inc.
537 Congress Street
5th Floor
Portland, ME 04101
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
22. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be duly executed as of the day and year first above written.
CORPORATION:
I-MANY, INC.
Attest: By:___________________________
Name:
Title:
By:_______________________
Name:_____________________
INDEMNITEE:
______________________________
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Exhibit 10.20
Execution Copy
MASTER PROFESSIONAL SERVICES AGREEMENT
This Master Professional Services Agreement, effective as of November 15,
1999, is made by and between Systems Consulting Company, Inc., with its
principal place of business at 537 Congress Street, 5th Floor, Portland, Maine
04101 ("Client") and Sapient Corporation, with a place of business at 10
Exchange Place, 21st Floor, Jersey City, New Jersey 07302 ("Consultant"), sets
forth the terms and conditions under which Consultant will provide services to
Client.
In consideration of the mutual promises contained herein, Client and
Consultant agree as follows:
1. Services.
1.1 Consultant agrees to provide certain services (the "Services") to
Client for specific projects that are mutually agreed upon from time to time
(the "Projects" or individually a "Project") between Client and Consultant. Each
Project will be set forth on a separate "Work Statement" substantially in the
form attached hereto as Appendix A. Each Work Statement, when executed by an
authorized representative of both parties, shall constitute a separate agreement
and, except for provisions herein which are specifically excluded or modified in
such Work Statement, each such Work Statement shall incorporate therein all of
the terms and conditions of this Agreement. In the event of any conflict between
the terms and conditions of this Agreement and the terms and conditions of any
Work Statement, the terms and conditions of such Work Statement shall govern.
1.2 In the event the fees for any Project are fixed, the additional terms
and conditions set forth on Appendix B hereto will apply and if Services are
being provided on a time and materials basis, the additional terms and
provisions set forth on Appendix C will apply. In the event any Project includes
website development, the additional terms and conditions included on Appendix D
will apply.
1.3 Each Work Statement shall, to the extent applicable, contain: (i) a
description of the Project and the Services to be performed by Consultant; (ii)
the tasks to be completed by Client and any third parties; (iii) a description
of the deliverables to be produced by Consultant; (iv) the schedule for
completion of each deliverable or stage of a Project; (v) the fees to be paid to
Consultant for such Services and a payment schedule for fixed-price Projects,
and (vi) such additional information as the parties may wish to include.
1.4 During the course of Consultant's performance of any Project, Client
<PAGE>
may request changes in the Services. Consultant shall incorporate any such
changes provided that the parties execute a change order setting forth the
amended scope of work, program specifications, delivery dates and the impact on
the compensation to be paid to Sapient. If the parties are unable to agree on a
change order setting forth the specified information, then the parties may agree
to complete the Project according to the original Work Statement.
2. Term. This Agreement shall remain in effect for three years from the date
first written above unless earlier terminated by either party as provided
herein. After the initial three-year term expires, this Agreement will renew
automatically for additional one-year periods unless earlier terminated by
either party as provided herein.
3. Payment for Services.
3.1 Client will pay to Consultant the fees set forth in the applicable
Work Statement for the performance of the Services described therein. If
invoicing and payment are tied to milestone payments, a payment schedule shall
be included in the Work Statement. If invoicing and payment are not tied to
milestone payments, Consultant will invoice Client monthly at the rates set
forth in the Work Statement. All invoices are payable within 30 days of receipt.
Unless otherwise provided in the Work Statement, fees do not include computer
hardware costs and third party software costs, which shall be paid by Client.
All amounts paid by Client to Consultant prior to the execution of this
Agreement which relate to any Project covered by this Agreement shall be
credited and deducted from the amounts set forth on the related Work Statement.
3.2 Client shall reimburse Consultant for reasonable out-of-pocket
expenses incurred by Consultant and its personnel in connection with its
performance of Services. Consultant will provide Client with reasonably detailed
invoices for such expenses on a monthly basis and Client agrees to pay the total
amount shown as due on each invoice within 30 days after receipt thereof.
4. Cooperation and Access. Client agrees to cooperate, as set forth in each Work
Statement, with Consultant to the extent necessary for Consultant to perform its
Services thereunder. In addition to the activities listed on each Work
Statement, Client cooperation shall include, but not be limited to, providing
Consultant with all necessary equipment, material, information, assistance and
access to, and use of, Client's premises, computers and other equipment during
normal business hours. Client shall also provide Consultant with access to
Client's personnel during normal business hours, including, but not limited to,
the persons listed on each Work Statement. Consultant agrees to comply at all
times with the Client's applicable rules and regulations regarding safety,
security, use and conduct provided Consultant has notice of same.
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5. Confidentiality.
5.1 As used in this Agreement, "Confidential Information" shall mean all
confidential, proprietary or secret information, including without limitation
components, parts, drawings, data sketches, plans, programs, specifications,
techniques, processes, algorithms, inventions and other information or material,
owned, possessed or used by either Consultant or Client which is at any time so
designated by such party in writing "Confidential" or "Proprietary", whether by
letter or by the use of a proprietary stamp or legend, prior to the time any
such Proprietary Information is disclosed to the other party. In addition,
information which (i) would be apparent to a reasonable person, familiar with
the disclosing party's business and the industry in which it operates, that such
information is of a confidential or proprietary nature the maintenance of which
is important to the disclosing party or (ii) is orally or visually disclosed to
the other party or which is not designated in writing as confidential,
proprietary or secret at the time of disclosure but within a reasonable time
after such disclosure the disclosing party delivers to the receiving party a
written document describing such Proprietary Information and referencing the
place and date of such disclosure and the names of the employees of the party to
whom such disclosure was made, shall constitute Confidential Information.
Notwithstanding anything herein to the contrary, the terms of this Agreement,
and Consultant's methodologies, work approaches, tutorials, procedures,
techniques, algorithms, and processes, shall constitute Consultant Confidential
Information without the requirement of designating it as such either in writing
or by use of a stamp or legend.
