SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995 Commission File No. 0-11521
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in charter)
Delaware 23-1701520
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
4 Country View Road
Malvern, Pennsylvania 19355
(Address of principal executive offices)
Registrant's telephone number, including area code: (610) 647-5930
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
6 1/4% Convertible Subordinated Debentures Due 2003
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing:
$257,425,273 at December 15, 1995
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
14,057,536 shares at December 15, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Definitive Proxy Statement to be delivered to shareholders in
connection with the Annual Meeting of Shareholders scheduled to be held on
February 23, 1996 is incorporated by reference to the extent provided in
Part III, Items 10-13.
TABLE OF CONTENTS
Page
Item Number and Caption Number
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
PART I
ITEM 1. BUSINESS.
Systems & Computer Technology Corporation ("SCT" or the "Company")
provides computing management services and administrative application software
in the higher education, local government, utilities, and
manufacturing/distribution markets.
The Company concentrates on meeting the current trend toward outsourcing
of administrative computing resources, allowing clients to improve the quality
and reliability of support services and reduce or contain costs. The Company
accomplishes this by focusing on specific vertical markets enabling it more
fully to understand client requirements and provide solutions which directly
address their needs. In addition, by providing both computing management
services and administrative application software, the Company makes available
to its clients the technology and the management tools necessary to manage
information resources efficiently and cost-effectively.
The Company was incorporated in Delaware in 1968.
BANNER[registerd trademark] and SCT[registerd trademark] are registered
trademarks of the Company and BANNERQuest[trademark], IA-Plus[trademark] and
ADAGE[trademark] are trademarks of the Company. All other trade names
referenced herein are the service marks, trademarks or registered trademarks
of their respective companies or organizations.
Markets
In fiscal year 1995, approximately 59% of the Company's revenues were
derived from the higher education market, approximately 22% were derived from
the local government market, approximately 16% were derived from the utility
market, and approximately 3% were derived from other markets. The Company's
foreign operations represented approximately 8% of the Company's fiscal year
1995 revenues.
Higher Education
The Company provides computing management services and application
software to higher education institutions. With extensive functional and
technical expertise in the software system needs of the higher education
market, SCT regularly develops new products to serve this marketplace.
Approximately 2,200 U.S. institutions of higher education, typically
those with enrollments greater than 1,000 students, represent the Company's
target market, of which approximately 1,400 are public institutions and the
other 800 are private. Many of these target customers are currently using
mainframe and minicomputer systems which are likely prospects for replacement,
as they are less cost effective and require a higher level of maintenance than
systems that the Company provides. The Company also targets institutions of
this nature in Canada and in other areas of the world. The Company serves
this market with a comprehensive set of its BANNER and IA-Plus application
software products. Approximately 500 of these institutions are potential
candidates for SCT's OnSite services.
Local Government
The computing management services and application software markets for
local government jurisdictions are highly fragmented, with many competitors,
including in-house computing departments of local governments, custom software
programmers and packaged application software companies. Local governments,
which are conservative in their decisions regarding capital expenditures and
long-term contracts, are influenced by the acceptance of a particular
company's product or service by other local governments.
The Company's target market consists of approximately 2,500 local
government entities. The Company serves this market with a comprehensive set
of its BANNER application software products. Approximately 1,000 of these
entities are potential candidates for SCT's OnSite services.
Utilities
The Company acquired an installed base of utility clients as a result of
acquisitions in July 1990 and March 1991. In December 1992, the Company
released its BANNER Customer Information System, an open systems RDBMS
application software package for the utility market. SCT's target utility
market includes approximately 1,000 water, gas and electric utilities serving
over 25,000 consumers.
Many of these target customers currently use custom-designed or
internally-developed software running on proprietary systems which are likely
prospects for replacement. In addition, many utilities use software systems
which run on open systems platforms, including ORACLE, for engineering
purposes, such as mapping, plant maintenance and computer-aided design.
Manufacturing/Distribution
The Company entered the Enterprise Resource Planning ("ERP") market
through its June 1, 1995 acquisition of Adage Systems International, Inc., now
SCT Manufacturing & Distribution Systems, Inc. The Company serves this
market, which is estimated at $3-$4 billion for calendar year 1996 and which
has proved to be receptive to client/server technology, with its newly
developed ADAGE product. This market essentially consists of two components:
discrete (such as metals, industrial equipment, electronics, automotive,
defense, aerospace) and process (such as chemicals, food and beverage,
petroleum, pharmaceutical, pulp and paper). SCT targets companies with over
$100 million in annual revenues. Worldwide, there are approximately 8,200
discrete and 8,400 process companies with such annual revenues.
Services and Products
The Company's revenues are derived from two primary sources: (i) OnSite
service contracts and (ii) software and hardware sales and services, which
include licensing, maintenance and enhancements and installation of the
Company's software products and the resale of software and hardware products
complementary to the Company's proprietary products.
OnSite Services
SCT provides OnSite services, a variety of computing management services
designed to assume total or partial control and responsibility of information
resources on a long-term or short-term basis. SCT provides management,
staffing and support with skilled information systems personnel and industry
specialists who are knowledgeable in both computer-based technologies and the
administrative aspects of its clients' activities. SCT personnel located at a
client's site become an integral part of the client's operations, working with
managers and users at all levels as a focal point for information systems
activity. SCT site personnel also draw upon SCT's staff of specialists to
address special issues and projects. SCT can manage, staff and support most
aspects of a client's information systems and operations, including data center
management and operations, short-term and long-range planning, user liaison
and functional consulting, technical support services, application and systems
software support, office automation, microcomputer maintenance, systems
integration, and telecommunications services and network integration.
Contracts for OnSite services may be either on a fixed price or time and
materials basis, and generally cover an initial period of five to ten years.
Fixed price contracts require the Company to perform specified services for a
fixed payment, generally subject to annual adjustments to reflect inflationary
cost increases. The Company negotiates the fee to be charged based on its
estimate of the total expenses to be incurred in providing the services. In
the event the Company's costs to perform an OnSite services contract become
greater than originally anticipated, the Company's profit on that contract
would be reduced; and in an extreme case, the Company could suffer a loss. As
many clients are restricted from incurring binding commitments which extend
beyond their current annual budgets or appropriations, contracts often include
a "fiscal funding" provision which provides for the reduction or termination
of services commensurate with reductions in a client's allocated funding. The
Company has not been impacted materially by early terminations or reductions
in service from the use of fiscal funding provisions.
Application Software
The Company develops and licenses standardized administrative application
software designed to serve the specialized needs of its higher education,
local government, utility, and manufacturing/distribution markets. The
Company also provides support services to its licensees, including
implementation, modification, user training, consulting and maintenance
services. Clients typically also purchase specified initial services, such as
installation, training and other client support activities. In addition to a
license of the application software, clients typically also enter into a
maintenance agreement with the Company, usually for terms ranging from one to
seven years, which entitles the client to service and support, regulatory
updates and functional and technical enhancements. The annual maintenance fee
generally ranges from 12% to 15% of the license fee, and generally increases
each year by up to 10% of the preceding year's maintenance fee.
BANNER. BANNER is a comprehensive series of administrative software
systems, combining a graphical user interface ("GUI"), rule-based
architecture, hardware flexibility, fourth generation language and ORACLE, the
relational database management system of Oracle Corporation. BANNER operates
on a variety of UNIX-based hardware platforms and supports client/server
computing on PCs, Macintoshes and host terminals simultaneously. Rule-based
architecture permits clients to adapt the software to their particular
business requirements without programming modifications.
The Company offers a multitude of BANNER systems to the higher education
market, including Student, Financial Aid, Finance, Human Resources,
Alumni/Development and Strategic Enrollment Management systems, EDI.Smart
electronic document management/delivery software, and information access
solutions such as voice response, kiosk gateway, and BANNERQuest. To the
local government market, the Company offers its BANNER Finance, Human
Resources, Courts Case Management, Real Property Tax, Occupational Tax &
License, Records Indexing and Cash Receipts systems. BANNER systems which the
Company offers to the utility market include Customer Information, Finance,
Human Resources, and the Inventory Management, Procurement, and Fuels
Management systems purchased from another company in December 1994.
The Company currently has an agreement with Oracle Corporation pursuant
to which the Company has the right to sublicense a limited use ORACLE system,
which enables the client to use ORACLE in connection with BANNER at a
significantly lower cost than a full-use ORACLE license. The Company's
results of operations would be adversely affected if ORACLE's market
acceptance declined or its customer base eroded. The agreement expires in
February 1999.
IA-Plus. Like BANNER, IA-Plus is a comprehensive series of application
software systems designed to meet the administrative computing needs of the
higher education market. The IA-Plus systems operate on large-scale IBM and
DEC computers using proprietary operating systems rather than in an open
systems environment.
The IA-Plus Series of application software consists of five administrative
application software systems geared for the higher education market. Each
system may be sold in its entirety or in modules, with the five systems
comprising a total of 16 modules. The voice response and kiosk gateway
information access solutions are also available with IA-Plus. On the IBM
mainframe platform, IA-Plus can utilize DB2, IBM's relational database
software product.
ADAGE. ADAGE is a newly developed Enterprise Resource Planning ("ERP")
system which combines multi-site functionality with client/server technology,
use of object technology and a state-of-the-art graphical user interface. The
ADAGE product is intended to address the sales, engineering, procurement,
manufacturing, logistics, quality assurance and finance functions for hybrid
manufacturing (discrete and process industries) and order
fulfillment/distribution disciplines. ADAGE is designed to enable large
multi-site, often multinational manufacturers to integrate critical business
functions across business units, providing greater visibility and control over
operations as well as enhanced planning and decision support. The flexibility
of the system is achieved through the use of state-of-the-art tools that
enable the user to build job-specific workflows which can include dynamic
messaging, Internet access, multimedia, electronic authorizations, desktop
integration and other productivity enhancing features that enable a user to
manage its business more proactively. ADAGE is currently written in the CA-
OpenIngres relational database management system.
Software Related Services. The Company's English subsidiary, SCT
International Limited, provides systems integration and services related to
implementations of the Company's utility product to the utility industry in
the United Kingdom. In July 1995, the Company established a Systems
Integration Division utilizing existing SCT sales and marketing resources
which will support the Company's software product divisions in North America.
The services offered by SCT International Limited provide and the services to
be offered by the newly formed Systems Integration Division would provide
clients with the opportunity to unite diverse technical components to more
effectively and efficiently solve their business problems through the
application of technology, customized software development and networks.
Product Development
SCT devotes substantial resources to product development in order to
address evolving clients' needs and provide new product offerings. The
product development staff is comprised of experts in various functional areas
including student-related matters, finance, fund accounting, human resources,
financial aid, alumni development, utilities, manufacturing processes and
court administration. Technical experts include specialists in systems
software and operating systems (including ORACLE and DB2). Product
development expenditures, including expenditures for software maintenance, for
the fiscal years ended September 30, 1993, 1994 and 1995 were approximately
$6.8 million, $8.8 million, and $12.9 million, respectively. After
capitalization, $6.1 million, $7.4 million and $9.5 million, respectively, of
these amounts were charged to operations as incurred. For the same fiscal
years, amortization of capitalized software costs amounted to approximately
$762,000, $889,000, and $871,000, respectively.
SCT currently has several projects in the development stage. BANNER Web
for Student, expected to be released during fiscal 1996, will enable students
to update and query their own information stored in the BANNER Student system
through the World Wide Web. Students will be able to access information about
their grades, schedules and transcripts; query the system about their account
balances and addresses; check the availability of courses, build a schedule
and register on line; and determine admission status. In addition, scheduled
for release in fiscal 1996 is an IA-Plus system operating in an RS 6000
downsized environment, a graphical user interface to IA-Plus and World Wide
Web access for IA-Plus.
For the manufacturing/distribution market, the Company is currently
investing in a new version of the ADAGE software which the Company expects to
release in fiscal 1996. This new release will include enhanced functionality
and will be designed to operate on the ORACLE and Microsoft SQL/Server
databases in addition to CA-OpenIngres. The new release will also be designed
to operate under Microsoft NT and Windows 95.
Scheduled for release during fiscal 1996 for the government market are
new BANNER applications for Remote Access (will allow users to connect to the
BANNER Records Indexing system through World Wide Web) and Personal Property
Tax. Currently under development for the utilities market are new BANNER
applications for Electronic Work Queue, Customer Contact, and accrual-based
Finance, and BANNERQuest Customer Information System, as well as enhanced
versions of the Inventory Management, Procurement and Fuels Management systems
providing additional functionality and a graphical user interface.
The Company's ability to sustain growth depends in part on the timely
development or acquisition of successful new products and improvements to
existing products. However, software development is a complex and creative
process that can be difficult to accurately schedule and predict.
Sales and Marketing
The Company attracts clients primarily through the following means: its
own sales force of approximately 90 direct salespersons and support staff, of
which approximately 75 are engaged in selling licenses for the Company's
application software products and approximately 15 are engaged in selling the
Company's OnSite services; referrals from existing clients and others; and
active participation in industry conferences, trade shows and seminars within
its markets. In addition, the Manufacturing & Distribution Systems division
utilizes distributors in certain international markets. The Company engages
in cooperative marketing with other hardware and software suppliers, and
receives referrals as a result of these cooperative marketing arrangements.
The Company also advertises in trade journals and publications.
The sales cycle for OnSite services and software licenses typically
ranges from six to twenty-four months and involves product demonstrations and
site visits. Contracts are often offered by means of a public bidding
procedure, certain of which require the Company to appear at public hearings.
Although the Company's divisions have separate sales organizations, each
focuses on cross selling opportunities to market the products and services of
the other. Each sales group is comprised of regional managers, industry
specialists and corporate and client based technical specialists.
Competition
In each of its markets, SCT has various competitors, which differ
depending upon the characteristics of the customer including its size,
geographic location, and computing environment. Many established competitors
have greater marketing, technical and financial resources than the Company,
and there can be no assurance that SCT will be able to continue to compete
successfully with existing or new competitors.
In the OnSite services business, the Company competes with several large
providers of systems integration and consulting services, including IBM,
Electronic Data Systems, Business Records Corporation and Andersen Consulting.
The Company also competes with in-house information management and resource
development staffs at potential customer sites. Competitive factors in the
computing management business include the technical expertise of on-site and
support personnel, functional and industry-specific expertise, availability
and quality of hardware and software support, experience, reputation and
price.
In the application software business, the Company competes with companies
offering custom software and with other providers of packaged application
software. Competition also varies by vertical market. Within the higher
education market, the Company's principal competitor is Datatel. At the
higher end of the higher education market, the Company competes with
PeopleSoft and Oracle for Human Resources and Finance Systems. PeopleSoft
also has announced that it is developing a Student System for the higher
education market. The local government and utility markets are highly
fragmented and competition varies significantly within these markets depending
upon the customers' computing platforms. Competitors in the local government
market include PeopleSoft, Oracle, Bitech, and Ross Systems and in the
utilities market include Severn Trent, ORCOM, IBM and Andersen Consulting.
The manufacturing/distribution market is highly competitive and competitors
include SAP, Baan, Datalogix, Oracle, Systems Software Associates, Ross
Systems and qad Systems. Competitive factors in all the software markets
served by the Company include price/performance, technology, functionality,
portability, software support, and the level of market acceptance of the
competitor's products.
Backlog
At September 30, 1995, the revenues expected to be received by SCT under
OnSite services contracts, which are based on proposed budgeted amounts in
those contracts, and under software development and licensing agreements,
including enhancements, maintenance contracts, support services, and software
implementation, modification and training, amount to approximately $375
million as compared to approximately $320 million at September 30, 1994 and
extend through June 30, 2005. Of the $375 million, approximately $105 million
is expected to be recognized in fiscal 1996. Approximately $278 million of
the $375 million applies to OnSite services contracts. These figures include,
in connection with OnSite services contracts, any guaranteed minimum price
increases provided in the contracts.
SCT is unable to predict the impact, if any, on its future revenues that
may result from reductions in the budgets of educational institutions and
government jurisdictions. Any such reductions could impact new contracts as
well as existing contracts. Certain educational institutions and government
jurisdictions cannot contractually commit beyond the fiscal year for which
their budgets have been approved. For this reason, their contracts with SCT
usually contain a "fiscal funding" clause which provides that if there is a
reduction in the computing services budget, the level of SCT services will be
reduced accordingly, or terminated in certain circumstances. If there is a
substantial reduction in the budget, SCT may, at its option, terminate the
contract or reduce service levels consistent with funding. The backlog at
September 30, 1995 includes approximately $152 million of OnSite services
contracts with fiscal funding clauses.
Backlog is not necessarily indicative of actual revenues for any
succeeding period.
Proprietary Software Protection
SCT's software is proprietary and SCT relies primarily upon copyright,
trade secret laws and internal non-disclosure safeguards generally
incorporated in its software license agreements to protect its software.
There can be no assurance that such protection will be effective. In
addition, other holders of patents and copyrights may assert claims of
infringement with respect to the Company's products. To date, SCT is not
aware of any material breach in the security of its products or any claims of
infringement asserted against it.
Employees
As of September 30, 1995, the Company employed approximately 1,900
employees, of which approximately 450 are resident in Malvern, Pennsylvania,
with the remainder resident primarily at the Company's various offices and
client sites. None of the Company's employees are subject to collective
bargaining agreements, except for approximately 15 employees at one client
site. The Company considers its relationship with its employees to be
satisfactory.
When the Company receives a new OnSite services contract, it generally
recruits most of the existing employees of the client's data processing
department to become SCT employees. However, the Company also supplies some
senior level personnel from its own group of trained specialists, which
requires the Company to identify employees willing to relocate to the client's
area.
Executive Officers of SCT
The Executive Officers of SCT are as follows:
Position and Office
Name Age Currently Held
- --------------------- --- ---------------------------------------------
Michael J. Emmi 53 Chairman of the Board, President and Chief
Executive Officer; Director
Michael D. Chamberlain 51 Senior Vice President; President, SCT Software
Group; Director
Eric Haskell 49 Senior Vice President, Finance and
Administration, Treasurer, and Chief Financial
Officer
Richard A. Blumenthal 47 Senior Vice President, General Counsel and
Secretary
Susan R. Sheridan 42 Vice President, Human Resources and
Organizational Strategy
Officers are appointed by the Board of Directors, typically at its first
meeting after the annual meeting of shareholders for such terms as the Board
of Directors shall determine or until their successors have been elected and
have qualified.
Business Experience During the Past Five Years of Each Officer
Michael J. Emmi has served as Chairman of the Board, President and Chief
Executive Officer of the Company since May 1985. Prior thereto, he held
various senior management positions with General Electric Information Services
Company, a unit of General Electric Company. He is also a director of
National Media Corporation and CompuCom Systems, Inc.
Michael D. Chamberlain has served as a director of the Company since July
1989. He has served as Senior Vice President of the Company since July 1990,
and prior thereto, as Vice President since September 1986. He has been
President of the SCT Software Group since May, 1994 and prior thereto served
as President of the Software and Technology Services Division, the Company's
higher education software division.
Eric Haskell has served as Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer of the Company since July 1990, and
prior thereto, as Vice President, Finance and Administration, Treasurer and
Chief Financial Officer since March 1989.
Richard A. Blumenthal has served as Senior Vice President, General Counsel and
Secretary of the Company since July 1990, and prior thereto, as Vice
President, General Counsel and Secretary since July 1987. He has been General
Counsel of the Company since December 1985.
Susan R. Sheridan has served as Vice President, Human Resources and
Organizational Strategy since May, 1994. Prior thereto, she served in various
marketing positions in the Company's Software and Technology Services division
since May, 1984, including Vice President, Marketing for that division since
July 1990.
ITEM 2. PROPERTIES.