5.2 The provisions of Section 5.1 notwithstanding, Confidential
Information shall not include any information to the extent it (i) is or becomes
a part of the public domain through no act or omission on the part of the
receiving party, (ii) is in the receiving party's possession, without actual or
constructive knowledge of an obligation of confidentiality with respect thereto,
at or prior to the time of disclosure under this Agreement, (iii) is disclosed
to the receiving party by a third party having no obligation of confidentiality
with respect thereto, (iv) is independently developed by the receiving party
without reference to the disclosing party's Confidential Information or (v) is
released from confidential treatment by written consent of the disclosing party.
5.3 Each of Consultant and Client shall hold in confidence and not
disclose (except on a confidential basis to its employees, agents, consultants
or subcontractors who need to know in connection with the Project or, on a
confidential basis to any third party in connection with Client's valid exercise
of the Materials Deliverable License and the Elements Deliverable License (as
defined in Sections 6.2 and 6.3, below), provided that any such recipient is
bound to preserve the confidentiality thereof) all Confidential Information
received from the other party in the same
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manner and to the same extent as it holds in confidence its own Confidential
Information of a similar nature and value, and shall not use any such
Confidential Information except for purposes contemplated by this Agreement.
5.4 Each of Consultant and Client shall take appropriate action by
instruction or agreement with its employees, agents, consultants and
subcontractors to satisfy its obligations under this Section 5 and each shall be
responsible for any breach of this Section 5 by its employees, agents,
consultants or subcontractors.
6. Intellectual Property Rights.
6.1 Artistic Elements. The latest work-product delivered to Client,
including without limitation, all designs, software, computer programs, data,
documents, artistic elements created specifically and uniquely for Client (such
as final forms of images, artwork and text) for use in screen display ("Artistic
Elements"), and all other materials included in such deliverable, including any
Preexisting Materials (defined below) and Consultant Program Elements included
therein, are referred to herein as the "Deliverables." Consultant acknowledges
and agrees that all Deliverables other than Preexisting Materials and Consultant
Program Elements shall constitute "works made for hire" for Client within the
meaning of the Copyright Act of 1976, as amended, and shall be the exclusive
property of Client, and Consultant assigns to Client all right, title and
interest and copyright in such Deliverables to Client. Upon Client's request,
Consultant agrees to execute any instruments and do all things reasonably
necessary by Client in order to further perfect Client's ownership rights.
Client hereby grants to Consultant a non-exclusive, royalty free, perpetual,
irrevocable (except in the event of a termination of this Agreement or the
applicable Work Statement under Sections 7.4 or 13.2) license to use, copy,
operate, process, modify and sublicense the Deliverables solely to perform its
Services hereunder.
6.2 (a) Definition and Ownership of Preexisting Materials. Client
acknowledges and agrees that the materials created for Client by Consultant may
contain software, UI conventions, UI design patterns, and other design and
development tools and materials that were (A) developed by Consultant prior to
the execution of this Agreement or the commencement of work for Client; (B)
developed by Consultant during the course of this Agreement or any Work
Statement but were developed at Consultant's cost; or (C) developed by
Consultant during the course of this Agreement or any Work Statement but are not
uniquely applicable to the particular specifications, characteristics or
functions of the Deliverables created for Client hereunder or thereunder (those
items described in this subsection (C), only, are referred to as the "Generic
Materials"), and (D) enhancements and derivatives of such work (those items
described in subsections (A), (B), (C) and (D), are referred to collectively as
the "Preexisting Materials"). Client acknowledges and agrees that Consultant
retains all right, title and interest in such Preexisting Materials and all
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subsequent enhancements thereto.
(b) License to Preexisting Materials. Subject to the provisions of
Sections 13.1 and 13.3 below, Consultant hereby grants to Client a
non-exclusive, non-transferable (except as provided herein), royalty free,
perpetual and irrevocable (except in the event of a termination of this
Agreement or the applicable Work Statement under Section 7.1) license, to use,
copy, modify, operate and create derivative works from the Preexisting Materials
included in the Deliverables to the extent reasonably necessary to enable Client
to (A) utilize, maintain and create "Enhancements" (as defined below) to the
Deliverables (the license described in this clause (A) only is referred to as
the "Materials Deliverable License" and such license shall include the right to
sublicense the Preexisting Materials solely in connection with the maintenance
and use of the Deliverables and the creation, maintenance, use and modification
of Enhancements thereto); and (B) provided that Client's exercise of such
license with respect to the Preexisting Materials (excluding the Generic
Materials) isnot undertaken with any competitor of Consultant, to develop,
utilize and maintain (i) internal websites and (ii) external initiatives not
permitted under 6.2(b)(A) in the product exchange, contract management, or
healthcare areas (collectively, the "Permitted Initiatives") (the license
described in clause (B) only is referred to as the "Materials External License"
and shall not include any right to sublicense the Preexisting Materials other
than to a website hosting company to the extent allowed under Section 6.4).
"Enhancements" shall mean any modification or extension of the Deliverable that
pertains to the creation (e.g. product selection, product marketing, product
information gathering and dissemination) and management (e.g. price management,
eligibility management, chargeback/rebated management) of contractual
relationships and the procurement of products via the web, regardless of
industry.
6.3 (a) Description and Ownership of Consultant Program Elements. Client
further acknowledges and agrees that (A) software programs, routines,
user-interface conventions and other development tools which Consultant develops
during the course of this Agreement or any Work Statement but which are (i)
developed at Consultant's cost (the "Independent Program Elements") or (ii)
developed by Consultant during the course of this Agreement or any Work
Statement but which are not uniquely applicable to the particular specifications
and performance capabilities, characteristics or functions of the Deliverables
(the "Generic Program Elements"), (B) any elements of code developed or utilized
by Consultant not embodied in the direct data representation of the Deliverables
and techniques developed or utilized by Consultant for importing, exporting,
displaying and manipulating such Deliverables, and (C) any enhancements and
derivatives to those items described in clauses (A) or (B) (those items
described in clauses (A), (B) and (C) are collectively referred to as the
"Consultant Program Elements"), shall remain the exclusive property of
Consultant.