SCT occupies three adjacent buildings in the Great Valley Corporate
Center in Malvern, Pennsylvania. The Company's corporate offices are located
in an approximately 47,000 square-foot facility owned by the Company, which
also includes employees of other divisions of the Company. The Company also
owns an approximately 56,200 square-foot facility and leases an approximately
48,900 square-foot facility under a lease which expires on August 15, 2005.
The Company owns and occupies an approximately 45,000 square-foot
facility in Rochester, New York and three buildings aggregating about 13,500
square feet in Baton Rouge, Louisiana. The Company leases an approximately
28,600 square-foot facility in Lexington, Kentucky under a lease which expires
on March 31, 1999. The Company owns a new approximately 60,000 square-foot
facility in Columbia, South Carolina, of which about 40,000 square feet is
occupied and fitted. SCT leases sales offices in Irvine, California, San
Diego, California, Reston, Virginia, and Dallas, Texas and also leases office
space in Basingstoke, England and Manchester, England.
SCT believes that its facilities are adequate for its present business
needs.
ITEM 3. LEGAL PROCEEDINGS.
On October 4, 1995, John J. Wallace filed a purported class action
lawsuit in the United States District Court for the Eastern District of
Pennsylvania against the Company, Michael J. Emmi, Chairman of the Board,
President and Chief Executive Officer of the Company, Michael D. Chamberlain,
Senior Vice President and a director of the Company and Eric Haskell, Senior
Vice President, Finance and Administration, Treasurer and Chief Financial
Officer of the Company. The plaintiff filed an amended complaint on November
28, 1995. The amended complaint alleges that the defendants violated sections
10 (b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder by making misstatements and omissions regarding the
Company's financial performance in the second half of fiscal year 1995. The
class period alleged is from June 5, 1995 through October 2, 1995. The
amended complaint seeks damages in unspecified amounts as well as equitable
relief. Management believes the amended complaint is without merit and
intends to contest the allegations vigorously. While management, based on its
investigation to date, believes that resolution of this action will not have a
materially adverse effect on the Company's consolidated financial position,
the ultimate outcome of this matter cannot be presently determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
SCT's Common Stock is traded over the counter under the Nasdaq
symbol "SCTC." The following table sets forth the high and low sale prices on
the Nasdaq National Market for the specified quarter.
Period Year ended September 30, 1995
-----------------------------
High Low
-----------------------------
1st Quarter 21 16 3/4
2nd Quarter 21 1/4 15 7/8
3rd Quarter 21 5/8 15 3/4
4th Quarter 29 5/8 19 5/8
-----------------------------
Year ended September 30, 1994
-----------------------------
High Low
-----------------------------
1st Quarter 18 1/2 12 3/8
2nd Quarter 23 7/8 17 1/4
3rd Quarter 21 3/4 13 7/8
4th Quarter 18 3/4 13 3/4
-----------------------------
The approximate number of stockholders of record of SCT's Common Stock as of
September 30, 1995 was 559.
SCT has not paid any dividends for more than the last three fiscal years. The
Company's revolving credit agreement prohibits the Company
from declaring or paying any dividends other than stock dividends.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Selected Financial Data
Year Ended September 30,
(in thousands except per share data)
------------------------------------------------
1995* 1994 1993 1992* 1991
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $176,148 $148,214 $120,168 $90,883 $65,366
------------------------------------------------
Income (Loss) Before Income Taxes
and Extraordinary Credit 10,316 17,794 11,223 (1,647) 5,159
------------------------------------------------
Provision for Income Taxes 7,258 6,148 4,511 803 2,167
------------------------------------------------
Income (Loss) Before Extraordinary Credit 3,058 11,646 6,712 (2,450) 2,992
------------------------------------------------
Extraordinary Credit: Net Operating
Loss Carryforwards 0 0 2,901 180 1,744
------------------------------------------------
Net Income (Loss) 3,058 11,646 9,613 (2,270) 4,736
------------------------------------------------
Primary Income (Loss) per Share
Before Extraordinary Credit 0.22 0.86 0.53 (0.21) 0.24
------------------------------------------------
Fully Diluted Income per Share
Before Extraordinary Credit 0.21 0.83 0.51 -- --
------------------------------------------------
Primary Net Income (Loss) per Share 0.22 0.86 0.75 (0.19) 0.38
------------------------------------------------
Fully Diluted Net Income per Share 0.21 0.83 0.74 -- --
------------------------------------------------
Primary Average Equivalent Shares Outstanding 14,030 13,517 12,780 11,848 12,506
------------------------------------------------
Fully Diluted Average Equivalent Shares
Outstanding 14,399 15,818 13,196 -- --
------------------------------------------------
Working Capital 63,555 59,239 50,432 20,159 25,849
------------------------------------------------
Total Assets 150,983 128,809 110,082 72,487 51,325
------------------------------------------------
Long-Term Debt 31,790 34,500 34,500 12,610 2,260
------------------------------------------------
Stockholders' Equity 85,565 65,481 51,282 40,674 41,664
------------------------------------------------
*Includes charge of $8,700 and $7,693 for purchased research and development in the years ended
September 30, 1995 and 1992, respectively.
Results without the charge for purchased research and development would have been:
1995 1992
----------------
Income before extraordinary credit $11,758 $3,628
Fully diluted income per share before extraordinary credit $ 0.80 $ 0.29
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The purpose of this section is to give interpretive guidance to the reader of
the financial statements. For specific policies and breakdowns, refer to the
consolidated financial statements and disclosures.
Overview
Systems & Computer Technology Corporation derives revenue from OnSite services
contracts and software and hardware sales and services. Software and hardware
sales and services includes (i) licensing, (ii) maintenance and enhancements
and (iii) installation of the Company's software products, as well as the
resale of software and hardware products complementary to the Company's
proprietary products. The Company's client/server software applications enable
higher education institutions, local government jurisdictions, public and
private utilities and manufacturing and distribution enterprises to better
manage their administrative functions such as accounting and finance, customer
services, and production scheduling. Strategic acquisitions in recent years
have added to the Company's revenues and growth opportunities. In June 1995,
the Company acquired Adage Systems International, Inc. (Adage), which provides
client/server applications for manufacturing and distribution operations. In
June 1992, the Company acquired a supplier of administrative software to the
higher education market. In 1991 and 1990, the Company acquired businesses
which provide administrative and financial software to government
jurisdictions and not-for-profit organizations, as well as customer
information and billing software to utilities.
Contract fees from OnSite services are typically based on multi-year
contracts ranging from five to 10 years and provide a recurring revenue stream
throughout the term of the contract. During the first several years of a
typical OnSite services contract, services are performed and expenses are
incurred by the Company at a greater rate than in the later years of the
contract. Billings usually remain constant during the term of the contract and,
in some cases, when a contract term is extended, the billing period is also
extended over the new life of the contract. Revenue is recognized as work is
performed; therefore, revenues usually exceed billings in the early years of
the contract. The resulting excess is reflected on the Company's Consolidated
Balance Sheet as unbilled accounts receivable. As a contract proceeds, services
are performed and expenses are incurred at a lesser rate, resulting in billings
exceeding revenue recognized, which causes a decrease in the unbilled accounts
receivable.
Results of Operations
The following table sets forth: (a) income statement items as a percentage of
total revenues and (b) for revenues, the percentage change for each item from
the prior year.
% Change from
% of Total Revenues Prior Year
Year Ended September 30,
---------------------------------------
1995 1994 1993 1995 1994
---------------------------------------
Revenues:
OnSite services 38% 43% 45% 5% 19%
Software and hardware
sales and services 41% 36% 33% 37% 32%
Maintenance and enhancements 20% 20% 22% 16% 16%
Interest and other revenue 1% 1% 0% 67% 174%
Total 100% 100% 100% 19% 23%
Expenses:
Cost of services, sales
and maintenance and
enhancements 63% 62% 64%
Selling, general and
administrative 25% 24% 26%
Charge for purchased
research and development 5% 0% 0%
Interest expense 2% 2% 1%
Income before
income taxes and
extraordinary credit 6% 12% 9%
---------------------------------------
The following table sets forth the gross profit for each of the following
revenue categories as a percentage of revenue for each such category and the
total gross profit as a percentage of total revenue (excluding interest and
other revenue). The Company does not separately present the cost of
maintenance and enhancements revenue as it is impracticable to separate such
cost from the cost of software and hardware sales and services.
Year Ended September 30,
------------------------
1995 1994 1993
------------------------
Gross Profit:
OnSite services 22% 22% 21%
Software and hardware sales
and services and maintenance
and enhancements 45% 50% 48%
Total 36% 38% 36%
------------------------
Revenues: Growth in OnSite services revenues is impacted by large contract
signings. The five percent increase in fiscal year 1995 was the result of
several new agreements, including a five-year agreement with Continental
Cablevision, Inc., which commenced in January 1995 and expanded throughout the
year. This contract represents SCT's initial entry into the cable industry.
The 19% increase in fiscal year 1994 was due primarily to a full year's
revenues from a 10-year contract with the University of Medicine and Dentistry
of New Jersey, which commenced in July 1993, as well as two additional
contracts signed during the year. Contract renewal rates, as a percentage of
annual revenue from contracts available for renewal, for the fiscal years
1995, 1994, and 1993, were 97%, 89%, and 100%, respectively. Contracts
available for renewal in a particular period include contracts with expiration
dates within the period, as well as contracts renewed during that period which
have expiration dates in a later period.
Software and hardware sales and services revenues have increased in each
period due to a continued demand for BANNER products, acquisitions and an
increased focus on the global marketplace. The 37% and 32% increases in fiscal
years 1995 and 1994, respectively, are attributable to increases in BANNER
related revenues to U.S. and international utilities and a continued demand
for BANNER products and related services in the global higher education
market.
The 16% increases in maintenance and enhancements revenues in fiscal years
1995 and 1994 are the result of continued high annual renewal rates and a
growing installed base of clients primarily in the higher education market.
Gross Profit: The decrease in total gross profit as a percentage of total
revenue (excluding interest and other revenue) from 38% to 36% for fiscal year
1995 resulted from a change in revenue mix. The percentage of software
services revenues to the international utilities market included in software
and hardware sales and services revenues increased relative to license fees
during the period. The Company is increasing its focus on software services
revenues, which may result in a decreased profit margin versus a revenue mix
with a higher percentage of license fees. The cost of software and hardware
sales and services may also increase as a result of the Company's increased
expenditures in the utility business to build a more stable and robust product
to serve a broader range of customers.
The increase in total gross profit as a percentage of total revenue
(excluding interest and other revenue) from 36% for fiscal year 1993 to 38%
for fiscal year 1994 is volume, mix, and operating leverage related. The
percentage of license fees included in software and hardware sales and
services revenues increased during the year compared to the prior year,
resulting in the mix improvement. In addition, there were revenue increases in
the fiscal year 1994 compared to the prior year which exceeded increases in
costs.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses decreased as a percentage of revenues in fiscal year
1994 from 26% to 24% due to continued cost control and increased revenues.
Adage Acquisition: In June 1995, the Company acquired Adage for
consideration of one million shares of common stock valued at approximately
$10.9 million. Adage offers a newly developed enterprise resource planning
system to multinational users in the manufacturing and distribution
industries. In conjunction with the acquisition, the Company incurred a charge
of $8.7 million for in-process research and development. Included in this
amount are the fair values of Adage products under development which had not
reached technological feasibility at the time of acquisition. These products
will be part of a 1996 release of ADAGE which is designed to operate on Oracle
and Microsoft SQL/Server databases in addition to the currently supported CA-
OpenIngres database. The anticipated costs of completing these functional
enhancements are not expected to have a material impact on the Company's
liquidity, capital resources or results of operations.
Income Taxes: The fiscal year 1995 provision for income taxes does not
reflect the customary relationship between income and tax expense principally
due to the write-off of purchased research and development, which is not
deductible for tax purposes. The fiscal year 1995 effective tax rate would
have been 38% without the write-off of purchased research and development. The
rate was further affected by the expiration of the research and development
tax credit as of June 30, 1995. The purchased research and development write-
off has an impact on both the state effective tax rate and the relationship
between income and the effect of the research and development tax credit.
Foreign Operations: The Company's foreign operations represented
approximately eight percent of the total fiscal year 1995 revenues. Product
licensing is denominated in U.S. dollars and services are denominated in
either U.S. dollars or the local currency where services are performed. At
September 30, 1995, the Company does not have a significant exposure to
currency deviations.
Seasonality: Certain factors have resulted in quarterly fluctuations in
operating results, including variability of software license fee revenues,
seasonal patterns of capital spending by clients, the timing and receipt of
orders, competition, pricing, new product introductions by the Company or its
competitors, levels of market acceptance for new products, and general
economic and political conditions. While the Company has historically
generated a greater portion of license fees in total revenue in the last two
fiscal quarters, the non-seasonal factors cited above may have a greater
effect than seasonality on the Company's results of operations. The 1995
fourth quarter results were less than expected as a result of several factors.
These factors included a slippage of software license fees during the quarter
and greater-than-expected expenditures related to building a sales force in
the new manufacturing and distribution business and higher product development
costs in the utility business.
Liquidity, Capital Resources and Financial Position
The Company's cash and short-term investments balance was $15.3 million and
$30.5 million at September 30, 1995 and 1994, respectively. The short-term
investment portfolio is classified as available-for-sale in accordance with
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
available cash and short-term investments balances are derived from continuing
operations and the September 1993 convertible debenture offering. Uses of cash
during the year ended September 30, 1995 included spending on new product
development, new facility construction, and investment in the new
manufacturing and distribution business infrastructure.
The increase in accounts receivable at September 30, 1995 is due to
increases in revenues and the timing of billings on the Company's software
services contracts and software licenses. The increase in prepaid expenses and
other receivables is the result of prepayments of income taxes. Estimated
income taxes were paid throughout the year based on the fiscal 1995 estimated
income. Actual operating results in the fourth quarter were less than budgeted
amounts which resulted in prepayments at the end of the year. The Company's
working capital was $63.6 million at September 30, 1995 and $59.2 million at
September 30, 1994.
Property and equipment at September 30, 1995 increased over September 30,
1994 balances as the result of construction of a new office building in
Columbia, SC and improvements to an office building, adjacent to the Company's
corporate headquarters in Malvern, PA, which was purchased in the fourth
quarter of fiscal year 1994.
The Company has outstanding $31.3 million of convertible subordinated
debentures bearing interest at 6 1/4% and maturing on September 1, 2003. The
debentures are convertible into common stock of the Company any time prior to
redemption or maturity at a conversion price of $15 per share. During the
fiscal year 1995, $3.2 million of the debentures were converted into 215,000
shares of common stock of the Company. The debentures are redeemable at any
time after September 10, 1996 at prices decreasing from 104.2% of the
principal amount at September 1, 1996, to par on September 1, 2002.
The Company has a $20 million senior revolving credit facility, available
for general corporate purposes, which expires in June 1996 with optional
annual extensions. At September 30, 1995, there were no borrowings
outstanding. As long as borrowings are outstanding and as a condition
precedent to new borrowings, the Company must comply with certain covenants,
and the Company is prohibited from paying any dividends other than stock
dividends. See Note F to Consolidated Financial Statements.
The Company believes that its cash and cash equivalents, short-term
investments, and borrowing arrangements, together with net cash provided by
operations, should satisfy its needs for the foreseeable future.
Primary common shares and equivalents used in the income per share
calculation increased as a result of employee stock option exercises during
the years ending September 30, 1995 and 1994 and, at September 30, 1995, by
shares issued for the Adage acquisition. Equivalent shares used in the fully
diluted income per share calculation increased at September 30, 1994,
primarily as a result of the inclusion of the increased number of shares that
would be outstanding assuming the conversion of the 6 1/4% convertible
subordinated debentures. Fully diluted equivalent shares decreased at
September 30, 1995 versus 1994 as a result of the anti-dilutive effect of the
aforementioned debentures at September 30, 1995.
Contingencies: A purported class action complaint was filed against the
Company and certain of its officers and directors on October 4, 1995. The
complaint alleges violations of certain disclosure and related provisions of
the Federal Securities Laws. The complaint seeks damages in unspecified
amounts as well as equitable relief. Management believes the complaint is
without merit and intends to contest the allegations vigorously. While
management of the Company, based on its investigation to date, believes that
resolution of this action will not have a materially adverse effect on the
Company's consolidated financial position, the ultimate outcome of this matter
cannot presently be determined.
Numerous factors could affect the Company's future operating results,
including general economic conditions, market acceptance of the Company's new
and existing products, the timing of contract signings and renewals, and
competitive pressures. Future revenue growth and operating results are in part
dependent upon increased license fee revenue and related services from the
Company's operations.
The Company's ability to sustain growth depends in part on the timely
development or acquisition of successful new and updated products. The Company
is investing in the development of new products and in improvements to
existing products; however, software development is a complex and creative
process that can be difficult to accurately schedule and predict. The Company
believes it has the resources to continue to compete effectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated Balance Sheets
September 30,
---------------------------
Assets 1995 1994
---------------------------
Current Assets
Cash and short-term investments $ 15,312,000 $ 30,537,000
Receivables, including $46,746,000 and
$34,640,000 of earned revenues in excess of
billings, net of allowance for doubtful
accounts of $1,003,000 and $1,228,000 70,270,000 52,406,000
Prepaid expenses and other receivables 9,994,000 5,124,000
------------ ------------
Total Current Assets 95,576,000 88,067,000
Property and Equipment--at cost, net of
accumulated depreciation 28,899,000 20,002,000
Capitalized Computer Software Costs, net of
accumulated amortization of $6,105,000
and $5,234,000 5,532,000 3,003,000
Cost in Excess of Fair Value of Net Assets
Acquired, net of accumulated amortization
of $1,741,000 and $1,284,000 8,754,000 6,812,000
Covenants-Not-To-Compete, net of accumulated
amortization of $4,350,000 and $3,259,000 1,721,000 2,541,000
Other Assets and Deferred Charges 10,501,000 8,384,000
------------ ------------
Total Assets $150,983,000 $128,809,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 5,234,000 $ 3,660,000
Current portion of long-term debt 100,000 0
Income taxes payable 167,000 985,000
Accrued expenses 12,065,000 10,097,000
Deferred revenue 14,455,000 14,086,000
------------ ------------
Total Current Liabilities 32,021,000 28,828,000
------------ ------------
Long-Term Debt, net of current portion 31,790,000 34,500,000
Deferred Taxes 1,607,000 0
------------ ------------
Total Liabilities 65,418,000 63,328,000
------------ ------------
Stockholders' Equity
Preferred stock, par value $.10 per share--
authorized 3,000,000 shares, none issued
Common stock, par value $.01 per share--
authorized 24,000,000 shares, issued
15,159,804 and 13,581,235 shares 152,000 136,000
Capital in excess of par value 58,442,000 40,869,000
Retained earnings 30,568,000 27,510,000
------------ ------------
89,162,000 68,515,000
Less:
Held in treasury, 1,150,941 common shares--
at cost (2,959,000) (2,959,000)
Unearned compensation (28,000) (75,000)
Notes receivable from stockholders (610,000) 0
------------ ------------
85,565,000 65,481,000
------------ ------------
Total Liabilities and Stockholders' Equity $150,983,000 $128,809,000
============ ============
See notes to consolidated financial statements.