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(b) License to Consultant Program Elements. Subject to the
provisions of Sections 13.1 and 13.3 below, Consultant hereby grants to Client a
non-exclusive, non-transferable (except as provided herein), royalty-free,
perpetual and irrevocable (except in the event of a termination of this
Agreement or the applicable Work Statement under Sections 7.1) license to use,
copy, modify, operate, and create derivative works of the Consultant Program
Elements as reasonably required for the use of the Deliverables to the extent
necessary to enable Client to (A) utilize, maintain and create Enhancements (as
defined in 6.2(b)) to the Deliverables (the license described in clause (A) only
is referred to as the "Elements Deliverable License" and such license shall
include the right to sublicense the Consultant Program Elements solely in
connection with the maintenance and use of the Deliverables and the creation,
maintenance, use and modification of Enhancements thereto); and (B) provided
that Client's exercise of such license with respect to the Consultant Program
Elements (excluding the Generic Program Elements) is not undertaken with any
competitor of Consultant, to develop, utilize and maintain the Permitted
Initiatives (the license described in clause (B) only is referred to as the
"Elements External License" and shall not include any right to sublicense the
Consultant Program Elements other than to a website hosting company to the
extent allowed under Section 6.4).
6.4 Restrictions; Sublicensing. Client shall limit use of and access to
the Preexisting Materials and Consultant Program Elements to such of Client's
employees, agents and subcontractors as are directly involved in the utilization
of, maintenance of and creation of Enhancements and/or the Deliverables and/or
the development, utilization and maintenance of the Permitted Initiatives and
who are bound to preserve the confidentiality thereof. Except as explicitly
provided herein, Client shall not disclose, distribute or resell to any third
party, including without limitation any competitor of Consultant, the
Preexisting Materials, Program Elements or any enhancements thereto or
derivative works thereof. Notwithstanding any provision to the contrary in this
Agreement, subject to the provisions of Sections 13.1 and 13.3 below, Client
shall have the right to (A) transfer any license granted to it hereunder to any
successor of Client's Healthcare Exchange internet business, provided that any
suchtransferee is bound to preserve the confidentiality thereof and further
provided that such transferred license shall be revocable to the extent it
exceeds Client's license rights in the event of a subsequent termination of this
Agreement under Sections 13.1 or 13.3, and (B) sublicense to any third party
website hosting company solely to the extent necessary for such company to
provide website hosting services to Client.
6.5 Solely for the purpose of enabling it to utilize the licenses granted
to it hereunder, and subject to all payments required hereunder and under the
applicable Work Statement and compliance with all of the other terms and
conditions of this Agreement, Consultant agrees to deliver one copy of the
Deliverables or any portion thereof written in a programming language employed
by computer programmers
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which must be translated into the language of a machine before it can be
executed.
6.6 To the extent that there is a good faith question with respect whether
a particular Deliverable or portion thereof is categorized as an Artistic
Element, Preexisting Material (Generic Material or otherwise), or Consultant
Program Element (Generic Program Element or otherwise), the parties agree to
cooperate in good faith to reach a mutually acceptable clarification consistent
with the terms of this Agreement.
6.7 Client further agrees that its Deliverables may be based on
Consultant's Confidential Information or Preexisting Materials and that the
delivery of Services shall not impair Consultant's right to make, prepare,
create, procure or market products or services now or in the future, whether or
not competitive with Client or its business.
6.8 Notwithstanding anything in this Agreement to the contrary, Consultant
and Client shall be free to use for any purpose the Residuals resulting from its
work on the Project. The term "Residuals" means information in intangible form,
which may be retained by persons performing or receiving the Services such as
ideas, concepts, know-how, techniques and which do not contain any Confidential
Information of the other party.
7. Indemnification.
7.1 In the event that any action is brought against Client based on a
claim that the Deliverables infringe any valid United States patent, copyright
or trade secret of a third party, Consultant shall indemnify, defend and hold
harmless Client and its officers, directors, employees, subcontractors, legal
counsel, accountants, stockholders, successors and assigns against such action
at Consultant's expense and pay all claims and expenses (including reasonable
attorneys' fees) and damages finally awarded in such action or settlement which
are attributable to such claim. Client agrees to promptly notify Consultant of
any such action; provided, however, that the failure to so notify Consultant
shall not relieve Consultant of its indemnification obligation except to the
extent Consultant is materially and adversely prejudiced by such failure to
notify. Consultant shall have sole control of the defense of any such action and
all negotiations for its settlement or compromise, provided that, where
Consultant reasonably determines that a settlement or compromise would be
significantly restrictive for Client, Consultant will seek Client's prior
written approval, which shall not be unreasonably withheld, before entering such
settlement or compromise. Client shall cooperate reasonably with Consultant in
the defense, settlement or compromise of any action described in this
subsection, and Consultant shall diligently pursue such defense, settlement or
compromise. Such cooperation shall be at Consultant's expense. In the event that
a final injunction is obtained against Client's use of the
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Deliverables, or if Consultant reasonably believes that Client's use of the
Deliverables could be so enjoined, or if in Consultant's opinion any Deliverable
is likely to become the subject of a successful claim of such infringement,
Consultant shall, at its option and expense, (i) procure for Client the right to
continue using the Deliverables as provided in this Agreement, (ii) replace or
modify the Deliverables so that they become non-infringing (so long as the
functionality of the Deliverables is essentially unchanged) or, in the event
neither of the previous two options can be effected by Consultant, (iii)
terminate the applicable Work Statement and the rights granted thereunder and
refund to Client the amount paid to Consultant for the Deliverables, plus in
each case any claims, expenses and damages as provided above. This Section 7.1
states Consultant's entire liability and Client's exclusive remedy for
infringement.
7.2 Notwithstanding the foregoing, Consultant shall not have any liability
to Client under this Section 7 to the extent that any infringement or claim
thereof is based upon (i) the combination, operation or use of a Deliverable in
combination with equipment or software not supplied or recommended by Consultant
hereunder where the Deliverable would not itself be infringing, (ii) compliance
with designs, specifications or instructions provided by Client (the "Client
Designs"), where, but for such compliance, the Deliverable would not be
infringing, (iii) use of a Deliverable in an application or environment for
which it was not designed or not contemplated under this Agreement, where, but
for such use, the Deliverable would not be infringing, or (iv) modifications of
a Deliverable by anyone other than Consultant where the unmodified version of
the Deliverable would not be infringing.