Consolidated Statements of Operations
Year Ended September 30,
------------------------------------------
Revenues 1995 1994 1993
------------------------------------------
OnSite services $ 66,904,000 $ 63,979,000 $ 53,685,000
Software and hardware sales
and services 72,007,000 52,712,000 39,979,000
Maintenance and enhancements 35,145,000 30,270,000 26,046,000
Interest and other revenue 2,092,000 1,253,000 458,000
------------------------------------------
176,148,000 148,214,000 120,168,000
------------------------------------------
Expenses
Cost of OnSite services 51,927,000 50,095,000 42,403,000
Cost of software and hardware
sales and services and
maintenance and enhancements 58,763,000 41,661,000 34,354,000
Selling, general and
administrative 43,746,000 36,144,000 31,172,000
Charge for purchased research
and development 8,700,000 0 0
Interest expense 2,696,000 2,520,000 1,016,000
------------------------------------------
165,832,000 130,420,000 108,945,000
------------------------------------------
Income before income taxes and
extraordinary credit 10,316,000 17,794,000 11,223,000
Provision for income taxes 7,258,000 6,148,000 4,511,000
------------------------------------------
Income before extraordinary credit 3,058,000 11,646,000 6,712,000
Extraordinary credit:
Utilization of net operating
loss carryforwards 0 0 2,901,000
------------------------------------------
Net income $ 3,058,000 $ 11,646,000 $ 9,613,000
==========================================
Per common share:
Income before extraordinary credit
Primary $ 0.22 $ 0.86 $ 0.53
Fully diluted $ 0.21 $ 0.83 $ 0.51
Net income
Primary $ 0.22 $ 0.86 $ 0.75
Fully diluted $ 0.21 $ 0.83 $ 0.74
Common shares and equivalents
outstanding
Primary 14,029,700 13,517,146 12,780,223
Fully diluted 14,399,182 15,817,862 13,195,672
------------------------------------------
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Year Ended September 30,
------------------------------------------
Operating Activities 1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
Net income $ 3,058,000 $ 11,646,000 $ 9,613,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Charge for purchased research and development 8,700,000 0 0
Depreciation and amortization 8,942,000 7,376,000 6,197,000
Provision for doubtful accounts 508,000 570,000 923,000
Compensation earned 47,000 128,000 336,000
Deferred tax provision 1,073,000 (161,000) 0
Changes in operating assets and liabilities:
(Increase) in receivables (17,887,000) (13,095,000) (10,929,000)
(Increase) decrease in other current assets, principally
prepaid expenses (4,409,000) 205,000 (141,000)
Increase (decrease) in accounts payable 1,407,000 646,000 (162,000)
(Decrease) increase in income taxes payable (820,000) 1,941,000 (222,000)
Increase in other accrued expenses and liabilities 1,750,000 1,772,000 1,076,000
(Decrease) increase in deferred revenue (129,000) 1,170,000 4,405,000
Changes in other operating assets and deferred charges (963,000) (1,993,000) (1,514,000)
------------------------------------------
Net Cash Provided by Operating Activities 1,277,000 10,205,000 9,582,000
------------------------------------------
Investing Activities
Purchase of property and equipment (12,897,000) (9,167,000) (3,752,000)
Capitalized computer software costs (3,384,000) (1,447,000) (705,000)
Proceeds from reduction in key man life insurance 0 0 143,000
Proceeds from the sale or maturity of investments available-for-sale 20,829,000 0 0
Purchase of investments available-for-sale (11,687,000) 0 0
(Increase) in short-term investments 0 (22,852,000) 0
(Increase) in notes receivable from stockholders (610,000) 0 0
Purchase of subsidiary assets, net of cash acquired (1,374,000) 0 (1,009,000)
-------------------------------------------
Net Cash (Used In) Investing Activities (9,123,000) (33,466,000) (5,323,000)
-------------------------------------------
Financing Activities
Principal payments on long-term debt (305,000) 0 (17,710,000)
Proceeds from long-term debt 0 0 38,015,000
Proceeds from exercise of stock options 2,068,000 1,424,000 659,000
------------------------------------------
Net Cash Provided by Financing Activities 1,763,000 1,424,000 20,964,000
------------------------------------------
(Decrease) increase in cash and cash equivalents (6,083,000) (21,837,000) 25,223,000
------------------------------------------
Cash and cash equivalents at beginning of year 7,685,000 29,522,000 4,299,000
------------------------------------------
Cash and cash equivalents at end of year $ 1,602,000 $ 7,685,000 $ 29,522,000
==========================================
Supplemental Information
Noncash investing and financing activities:
Conversion of subordinated debentures for common stock $ 3,225,000 $ 0 $ 0
Purchase of subsidiary assets--noncash portions of cost $ 11,949,000 $ 0 $ 0
See notes to consolidated financial statements.
</TALBE>
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Unearned
Compensation
and Notes Total
Common Capital in Receivable Stock-
Stock Excess of Retained Treasury from holders'
Par Value Par Value Earnings Stock Stockholders Equity
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992 $131,000 $37,790,000 $ 6,251,000 $(2,959,000) $(539,000) $40,674,000
-----------------------------------------------------------------------------------
Stock issued under stock
option plans, 160,303 shares 2,000 657,000 659,000
-----------------------------------------------------------------------------------
Earned restricted stock compensation 336,000 336,000
-----------------------------------------------------------------------------------
Net income, year ended September 30, 1993 9,613,000 9,613,000
-----------------------------------------------------------------------------------
Balance at September 30, 1993 133,000 38,447,000 15,864,000 (2,959,000) (203,000) 51,282,000
===================================================================================
Stock issued under stock option plans,
including tax benefits, 294,588 shares 3,000 2,422,000 2,425,000
-----------------------------------------------------------------------------------
Stock exchanged under restricted stock
purchase plans, (1,187) shares 0
-----------------------------------------------------------------------------------
Earned restricted stock compensation 128,000 128,000
-----------------------------------------------------------------------------------
Net income, year ended September 30, 1994 11,646,000 11,646,000
-----------------------------------------------------------------------------------
Balance at September 30, 1994 136,000 40,869,000 27,510,000 (2,959,000) (75,000) 65,481,000
===================================================================================
Stock issued under stock option plans,
including tax benefits, 363,569 shares 4,000 3,482,000 3,486,000
-----------------------------------------------------------------------------------
Earned restricted stock compensation 47,000 47,000
-----------------------------------------------------------------------------------
Issuance of stock for acquisition,
1,000,000 shares 10,000 10,868,000 10,878,000
-----------------------------------------------------------------------------------
Conversion of 6 1/4% convertible
subordinated debentures, 215,000 shares 2,000 3,223,000 3,225,000
-----------------------------------------------------------------------------------
Notes receivable from stockholders (610,000) (610,000)
-----------------------------------------------------------------------------------
Net income, year ended September 30, 1995 3,058,000 3,058,000
===================================================================================
Balance at September 30, 1995 $152,000 $58,442,000 $30,568,000 $(2,959,000) $(638,000) $85,565,000
===================================================================================
See notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
Note A--Significant Accounting Policies
Consolidation Policy: The accompanying consolidated financial statements
include the accounts of Systems & Computer Technology Corporation and its
subsidiaries. Intercompany items have been eliminated in consolidation.
Revenue Recognition: The Company provides computing management
services, consisting of OnSite services, and the licensing and maintenance
of client/server applications software, for the higher education,
government, utilities and manufacturing/distribution, and
cable/telecommunications markets. Certain contracts provide for
reimbursement of expenses, which are classified as a reduction of operating
expenses in the accompanying financial statements.
During the first several years of a typical OnSite services contract,
services are performed and expenses are incurred by the Company at a
greater rate than in the later years of the contract. Since billings
usually remain constant during the term of the contract, and revenue is
recognized as work is performed, revenues usually exceed billings in the
early years of the contract. The resulting excess is reflected on the
Company's Consolidated Balance Sheets as unbilled accounts receivable. As a
contract proceeds, services are performed and expenses are incurred at a
diminishing rate, resulting in billings exceeding revenue recognized, which
causes a decrease in the unbilled accounts receivable balance. Ninety-nine
percent of these unbilled receivables at September 30, 1995 will be billed
within the normal twelve month business cycle, although additional unbilled
receivables will continue to build based on the terms of the contracts.
These contracts require estimates of periodic revenue earned and costs to
be incurred to deliver products or services and are subject to revision as
work progresses. Revisions to the estimates are reflected in operations in
the period in which facts requiring those revisions become known.
Certain of the Company's OnSite services contracts are subject to
"fiscal funding" clauses which provide that, in the event of budgetary
constraints, the client is entitled to reduce the level of services to be
provided by the Company with a corresponding reduction in the fee to be
paid by the client or, in certain circumstances, to terminate the services
altogether. Revenues are recognized under such contracts only when the
likelihood of cancellation is considered by the Company to be remote.
The Company requires delivery of software and a substantial payment by
the customer within normal trade terms prior to revenue recognition.
Customers may take an extended period of time to train personnel and
transfer their administrative functions to the software that they have
licensed from the Company. Payment terms for the remaining amounts
generally coincide with planned installations and the implementation
process. The Company's policy is to charge interest on or discount unbilled
accounts receivable not expected to be billed within one year, which were
approximately $1,541,000 and $674,000 at September 30, 1995 and 1994,
respectively. The Company classifies such receivables as current assets
consistent with its business cycle.
The Company has "bundled" contracts which include both OnSite management
services and software licenses. Because licensing of the software is not
dependent on continuation of the OnSite management services portion of the
contract, the software revenue is recognized upon delivery. The remainder
of the contract revenue is recorded consistent with other OnSite management
service contracts.
Fees for maintenance agreements, in conjunction with product licenses,
are recognized ratably over the term of the agreement and the software
services revenue is recognized as services are provided. The Company does
not separately present the cost of maintenance and enhancements revenues as
it is impracticable to separate such cost from the cost of software and
hardware sales and services.
Property and Equipment: Equipment is depreciated over its estimated
useful life, for periods ranging from three to ten years, using the
straight-line method. Buildings and related improvements are depreciated
using the straight-line method, for periods not to exceed 30 years.
Capitalized Computer Software Costs: The Company capitalizes direct
costs associated with the development of software for resale. Amortization
of such capitalized costs is the greater of the amount computed using (a)
the ratio that current gross revenues for a product bear to the total of
current and anticipated future gross revenues of that product or (b) the
straight-line method over the remaining estimated economic life of the
product, including the period being reported on. Amortization begins when
the product is available for general release to customers.
Income per Share: Primary income per share is computed using the
weighted average number of common shares outstanding, plus, to the extent
dilutive, common stock equivalents. Fully diluted income per share is based
on an increased number of shares that would be outstanding assuming the
exercise of stock options when the Company's stock price at the end of the
period is higher than the average stock price within the respective period,
plus to the extent dilutive, the increased number of shares that would be
outstanding, assuming conversion of the 6 1/4% convertible subordinated
debentures. Net income used in the calculation of fully diluted income per
share is adjusted for interest expense (net of tax) on the convertible
subordinated debentures. The fully diluted income per share calculation for
the year ended September 30, 1995, did not include the anti-dilutive effect
of the convertible subordinated debentures.
Cost in Excess of Fair Value of Net Assets Acquired: This amount is
associated with companies acquired. It is amortized over periods ranging
between 15 and 20 years using the straight-line method. The Company
periodically reviews the cost in excess of fair value of net assets acquired
to assess recoverability by comparing the carrying value to the undiscounted
future cash flows of the related assets. An impairment would be recognized in
operating results if a permanent diminution in value were to occur.
Covenants-Not-To-Compete: These amounts are amortized using the
straight-line method over 60 months, their contractual lives, from their
respective acquisition dates.
Note B--Cash and Short-Term Investments
Cash Equivalents: Cash equivalents are defined as short-term highly
liquid investments with a maturity of three months or less at the date of
purchase.
Short-Term Investments: Effective October 1, 1994, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (FAS
115). In accordance with the provisions of FAS 115, the Company has
classified marketable equity securities and debt securities as available-
for-sale.
Securities held as available-for-sale consist of certificates of
deposit, repurchase agreements, commercial paper, U.S.
Treasury securities, municipal securities, collateralized
mortgage obligations, and corporate obligations. The available-for-sale
portfolio represents highly liquid investments available for current
operations and, accordingly, is classified as short-term investments.
Available-for-sale securities are stated at approximate market value.
September 30,
--------------------------
1995 1994
--------------------------
Cash and cash equivalents $ 1,602,000 $ 7,685,000
Short-term investments,
including accrued interest
of $230,000 and
$209,000, respectively 13,710,000 22,852,000
--------------------------
Cash and short-term
investments $15,312,000 $30,537,000
==========================
The contractual maturities held at September 30, 1995 are:
Due in one year or less $ 5,500,000
Due after one year through
three years 7,980,000
------------
$13,480,000
============
The following is a summary of available-for-sale securities at September
30, 1995:
U.S. Treasury securities
and obligations of U.S.
government agencies $ 9,497,000
Corporate debt securities 3,983,000
------------
$13,480,000
============
During the fiscal year ended September 30, 1995, the gross realized gains
on sales of available-for-sale securities totaled $86,000 and gross
realized losses on sales totaled $52,000.
Note C--Acquisitions
In June 1995, the Company acquired Adage Systems International, Inc.
(Adage), including all existing Adage software, technology and operations
for consideration of one million shares of common stock valued at
approximately $10.9 million. Such shares are not registered and cannot be
sold immediately; as a result, the valuation reflects a discount from the
fair market value of the underlying shares.
Adage offers a newly developed enterprise resource planning system to
multinational users in the manufacturing and distribution industries. Under
the terms of the purchase agreement, the Company may be required to pay
additional consideration in either additional shares (up to 1.5 million
shares) of common stock or a combination of additional shares of common
stock and cash, in the event that the market price of the common stock
approximately five years after the closing is lower than a base price. The
base price may not be lower than $15 or higher than $50, and will be
determined pursuant to a formula tied to the pretax profits of Adage during
the five-year period commencing October 1, 1995. Certain future payments
would result in an adjustment to the purchase price. In conjunction with
the acquisition, which was accounted for as a purchase, the Company
recorded a charge to operations of $8.7 million for in-process research and
development at the time of the acquisition. In addition, the Company
charged approximately $1.4 million to the cost of the acquisition for
incremental costs including professional fees and other costs directly
related to the acquisition. The cost in excess of fair value of net assets
acquired is being amortized over 15 years. The purchase price was allocated
as follows:
Purchased software $ 2,800,000
Purchased research and development(a) 8,700,000
Cost in excess of fair value of assets acquired 2,435,000
Deferred taxes (1,039,000)
Net liabilities assumed (596,000)
-----------
Total purchase price $12,300,000
===========
(a) Purchased research and development, charged to expense at date of
purchase, represents the estimated fair value of specifically identified
projects under development which did not meet the applicable accounting
criteria for capitalization.
In December 1994, the Company acquired the IntelliSource Software
Group, a division of the privately-held Management Analysis Company.
IntelliSource Software Group products serve the utility market. The Company
will pay a purchase price of $1.2 million over a four-year period. Under
the terms of the purchase agreement, the Company may be required to make
additional payments contingent upon the performance of the IntelliSource
Software Group over a five-year period.
The proforma effect of these acquisitions on operations would be
immaterial.
Note D--Property and Equipment
September 30,
--------------------------
1995 1994
--------------------------
Land $ 1,316,000 $ 1,316,000
Buildings 14,656,000 10,610,000
Computer equipment 11,829,000 8,947,000
Other equipment, furniture,
fixtures and building
improvements 16,314,000 11,761,000
--------------------------
44,115,000 32,634,000
Less accumulated
depreciation 15,216,000 12,632,000
--------------------------
$28,899,000 $20,002,000
==========================
Depreciation expense for the years ended September 30, 1995, 1994 and 1993
was $3,495,000, $2,656,000 and $2,081,000, respectively.
Note E--Other Assets and Deferred Charges
September 30,
-------------------------
1995 1994
-------------------------
Deferred costs and sales
commissions related to
OnSite services contracts
in progress(a)(b) $ 2,284,000 $2,732,000
Purchased software(b)(c) 5,657,000 3,147,000
Deferred debt issuance
expenses(b)(d) 1,162,000 1,507,000
Other 1,398,000 998,000
--------------------------
$10,501,000 $8,384,000
==========================
(a)Being amortized over the remaining term of the OnSite service contract.
(b)Shown net of accumulated amortization.
(c)Includes software received as part of business acquisitions.
(d)Being amortized over the term of the related debt.
Note F--Long-Term Debt
September 30,
--------------------------
1995 1994
--------------------------
6 1/4% convertible
subordinated debentures,
due 2003 $31,275,000 $34,500,000
Promissory note, net of
interest of $185,000 615,000 0
--------------------------
Total long-term debt 31,890,000 34,500,000
Less current portion 100,000 $0
--------------------------
Long-term debt, net of
current portion $31,790,000 $34,500,000
==========================
Aggregate maturities, including interest, during the next five fiscal years
are $100,000, $200,000, $250,000, $250,000 and $0.
In September 1993, the Company issued $34.5 million of convertible
subordinated debentures bearing interest at 6 1/4% and maturing on
September 1, 2003. The debentures are convertible into common stock of the
Company at any time prior to redemption or maturity at a conversion price
of $15 per share, subject to change as defined in the Trust Indenture.
During the fiscal year ended September 30, 1995, $3,225,000 of the
convertible subordinated debentures were converted into 215,000 shares of
common stock of the Company. The debentures are redeemable at any time
after September 10, 1996 at prices decreasing from 104.2 percent of the
principal amount at September 1, 1996, to par on September 1, 2002. The
fair value of the convertible subordinated debentures at September 30, 1995
was approximately $48,000,000.
The Company has a $20,000,000 senior revolving credit agreement which
terminates in June 1996 with optional annual renewals. There were no
borrowings outstanding at September 30, 1995 or 1994. The interest rate under
the agreement is based on one of three formulae--one tied to the prime rate of
the lender, one at a rate offered by the bank and another tied to the London
Interbank Offered Rate (LIBOR). The weighted average interest rate on
borrowings outstanding during 1993 was 5.93%. Initially there was a 3/8%
commitment fee on the unused funds that are available for borrowing under the
agreement. This rate was reduced to 5/16% in June 1995. The Company has the
right to permanently terminate the unused portion of the revolving commitment.
As long as there are borrowings outstanding, and as a condition precedent to
new borrowings, the Company must comply with certain covenants established in
the agreement. Under the covenants, the Company is required to maintain certain
financial ratios and other financial conditions. In addition, the Company may
not pay dividends (other than dividends payable in common stock) or acquire any
of its capital stock outstanding.
The Company signed a promissory note on December 7, 1994, in connection
with the acquisition of the IntelliSource Software Group, with a face
amount of $800,000 and a fair value of $615,000. The note payments commence
on the first anniversary date and continue on each of the following three
anniversaries until the note is paid in full. Interest will be accreted over
the life of the note.
Interest paid on long-term debt during the years ended September 30,
1995, 1994, and 1993 was $2,093,000, $2,235,000 and $963,000, respectively.
Note G--Benefit Plans
Stock Option Plans: The Company's 1994 Long-Term Incentive Plan
provides for the issuance of stock options, stock appreciation rights,
restricted stock and other long-term performance awards. At September 30,
1995 only stock options have been issued pursuant to the plan.
The Company has stock option plans for the benefit of its key employees
and non-employee directors that provide for the grant of options to
purchase the Company's common stock at not less than the fair market value
on the date of grant.
As of September 30, 1995 and 1994, respectively, options for 1,304,177
and 1,143,667 shares were exercisable. Outstanding options as of September
30, 1995 are exercisable at an average price of $13.43 per share and expire
on various dates through the year 2005. As of September 30, 1995, 1,299,196
shares of common stock were reserved for future grants under the stock
option plans.
Transactions under the previously stated option plans follow:
September 30,
---------------------------
1995 1994
---------------------------
Options outstanding,
beginning of year 2,599,000 1,731,000
Granted 530,000 1,193,000
Exercised (364,000) (295,000)
Cancelled or expired (169,000) (30,000)
---------------------------
Options outstanding,
end of year 2,596,000 2,599,000
===========================
Options were exercised in 1995 and 1994 at price ranges between
$2.63-$16.38 and $2.63-$7.38, respectively.
Employee Stock Ownership Plan: The Company has a noncontributory
Employee Stock Ownership Plan (ESOP) covering eligible employees. The ESOP
provides for the Employee Stock Ownership Trust (ESOT) to distribute shares
of the Company's common stock as retirement and/or other benefits to the
participants. The Company discontinued its contributions to the ESOT
subsequent to the 1986 plan year. In accordance with the terms of the ESOP,
the total amounts then allocated to the accounts of the participants
immediately vested. As of September 30, 1995 there were 1,088,321 shares
held by the ESOT.
Restricted Stock Plans: The Company had an Employees' Restricted Stock
Purchase Plan, which has been terminated, pursuant to which shares of the
Company's common stock were sold to key employees at 40% of the fair market
value of unrestricted shares on the date of sale. The shares sold are
restricted, and may not be sold, transferred, or assigned other than by an
exchange with the Company for a number of shares of common stock not so
restricted, to be determined by a formula. The formula reduces the number
of unrestricted shares to be exchanged to give effect to the 60% reduction
from fair market value of shares not so restricted. Certain of the shares
sold are subject to the Company's option to repurchase a fixed percentage
of the shares during a specified period at the employee's purchase price
plus 10% a year from the date of purchase in the event of certain
terminations of employment. As of September 30, 1995, there were 81,002
restricted shares sold but not exchanged for unrestricted shares.
The Company has a 1985 Restricted Stock Incentive Plan, which expired on
June 30, 1995. Under the plan, shares were awarded to key persons and are
restricted with the effect that, for the term of the restrictions, the
recipient may not sell, assign, transfer or otherwise hypothecate any of
the shares. Restricted stock awards under the 1985 plan vest to the
recipients over a number of years, in equal annual installments as
determined by the Compensation Committee of the Board of Directors, and are
recorded at the fair market value of the shares on the date of the award as
unearned compensation. The unearned compensation is charged to operations
ratably over the vesting period. Under the plan, 605,000 shares were
issued.
Savings Plan: The Company also provides a defined contribution 401(k) plan
to substantially all its employees whereby the Company may make matching
contributions equal to a percentage of the contribution made by participants.
One half of the Company's contributions are used to buy shares of the Company's
common stock. Expenses under this plan for the years ended September 30, 1995,
1994 and 1993 were $1,432,000, $1,061,000 and $822,000, respectively.
Note H--Income Taxes
The components of the provision for federal and state income taxes are as
follows:
Liability Liability Deferred
Method Method Method
Year ended September 30,
----------------------------------------
1995 1994 1993
----------------------------------------
State $1,974,000 $1,628,000 $1,401,000
Federal 5,284,000 4,520,000 3,110,000
----------------------------------------
$7,258,000 $6,148,000 $4,511,000
========================================
A reconciliation of the provision for income taxes to the federal statutory
rate follows:
Year ended September 30,
-------------------------
1995 1994 1993
-------------------------
Expected federal tax rate 35.0% 35.0% 34.0%
Adjustments due to:
Effect of state income tax 12.4% 6.0% 8.0%
Purchased research and
development 29.5% -- --
Reversal of valuation
allowance -- (2.2)% --
Research and development
tax credit (7.3)% (4.7)% (2.0)%
Other 0.8% 0.4% --
-------------------------
70.4% 34.5% 40.0%
=========================
The fiscal year 1995 provision for income taxes does not reflect the
customary relationship between income and tax expense principally due to
the write-off of purchased research and development, which is not
deductible for tax purposes. The effective tax rate would have been 38%
without the write-off of purchased research and development. The rate was
further affected by the expiration of the research and development tax
credit as of June 30, 1995. The purchased research and development write-
off has an impact on both the state effective tax rate and the relationship
between income and the effect of the research and development tax credit.
Significant components of the provision for income taxes for the year
ended September 30, 1995 are:
Current $6,185,000
Deferred 1,073,000
-----------
$7,258,000
The provision for income taxes for the years ended September 30, 1994 and
1993 relates primarily to current income taxes payable. The reversal of the
valuation allowance in fiscal year 1994 relates primarily to utilization of
research and development and minimum tax credits generated in prior years.
The Company has no valuation allowance for deferred tax assets at September
30, 1995 and 1994.
Income taxes paid during fiscal years ended September 30, 1995, 1994 and
1993 were $9,921,000, $3,903,000 and $2,146,000, respectively.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FAS 109), as of October 1, 1993. For fiscal
year 1993, the Company accounted for income taxes under the provisions of
APB 11. Adoption of FAS 109 was immaterial to the consolidated financial
statements and no cumulative adjustment was required. Deferred income taxes
for fiscal year 1995 reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes.
The tax effects of the temporary differences that give rise to the
significant portions of the deferred tax assets and liabilities as of
September 30, 1995 are as follows:
September 30,
--------------------------
1995 1994
--------------------------
Deferred tax assets:
Purchased research and
development (1992 acquisition) $ 2,365,000 $2,538,000
Purchased software -- 462,000
Accrued expenses and reserves 1,001,000 1,203,000
Change in tax accounting method -- 134,000
Other 46,000 137,000
--------------------------
Total deferred tax asset 3,412,000 4,474,000
Deferred tax liabilities:
Depreciation and amortization (1,216,000) (2,067,000)
Software capitalization, net (2,176,000) (1,171,000)
Prepaids (501,000) (368,000)
Purchased software (412,000) --
Other (714,000) (707,000)
---------------------------
Total deferred tax liability (5,019,000) (4,313,000)
---------------------------
Net deferred tax (liability) asset $(1,607,000) $ 161,000
===========================
Note I--Commitments and Other Items
Product development expenditures, including software maintenance
expenditures, for the years ended September 30, 1995, 1994, and 1993, were
approximately $12,856,000, $8,834,000 and $6,825,000, respectively. After
capitalization (Note A) these amounts were approximately $9,472,000,
$7,387,000 and $6,120,000, respectively, and were charged to operations as
incurred. For the same years, amortization of capitalized software costs
amounted to $871,000, $889,000 and $762,000, respectively.
Warrants to purchase 250,000 shares of common stock at $4.38 per share
(fair market value at date of issuance) were issued in July 1990, of which
warrants to purchase 28,350 shares remained outstanding at September 30,
1995. The warrants expire June 30, 1996.
Rent expense for the years ended September 30, 1995, 1994, and 1993 was
$2,043,000, $1,995,000 and $1,542,000, respectively. Aggregate rentals
payable under significant non-cancelable lease agreements with initial
terms of one year or more at September 30, 1995, are as follows:
---------------------------------
Fiscal year Amount
---------------------------------
1996 $1,798,000
1997 1,556,000
1998 1,469,000
1999 1,172,000
2000 865,000
Thereafter 2,401,000
-----------
$9,261,000
------------------------------
Note J--Legal Matters
A purported class action complaint was filed against the Company and
certain of its officers and directors on October 4, 1995. The complaint
alleges violations of certain disclosure and related provisions of the
Federal Securities Laws. The complaint seeks damages in unspecified amounts
as well as equitable relief. Management believes the complaint is without
merit and intends to contest the allegations vigorously. While management
of the Company, based on its investigation to date, believes that
resolution of this action will not have a materially adverse effect on the
Company's consolidated financial position, the ultimate outcome of this
matter cannot presently be determined.
Note K--Quarterly Results of Operations (Unaudited)
The following is a summary of the quarterly results of operations for the
years ended September 30, 1995 and 1994 (in thousands except per share
data):
<TABLE>
<CAPTION>
Three Months Ended
December 31, March 31, June 30, September 30,
-----------------------------------------------------------------------------
1994 1993 1995 1994 1995* 1994 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $39,199 $32,393 $43,191 $37,490 $46,705 $37,446 $47,053 $40,885
-----------------------------------------------------------------------------
Gross profits 14,630 11,309 15,025 14,049 17,219 13,386 16,492 16,461
-----------------------------------------------------------------------------
Income (loss) before income taxes 4,606 2,981 5,188 4,275 (2,188) 4,471 2,710 6,067
-----------------------------------------------------------------------------
Provision for income taxes 1,635 1,014 1,939 1,453 2,475 1,565 1,209 2,116
-----------------------------------------------------------------------------
Net income (loss) $ 2,971 $ 1,967 $ 3,249 $ 2,822 $(4,663) $ 2,906 $ 1,501 $ 3,951
-----------------------------------------------------------------------------
Primary net income (loss) per share $ 0.22 $ 0.15 $ 0.24 $ 0.21 $ (0.35) $ 0.22 $ 0.11 $ 0.29
-----------------------------------------------------------------------------
Fully diluted net income (loss) per share $ 0.21 $ 0.15 $ 0.23 $ 0.20 $ (0.35) $ 0.21 $ 0.10 $ 0.27
-----------------------------------------------------------------------------
*Includes a charge of $8,700 for purchased research and development.
</TABLE>
Report of Independent Auditors
The Board of Directors and Stockholders
Systems & Computer Technology Corporation
We have audited the accompanying consolidated balance sheets of Systems &
Computer Technology Corporation as of September 30, 1995, and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial position of Systems &
Computer Technology Corporation at September 30, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
As discussed in Note H to the Consolidated Financial Statements, in 1994 the
Company changed its method of accounting for income taxes.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 20, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required under this Item is contained in the Registrant's
Definitive Proxy Statement to be delivered to shareholders in connection with
the Annual Meeting of Shareholders scheduled to be held on February 23, 1996
and is incorporated herein by reference. Also, see the information under the
heading "Executive Officers of SCT" appearing in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is contained in the Registrant's
Definitive Proxy Statement to be delivered to shareholders in connection with
the Annual Meeting of Shareholders scheduled to be held on February 23, 1996
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is contained in the Registrant's
Definitive Proxy Statement to be delivered to shareholders in connection with
the Annual Meeting of Shareholders scheduled to be held on February 23, 1996
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is contained in the Registrant's
Definitive Proxy Statement to be delivered to shareholders in connection with
the Annual Meeting of Shareholders scheduled to be held on February 23, 1996
and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedule and Exhibits.
(1) The following consolidated financial statements of the Registrant
and its subsidiaries are included herein:
Consolidated Balance Sheets--September 30, 1995 and 1994
Consolidated Statements of Operations--Years Ended September 30,
1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity--Years Ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows--Years Ended September 30,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
(2) The following consolidated financial statement schedule of the
Registrant and its subsidiaries is included herein:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore, have been omitted.
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
For the Three Years in the Period Ended September 30, 1995
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
----------------------------
Balance at Charged to Charged to Balance at
Description Beginning of Period Costs and Other Accounts Deductions-Describe End of Period
Expenses -Describe
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended September 30, 1995:
Reserves and allowances deducted from
other assets and deferred charges:
Reserves for non-interest bearing
loans to employees
Short-term $109,000 $22,000 (1) $87,000
Long-term 0
Allowance for doubtful accounts 1,228,000 $508,000 733,000 (1) 1,003,000
---------- --------- --------- -------- ----------
Total $1,337,000 $508,000 $0 $755,000 $1,090,000
For the year ended September 30, 1994:
Reserves and allowances deducted from
other assets and deferred charges:
Reserves for non-interest bearing
loans to employees
Short-term $153,000 $11,000 $55,000 (1) $109,000
Long-term 8,000 8,000 (1) 0
Allowance for doubtful accounts 1,321,000 559,000 652,000 (1) 1,228,000
---------- --------- --------- -------- ----------
Total $1,482,000 $570,000 $0 $715,000 $1,337,000
For the year ended September 30, 1993:
Reserves and allowances deducted from
other assets and deferred charges:
Reserves for non-interest bearing
loans to employees
Short-term $181,000 $28,000 $153,000
Long-term 8,000 8,000
Allowance for doubtful accounts 834,000 $923,000 $41,000 (2) 477,000 (1) 1,321,000
---------- --------- --------- -------- ----------
Total $1,023,000 $923,000 $41,000 $505,000 $1,482,000
(1) Uncollectible accounts written-off during the year
(2) Adjustment to reserve for change in probability of repayment
</TABLE>
(3) Exhibits (not included in the copies of the Form 10-K sent
to stockholders).
No. Exhibit
------ ----------------------------------------------------------------
2 Agreement and Plan of Merger and Reorganization by and among the
Registrant, SCT Acquisition Corporation, Adage Systems
International, Inc. and Gerald F. O'Connell and David Phelan
(Exhibit A to the Registrant's Form 8-K dated May 12, 1995) 1
[Attached to the Agreement and Plan of Merger and Reorganization
were disclosure schedules generally relating to the business
acquired thereunder and documents executed in connection with such
Agreement. Copies of such schedules and documents will be
furnished to the Commission upon request.]
3.1 Restated Certificate of Incorporation (Exhibit 3.1 to the
Registrant's Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on September 1, 1993) 1
3.2 Bylaws (Exhibit 3.2 to the Registrant's Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on
September 1, 1993) 1
4 Form of Indenture under which the Registrant's 6 1/4% Convertible
Subordinated Debentures due 2003 are issued (Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on September 1, 1993) 1
10.1 Warrant Agreement executed by the Registrant and Ralph A. Lousteau
(Exhibit 10.10 to the Registrant's Registration Statement on Form
S-3 filed with the Securities and Exchange Commission on
September 1, 1993) 1
10.2 VAR Agreement dated as of September 1, 1991 between Oracle
Corporation and the Registrant, together with Amendments One, Two
and Three thereto (Exhibit 10.12 to the Registrant's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on September 1, 1993) 1
10.3 Credit Agreement dated as of June 20, 1994 among the Registrant
and SCT Software & Resource Management Corporation as Borrowers
and Mellon Bank (Exhibit 10.4 to the Registrant's Form 10-K for
the fiscal year ended September 30, 1994) 1
10.4 Subsidiary Guaranty Agreement dated as of June 20, 1994 entered
into by SCT Utility Systems, Inc. in favor of Mellon Bank.
(Identical Subsidiary Guaranties, except as to the identity of the
guarantor, were entered into by SCT Public Sector, Inc., SCT
Financial Corporation, SCT International Limited, SCT Software &
Technology Services, Inc., and SCT Property, Inc.) (Exhibit 10.5
to the Registrant's Form 10-K for the fiscal year ended September
30, 1994) 1
10.5 Systems & Computer Technology Corporation 1994 Long-Term Incentive
Plan (Exhibit 4.3 to the Registrant's Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on June
30, 1995) 1 2
10.6 Systems & Computer Technology Corporation 1994 Non-Employee
Director Stock Option Plan (Exhibit 4.4 to the Registrant's
Registration Statement on Form S-8 filed with the Securities and
Exchange Commission on June 30, 1995) 1 2
10.7 Agreement of Purchase and Sale dated August 9, 1994 between
Provident Mutual Life Insurance Company of Philadelphia and the
Registrant (Exhibit 10.6 to the Registrant's Form 10-K for the
fiscal year ended September 30, 1994) 1
10.8 Employment Agreement dated June 1, 1995 between the Registrant and
Gerald F. O'Connell 2 3
10.9 Employment Agreement dated June 1, 1995 between the Registrant and
David Phelan 2 3
10.10 Agreement of Lease by and between Liberty Property Limited
Partnership and Systems & Computer Technology Corporation for
premises located at One Country View Road, Malvern, PA 3
10.11 Lease between International Business Machines Corporation and SCT
Public Sector, Inc. for premises located at 1733 Harrodsburg Road,
Lexington, KY 3
11 Statement re: Computation of Per Share Earnings 3
21 Subsidiaries of the Registrant 3
23 Consent of Ernst & Young LLP 3
27 Financial Data Schedule 3
SCT will furnish to any stockholder upon written request, any exhibit
listed in the accompanying Index to Exhibits upon payment by such stockholder
to SCT of SCT's reasonable expenses in furnishing such exhibit.
(b) Reports on Form 8-K.
None.
- ---------------
1 Incorporated by reference
2 Compensatory Plan, Contract or Arrangement
3 Filed with this Annual Report on Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SYSTEMS & COMPUTER TECHNOLOGY
CORPORATION (Registrant)
By: /s/ Michael J. Emmi Date: December 21, 1995
----------------------------------
Michael J. Emmi
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------------------------- ----------------------------- ----------------
/s/ Michael J. Emmi
- ---------------------------
Michael J. Emmi Chairman of the Board December 21, 1995
and Chief Executive Officer
(Principal Executive Officer);
Director
/s/ Michael D. Chamberlain
- ---------------------------
Michael D. Chamberlain Director December 21, 1995
/s/ Allen R. Freedman
- ---------------------------
Allen R. Freedman Director December 21, 1995
/s/ Thomas I. Unterberg
- ---------------------------
Thomas I. Unterberg Director December 21, 1995
/s/ Terrel H. Bell
- ---------------------------
Terrel H. Bell Director December 21, 1995
/s/ Eric Haskell
- ---------------------------
Eric Haskell Senior Vice President, December 21, 1995
Finance and Administration,
Treasurer and Chief Financial
Officer (Principal Financial
and Accounting Officer)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
Index of Exhibits Filed Herewith
Exhibit No. Exhibit Page
- ------------- --------------------------------------------------- -----
10.8 Employment Agreement dated June 1, 1995 between the
Registrant and Gerald F. O'Connell
10.9 Employment Agreement dated June 1, 1995 between the
Registrant and David Phelan
10.10 Agreement of Lease by and between Liberty Property
Limited Partnership and Systems & Computer
Technology Corporation for premises located at One
Country View Road, Malvern, PA
10.11 Lease between International Business Machines
Corporation and SCT Public Sector, Inc. for premises
located at 1733 Harrodsburg Road, Lexington, KY
11 Statement re: Computation of Per Share Earnings
21 Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
EMPLOYMENT AGREEMENT
Employment Agreement made this 1st day of June, 1995, by and
between SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, a Delaware corporation
(the "Company"), and GERALD F. O'CONNELL ("Executive").
WHEREAS, the Company, Adage Systems International, Inc., a Michigan
corporation ("Adage"), Executive and certain other persons have entered
into an Agreement and Plan of Merger and Reorganization dated as of May 12,
1995 (the "Merger Agreement");
WHEREAS, execution and delivery of this Agreement is a condition to
the obligations of each of the Company and Adage to consummate the
transactions contemplated by the Merger Agreement;
WHEREAS, upon consummation of the merger contemplated by the Merger
Agreement, Adage and a subsidiary of the Company will merge, and the
survivor of such merger is referred to below as "Adage."
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
I. EMPLOYMENT
The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, for the term, and on and subject to the terms
and conditions, hereinafter set forth.
II. POSITION AND DUTIES
2.01. Scope of Services. Executive shall serve the Company as the
President of Adage and shall have such authority, duties and
responsibilities, consistent with such position, as the Board may determine
from time to time. In the performance of his responsibilities hereunder,
Executive shall not take any action, or omit to take any action, for the
purpose of arbitrarily increasing the ability of Adage to maximize the
Floor Price (as defined in the Merger Agreement). In his capacity as
President of Adage, Executive shall report to the Board. Executive
acknowledges that Adage will be operated as part of the SCT Software Group
unless and until such arrangement is changed at the direction of the Board
or the Company. The term "Board," as used herein, shall have the meaning
assigned to it in Section 3.8 of the Merger Agreement. Nothing contained
in this Agreement shall be construed to require the Company to maintain the
separate corporate existence of Adage.
2.02. Full Business Efforts. During the term of this Agreement,
Executive shall devote his full business time, attention and energies to
the performance of his duties hereunder, and shall not be employed by,
participate or engage in, or be part of, in any manner, the management or
operation of any business enterprise other than that of the Company and its
affiliates (as defined below); provided that the foregoing shall not
prevent Executive from serving as a director or officer of an educational,
religious, social or civic organization or otherwise participating in any
of the ventures identified on Exhibit A hereto (or hereafter approved by
the Company) so long as such service or participation does not interfere
with the performance by Executive of his responsibilities hereunder. For
purposes of this Agreement, the term "affiliate" shall mean any
corporation, company, partnership, joint venture and/or firm which is
controlled by or under common control with the Company.