7.3 Except in the case of suits or actions arising under Sections 5, 6 or
7, neither party shall bring any suit or action arising out of breach of this
Agreement against the other more than two years after the breach or harm from
the breach has been discovered by management of the party bringing suit and no
such suit or action shall be brought by either party more than three years from
Client's final acceptance of the related Program.
7.4 In the event that an action is brought against Consultant based on a
claim that any Deliverable, Enhancement or Permitted Initiative infringes any
valid United States patent, copyright or trade secret of a third party, to the
extent that such infringement is a result of (A) Consultant's compliance with
Client Designs or (B) an Enhancement not developed by Consultant or (C) a
Permitted Initiative not developed by Consultant, Client shall indemnify, defend
and hold harmless Consultant and its officers, directors, employees, legal
counsel, accountants, stockholders, subcontractors, successors and assigns
against such action at Client's expense and pay all claims and expenses
(including reasonable attorneys' fees) and damages finally awarded in such
action or settlement which are attributable to such claim. Consultant agrees to
promptly notify Client of any such action; provided, however, that the failure
to so notify Client shall not relieve Client of its indemnification obligation
except to the
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extent Client is materially and adversely prejudiced by such failure to notify.
Client shall have sole control of the defense of any such action and all
negotiations for its settlement or compromise, provided that, where Client
reasonably determines that a settlement or compromise would be significantly
restrictive for Consultant, Client will seek Consultant's prior written
approval, which shall not be unreasonably withheld, before entering such
settlement or compromise. Consultant shall cooperate reasonably with Client in
the defense, settlement or compromise of any action described in this
subsection, and Client shall diligently pursue such defense, settlement or
compromise. In the event that a final injunction is obtained against
Consultant's provision of Services hereunder with respect to the Client Designs,
or if Client reasonably believes that Consultant's provision of Services
hereunder with respect to the Client Designs could be so enjoined, or if in
Client's opinion any Deliverable is likely to become the subject of a successful
claim of such infringement as a result of Consultant's compliance with Client
Designs, Client shall, at its option and expense, (i) procure for Consultant the
right to continue using the Client Designs in connection with its Services
hereunder, (ii) replace or modify the Client Designs so that they become
non-infringing or, in the event neither of the previous two options can be
reasonably effected by Client, (iii) terminate the applicable Work Statement and
the rights granted thereunder and pay Consultant an amount equal to the pro
rated amount of Services provided at such termination, less any amounts already
paid by Client for such Services, plus in each case any claims, expenses and
damages as provided above. This Section 7.4 states Client's entire liability and
Consultant's exclusive remedy for infringement.
7.5 THE FOREGOING INDEMNIFICATION PROVISIONS STATE THE ENTIRE LIABILITY OF
THE PARTIES WITH RESPECT TO INFRINGEMENT OR ALLEGED INFRINGEMENT OF PATENTS,
COPYRIGHTS, TRADEMARKS, TRADE SECRETS AND OTHER INTELLECTUAL OR PROPRIETARY
RIGHTS BY THE DELIVERABLES OR THEIR USE.
8. Warranties.
8.1 Consultant warrants that the Services performed under this Agreement
and all Work Statements will be performed in a professional and workmanlike
manner and that Consultant has the required skills and experience to perform the
Services set forth in this Agreement. Consultant also warrants the Deliverables
will be based upon the description of the Deliverables stated in that certain
Design Deliverables Binder dated October 29, 1999 and will conform to the
description of the Deliverables stated in the Work Statement. Consultant further
warrants that Consultant is the owner and otherwise has the right to use or
distribute the material and methodologies used in connection with providing the
Deliverables. Consultant will comply with all applicable federal, state and
local laws in the performance of its obligations under this Agreement.
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8.2 Consultant agrees to fix any deficiencies in any Deliverable which is
a software program or Artistic Element within the period following the Live Date
(as defined on the applicable Work Statement hereto) of such Deliverable set
forth on the related Work Statement (the "Warranty Period"), using the process
and definitions included on Appendix D hereto. With respect to any Deliverable
that is a software program or Artistic Element, Consultant shall have no
obligation to make corrections, repairs or replacements to such Deliverable
which result, in whole or in part, if the deficiency results from (i) errors
that relate solely to the third party software procured or provided by Client
which forms a part of a Deliverable, (ii) catastrophe, fault or negligence of
Client, (iii) improper or unauthorized use of the Deliverable, (iv) use of the
Deliverable in a manner for which they were not designed, including, without
limitation, use of the Deliverable in connection with computer hardware other
than as specified in the related Work Statement, (v) modifications of the
Deliverable by anyone other than Consultant or its employees or agents, or (vi)
causes external to the Deliverable such as, but not limited to, power failure or
electric power surges.
8.3 In the event the Deliverables include the delivery of software or code
by Consultant, Consultant further warrants that such Deliverables will be "Year
2000 Compliant" provided that (i) all products (for example, hardware, software
and firmware) procured or provided by Client and used with the Deliverables
properly exchange accurate date data with the Deliverables and are Year 2000
Compliant, (ii) all development tools procured or provided by Client and used by
Consultant are Year 2000 Compliant, (iii) the Deliverables are used in
accordance with any associated documentation provided by Consultant, and (iv)
Client has installed and is using the most current version (including without
limitation any fixes, patches, interim releases and updates) of the Deliverables
at the time noncompliance with the warranty is reported. Consultant warrants
that all software or documentation incorporated into the Deliverables and
furnished by a third party with whom Consultant has contracted directly
Consultant is Year 2000 Compliant. "Year 2000 Compliant" means that: (A) date
data from at least 1900 through 2101 will process without error or interruption
in any level of computer software developed by Consultant, including but not
limited to, microcode, firmware, system and application programs, files,
databases and computer services; (B) there will be no loss of any functionality
of the Deliverables with respect to the introduction, processing or output of
records containing dates falling on or after January 1, 2000; (C) the design of
the Deliverables shall accommodate, at a minimum, all of the following: (1) date
data century recognition, (2) calculations which accommodate same- and
multi-century formulas and date values, (3) input/output values that reflect the
century, and (4) correct processing of leap year dates (of which the year 2000
is one); (D) Deliverables delivered by Consultant will perform all date-related
operations accurately without human intervention, other than date data entry
that is part of the normal functions of the Deliverables; and (E) the
Deliverables will respond to two-digit date input in a way that resolves any
ambiguity as to century in a
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disclosed, defined and predetermined manner.