2.03. Relocation; Principal Residence. Executive agrees that he will
perform his day-to-day responsibilities hereunder from the headquarters of
the Company in Malvern, Pennsylvania, commencing on the date hereof.
Executive further agrees that he will establish a residence in the Greater
Philadelphia metropolitan area promptly following the date hereof, but in
no event later than 180 days following the date hereof. In connection with
such establishment, Executive shall be entitled to receive full benefits
under the Company's relocation policy, "existing employees (level 15 and
above)," as modified and attached hereto as Exhibit B.
III. COMPENSATION
3.01. (a) Salary. Executive shall receive a salary at the rate of
$130,000 per annum, commencing on the date of this Agreement, payable by
the Company in semi-monthly installments or at such other intervals (not
less frequently than monthly) as the Company may determine. In addition,
Executive shall be eligible to participate in any bonus plan established by
the Company for similarly situated employees, but such eligibility shall
not be construed to obligate the Company to award Executive any bonus.
Whether or not Executive receives a bonus from the Company shall be
determined by the Board of Directors of the Company, or the Compensation
Committee of the Board of Directors, in its sole discretion.
(b) Health Care Benefits. During the term of this Agreement,
Executive shall be included in all medical, dental, disability and other
insurance plans identified on Exhibit C hereto, subject to the provisions
of such plans as the same may be in effect from time to time.
3.02. Vacation. During the term of this Agreement, Executive shall
be entitled to vacation on the terms described in Exhibit C hereto.
3.03. Expense Reimbursement. During the term of this Agreement, the
Company shall reimburse Executive for all ordinary and necessary business
expenses incurred by him in connection with the business of the Company on
the terms described in Exhibit C hereto.
IV. TERM OF EMPLOYMENT; TERMINATION
4.01. Term. The term of this Agreement shall be for a period
commencing on the date hereof and ending on the Measurement Date (as
defined in the Merger Agreement) (the "Term").
4.02. Termination.
(a) Death or Disability. The employment of Executive
hereunder shall immediately terminate upon the death of Executive, and may
be terminated by the Company upon the total disability of Executive; and
the Company shall not thereafter be obligated to make any further payments
under this Agreement other than compensation payments and reimbursement for
expenses due, accrued or payable as of the date of Executive's death or
total disability pursuant to paragraphs 3.01(a) and 3.03. Executive shall
be deemed to have a "total disability" if (i) as a result of Executive's
incapacity, Executive has become eligible for full benefits under the
Company's long-term disability policy, if any, or (ii) the Company
determines, on the basis of a written report (the "Committee Report") of a
committee comprised of a majority of the Board, that Executive has been
unable or can reasonably be expected to be unable, due to physical or
mental illness or incapacity, to perform the essential duties of his
employment with reasonable accommodation for a period of 90 days during any
180-day period. The Committee Report shall be based upon the reports of at
least two physicians (at least one of which shall be reasonably acceptable
to Executive or his personal representatives); provided that if the two
physician reports are materially different in their conclusions, the
Committee Report shall be based upon, and consistent with, the reports of a
majority of three physicians at least one of which shall be reasonably
acceptable to Executive or his personal representatives.
(b) Discharge for Cause. The employment of Executive
hereunder shall immediately terminate if the Company elects to discharge
Executive for cause. If the Company has grounds to elect to discharge
Executive for cause pursuant to this paragraph, but does not elect to
discharge him within one year of the later of the time the grounds for
discharge arise or become known to the Company, the Company shall be deemed
to have waived or forfeited its right thereafter to discharge Executive on
the basis of such grounds, but shall not be deemed to have waived its right
thereafter to discharge Executive on the basis of any other similar or
different grounds for discharge for cause; provided that if grounds for the
discharge of Executive arise and become known to the Company, the Company
shall provide Executive with notice of such grounds within 30 days after
such grounds become known to the Company in order for the Company to elect
to discharge Executive for cause on the basis of such grounds. In
addition, if the Company has grounds to elect to discharge Executive for
cause as the result of the occurrence of a Performance-Based Trigger (as
defined below), but does not elect to discharge him for cause within the
foregoing one-year period, the Company will not be deemed to have waived
its right to count the failure of Adage to achieve the required level of
Pretax Profits for a given fiscal year for purposes of determining whether
another Performance-Based Trigger will have occurred in the event Adage
fails to achieve the required level of Pretax Profits for a subsequent
fiscal year. "Cause" shall mean any of the following: (i) the material
breach by Executive of any of his obligations under this Agreement
(provided that in order for the Company to discharge Executive on account
of his material breach of any of his obligations under this Agreement, the
Company shall have first given Executive written notice of such material
breach and afforded him the opportunity to cure such material breach within
the 10-day period following the date such written notice is given to him,
but, notwithstanding the foregoing, the Company shall not be required to
give Executive any such written notice of material breach or afford him any
opportunity to cure a material breach if the Company has, within the
preceding 12-month period, given him written notice of a similar breach and
afforded him an opportunity to cure such similar breach and,
notwithstanding the foregoing, the Company shall not be required to give
Executive any such written notice of material breach or opportunity to cure
if the grounds constituting such material breach also fall within one of
the other clauses covered by this definition of the term "cause"), (ii) an
act of insubordination by Executive (including, without limitation, a
refusal by Executive to carry out a written directive of the President of
the Company or the Board), (iii) a failure by Executive to follow the
Company's written business policies, procedures or strategies, (iv)
Executive's conviction of a felony, (v) Executive's act of fraud on the
Company, willful breach of his duty of loyalty to the Company or
misappropriation of Company funds, (vi) Executive's appropriation to
himself of a Company corporate opportunity or (vii) the occurrence of a
Performanced-Based Trigger (as defined below). Upon termination of
Executive's employment for cause pursuant to this paragraph 4.02(b), the
Company shall have no further obligations to Executive hereunder other than
to pay Executive such compensation payments and reimbursement for expenses
as may be due, accrued or payable as of the date of such termination
pursuant to paragraphs 3.01(a) and 3.03. The term "Performance-Based
Trigger" means the failure of Adage to achieve, for two consecutive fiscal
years (commencing with the fiscal year ending September 30, 1996), Pretax
Profits (as defined in the Merger Agreement) (a) at least at the level set
forth in an annual business plan for Adage for a fiscal year if such annual
business plan has been approved by a Joint Vote of the members of the Board
or (b) if the Board does not approve a business plan for either or both of
the fiscal years ending September 30, 1997 and September 30, 1998,
respectively, by a Joint Vote of its members, at least equal to $4,000,000
and $5,000,000 (or such lesser amount as may be set forth in the applicable
business plan), respectively, in such fiscal years. A "Joint Vote" of the
members of the Board shall mean a vote of at least a majority of the
members of the Board in which either or both of Executive and David Phelan
(if then a member of the Board) is member of such majority.
Notwithstanding the foregoing, a Performance-Based Trigger will not be
deemed to have occurred, based on the failure of Adage to achieve at least
the minimum required level of Pretax Profits for a given fiscal year, as
provided above, if the failure was attributable to a "reasonably
unforeseeable event." In order for an event to qualify as reasonably
unforeseeable, the event must be generally not of a type that businesses
similarly situated to Adage customarily take into account in their
contingency planning. Examples of reasonably unforeseeable events include,
but are not limited to, unavailability of announced computer equipment or
computer programs from suppliers necessary for essential development
activities of Adage or the death of several key employees of Adage in a car
or airplane accident or by fire or the development after the date hereof of
disputes between key strategic partners or alliances (in which dispute
neither the Company nor Adage is involved) resulting in a significant
reduction in sales by Adage to one or more of its customers. In no event
shall the performance or non-performance, financially or in any other
respect not constituting a separate basis for discharge for cause
hereunder, of the business of Adage constitute "cause" for purposes of
terminating the employment of Executive except as expressly set forth in
clause (vii) above. Executive agrees that he will not, in his capacity as a
member of the Board, arbitrarily refuse to approve an annual business plan
which Executive actually believes to be reasonable.
(c) Discharge Without Cause. The employment of Executive
hereunder shall immediately terminate if the Company discharges Executive
without cause. Upon termination of Executive's employment without cause
pursuant to this paragraph 4.02(c), the Company shall have no further
obligations to Executive hereunder other than (i) to pay Executive such
compensation payments and reimbursement for expenses as may be due, accrued
or payable as of the date of such termination pursuant to paragraphs
3.01(a) and 3.03 and (ii) to pay and provide to Executive the amount of the
salary and the health care benefits Executive would have been entitled to
receive during the remaining term of this Agreement pursuant to paragraphs
3.01(a) and 3.01(b) hereof if he had not been discharged, in any such case
at the time or times Executive would have received such payments or
benefits if he had not been discharged.
V. ADDITIONAL COVENANTS
5.01. Non-competition.
(a) General Prohibition. Executive hereby agrees that he will
not, during the Restricted Period (as defined below), compete, directly or
indirectly, with the Company or any of its successors, affiliates, related
companies or subsidiaries, whether now existing or hereafter created or
acquired, during the Restricted Period (all of the foregoing being
collectively referred to herein as the "Companies") in any business engaged
in or under consideration by the Companies, or any of them, during the term
of Executive's employment hereunder. In recognition of the scope of the
Company's activities, the foregoing prohibition against competition shall
apply worldwide.
(b) Prohibition on Indirect Competition. Executive shall be
deemed to be competing as described in paragraph (a) hereof if Executive
shall engage, directly or indirectly, in any of the businesses covered
thereby, whether for his own account or that of any other person, firm,
corporation, partnership or other business entity, and whether his
participation shall be as a stockholder, general or limited partner, or
investor in any such entity (except to the extent that Executive's
investment constitutes less than 2% of the equity of a publicly-traded
company) or as a principal, agent, proprietor, officer, director, employee,
sales representative, consultant, lender or in any other capacity.
Notwithstanding the foregoing, Executive shall be permitted to retain his
investments identified on Exhibit A.
(c) Restricted Period. The "Restricted Period" shall mean the
period commencing on the date hereof and continuing until the later of (i)
one year from the date of termination of Executive's employment by the
Company other than for cause (as defined in Section 4.02(b) above), (ii)
two (2) years from the date of termination of Executive's employment with
the Company hereunder for cause and (iii) five (5) years from the date
hereof.
(d) Non-Solicitation. During the Restricted Period, Executive
shall not, directly or indirectly: (i) solicit, divert, take away or induce
customers or prospective customers of any of the Companies to avail
themselves of, or to distribute or market, the services or products of
others which are competitive with any of the Companies' services or
products or (ii) solicit, direct, take away or induce any employee of any
of the Companies to leave the employ of the Companies.
5.02. Confidentiality. Executive recognizes and acknowledges that
the Proprietary Information (as hereinafter defined) is a valuable, special
and unique asset of the Company. As a result, both during the Term and
thereafter, Executive shall not, without the prior written consent of the
Company (which consent may be withheld by the Company in its sole
discretion), for any reason either directly or indirectly divulge to any
third-party or use for his own benefit, or for any purpose other than the
exclusive benefit of the Company, any confidential, proprietary, business
or technical information or trade secrets of any of the Companies
(collectively, "Proprietary Information") revealed, obtained or developed
in the course of his employment with the Company or Adage. Failure by any
of the Companies to mark any of the Proprietary Information as confidential
or proprietary shall not affect its status as Proprietary Information under
the terms of this Agreement. Notwithstanding the foregoing, Proprietary
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by Executive
in violation of this Agreement, (ii) becomes available to Executive on a
non-confidential basis from a person other than any of the Companies who is
not otherwise bound by a confidentiality agreement with any of the
Companies or (iii) is disclosed in response to a valid order of a court or
other governmental body of the United States or any political subdivision
thereof; provided, however, that such disclosure is not greater than what
was required to be produced or disclosed and provided further that
Executive will first have given notice of such order as soon as practical
to the Company, and render reasonable cooperation to enable the Company to
contest the order.
5.03. Property. All Proprietary Information shall be and remain the
sole property of the Company. During the Term, Executive shall not remove
from the Company's offices or premises any documents, records, notebooks,
files, correspondence, reports, memoranda or similar materials of or
containing Proprietary Information unless necessary or appropriate in
accordance with the duties and responsibilities required by or appropriate
for his position and, in the event that such materials or property are
removed, all of the foregoing shall be returned to their proper files or
places of safekeeping as promptly as possible after the removal shall serve
its specific purpose.
5.04. Equitable Relief. Executive expressly acknowledges that
damages alone will be an inadequate remedy for any breach or violation of
any of the provisions of this Section V, and that the Company, in addition
to all other remedies available at law or hereunder, shall be entitled, as
a matter of right, to injunctive relief, including specific performance,
with respect to any such breach or violation, in any court of competent
jurisdiction. If any of the provisions of this Section V are held to be in
any respect an unreasonable restriction upon Executive, then they shall be
deemed to extend only over the maximum period of time, geographic area or
range of activities as to which they may be enforceable. In the event that
Executive shall be in violation of the restrictive covenants in paragraph
5.01, then the Restricted Period shall be extended for a period of time
equal to the period of time between the time the Company delivers written
notice of such breach to Executive and the time such breach is cured.
Executive acknowledges that the restrictions in Section V are reasonably
necessary to protect the Company's interests, and that Executive will not,
as a result of such restrictions, be unable to earn a livelihood during the
Restricted Period.
VI. MISCELLANEOUS
6.01. Notices. Any notice, request, instruction, waiver or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and deemed to be duly given for all purposes
when (i) delivered personally, (ii) sent by certified or registered mail
(postage prepaid and return receipt requested), (iii) sent by recognized
overnight courier (such as Federal Express), or (iv) sent by telegram or
telecopier as follows:
(a) if to the Company, to it at:
Systems & Computer Technology Corporation
4 Country View Road
Malvern, PA 19355
Attention: Senior Vice President - Finance and
Administration and Chief
Financial Officer
Telecopier Number: (610) 648-7457
with a copy to:
Systems & Computer Technology Corporation
4 Country View Road
Malvern, PA 19355
Attention: Senior Vice President and
General Counsel
Telecopier Number: (610) 648-7457
with an additional copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: Barry M. Abelson, Esquire
Telecopier Number: (215) 981-4750
(b) if to the Executive, to it at:
Gerald F. O'Connell
557 Oenoke Ridge
New Canaan, CT 06840
with a copy to:
Kantner & Associates
Tower Plaza
555 East William Street
Ann Arbor, MI 48104
Attention: Perry M. Kantner, Esquire
Telecopier Number: (313) 663-8514
or to such other address for a party as shall be specified by like notice.
A notice shall be deemed to have been duly given to the party to whom it is
directed (i) when received personally, (ii) on the third business day after
the day it is placed in the mail, if sent by certified or registered mail,
(iii) on the business day following the mailing thereof if sent by
recognized overnight courier or (iv) when sent by telegram or telecopier,
upon receipt by the sender of a confirmed answer-back. Whenever the giving
of notice is required, the giving of such notice may be waived in writing
by the party entitled to receive such notice.
6.02. Waiver of Breach. The waiver by the Company of a breach or
violation of any of the provisions of this Agreement shall not operate or
be construed as a waiver of any subsequent breach or violation thereof.
6.03. Assignability. This Agreement shall not be assignable by
Executive, but otherwise shall be binding upon and inure to the benefit of
the parties hereto and their successors and assigns.
6.04. Entire Agreement. This writing represents the entire agreement
and understanding of the parties with respect to the matters addressed
herein and may not be altered or amended except by a written instrument
signed by the Company and Executive. Any and all promises, agreements,
representations, warranties and other statements, written or oral, made
among the parties in respect to such matters prior to, or contemporaneously
with, the execution hereof are hereby canceled and superseded and shall be
of no further force and effect.
6.05. Severability. If any provision of this Agreement shall be or
become illegal or unenforceable in whole or in part for any reason
whatsoever, the remaining provisions shall be deemed severable and
independent and shall nevertheless be deemed valid, binding and
enforceable.
6.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
6.07. Headings. The headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its
interpretation.
6.08. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ Eric Haskill
---------------------------------
Title: Senior Vice President
- Finance and Administration and Chief Financial Officer
/s/ Gerald F. O'Connell
---------------------------------
Gerald F. O'Connell
EMPLOYMENT AGREEMENT
Employment Agreement made this 1st day of June, 1995, by and
between SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, a Delaware corporation
(the "Company"), and DAVID PHELAN ("Executive").
WHEREAS, the Company, Adage Systems International, Inc., a Michigan
corporation ("Adage"), Executive and certain other persons have entered
into an Agreement and Plan of Merger and Reorganization dated as of May 12,
1995 (the "Merger Agreement");
WHEREAS, execution and delivery of this Agreement is a condition to
the obligations of each of the Company and Adage to consummate the
transactions contemplated by the Merger Agreement;
WHEREAS, upon consummation of the merger contemplated by the Merger
Agreement, Adage and a subsidiary of the Company will merge, and the
survivor of such merger is referred to below as "Adage."
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
I. EMPLOYMENT
The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, for the term, and on and subject to the terms
and conditions, hereinafter set forth.
II. POSITION AND DUTIES
2.01. Scope of Services. Executive shall serve the Company as the
Vice President - Marketing of Adage and shall have such authority, duties
and responsibilities, consistent with such position, as the President of
Adage or the Board may determine from time to time. In the performance of
his responsibilities hereunder, Executive shall not take any action, or
omit to take any action, for the purpose of arbitrarily increasing the
ability of Adage to maximize the Floor Price (as defined in the Merger
Agreement). In his capacity as Vice President - Marketing of Adage,
Executive shall report to the President of Adage. Executive acknowledges
that Adage will be operated as part of the SCT Software Group unless and
until such arrangement is changed at the direction of the Board or the
Company. The term "Board," as used herein, shall have the meaning assigned
to it in Section 3.8 of the Merger Agreement. Nothing contained in this
Agreement shall be construed to require the Company to maintain the
separate corporate existence of Adage.
2.02. Full Business Efforts. During the term of this Agreement,
Executive shall devote his full business time, attention and energies to
the performance of his duties hereunder, and shall not be employed by,
participate or engage in, or be part of, in any manner, the management or
operation of any business enterprise other than that of the Company and its
affiliates (as defined below); provided that the foregoing shall not
prevent Executive from serving as a director or officer of an educational,
religious, social or civic organization or otherwise participating in any
of the ventures identified on Exhibit A hereto (or hereafter approved by
the Company) so long as such service or participation does not interfere
with the performance by Executive of his responsibilities hereunder. For
purposes of this Agreement, the term "affiliate" shall mean any
corporation, company, partnership, joint venture and/or firm which is
controlled by or under common control with the Company.
2.03. Relocation; Principal Residence. Executive agrees that he will
perform his day-to-day responsibilities hereunder from the headquarters of
the Company in Malvern, Pennsylvania, commencing on the date hereof.
Executive further agrees that he will establish a residence in the Greater
Philadelphia metropolitan area promptly following the date hereof, but in
no event later than 180 days following the date hereof. In connection with
such establishment, Executive shall be entitled to receive full benefits
under the Company's relocation policy, "existing employees (level 15 and
above)", as modified and attached hereto as Exhibit B.
III. COMPENSATION
3.01. (a) Salary. Executive shall receive a salary at the rate of
$110,000 per annum, commencing on the date of this Agreement, payable by
the Company in semi-monthly installments or at such other intervals (not
less frequently than monthly) as the Company may determine. In addition,
Executive shall be eligible to participate in any bonus plan established by
the Company for similarly situated employees, but such eligibility shall
not be construed to obligate the Company to award Executive any bonus.
Whether or not Executive receives a bonus from the Company shall be
determined by the Board of Directors of the Company, or the Compensation
Committee of the Board of Directors, in its sole discretion.