8.4 UNLESS OTHERWISE INCLUDED IN A WORK STATEMENT, THE FOREGOING
WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION, THOSE CONCERNING MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND NO REPRESENTATION OR STATEMENT NOT EXPRESSLY CONTAINED IN THIS
AGREEMENT AND ANY WORK STATEMENT WILL BE BINDING ON CONSULTANT AS A WARRANTY. IN
THE CASE OF BREACH OF THE FOREGOING WARRANTIES BY CONSULTANT, CLIENT WILL
OUTLINE WITH PARTICULARITY THE DEFECTS IN THE DELIVERABLES OR SERVICES AND
CONSULTANT WILL COOPERATE WITH CLIENT AND CORRECT THE DEFECTS WITHIN A TIME
PERIOD REASONABLY ACCEPTABLE TO CLIENT.
9. Acceptance. "Acceptance" shall mean that a Deliverable successfully meets the
acceptance criteria set forth in the applicable Work Statement. Any Deliverable
needing acceptance from Client will be deemed accepted if Client does not
respond within the period specified in the related Work Statement or if Client
uses the deliverable for commercial purposes prior to completing its formal
acceptance procedure.
10. Limitation of Liability. EXCEPT IN THE CASE OF A BREACH OF SECTIONS 5
(CONFIDENTIALITY) AND AS PROVIDED IN SECTION 7 (INDEMNIFICATION), OR AS
OTHERWISE SET FORTH IN THIS SECTION, IN NO CASE SHALL EITHER PARTY'S MAXIMUM
LIABILITY ARISING OUT OF THIS AGREEMENT, WHETHER BASED UPON WARRANTY, CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, EXCEED IN THE AGGREGATE THE ACTUAL
PAYMENTS RECEIVED BY CONSULTANT UNDER THE WORK STATEMENT TO WHICH THE CLAIM
RELATES. IN THE CASE OF A BREACH OF SECTION 6 (INTELLECTUAL PROPERTY RIGHTS), IN
NO CASE SHALL EITHER PARTY'S MAXIMUM LIABILITY ARISING OUT OF THIS AGREEMENT,
WHETHER BASED UPON WARRANTY, CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHERWISE, EXCEED IN THE AGGREGATE AN AMOUNT EQUALLING TWO TIMES THE ACTUAL
PAYMENTS RECEIVED BY CONSULTANT UNDER THE WORK STATEMENT TO WHICH THE CLAIM
RELATES. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, LOSS OF
OPPORTUNITIES, LOSS OF DATA, OR LOSS OF USE DAMAGES, ARISING OUT OF THIS
AGREEMENT OR ANY WORK STATEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
11. Publicity. Each party may (i) summarize generally in oral form the nature of
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the services performed under this Agreement and (ii) include the other party's
name and logo on its customer/service provider list(s), provided that no such
disclosure shall include either party's Confidential Information . Except as
permitted in the immediately preceding sentence or in a Work Statement, neither
party may use the other's name or logo in any marketing materials without such
party's prior consent.
12. Non-Solicitation. During the period of performance of Services by Consultant
hereunder and for 12 months thereafter, Client and Consultant each agree not to
solicit or induce any employee of the other who was an employee during such
period to terminate his or her employment with the other or to hire any employee
of the other who was an employee during such period without the prior written
approval of the employing company.
13. Termination.
13.1 Any Work Statement may be terminated by either party, by written
notice to the other party (the "Defaulting Party"), in the event of a material
breach by the Defaulting Party of any of its obligations under such Work
Statement and failure by the Defaulting Party to remedy such breach within
thirty (30) days after written notice of such breach is provided to the
Defaulting Party. In the event of such termination, neither party shall be
relieved of any of its obligations incurred prior to such termination and each
party shall have any and all rights and remedies available to it at law or in
equity. Upon the effective date of any valid termination pursuant to this
subsection, Client shall be entitled to the Deliverables or portions thereof
covered by the terminated Work Statement only to the extent such Deliverables or
portions thereof were paid for by Client as of the effective date of the
termination (for purposes of this subsection, the "Paid Deliverables") in their
then-current forms, "as is", without any warranty, which Paid Deliverables shall
constitute "works made for hire" for Client within the meaning of the Copyright
Act of 1976, as amended, and shall be the exclusive property of Client. To the
extent such Paid Deliverables incorporate Preexisting Materials or Program
Elements, Client shall have with respect to such Preexisting Materials and
Program Elements or portions thereof the Materials Deliverable License and the
Elements Deliverable License set forth under Sections 6.2(b) and 6.3(b), above.
To the extent such Paid Deliverables incorporate Preexisting Materials or
Program Elements, and provided that Client has paid to Consultant, in the
aggregate, at least 80% of the fees for Services pursuant to the terminated Work
Statement, Client shall have with respect to such Preexisting Materials and
Program Elements the Materials External License and the Elements External
License set forth under Sections 6.2(b) and 6.3(b), above.
13.2 This Agreement and all Work Statements (except any irrevocable
licenses granted hereunder) may be terminated, by either party, effective
immediately and without notice, in the event of (i) the dissolution, termination
of existence,
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liquidation or insolvency of the other party, (ii) the appointment of a
custodian or receiver for the other party, (iii) the institution by or against
the other party of any proceeding under the United States Bankruptcy Code or any
other foreign, federal or state bankruptcy, receivership, insolvency or other
similar law affecting the rights of creditors generally, or (iv) the making by
the other party of a composition of, or any assignment or trust mortgage for the
benefit of, creditors.