(b) Health Care Benefits. During the term of this Agreement,
Executive shall be included in all medical, dental, disability and other
insurance plans now existing or hereafter adopted for the benefit of
similarly situated employees of the Company if and to the extent that he is
and remains eligible to participate thereunder, and subject to the
provisions of such plans as the same may be in effect from time to time.
3.02. Vacation. During the term of this Agreement, Executive shall
be entitled to vacation on the terms made available by the Company to
similarly situated employees of the Company.
3.03. Expense Reimbursement. During the term of this Agreement, the
Company shall reimburse Executive for all ordinary and necessary business
expenses incurred by him in connection with the business of the Company.
Such payments shall be made by the Company upon submission by Executive of
vouchers itemizing such expenses in a form reasonably satisfactory to the
Company. Such payments shall be made within a reasonable period of time
after submission of vouchers.
IV. TERM OF EMPLOYMENT; TERMINATION
4.01. Term. The term of this Agreement shall be for a period
commencing on the date hereof and ending on the Measurement Date (as
defined in the Merger Agreement) (the "Term").
4.02. Termination.
(a) Death or Disability. The employment of Executive
hereunder shall immediately terminate upon the death of Executive, and may
be terminated by the Company upon the total disability of Executive; and
the Company shall not thereafter be obligated to make any further payments
under this Agreement other than compensation payments and reimbursement for
expenses due, accrued or payable as of the date of Executive's death or
total disability pursuant to paragraphs 3.01(a) and 3.03. Executive shall
be deemed to have a "total disability" if (i) as a result of Executive's
incapacity, Executive has become eligible for full benefits under the
Company's long-term disability policy, if any, or (ii) the Company
determines, on the basis of a written report (the "Committee Report") of a
committee comprised of a majority of the Board, that Executive has been
unable or can reasonably be expected to be unable, due to physical or
mental illness or incapacity, to perform the essential duties of his
employment with reasonable accommodation for a period of 90 days during any
180-day period. The Committee Report shall be based upon the reports of at
least two physicians (at least one of which shall be reasonably acceptable
to Executive or his personal representatives); provided that if the two
physician reports are materially different in their conclusions, the
Committee Report shall be based upon, and consistent with, the reports of a
majority of three physicians at least one of which shall be reasonably
acceptable to Executive or his personal representatives.
(b) Discharge for Cause. The employment of Executive
hereunder shall immediately terminate if the Company elects to discharge
Executive for cause. If the Company has grounds to elect to discharge
Executive for cause pursuant to this paragraph, but does not elect to
discharge him within one year of the later of the time the grounds for
discharge arise or become known to the Company, the Company shall be deemed
to have waived or forfeited its right thereafter to discharge Executive on
the basis of such grounds, but shall not be deemed to have waived its right
thereafter to discharge Executive on the basis of any other similar or
different grounds for discharge for cause; provided that if grounds for the
discharge of Executive arise and become known to the Company, the Company
shall provide Executive with notice of such grounds within 30 days after
such grounds become known to the Company in order for the Company to elect
to discharge Executive for cause on the basis of such grounds. In
addition, if the Company has grounds to elect to discharge Executive for
cause as the result of the occurrence of a Performance-Based Trigger (as
defined below), but does not elect to discharge him for cause within the
foregoing one-year period, the Company will not be deemed to have waived
its right to count the failure of Adage to achieve the required level of
Pretax Profits for a given fiscal year for purposes of determining whether
another Performance-Based Trigger will have occurred in the event Adage
fails to achieve the required level of Pretax Profits for a subsequent
fiscal year. "Cause" shall mean any of the following: (i) the material
breach by Executive of any of his obligations under this Agreement
(provided that in order for the Company to discharge Executive on account
of his material breach of any of his obligations under this Agreement, the
Company shall have first given Executive written notice of such material
breach and afforded him the opportunity to cure such material breach within
the 10-day period following the date such written notice is given to him,
but, notwithstanding the foregoing, the Company shall not be required to
give Executive any such written notice of material breach or afford him any
opportunity to cure a material breach if the Company has, within the
preceding 12-month period, given him written notice of a similar breach and
afforded him an opportunity to cure such similar breach and,
notwithstanding the foregoing, the Company shall not be required to give
Executive any such written notice of material breach or opportunity to cure
if the grounds constituting such material breach also fall within one of
the other clauses covered by this definition of the term "cause"), (ii) an
act of insubordination by Executive (including, without limitation, a
refusal by Executive to carry out a written directive of the President of
Adage or the Board), (iii) a failure by Executive to follow the Company's
written business policies, procedures or strategies, (iv) Executive's
conviction of a felony, (v) Executive's act of fraud on the Company,
willful breach of his duty of loyalty to the Company or misappropriation of
Company funds, (vi) Executive's appropriation to himself of a Company
corporate opportunity or (vii) the occurrence of a Performance-Based
Trigger. Upon termination of Executive's employment for cause pursuant to
this paragraph 4.02(b), the Company shall have no further obligations to
Executive hereunder other than to pay Executive such compensation payments
and reimbursement for expenses as may be due, accrued or payable as of the
date of such termination pursuant to paragraphs 3.01(a) and 3.03. The term
"Performance-Based Trigger" means the failure of Adage to achieve, for two
consecutive fiscal years (commencing with the fiscal year ending September
30, 1996), Pretax Profits (as defined in the Merger Agreement) (a) at least
at the level set forth in an annual business plan for Adage for a fiscal
year if such annual business plan has been approved by a Joint Vote (as
defined below) of the members of the Board or (b) if the Board does not
approve a business plan for either or both of the fiscal years ending
September 30, 1997 and September 30, 1998, respectively, by a Joint Vote of
its members, at least equal to $4,000,000 and $5,000,000 (or such lesser
amount as may be set forth in the applicable business plan), respectively,
in such fiscal years. A "Joint Vote" of the members of the Board shall
mean a vote of at least a majority of the members of the Board in which
either or both of Executive and Gerald F. O'Connell (if then a member of
the Board) is member of such majority. Notwithstanding the foregoing, a
Performance-Based Trigger will not be deemed to have occurred, based on the
failure of Adage to achieve at least the minimum required level of Pretax
Profits for a given fiscal year, as provided above, if the failure was
attributable to a "reasonably unforeseeable event." In order for an event
to qualify as reasonably unforeseeable, the event must be generally not of
a type that businesses similarly situated to Adage customarily take into
account in their contingency planning. Examples of reasonably
unforeseeable events include, but are not limited to, unavailability of
announced computer equipment or computer programs from suppliers necessary
for essential development activities of Adage or the death of several key
employees of Adage in a car or airplane accident or by fire or the
development after the date hereof of disputes between key strategic
partners or alliances (in which dispute neither the Company nor Adage is
involved) resulting in a significant reduction in sales by Adage to one or
more of its customers. In no event shall the performance or non-
performance, financially or in any other respect not constituting a
separate basis for discharge for cause hereunder, of the business of Adage
constitute "cause" for purposes of terminating the employment of Executive
except as expressly set forth in clause (vii) above. Executive agrees that
he will not, in his capacity as a member of the Board, arbitrarily refuse
to approve an annual business plan which Executive actually believes to be
reasonable.
(c) Discharge Without Cause. The employment of Executive
hereunder shall immediately terminate if the Company discharges Executive
without cause. Upon termination of Executive's employment without cause
pursuant to this paragraph 4.02(c), the Company shall have no further
obligations to Executive hereunder other than (i) to pay Executive such
compensation payments and reimbursement for expenses as may be due, accrued
or payable as of the date of such termination pursuant to paragraphs
3.01(a) and 3.03 and (ii) to pay and provide to Executive the amount of the
salary and the health care benefits Executive would have been entitled to
receive during the remaining term of this Agreement pursuant to paragraphs
3.01(a) and 3.01(b) hereof if he had not been discharged, in any such case
at the time or times Executive would have received such payments or
benefits if he had not been discharged.
V. ADDITIONAL COVENANTS
5.01. Non-competition.
(a) General Prohibition. Executive hereby agrees that he will
not, during the Restricted Period (as defined below), compete, directly or
indirectly, with the Company or any of its successors, affiliates, related
companies or subsidiaries, whether now existing or hereafter created or
acquired, during the Restricted Period (all of the foregoing being
collectively referred to herein as the "Companies") in any business engaged
in or under consideration by the Companies, or any of them, during the term
of Executive's employment hereunder. In recognition of the scope of the
Company's activities, the foregoing prohibition against competition shall
apply worldwide.
(b) Prohibition on Indirect Competition. Executive shall be
deemed to be competing as described in paragraph (a) hereof if Executive
shall engage, directly or indirectly, in any of the businesses covered
thereby, whether for his own account or that of any other person, firm,
corporation, partnership or other business entity, and whether his
participation shall be as a stockholder, general or limited partner, or
investor in any such entity (except to the extent that Executive's
investment constitutes less than 2% of the equity of a publicly-traded
company) or as a principal, agent, proprietor, officer, director, employee,
sales representative, consultant, lender or in any other capacity.
Notwithstanding the foregoing, Executive shall be permitted to retain his
investments identified on Exhibit A.
(c) Restricted Period. The "Restricted Period" shall mean the
period commencing on the date hereof and continuing until the later of (i)
one year from the date of termination of Executive's employment by the
Company other than for cause (as defined in Section 4.02(b) above), (ii)
two (2) years from the date of termination of Executive's employment with
the Company hereunder for cause and (iii) five (5) years from the date
hereof.
(d) Non-Solicitation. During the Restricted Period, Executive
shall not, directly or indirectly: (i) solicit, divert, take away or induce
customers or prospective customers of any of the Companies to avail
themselves of, or to distribute or market, the services or products of
others which are competitive with any of the Companies' services or
products or (ii) solicit, direct, take away or induce any employee of any
of the Companies to leave the employ of the Companies.
5.02. Confidentiality. Executive recognizes and acknowledges that
the Proprietary Information (as hereinafter defined) is a valuable, special
and unique asset of the Company. As a result, both during the Term and
thereafter, Executive shall not, without the prior written consent of the
Company (which consent may be withheld by the Company in its sole
discretion), for any reason either directly or indirectly divulge to any
third-party or use for his own benefit, or for any purpose other than the
exclusive benefit of the Company, any confidential, proprietary, business
or technical information or trade secrets of any of the Companies
(collectively, "Proprietary Information") revealed, obtained or developed
in the course of his employment with the Company or Adage. Failure by any
of the Companies to mark any of the Proprietary Information as confidential
or proprietary shall not affect its status as Proprietary Information under
the terms of this Agreement. Notwithstanding the foregoing, Proprietary
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by Executive
in violation of this Agreement, (ii) becomes available to Executive on a
non-confidential basis from a person other than any of the Companies who is
not otherwise bound by a confidentiality agreement with any of the
Companies or (iii) is disclosed in response to a valid order of a court or
other governmental body of the United States or any political subdivision
thereof; provided, however, that such disclosure is not greater than what
was required to be produced or disclosed and provided further that
Executive will first have given notice of such order as soon as practical
to the Company, and render reasonable cooperation to enable the Company to
contest the order.
5.03. Property. All Proprietary Information shall be and remain the
sole property of the Company. During the Term, Executive shall not remove
from the Company's offices or premises any documents, records, notebooks,
files, correspondence, reports, memoranda or similar materials of or
containing Proprietary Information unless necessary or appropriate in
accordance with the duties and responsibilities required by or appropriate
for his position and, in the event that such materials or property are
removed, all of the foregoing shall be returned to their proper files or
places of safekeeping as promptly as possible after the removal shall serve
its specific purpose.
5.04. Equitable Relief. Executive expressly acknowledges that
damages alone will be an inadequate remedy for any breach or violation of
any of the provisions of this Section V, and that the Company, in addition
to all other remedies available at law or hereunder, shall be entitled, as
a matter of right, to injunctive relief, including specific performance,
with respect to any such breach or violation, in any court of competent
jurisdiction. If any of the provisions of this Section V are held to be in
any respect an unreasonable restriction upon Executive, then they shall be
deemed to extend only over the maximum period of time, geographic area or
range of activities as to which they may be enforceable. In the event that
Executive shall be in violation of the restrictive covenants in paragraph
5.01, then the Restricted Period shall be extended for a period of time
equal to the period of time between the time the Company delivers written
notice of such breach to Executive and the time such breach is cured.
Executive acknowledges that the restrictions in Section V are reasonably
necessary to protect the Company's interests, and that Executive will not,
as a result of such restrictions, be unable to earn a livelihood during the
Restricted Period.
VI. MISCELLANEOUS
6.01. Notices. Any notice, request, instruction, waiver or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and deemed to be duly given for all purposes
when (i) delivered personally, (ii) sent by certified or registered mail
(postage prepaid and return receipt requested), (iii) sent by recognized
overnight courier (such as Federal Express), or (iv) sent by telegram or
telecopier as follows:
(a) if to the Company, to it at:
Systems & Computer Technology Corporation
4 Country View Road
Malvern, PA 19355
Attention: Senior Vice President - Finance and
Administration and Chief
Financial Officer
Telecopier Number: (610) 648-7457
with a copy to:
Systems & Computer Technology Corporation
4 Country View Road
Malvern, PA 19355
Attention: Senior Vice President and
General Counsel
Telecopier Number: (610) 648-7457
with an additional copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: Barry M. Abelson, Esquire
Telecopier Number: (215) 981-4750
(b) if to Executive, to it at:
David Phelan
126 Holmes Road
Ridgefield, CT 06877
with a copy to:
Kantner & Associates
Tower Plaza
555 East William Street
Ann Arbor, MI 48104
Attention: Perry M. Kantner, Esquire
Telecopier Number: (313) 663-8514
or to such other address for a party as shall be specified by like notice.
A notice shall be deemed to have been duly given to the party to whom it is
directed (i) when received personally, (ii) on the third business day after
the day it is placed in the mail, if sent by certified or registered mail,
(iii) on the business day following the mailing thereof if sent by
recognized overnight courier or (iv) when sent by telegram or telecopier,
upon receipt by the sender of a confirmed answer-back. Whenever the giving
of notice is required, the giving of such notice may be waived in writing
by the party entitled to receive such notice.
6.02. Waiver of Breach. The waiver by the Company of a breach or
violation of any of the provisions of this Agreement shall not operate or
be construed as a waiver of any subsequent breach or violation thereof.
6.03. Assignability. This Agreement shall not be assignable by
Executive, but otherwise shall be binding upon and inure to the benefit of
the parties hereto and their successors and assigns.
6.04. Entire Agreement. This writing represents the entire agreement
and understanding of the parties with respect to the matters addressed
herein and may not be altered or amended except by a written instrument
signed by the Company and Executive. Any and all promises, agreements,
representations, warranties and other statements, written or oral, made
among the parties in respect to such matters prior to, or contemporaneously
with, the execution hereof are hereby canceled and superseded and shall be
of no further force and effect.
6.05. Severability. If any provision of this Agreement shall be or
become illegal or unenforceable in whole or in part for any reason
whatsoever, the remaining provisions shall be deemed severable and
independent and shall nevertheless be deemed valid, binding and
enforceable.
6.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
6.07. Headings. The headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its
interpretation.
6.08. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ Eric Haskell
---------------------------------
Title: Senior Vice President
- Finance and Administration and Chief Financial Officer
/s/ David Phelan
--------------------------------
David Phelan
Agreement of Lease
Office Building
This Agreement of Lease by and between Liberty Property Limited
Partnership organized and existing under the laws of Pennsylvania (herein
called "Landlord" and Systems & Computer Technology Corporation, a
corporation organized and existing under the laws of Delaware (therein
called "Tenant").
1. Premises. As used in this Article the term building shall mean
the building(s) containing approximately 48,900 rentable square feet
(herein called the "Building") on a tract of land (herein called the "Lot")
located at One Country View Road, Malvern, PA 19355 (the Building, the Lot
and any other improvements thereon being herein collectively called the
"Premise" and sometimes the "Property"). Landlord does hereby demise and
let unto Tenant and Tenant does hereby lease and take sometimes from
Landlord for the term and upon the terms, convenants, conditions and
provisions set forth herein.
2. Completion by Landlord. The Premises shall be completed in
accordance with the specifications attached hereto as Exhibit "C" (herein
called the "Specifications"). All necessary construction shall be
commenced promptly and shall be substantially completed ready for use and
occupancy by Tenant 90 days after the date set forth in Article 3.
Provided, however, that the time for substantial completion of the Premises
shall be extended for additional periods of time equal to the time lost by
Landlord or Landlord's contractors, subcontractors or suppliers due to
strikes or other labor troubles, governmental restrictions and limitations,
scarcity, unavailability or delays in obtaining fuel, labor or materials,
war or other national emergency, accidents, floods, defective materials,
fire damage or other casualties, adverse weather conditions, or any cause
similar or dissimilar to the foregoing beyond the reasonable control of
Landlord or Landlord's contractors, subcontractors or suppler. ("Fore
Majeure Delays") All construction shall be done in a good and workmanlike
manner and shall comply at the time of completion with all applicable and
lawful laws, ordinances, regulations and orders of the federal, state,
county or other governmental authorities having jurisdiction thereof.
Tenant and its authorized agents, employees and contractors shall have the
right, at Tenant's own risk, expense and responsibility, at all reasonable
times prior to the Commencement Date as hereinafter defined, to enter the
Premises for the purpose of taking measurements, undertaking its demolition
and fit up and installing its furnishings equipment; provided that neither
party shall interfere with or delay the work to be engaged in the work to
be performed hereunder by Landlord.
See continuation of Article 2 attached hereto.
See Article 3 attached hereto.
4. Use of Premises. Tenant shall occupy the Premises throughout the
term and shall use the same for and only for general office purposes. The
building is designed to normal office building standards for floor-loading
capacity. Tenant shall not use the Premises in such a way as to exceed
such load limits.
5. Rent.
(a) Minimum Annual Rent. Tenant shall pay a minimum annual rent
of see attached Article 33, without notice or demand, and without setoff,
in equal monthly installments of see Attached Article 33 in advance, on the
first day of each calendar month during the term of this lease. Provided,
however, that rent for the first full month shall be paid upon the signing
of the lease. If the Commencement Date shall fall on a day other than the
first day of the following calendar month and such apportioned sum shall be
paid on such Commencement Date. In addition, Tenant shall pay Landlord
without setoff the additional rent as hereinafter set forth. Unless
otherwise specifically provided, all sums shall be paid to Landlord at the
address given in Article 30 hereof.
(c) Base Operating Cost. In addition to the minimum annual rent,
Tenant shall pay annually Two Hundred Sixty Eight Thousand Nine Hundred
Fifty Dollars and 00/100 ($268,950.00) herein called the "Base Operating
Cost" in equal monthly in equal monthly installments concurrent with and in
the same manner as Tenant's payment of the minimum annual rent and
adjustments thereto. The Base Operating Cost represents Landlord's
estimate of Tenant's share of the annual operating costs for the 1995
calendar year to the extent the Base Operating Cost exceeds Tenant's share
of the annual operating costs as calculated for any given calendar year.
Landlord shall credit such excess to Tenant's account for the following
year.
See continuation of Article 5(c) attached hereto.
(d) Additional Rent.
(i) Annual Operating Costs. As used herein the term "annual
operating costs" shall mean the costs to Landlord of operating and
maintaining the Property during each calendar year of the term. Such costs
shall include by way of example rather than limitation: insurance
premiums, fees, impositions, costs for repairs, maintenance, service
contracts, management fees, governmental permits, overhead expenses, costs
of furnishing water, sewer, gas, fuel, electricity, other utility services,
janitorial service, trash removal and the costs of any other items
attributable to operating or maintaining any or all of the Property
excluding any costs which under generally accepted accounting principles
are capital expenditures.
(ii) Computation of Tenant's Share of Annual Operating Costs.