13.3 In the event that Client fails to pay in full, within 30 calendar
days after receipt, any invoice rendered by Consultant for payments due under
any Work Statement (other than an invoice subject to a good faith dispute over
fees which will be resolved in accordance with the Dispute Resolution Process
set forth on Appendix E attached hereto), and such failure is not cured within
10 business days after receipt of written notice thereof from Consultant,
Consultant shall have the right to terminate the applicable Work Statement and
all rights granted thereunder, except as otherwise set forth herein, effective
immediately upon delivery of written notice of termination to Client. Upon
termination of any Work Statement pursuant to this subsection, Client shall
promptly return to Consultant (or, at Consultant's option, destroy and certify
in writing to Consultant that it has destroyed) the original and all copies of
the Deliverables that are not "Paid Deliverables", as defined below, including
source code, archival copies, compilations, translations, partial copies,
updates and modifications, if any, and shall delete all copies of such
Deliverables from its computer libraries or storage facilities. Upon the
effective date of any termination by Consultant pursuant to this subsection,
Client shall be entitled to the Deliverables or portions thereof covered by the
terminated Work Statement only to the extent such Deliverables or portions
thereof were paid for by Client as of the effective date of the termination (for
purposes of this subsection, the "Paid Deliverables") in their then-current
forms, "as is", without any warranty, which Paid Deliverables shall constitute
"works made for hire" for Client within the meaning of the Copyright Act of
1976, as amended, and shall be the exclusive property of Client. To the extent
such Paid Deliverables incorporate or reasonably require the use of Preexisting
Materials or Program Elements, Client shall have with respect to such
Preexisting Materials and Program Elements or portions thereof the Materials
Deliverable License and the Elements Deliverable License set forth under
Sections 6.2(b) and 6.3(b), above. To the extent such Paid Deliverables
incorporate or reasonably require the use of Preexisting Materials or Program
Elements, and provided that Client has paid to Consultant, in the aggregate, at
least 80% of the fees for Services pursuant to the terminated Work Statement,
Client shall have with respect to such Preexisting Materials and Program
Elements the Materials External License and the Elements External License set
forth under Sections 6.2(b) and 6.3(b), above.
13.4 Work Statements under this Agreement may be terminated as provided in
Section 7 hereof.
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13.5 Sections 3, 5, 6, 7, 8, 10, 12, 13.1, 13.3 and 14 hereof and any
accrued rights to payment and remedies for breach of this Agreement shall
survive, in accordance with their terms, the completion of Consultant's Services
hereunder and the expiration or termination of this Agreement or any Work
Statement.
14. Remedies. Because a breach of any obligations set forth in Sections 5, 6,
12, 13.1 and 13.3 will irreparably harm either party and substantially diminish
the value of each party's proprietary rights in the Deliverables or its
Confidential Information, Client and Consultant agree that if either party
breaches any of its obligations thereunder, the other party shall, without
limiting its other rights or remedies, be entitled to equitable relief
(including, but not limited to, injunctive relief) to enforce its rights
thereunder, including without limitation protection of its proprietary rights.
The parties agree that a party need not invoke the procedures set forth on
Appendix E attached hereto in order to seek relief for a breach of any
obligations set forth in Sections 5, 6 and 12.
15. Force Majeure. In the event that either party is prevented from performing,
or is unable to perform, any of its obligations under this Agreement due to any
act of God, fire, casualty, flood, war, strike, lock out, failure of public
utilities, injunction or any act, exercise, assertion or requirement of any
governmental authority, epidemic, destruction of production facilities,
insurrection, inability to obtain labor, materials, equipment, transportation or
energy sufficient to meet needs, or any other cause beyond the reasonable
control of the party invoking this provision ("Force Majeure Event"), and if
such party shall have used reasonable efforts to avoid such occurrence and
minimize its duration and has given prompt written notice to the other party,
then the affected party's failure to perform shall be excused and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrence.
16. Taxes. The fees and other amounts payable pursuant to this Agreement are
exclusive of, and Client shall pay, all federal, state, local, municipal or
other sales, use, transfer, excise, property and other taxes and duties imposed
with respect to the delivery of the Services or any Deliverable and their
supplying to Client, except for taxes based on Consultant's net income.
17. Notices. Any notice or communication required or permitted under this
Agreement or any Work Statement shall be in writing and shall be deemed received
(i) on the date personally delivered, (ii) upon confirmed receipt if sent by
telecopier, (iii) the next business day after sending if sent by Federal Express
or any other next-day carrier service, or (iv) the third business day after
mailing via first-class mail, postage prepaid, to a party at the address
specified below or such other address as either party may from time to time
designate to the other:
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To Consultant: To Client:
Sapient Corporation Systems Consulting Company, Inc.
10 Exchange Place, 21st Floor 537 Congress Street, 5th Floor
Jersey City, NJ 07302 Portland, Maine 04101
Attention: Bill Herman Attention: CEO
Vice President
With a copy to:
Sapient Corporation Lucash, Gesmer & Updegrove, LLP
25 First Street 40 Broad Street
Cambridge, MA 02141 Boston, MA 02109
Attention: Deborah E. Gray Attention: William Contente
Vice President
and General Counsel
18. Disputes. Other than as provided in Section 14, any dispute or claim arising
out of or relating to this Agreement or any Work Statement shall be resolved in
accordance with the Dispute Resolution Process set forth on Appendix E attached
hereto.
19. Miscellaneous.
19.1 This Agreement and its Appendices and Work Statements constitute the
entire agreement between Consultant and Client with respect to the subject
matter hereof and supersede all prior agreements, promises, understandings and
negotiations, whether written or oral, regarding the subject matter hereof,
including any terms and conditions included on Client's purchase orders. This
Agreement and any Work Statement cannot be amended unless in writing and signed
by duly authorized representatives of each party.
19.2 In the event that any provision of this Agreement or any Work
Statement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the parties shall be construed and enforced as if the
Agreement or such Work Statement did not contain the particular provisions held
to be unenforceable and the unenforceable provisions shall be replaced by
mutually acceptable provisions which, being valid, legal and enforceable, come
closest to the intention of the parties underlying the invalid or unenforceable
provision.