After the end of each calendar year of the term, Landlord shall compute
Tenant's share of the annual operating costs described in Paragraph 5
(d)(i) incurred during such calendar year by [A] calculating an appropriate
adjustment, using generally accepted accounting principles, to avoid
allocating to Tenant or to any other tenant (as the case may be) those
specific costs which Tenant or any other tenant has agreed to pay; [B]
calculating an appropriate adjustment, using generally accepted accounting
principles, to avoid allocating to any vacant space those specific costs
which were not incurred for such space; and [C] multiplying the adjusted
annual operating costs by a fraction, the numerator of which shall be the
square foot area of the Premises and the denominator of which shall be the
rentable square foot area of the Building.
(iii) Payments. Tenant, promptly upon being billed therefor,
shall pay to Landlord as additional rent the amount by which Tenant's share
of the annual operating costs exceeds the Base Operating Cost. If only
part of any calendar year shall fall within the term, the amount computed
as additional rent with respect to such calendar year under the foregoing
provisions shall be prorated in the proportion to the portion of such
calendar year falling within the term. The expiration of the term prior to
the end of such calendar year shall not impair Tenant's obligation to pay
such prorated portion as a aforesaid. Notwithstanding the foregoing
provisions of this Article to the contrary, Landlord shall have the right,
at its option, to make from time to time during the term a reasonable
estimate of the additional rent which may become due hereunder with respect
to any calendar year, and to require Tenant to pay to Landlord, at the time
the monthly installments of minimum annual rent are payable, an amount
equal to the sum obtained by dividing the estimate of the additional rent
by the number of months remaining in such year. Landlord shall cause the
actual amount of Tenant's share of the annual operating costs to be
computed and certified to Tenant within one hundred and twenty (120) days
following the end of such calendar year, and Tenant or Landlord, as the
case may be, shall within ten (10) days or receipt of the certification
thereof pay to the other the amount of any deficiency or overpayment then
due from one to the other. In lieu thereof, at Landlord's option, Landlord
may credit Tenant's account for any overpayment. Tenant shall have the
right to inspect the books and records used by Landlord in calculating the
annual operating costs within sixty (60) days of receipt of the
certification during regular business hours after having given Landlord
written notice at least forty-eight (48) hours prior thereto; provided,
however, that Tenant shall make all payments of additional rent without
delay, and that Tenant's obligation to pay such additional rent shall not
be contingent on any such right.
e) Exemption From Taxation. It is contemplated by the parties
hereto that the construction of the Premises will be financed by a lender
in such a way that the interest payable upon such loan will be exempt from
taxation under Subtitle "A" of the United States Internal Revenue Code of
1954, as amended, Tenant hereby agrees not to do anything which would
endanger the tax exempt status of the interest referred to herein, and
agrees to file with the Internal Revenue Service, as and when applicable,
from time-to-time, such statements, applications, elections or other
written filings necessary to establish and/or maintain the tax exempt
status of the interest referred to herein, and to certify to such lender
information pertinent to the exemption. Based upon such expectation and
the continued exemption of the interest from federal income taxation, rent
shall be paid at the rates set forth hereinabove; provided, however, that
if at any time (including after repayment of all principal) the interest is
no longer exempt from federal income taxation as a result of any action or
failure to act by Tenant, then the minimum annual rent payable hereunder
shall be increased, retroactively, if necessary, from the date such
interest shall have ceased being exempt and for the remainder of the term
hereof, by the amount by which such minimum annual rent is exceeded by the
amount which bears the same ratio to such minimum annual rent as the
constant monthly payment to Landlord's lender after the interest is no
longer exempt bears the same ratio to such minimum annual rent as the
constant monthly payment to Landlord's lender after the interest is no
longer exempt bears to the constant monthly payment to any lender while the
interest is exempt.
6. Impositions. As used in this lease the term "Impositions" refers
to all levies, taxes, assessment and all charges, imposts or burdens of
whatsoever kind and nature, ordinary or extraordinary, which are applicable
to the term of this lease, and which are assessed or imposed by any
federal, state or municipal government or public authority, or under any
law, ordinance or regulation thereof, or pursuant to any recorded covenants
or agreements upon or with respect to the Property or any part thereof, any
improvements thereto or this lease. Tenant shall pay to Landlord with the
monthly payment of minimum annual rent any Imposition imposed directly upon
this lease or the rent payable hereunder or amounts payable by any
subtenants. Nothing herein contained shall be interpreted as requiring
Tenant to pay any income, excess profits, corporate capital stock or
franchise tax imposed or assessed upon Landlord, unless such tax or any
similar tax is levied or assessed, in lieu of all or any part of any
currently existing Imposition or an increase in any currently existing
Imposition. If under these requirements of any state or local law with
respect to such new method of taxation, Tenant is prohibited from paying
such new Imposition, Landlord may, at its election, terminate this lease by
giving written notice thereof to Tenant.
7. Insurance.
(a) Liability. Tenant, at Tenant's sole cost and expense, shall
maintain and keep in effect throughout the term insurance against liability
for bodily injury (including death) or property damage in or about the
Premises or the Property under a policy of comprehensive general public
liability insurance, with such limits as to each as may be reasonably
required by Landlord from time to time, but not less than $500,000 for each
person and $1,000,000 for each occurrence of bodily injury (including
death) and $500,000 for property damage. The policies of comprehensive
general public liability insurance shall name Landlord and Tenant as the
insured parties. Each such policy shall provide that it shall not be
cancelable without at least thirty (30) days prior written notice to
Landlord and to any mortgagee named in an endorsement thereto and shall be
issued by an insurer and in a form satisfactory to Landlord. At least ten
(10) days prior to the Commencement Date, a certificate of insurance shall
be delivered to Landlord. If Tenant shall fail, refuse or neglect to
obtain or to maintain any insurance that it is required to provide or to
furnish Landlord with satisfactory evidence of coverage on any such policy,
Landlord shall have the right to purchase such insurance. All such
payments made by Landlord shall be recoverable by Landlord from Tenant,
together with interest thereon, as additional rent promptly upon being
billed therefor.
(b) Waiver of Subrogation. Each of the parties thereto hereby
releases the other, to the extent of the releasing party's insurance
coverage, from any and all liability for any loss or damage covered by such
insurance which may be inflicted upon the property of such party even if
such loss or damage shall be brought about by the fault or negligence of
the other party, its agents or employees; provided, however, that this
release shall be effective only with respect to loss or damage occurring
during such time as the appropriate policy of insurance shall contain a
clause to the effect that this release shall not affect said policy or the
right of the insured to recover thereunder. If any policy does not permit
such a waiver, and if the party to benefit therefrom requests that such a
waiver be obtained, the other party agrees to obtain an endorsement to its
insurance policies permitting such waiver of subrogation if it is
available. In an additional premium is charged for such waiver, the party
benefiting therefrom agrees to pay the amount of such additional premium
promptly upon being billed therefor.
(c) Increase of Premiums. Tenant will not knowingly do anything
which will cause the cost of Landlord's insurance to increase or which will
prevent Landlord from procuring policies (including but not limited to
public liability) from companies and in a form satisfactory to Landlord.
If any breach of this Paragraph (c) by Tenant shall cause the rate of fire
or other insurance to be increased, Tenant shall pay the amount of such
increase as additional rent promptly upon being billed therefor.
8. Repairs and Maintenance.
(a) Tenant, at its sole cost and expense and throughout the term
of this lease, shall keep and maintain the Premises in a neat and orderly
condition. Tenant shall not use or permit the use of any portion of the
common areas for other than their intended use.
(b) Landlord, throughout the term of this lease, shall make all
necessary repairs to the Premises and other improvements located on the
Property; provided, however, that Landlord shall have no responsibility to
make any repairs unless and until Landlord receives written notice of the
need for such repair. Landlord shall keep and maintain all common areas of
the Property and any sidewalks, parking areas, curbs and access ways
adjoining the Property in a clean and orderly condition, free of
accumulation of dirt, rubbish, snow and ice, and shall keep and maintain
all landscaped areas in a neat and orderly condition.
(c) Repairs and replacements to the Premises and the Property
arising out of or caused by Tenant's use, manner of use or occupancy of the
Premises or by Tenant's installation in or upon the Premises or by any act
or omission of Tenant or any employee, agent, contractor, or invitee of
Tenant shall be made at the sole cost and expense of Tenant. Tenant shall
not bear the expense of any repairs or replacements to the Premises or the
Property arising out of or caused by any other Tenant's use, manner of use
or occupancy of the Property or by any other Tenant's installation in or
upon the Property, or by any act or omission of any other Tenant or any
other Tenant's employees, agents, contractors or invitees.
9. Utilities.
(a)
(b)
10. Janitorial Services. Landlord will provide Tenant with trash
removal and janitorial services pursuant to a cleaning schedule attached
hereto as Exhibit D.
11. Governmental Regulations.
(a) Tenant shall not violate any laws, ordinances, notices,
orders, rules, regulations or requirements of any federal, state or
municipal government or any department, commission, board or officer
thereof, or of the National Board of Fire Underwriters of any other body
exercising similar functions, relating to the Premises or to the use or
manner of use of the Property.
(b) Excepting specifically these capital improvements which
Landlord is to complete pursuant to Article 2 and Exhibit C, Tenant shall
pay a pro rata share of capital improvements which Landlord shall install
or construct in compliance with governmental requirements, or as energy
saving devices. Such pro rata share shall be determined as if such capital
improvement had a useful life of ten (10) years and that Tenant shall only
have to pay for the portion of the useful life of the capital improvement
which within the term or any extended term of this lease. Tenant shall
thus make payments in equal annual installments for such capital
improvements each annual payment to be equal to Tenant's share of one-tenth
(1/10) of the cost of the capital improvements, including any interest or
finance charges thereon until the term or any renewal thereof shall expire
or until the cost of the improvement has been fully paid for, whichever
first occur; such payments shall be computed by Landlord at the time of
installation of the capital improvement in the same manner as Landlord
makes computations of Tenant's share of the annual operating costs pursuant
to Paragraph 5(d)(ii) hereof.
12. Signs. Landlord will place Tenant's name and suite number on the
Building standard sign. Except for signs which are located wholly within
the interior of the Premises and which are not visible from the exterior of
the Premises, no signs shall be placed erected, maintained or painted at
any place upon the Premises or the Property. Provided, however, the Tenant
may erect signage outside of the Building consistent with the signage
located outside of Four Country View Road, as of the effective date of this
lease.
13. Alterations, Additions and Fixtures.
(a) Subject to the provisions of Article 14 hereof, Tenant shall
have the right to install in the Premises any trade and or other fixtures
from time to time during the term of this lease; provided, however, that no
such installation or removal thereof shall affect the structural portion of
the Premises and that Tenant shall repair and restore any damage or injury
to the Premises or the Property caused thereby.
(b) Tenant shall not make or permit to be made any alternations,
improvements or additions to the Premises or Property without on each
occasion first presenting to Landlord plans and specifications therefor and
obtaining Landlord's prior written consent thereto. If Landlord shall
consent to any such proposed alternations, improvements or additions, then
Tenant shall make the proposed alterations, improvements and additions at
Tenant's sole cost and expense provided that: (i) Tenant supplies any
necessary permits and certificates or insurance therefor; (ii) such
alterations and improvements do not impair the structural strength of the
Building or any other improvements or reduce the value of the Property;
(iii) Tenant shall take or cause to be taken all steps that are required by
Article 14 hereof and that are required or permitted by law in order to
avoid the imposition of any mechanic's, laborer's or materialman's lien
upon the Premises, Building or Lot; (iv) Tenant shall use a contractor
approved by Landlord not to be unreasonably withheld or delayed; and (v)
the occupants of the Building and of any adjoining real estate owned by
Landlord are not annoyed or disturbed by reason thereof. Any and all
alternations, improvements and additions to the Property which are
constructed, installed or otherwise made by Tenant shall be the property of
Tenant until the expiration or sooner termination of this lease; at that
time all such alterations and additions shall remain on the Property and
become the property of Landlord without payment therefor by Landlord;
unless, upon the termination of this lease, Landlord shall give written
notice to Tenant to remove the same; in which event Tenant will remove such
alterations, improvements and additions, and repair and restore any damage
to the Property caused by the installation or removal thereof.
14. Mechanics' Liens. Tenant shall promptly pay any contractors and
materialmen who supply labor, work or materials to Tenant at the Premises
of the Property so as to minimize the possibility of a lien attaching to
the Premises or the Property. Tenant shall take all steps permitted by law
in order to avoid the imposition of any mechanic's, laborer's or
materialman's lien upon the Premises, the Property or the Lot. Should any
such lien or notice of lien be filed for work performed for Tenant other
than by Landlord, Tenant shall bond against or discharge the same within
fifteen (15) days after the lien or claim is filed or formal notice of said
lien or claim has been issued regardless of the validity of such lien or
claim. Nothing in this lease is intended to authorize Tenant to do or
cause any work, or labor to be done or any materials to be supplied for the
account of Landlord, all of the same to be solely for Tenant's account and
at Tenant's risk and expense. Throughout this lease the term "mechanic's
lien" is used to include any lien, encumbrance or charge levied or imposed
upon the Premises or the Property or any interest therein or income
therefrom on account of any mechanic's, laborer's or materialman's lien or
arising out of any debt or liability to or any claim or demand of any
contractor, mechanic, supplier, materialman or laborer and shall include
without limitation any mechanic's notice of intention given to Landlord or
Tenant, any stop order given to Landlord or Tenant, any notice of refusal
to pay naming Landlord or Tenant and any injunction or equitable action
brought by any person entitled to any mechanic's lien.
15. Landlord's Right of Entry.
(a) Tenant shall permit Landlord and the authorized
representatives of Landlord and of any mortgagee or any prospective
mortgagee to enter the Premises at all reasonable times for the purpose of
(i) inspecting them or (ii) making any necessary repairs thereto or to the
Property and performing any work therein. During the progress of any work
on the Premises or the Property, Landlord will use reasonable efforts not
to inconvenience Tenant, but shall not be liable for inconvenience,
annoyance, disturbance, loss of business or other damage to Tenant by
reason of making any repair or by bringing or storing materials, supplies,
tools and equipment in the Premises during the performance of any work, and
the obligations of Tenant under this lease shall not be thereby affected in
any manner whatsoever.
(b) Landlord shall have the right at all reasonable times to
enter and to exhibit the Premises for the purpose of sale or mortgage, and
during the last nine (9) months of the term of this lease, to enter and to
exhibit the Premises to any prospective tenant.
16. Damage by Fire or Other Casualty.
(a) If the Premises or Building shall be damaged or destroyed by
fire or other casualty, Tenant shall promptly notify Landlord, and
Landlord, subject to the mortgagee's consent and to the conditions set
forth in this Article 16, shall repair, rebuild or replace such damage and
restore the Premises to substantially the same condition in which they were
immediately prior to such damage or destruction; provided, however, that
Landlord shall only be obligated to restore such damage which is covered by
the fire and other extended coverage insurance policies.
(b) The work shall be commenced promptly and completed with due
diligence in a good and workmanlike manner , taking into account the time
required by Landlord to effect a settlement with, and procure insurance
proceeds from, the insurer, and for delays beyond Landlord's reasonable
control.
(c) The net amount of any insurance proceeds (excluding proceeds
received pursuant to a rental coverage endorsement) recovered by reason of
the damage or destruction of the Building in excess of the cost of
adjusting the insurance claim and Collecting the insurance proceeds (such
excess amount being hereinafter called the "net insurance proceeds") shall
be applied towards the reasonable cost of restoration. if in Landlord's
sole opinion the net insurance proceeds will not be adequate to complete
such restoration, Landlord shall have the right to terminate this lease and
all the unaccrued obligations of ?lie parties hereto by sending a written
notice of this termination to Tenant, the notice to specify a termination
date no less then ten (10) days after Its transmission; provided, however,
(flat except during the last two (2) years of the term, Tenant may require
Landlord to withdraw the notice of termination by agreeing to pay the cost
of restoration in excess of the net insurance proceeds and by giving
Landlord adequate security for such payment prior to the termination date
specified in Landlord's notice of termination. If the net insurance
proceeds are more than adequate, the amount by which the net insurance
proceeds exceed the cost of restoration will be retained by Landlord or
applied to repayment of any mortgage secured by tile Premises.
(d) Landlord's obligation or election to restore the Premises
under this Article shall not include the repair, restoration or replacement
of the mixtures, improvements, alterations, furniture or any other property
owned, installed, made by, or in the possession of Tenant.
See attached Articles 16(e) and 16(f)
17. Non-Abatement of Rent. Except E6 otherwise expressly provided as
to damage by fire or by any other casualty in Paragraph 16 (e) and as to
condemnation in Paragraphs 19 (a) and (b) there shall be no abatement or
reduction of the minimum rent, additional rent or other sums payable
hereunder for any cause whatsoever, and this lease shall not terminate, and
Tenant shall not be entitled to surrender the Premises.
18. Indemnification of Landlord. Tenant will indemnify Landlord and
save Landlord harmless from and against any and all claims, actions,
damages, liability and expense (including without limitation fees of
attorneys, investigators and experts) in connection with loss of life,
personal injury or damage to property caused to any person in or about the
Premises or arising out of the occupancy or use by Tenant of the Premises
or any part thereof or occasioned by any act or omission of Tenant, its
agents, contractors, employees, licensees or invitees; unless such loss,
injury or damage was caused by the negligence of Landlord, its agents,
contractors, employees, licensees or invitees. Without limiting the
foregoing, Tenant will forever release and hold Landlord harmless from all
claims arising out of damage to Tenant's property unless such damage occurs
as a result of landlord's failure to make repairs after having received
written notice of the need for such repair. In case any such claim, action
or proceeding is brought against Landlord, upon notice from Landlord and at
Tenant's sole cost and expense, Tenant shall resist or defend such claim,
action or proceeding or shall cause it to be resisted or defended by an
insurer.
19. Condemnation.
(a) Termination. (i) If all of the Premises are covered by a
condemnation; or (ii) if any part of the Premises is covered by a
condemnation and the remainder thereof is insufficient for the reasonable
operation therein of Tenant's business; or, (iii) subject to the provisions
of Paragraph (b)(i) hereof, If any of the Property is covered by a
condemnation and, in Landlord's sole opinion, it would be impractical or
the condemnation proceeds are insufficient to restore the remainder of the
Property; then, in any such event, this lease shall terminate and all
obligations hereunder shall cease as of the date upon which possession is
taken by the condemnor and the rent herein reserved shall be apportioned
and paid in full by Tenant to Landlord to that date and all rent prepaid
for periods beyond that date shall forthwith be repaid by Landlord to
Tenant.
(b) Partial Condemnation.
(i) If there is a partial condemnation and Landlord decides
to terminate pursuant to Paragraph (a) hereof, except during the last two
(2) years of the term, Tenant may require Landlord to withdraw its notice
of termination by: (A) giving Landlord written notice thereof within ten
(10) days from transmission of Landlord's notice to Tenant of Landlord's
intention to terminate, (B) agreeing to pay the cost of restoration in
excess of the condemnation proceeds reduced by those sums expended by
Landlord in collecting the condemnation proceeds, and [C] giving Landlord
adequate security for such payment within such ten (10) day period.
(ii) If there is a partial condemnation and this lease has
not been terminated pursuant to Paragraph (a) hereof, Landlord shall
restore the Building and the improvements which are part of the Premises to
a condition and size as nearly comparable as reasonably possible to the
condition and size thereof immediately prior to the date upon which
possession shall have been taken by the condemnor. If the condemnation
proceeds are more than adequate to cover the cost of restoration and the
Landlord's expenses in, collecting the condemnation proceeds, any excess
proceeds shall be retained by Landlord or applied to repayment of any
mortgage secured by the Premises.