19.3 Neither this Agreement, any Work Statement or any rights or licenses
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granted hereunder may be assigned, delegated or subcontracted by any party
without the written consent of the other party, except that (i) a party may
assign and transfer this Agreement and any Work Statement and its rights and
obligations hereunder and thereunder to any third party which succeeds to
substantially own all of its business and assets or assign or transfer any
rights to receive payments hereunder, (ii) Client may assign and transfer this
Agreement and any Work Statement and its rights and obligations hereunder and
thereunder to any company controlled by, controlling, or under common control
with Client, provided that such company is not a competitor of Consultant as to
the business currently conducted by Consultant as of the date of this Agreement,
(iii) Consultant may subcontract its obligations hereunder to any third party
service providers or wholly owned subsidiaries of Consultant provided that
Consultant remains primarily liable to Client hereunder and (iv) Client may
assign and transfer this Agreement and any Work Statement and its rights and
obligations hereunder and thereunder to any successor of Client's Healthcare
Exchange internet business.
19.4 This Agreement shall be interpreted and enforced in accordance with
the laws the state of Massachusetts without regard to the conflict of laws
provisions thereof.
19.5 The parties hereto are independent contractors. Nothing herein shall
be deemed to constitute either party as the representative, agent, partner or
joint venture of the other.
19.6 Each party has full power and authority to enter into and perform
this Agreement and the person signing this Agreement on behalf of each party
hereto has been properly authorized and empowered to enter into this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year indicated above.
SAPIENT CORPORATION
By: /s/ William Herman
-------------------------------
Name: William Herman
Title: Vice President
SYSTEMS CONSULTING COMPANY, INC.
By: /s/ Leigh Powell
-------------------------------
Name: Leigh Powell
Title: President & CEO
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APPENDICES
Appendix A - - Form of Work Statement
Appendix B - - Additional Terms and Conditions for Fixed Price Projects
Appendix C - - Additional Terms and Conditions for Time & Material Projects
Appendix D - - Additional Terms and Conditions for Website Development
Services
Appendix E - - Dispute Resolution Process
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APPENDIX A
to Master Professional Services Agreement
Form of Work Statement
This Work Statement No. ___ is entered into as of this ___ day of _________,
1999 by and between _______________ ("Client") and Sapient Corporation
("Consultant") and is deemed to be incorporated into that certain Master
Professional Services Agreement dated as of ____________, 1999 by and between
Client and Consultant (the "Master Agreement'). Any terms used herein but not
defined shall have the meaning ascribed to such term in the Master Agreement.
1. Name and Description of Project:
2. Description of Deliverables
[Attach Scope Matrix if Applicable]
3. List of Assumptions
This section defines the assumptions under which Consultant has based its
fees for the services being performed under this Work Statement. This is to
ensure there are no misunderstandings regarding the scope of the Project. Any
deviation from these assumptions, similar to any deviation in scope of the
Project, that effects the delivery date for the Deliverables or requires
Consultant to incur additional expenses in order to deliver the Deliverables on
the delivery date may be predicated upon an extension of the Project and a
change in the fees and/or timeline by Consultant pursuant to Section 1.4 and
Appendix B of the Master Agreement.
4. Documentation to be Produced by Consultant
Consultant will provide all technical documentation of code to be
delivered to Client following Final Acceptance of the _____________ [Name of the
software Deliverable] by Client.
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5. Key Personnel Assigned for Each Party
Consultant:
Client:
6. Project Schedule
7. Tasks To Be Completed By Client
8. Warranty Period.
9. Payment Schedule [Include this Section ONLY if a fixed price project]
The contract price for the Services to be performed by Consultant under this
Work Statement No. ___ is $_______________, which shall be paid on the following
schedule:
- ------------------------------------------------------
Milestone Amount Invoice
Date
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
ALTERNATIVE 9. Time and Material Rates [Include project personnel names and
daily billable rates]
All payments shall be sent to Consultant's lock box address at:
Sapient Corporation
P. O. Box 4886
Boston, MA 02212
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year indicated above.
Sapient Corporation
By: __________________
Print Name:
Title
Client: __________________
By: _________________
Print Name:
Title:
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Appendix B
to Master Professional Services Agreement
Additional Terms and Conditions for Fixed Price Work Statements
1. Extensions.
1.1 Consultant agrees that the Project is to be completed with the Work
Schedule included on Appendix A. If, however, a Project is extended due to any
act by Consultant, Client will not be charged for such extension and Consultant
will absorb the cost of the resources required during such extension and
Consultant will use its best efforts to rectify the situation that is causing
the extension as soon as possible.
1.2 In the event Consultant's performance under any Work Statement is
delayed because of any act or omission of Client or any third parties hired by
the Client to work on a Project (including, without limitation, Client's failure
to meet delivery dates of required Client assistance listed in a Work Statement,
to deliver any material to be provided by the Client when and as required, or to
perform any of its covenants or obligations thereunder, whether or not caused by
a Force Majeure Event), then for each day of extension caused by such delay,
Consultant shall be entitled to a one-day extension of the delivery dates set
forth in the Work Statement for Consultant's performance.
1.3 In addition, Client shall reimburse Consultant for any fees and
expenses incurred by Consultant as a result of such delay referred to in Section
1.2 of this Appendix B if the delay causes Consultant to extend its Services
past the final delivery date set forth in the Work Statement or requires
Consultant to add additional personnel to its team in order to meet the dates
set forth on the related Work Statement. Such fees will be reduced by 50% if the
delay, hindrance or interference is caused by a Force Majeure Event affecting
Client.
1.4 Notwithstanding the foregoing, if Client's resources or personnel on
any Project change significantly from the design phase to the development phase
or during the development phase, and Consultant reasonably believes that such
changes will result in an increase cost to Consultant or cause Consultant to
miss a Project milestone, Consultant may cause a Project extension and increase
the fees payable by Client for that Project based on Consultant's good faith
efforts to accurately estimate its additional costs and project timeline impact
caused by a change in the Client resources. Consultant shall notify Client
immediately if Consultant believes that any change to Client resources will
result in an extension under this Section or increase in the contract price and
Client will have the option to either proceed with its proposed change or not.
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APPENDIX C
to Master Professional Services Agreement
Additional Terms and Conditions for Time & Material Projects
1. Price. The fees and expenses included on this Work Statement are estimates
only. The final fees and expenses will be set forth on Consultant's final
invoice to Client. If Consultant reasonably anticipates the aggregate fees and
expenses to exceed the original estimate by more than 10%, then Consultant shall
seek the Client's approval and Consultant shall have the right to suspend work
without liability and with a day-for-day extension of any subsequent deadlines
until the Client shall have provided such approval or agreed upon a reduction in
scope of Services.
2. Records. Consultant will maintain complete and accurate records of the work
performed hereunder, the amounts invoiced and time worked. Such records will be
in accordance with standard accounting practices and will include time logs.
Client will have the right to inspect and audit Consultant's records at
Consultant's place of business during normal business hours at a mutually
acceptable time during each Project and for a period of one year thereafter.
Client agrees to give Consultant at least 15 business days prior written notice
of its intent to inspect Consultant's records. Consultant may not exercise this
inspection right more than two times each calendar year.
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APPENDIX D
to Master Professional Services Agreement
Additional Terms and Conditions for Website Development Projects
1. Upon Consultant's completion of its Services under a Work Statement that
relates to the creation or modification of Client's web site and continuing for
a period of two years, such web site shall contain a notice prepared by Client
and approved by Consultant, such approval not to be unreasonably withheld, that
credits Consultant as the developer of the web site.
2. Client shall obtain the releases, licenses, permits and other authorization
to use copyrighted materials, copyrighted software code, artwork or any other
property or rights belonging to third parties obtained by Client for use by
Consultant in performing the Services for Client. Consultant is not responsible
for the accuracy, completeness and proprietary information concerning Client
products that Client furnishes to Consultant.
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APPENDIX E
to Master Professional Services Agreement
Dispute Resolution Process
The following procedures shall be used to resolve any disputes, claims or
controversies ("disputes") between us as provided herein, except for disputes
involving Sections 5, 6 or 12 of this Agreement. If any of these provisions are
determined to be invalid or unenforceable, the remaining provisions shall remain
in effect and binding on the parties to the fullest extent permitted by law.
1. Discussion; Management. The parties shall first employ the full resources of
the Executive Committee to resolve all disputes expeditiously and informally.
The Executive Committee shall be composed of the following representatives of
the Client and Consultant:
Consultant: Bill Herman, Vice President
Josh Alwitt, Vice President
Client: Tim Curran, Vice President and General Manager, Imany.com
Terry Nicholson, Vice President and General Manager, SCC
In the event that such dispute cannot be resolved by the Executive Committee,
the parties shall each involve an independent executive officer of the
respective parties, each of whom shall review and discuss the dispute between
them and attempt to resolve it by agreement. If such dispute cannot be resolved
by the foregoing method within a reasonable period of time, the parties shall
resort to the mediation procedure set forth below.
2. Mediation
2.1 Either party may submit a dispute to mediation by providing written
notice to the other party. In the mediation process, the parties will try to
resolve their differences voluntarily with the aid of an impartial mediator, who
shall attempt to facilitate negotiations. The mediator shall be selected by
agreement of the parties. If the parties cannot otherwise agree on a mediator, a
mediator shall be designated by the American Arbitration Association or any
successor organization ("AAA") at the request of a party. Any mediator so
designated must be acceptable to all parties.
2.2 The mediation shall be conducted as specified by the mediator and
agreed upon by the parties. The parties agree to discuss their differences in
good faith and to attempt, with the assistance of the mediator, to reach an
amicable resolution of the dispute.
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2.3 The mediation shall be treated as a settlement discussion and
therefore shall be confidential. The mediator may not testify for either party
in any later proceeding relating to the dispute. No recording or transcript
shall be made of the mediation proceedings.
2.4 Each party shall bear its own costs in the mediation. The fees and
expenses of the mediator shall be shared equally by the parties.
3. Arbitration.
3.1 If a dispute has not been resolved within 30 days after the written
notice beginning the mediation process (or a longer period, if the parties agree
to extend the mediation), the mediation shall terminate and the dispute shall be
settled by arbitration. The arbitration shall be conducted in accordance with
the procedures in this Exhibit and the Arbitration Rules for Professional
Accounting and Related Disputes of the AAA ("AAA Rules"). In the event of a
conflict, the provisions of this Appendix E shall control.
3.2 The arbitration shall be conducted before a single arbitrator,
regardless of the size of the dispute, to be selected as provided in the AAA
Rules. Any issue concerning the extent to which any dispute is subject to
arbitration, or concerning the applicability, interpretation, or enforceability
of these procedures, including any contention that all or part of these
procedures are invalid or unenforceable, shall be governed by the Federal
Arbitration Act and resolved by the arbitrator. No potential arbitrator may
serve unless he or she has agreed in writing to abide and be bound by these
procedures.
3.3 Unless provided otherwise herein, the arbitrator may not award
non-monetary or equitable relief of any sort. They shall have no power to award
(a) damages inconsistent with this Agreement or (b) punitive damages or any
other damages not measured by the prevailing party's actual damages, and the
parties expressly waive their right to obtain such damages in arbitration or in
any other forum. In no event, even if any other portion of these provisions is
held to be invalid or unenforceable, shall the arbitrator have power to make an
award or impose a remedy that could not be made or imposed by a court deciding
the matter in the same jurisdiction.
3.4 No discovery shall be permitted in connection with the arbitration
unless it is expressly authorized by the arbitrator upon a showing of
substantial need by the party seeking discovery.
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3.5 All aspects of the arbitration shall be treated as confidential.
Neither the parties nor the arbitrator may disclose the existence, content or
results of the arbitration, except as necessary to comply with legal or
regulatory requirements. Before making any such disclosure, a party shall give
written notice to all other parties and shall afford such parties a reasonable
opportunity to protect their interests.
3.6 The result of the arbitration shall bind the parties, and judgment on
the arbitrator's award may be entered in any court having jurisdiction. Each
party shall bear its own costs of the arbitration. The fees and expenses of the
arbitrator shall be shared equally by the parties.
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Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 11, 2000 and to all references to our Firm included in or made
a part of this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 13, 2000