(iii) If there is a partial condemnation and this lease has
not been terminated by the date upon which the condemnor shall have
obtained possession, the obligations of Landlord and Tenant under this
lease shall be unaffected by such condemnation except that there shall be
an equitable abatement for the balance of the term of the minimum annual
rent according to the value of the Premises before and after the date upon
which the condemnor shall have taken possession. In the event that the
parties are unable to agree upon the amount of such abatement, either party
may submit the issue to arbitration.
See Article 19(c) attached hereto
(d) Temporary Taking. If the condemnor should take only the
right to possession for a fixed period of time or for the duration of an
emergency or other temporary condition, then notwithstanding anything
hereinabove provided, this lease shall continue in full force and effect
without any abatement of rent, but the amounts payable by the condemnor
with respect to any period of time prior to the expiration or sooner
termination of this lease shall be paid by the condemnor or Landlord and
the condemnor shall be considered a subtenant of Tenant. Landlord shall
apply the amount received from the condemnor applicable to the rent due
hereunder net of costs to Landlord for the collection thereof, or as much
thereof as may be necessary for the purpose, toward the amount due from
Tenant as rent for that period; and , Tenant shall pay to Landlord any
deficiency between the amount thus paid by the condemnor and the amount of
the rent, or Landlord shall pay to Tenant any excess of the amount of the
award over the amount of the rent.
20. Quiet Enjoyment. Tenant, upon paying the minimum rent, additional
rent and other charges herein provided for, and observing and keeping all
covenants, agreements and conditions of this lease on its part to be kept,
shall quietly have and enjoy (lie Premises during the term of this lease
without hindrance or molestation by anyone claiming by or through Landlord,
subject, however, to the exceptions, reservations and conditions of this
lease. The Landlord hereby reserves the right to prescribe, at its sole
discretion, reasonable rules and regulations (herein called the "Rules and
Regulations") having uniform applicability to all tenants of the building
and governing the use and enjoyment of the Premises and the remainder of
the Property; provided that the Rules and Regulations shall not materially
interfere with the Tenant's use and enjoyment of the Premises in accordance
with the provisions of this lease for general office purposes. The Tenant
shall adhere to (lie Rules and Regulations and shall cause its agents,
employees, invitees, visitors and guests to do so. A copy of the Rules and
Regulations in effect on the date hereof Is attached hereto as Exhibit "F".
21. Assignment and Subletting.
(a) Restricted Assignment. Tenant shall not assign, mortgage,
pledge or encumber this lease, or sublet the whole or any part of the
Premises, without the prior written consent of Landlord which consent shall
not be unreasonably withheld. This prohibition against assigning or
subletting shall be construed to include a prohibition against any
assignment or subletting by operation of law, and/or a transfer by any
person or persons controlling Tenant on the date of the lease of such
control to a person or persons not controlling Tenant on the date of the
lease. In the event of any assignment of this lease made with or without
Landlord's consent, Tenant nevertheless shall remain liable for the
performance of all of the terms, conditions and covenants of this lease and
shall require any assignee to execute and deliver to Landlord an assumption
of liability agreement in form satisfactory to Landlord, including an
assumption by the assignee of all of the obligations of Tenant and the
assignees ratification of and agreement to be bound by all the provisions
of this lease. Landlord shall be entitled to, and Tenant shall promptly
remit to Landlord 50%, any profit which tray inure to the benefit of Tenant
as a result of any subletting of the Premises or assignment of this lease,
whereby not consented to by Landlords. See continuation of Article 21(a)
attached hereto.
b) Percentage Agreements. It is agreed that Tenant shall not
enter into any assignment, sublease, license, concession or other agreement
for use, occupancy or utilization of the whole or any part of the Premises
with or without Landlord's consent, which provides for rental or other
payment for such use, occupancy or utilization based, in whole or in part
on the net income or profits derived by any person or entity from the space
leased, used, occupied or utilized (other than an amount based on a fixed
percentage or percentages of receipts or sales), and any such purported
assignment, sublease, license, concession or other agreement shall be
absolutely void and ineffective as a conveyance of any right or interest in
the possession, use, occupancy or utilization of any part of the Premises.
22. Subordination. This lease and Tenant's rights hereunder shall be
subject and subordinate at all times in lien and priority to any first
mortgage or other primary encumbrance now or hereafter placed upon or
affecting the Premises, and to any second mortgage or encumbrance with the
consent of the first mortgagee, and to all renewals, modifications,
consolidations and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant. Tenant shall execute and deliver
upon demand any further instrument or instruments confirming the
subordination of this lease to the lien of any such first mortgage or to
the lien of any other mortgage if requested to do so by Landlord with the
consent of the first mortgagee, and any further instrument or instruments
of atonement that may be desired by any such mortgagee or Landlord.
Notwithstanding the foregoing, any mortgagee may at any time subordinate
its mortgage to this lease, without Tenant's consent, by giving notice in
writing to Tenant, and thereupon this lease shall be deemed prior to such
mortgage without regard to their respective dates of execution and
delivery, and in that event such mortgagee shall have (lie same rights with
respect to this lease as though this lease had been executed prior to the
execution and delivery of the mortgage and had been assigned to such
mortgagee.
23. Memorandum of Lease; Tenant's Certificate.
(a) Tenant, at any time and from time to time and within ten (10)
days after Landlord's written request, shall execute, acknowledge and
deliver to Landlord a short form or memorandum of this lease for recording
purposes.
(b) Tenant, at any time and from time to time and within 10
(10)days after Landlord's written request, so long as there are no material
and substantial defects in the Premises which Landlord is obligated to
remedy and which Landlord is not proceeding to remedy and so long as
Landlord is not otherwise In default of this lease, shall execute,
acknowledge and deliver to Landlord a written instrument in recordable form
certifying that this lease is unmodified and in full force and effect (or,
if there have been modifications, that it is in full force and effect as
modified and stating the modifications); stating that the improvements
required by Article 2 hereof have been completed; certifying that Tenant
has accepted possession of the Premises; stating the date on which the term
of the lease commenced and the dates to which minimum rent, additional rent
and other charges have been paid in advance, if any; stating that to the
best knowledge of the signer of such instrument Landlord Is not in default
of this lease; stating any other fact or certifying any other condition
reasonably requested by Landlord or required by any mortgagee or
prospective mortgagee or purchaser of the Premises or any interest therein;
and stating that it is understood that such instrument may be relied upon
by any mortgagee or prospective mortgagee or purchaser of the or an
interest therein or by any assignee of Landiord's interest in this lewe or
by any assignee of any mortgagee. The foregoing instrument share be
addressed to Landlord and to any mortgagee, prospective mortgagee,
purchaser or other party specified by Landlord.
24. Curing Tenant's Defaults. If Tenant shall be in default in the
performance of any of its obligations hereunder, Landlord, without any
obligation to do so, in addition to any other rights it may have in law or
equity, may elect to cure such default on behalf of Tenant after written
notice (except in the case of emergency) to Tenant. Tenant shall reimburse
Landlord upon demand for any sums paid or costs incurred by Landlord In
curing such default, Including interest thereon from the respective dates
of Landlord's making the payments and incurring such costs, which sums and
costs together with interest thereon shall be deemed additional rent
payable promptly upon being billed therefor.
25. Surrender.
(a) Subject to the terms of Paragraphs 13 (b) and 16 (c) hereof
at the expiration or earlier termination of the term hereof, Tenant shall
promptly yield up, clean and neat, and in the same condition, order and
repair In which they are required to be kept throughout the term hereof,
the Premises and all improvements, alterations and additions thereto, and
all mixtures and equipment servicing the Building, ordinary wear and tear
excepted.
(b) Tenant, or any person claiming through Tenant, shall continue
to occupy the Premises after the expiration or earlier termination of the
term or any renewal thereof, such occupancy shall be deemed to be under a
month-to-month tenancy tinder file same terms and conditions set forth In
this lease; except, however, that the minimum annual rent during such
continued occupancy shall be double the amount set forth in Paragraphs 5
(a) and (b) hereof. Anything to the contrary notwithstanding, any holding
over by Tenant without Landlord's prior written consent shall constitute a
default hereunder and shall be subject to all the remedies set forth in
Article 26 hereof.
26. Defaults - Remedies.
(a) Defaults. It shall be an event of default:
(i) If Tenant does not pay in full when due and without
demand any and all installments of minimum rent or additional rent or any
other charges or payments whether or not herein included as rent; or
(ii) If Tenant violates or fails to perform or otherwise
breaches any agreement, term, covenant or condition herein contained; or
(iii) If Tenant abandons the Premises or removes or attempts
to remove Tenant's goods or property therefrom other than in the ordinary
course of business without having first paid to Landlord in full all
minimum rent, additional rent and other charges that may have become due as
well as all which will become due thereafter; or
(iv) If Tenant becomes insolvent or bankrupt in any sense or
makes an assignment for the benefit of creditors or offers a composition or
settlement to creditors, or If a petition in bankruptcy or for
reorganization or for an arrangement with creditors under any federal or
state law is riled by or against Tenant, or a bill in equity or other
proceeding for the appointment of a receiver, trustee, liquidator,
custodian, conservator or similar official for any of Tenant's assets is
commenced, or if any of the real or personal property of Tenant shall be
levied upon by any sheriff, marshal or constable; provided, however, that
any proceeding brought by anyone other than the parties to this lease under
any bankruptcy, reorganization arrangement, insolvency, readjustment,
receivership or similar law shall not constitute a default until such
proceeding, decree, judgment or order has continued unstayed for more than
sixty (60) consecutive days.
(v) If any of the events enumerated in Paragraph (a) (iv) of
this Article shall happen to any guarantor of this lease;
(b) Remedies. Then, and in any such event, Landlord shall have
the following rights:
(i) To charge a late payment penalty of rive (501o) percent
of any amount owed to Landlord pursuant to this lease which is not paid
within rive (5) days of the date which is set forth in the lease if a date
is specified, or, if R date is not specified, within thirty (30) days of
the mailing of a bill therefor by Landlord. If Landlord incurs a penalty
in connection with any payment which Tenant has failed to make within the
times required in this lease, Tenant shall pay Landlord, in addition to
such sums, the full amount of such penalty incurred by Landlord.
(ii) To accelerate the whole or any part of the rent for the
entire unexpired balance of the term of this lease, as well as all other
charges, payments, costs and expenses herein agreed to be paid by Tenant,
and any rent or other charges, payments, costs and expenses if so
accelerated shall, In addition to any and all installments of rent already
due and payable and in arrears, and any other charge or payment herein
reserved, Included or agreed to be treated or collected as required any
other charge, expense or cost herein agreed to be paid by Tenant which may
be due and payable and in arrears, be deemed due and payable as if, by the
terms and provisions of (his lease, such accelerated rent and other
charges, payments, costs and expenses were on that date payable in advance.
(iii) To enter the Premises and without further demand or
notice proceed to distress and sale of the goods, chattels and personal
property there found, to levy the rent and other charges herein payable as
rent, and Tenant shall pay all costs and officers' commissions which are
permitted by law, including watchmen's wages and sums chargeable to
Landlord, and further including rive percent (5'7o) commissions to the
constable or other person making the levy, and in such case all costs,
officers' commissions and other charges shall immediately attach and become
part of the claim of Landlord for rent, and any tender of rent without said
costs, commissions and charges made after the issuance of a warrant of
distress, shall no( be sufficient to satisfy the claim of Landlord.
(iv) To re-enter the Premises, together with all additions,
alterations and improvements, and, at the option of Landlord, remove all
persons and all or any property therefrom, either by summary dispossess
proceedings or by any suitable action or proceeding at law or by force or
otherwise, without being liable for prosecution or damages therefor, and
repossess and enjoy the Premises. Upon recovering possession of the
Premises by reason of or based upon or arising out of a default on the part
of Tenant, Landlord may, at Landlord's option, either terminate this lease
or make such alterations and repairs as may be necessary in order to relet
the Premises and relet the Premises or any part or parts thereof, either in
Landlord's name or otherwise, for a term or terms which may, at Landlord's
option, be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and at such rent or rents
and upon such other terms and conditions as in Landlord's sole discretion
may seem advisable and to such person or persons as may in Landlord's
discretion see fit best; upon each such reletting all rents received by
Landlord from such reshall be applied: first, to the payment of any costs
and expenses of such reletting, including brokerage fees and attorney's
fees and all costs of such alterations and repairs; second, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord;
third, to the payment of rent due and unpaid hereunder; and the residue, if
any, shall be held by Landlord and applied in payment of future rent as it
may become due and payable hereunder. If such rentals received from such
reletting during any month shall be less than that to be paid during that
month by Tenant, Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly, No such re-entry or taking
possession of the Premises or the making of alterations or improvements
thereto or the reletting thereof shall be construed as an election on the
part of Landlord to terminate this lease unless written notice of such
intention be given to Tenant. Landlord shall in no event be liable in any
way whatsoever for failure to relet the Premises or, in the event that the
Premises or any part or arts thereof are relet, for failure to collect the
rent thereof under such reletting. Tenant, for Tenant and Tenant's
successors and assigns, Hereby irrevocably constitutes and appoints
Landlord Tenant's and their agent to collect the rents due and to become
due under all subleases of the Premises or any parts thereof without in any
way affecting Tenant's obligation to pay any unpaid balance of rent due or
to become due hereunder. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this
lease for such previous breach.
(v) To terminate this lease and the term hereby created
without any right on the part of Tenant to waive the forfeiture by payment
of any sum due or by other performance of any condition, term or covenant
broken. Whereupon Landlord shall be entitled to recover, in addition to
any and all sums and damages for violation of Tenant's obligations
hereunder in existence at the time of such termination, damages for
Tenant's default in an amount equal to the amount of the rent reserved for
the balance of the term of this lease, as well as all other charges,
payments, costs and expenses herein agreed to be paid by Tenant, all
discounted at the rate of six percent (6%) per annum to their then present
worth, less the fair rental value of the Premises for the remainder of said
term, also discounted at the rate or six percent (6%) per annum to Its then
present worth, all of which amount shall be immediately due and payable
from Tenant to Landlord.
(vi) Whenever not prohibited by the law of the state in which
the Property is located, when this lease and the term or any extension or
renewal thereof shall have been terminated on account of any default by
Tenant, or when the term hereby created or any extension or renewal thereof
shall have expired, it shall be lawful for any attorney of any court of
record to appear as attorney for Tenant as well as for all persons claiming
by, through or under Tenant, and to sign an agreement for entering in any
competent court an amicable action in rejection and judgment against Tenant
and all persons claiming by, through or under Tenant and therein confess
judgment for the recovery by Landlord of possession of the Premises, for
which this lease shall be his sufficient warrant; thereupon, if Landlord so
desires, an appropriate writ of possession may issue forthwith, without any
prior writ or proceeding whatsoever, and provided that if for any reason
after such action shall have been commenced it shall be determined and
possession of the Premises remain in or be restored t,) Tenant, Landlord
shall have the right for the same default and upon any subsequent default
or defaults, or upon the termination or this lease or Tenant's right of
possession as herein be forced set forth, to bring one or more further
amicable action or actions as herein before set forth to recover possession
of the Premises and confess judgment for the recovery of possession of the
Premises as herein before provided.
(vii) Whenever not prohibited by the law of the state in
which the Property is located, if Tenant shall default in the hereunder b
Tenant, Tenant hereby authorizes and empowers any prothanatory or attorney
of any court of record to appear for Tenant in any and all actions which
may be brought for said rent and said other sums; and to sign for Tenant an
agreement for entering in any competent court an amicable action or actions
for the recovery of said rental and other sums; and in said suits or in
said amicable action or actions to confess judgment against Tenant for all
or any part of said rental and said other sums, including, but not limited
to, the amounts due from Tenant to Landlord under Paragraphs (b)(i), (ii),
(iii) or (iv) above; and for interest and costs, together with an
attorney's commission for collection of five percent (5%). Such authority
shall not be exhausted by one exercise thereof, but judgment may be
confessed as aforesaid from time to time as often assay of said rental and
other sums shall fall due or be in arrears, and such powers may be
exercised as well after the expiration of the initial term of this lease
and during any extended or renewal term of this lease and after the
expiration of any extended or renewal term of this lease.
(c) Non-Waiver. No waiver by Landlord of any breach by Tenant of
any of Tenant's obligations, agreements or covenants herein shall be a
waiver of any subsequent breach or of any obligation, agreement or
covenant, nor shall any forbearance by Landlord to seek a remedy for any
breach by Tenant be a waiver by Landlord of any rights and remedies with
respect to such or any subsequent breach.
(d) Grace Period. Notwithstanding anything hereinabove stated,
except in the case of emergency set forth in Article 24 and except in the
event of any default enumerated in Paragraphs (a) (iii), (iv) and (v) of
this Article, neither party hereto will exercise any right or remedy I
provided for in this lease or allowed by law because of any default of the
owner, except those remedies contained ill Paragraph (6)(1) of this Article
unless such party shall have first given ten (10) days written notice
thereof to the defaulting party, and the defaulting party shall have failed
to cure the default within such period; provided, however, that if the
default consists of something other than the failure to pay money which
cannot reasonably be cured within ten (10) days, neither party hereto will
exercise any such right or remedy if the defaulting party begins to cure
the default within the ten (10) days and continues actively and diligently
in good faith to completely cure said default; and further provide that
Landlord shall not be required to give such ten (10) days notice more than
two(2)times during any twelve(12)month period. *See continuation of
Article 26(d) attached hereto.
(e) Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to Landlord is 'Intended to be exclusive of any
other right or remedy provided herein or by law, but each shall be
cumulative and in addition to every other right or remedy given herein or
now or hereafter existing at law or in equity or by statute.
27. Condition of Title and of Premises. Tenant represents that the
Property, the Lot and the Premises, the title thereto, the zoning thereof,
the street or streets, sidewalks, parking areas. curbs and access ways
adjoining them, any surface and subsurface conditions thereof, and the
present uses and non-uses thereof, have been examined by Tenant, and Tenant
accepts them in the condition or state in which they now are, or any of
them now is, without relying on any representation, covenant or warranty,
express or implied, in fact or in law, by., Landlord and without recourse
to Landlord, as to the title thereto, the encumbrances thereon, (lie
appurtenances thereto, file nature, condition or usability thereof or the
use or uses to which the Premises and the Property or any part thereof may
be put, except as to work to be performed by Landlord pursuant to Article 2
hereof. Tenant's occupancy of the Premises shall constitute acceptance of
the work performed by Landlord pursuant to Article 2 hereof.
28. Interpretation.
(a) Citations. The captions In this lease are for convenience
only find are not a part of this lease on(] do not in any way define,
limit, describe or amplify the terms and provisions of this lease or (lie
scope or intent thereof.
(b) Entire Agreement. This lease represents the entire agreement
between the parties hereto and there are no collateral or oral agreements
or understandings between Landlord and Tenant with respect to the Premises
or the Property. No rights, easements or licenses -.)re acquired in the
Property or any land adjacent to the Property by Tenant by implication or
otherwise except as expressly set forth in the provisions of this lease.
This lease shall not be modified in any manner except by an instrument in
writing executed by the parties. Tenant agrees to make such changes to
this lease as are required by any mortgagee, provided such changes do not
substantially affect Tenant's rights and obligation hereunder. The
masculine (or neuter) pronoun, singular number, shall include the
masculine, feminine and neuter genders and the singular and plural number.
(c) Exhibits. Each writing or plan referred to herein as being
attached hereto as an Exhibit or otherwise designated herein as an Exhibit
hereto is hereby made a part hereof.
(d) Covenants. The terms, covenants and obligations set forth
herein all constitute conditions and not covenants of this lease.
(f) Interest. Wherever interest is required to be paid
hereunder, such interest shall be at the highest rate permitted under law
but not in excess of fifteen percent (15%).
29. Definitions.
(a) "Landlord". The word "Landlord" is used herein to include
the Landlord named above as well as its heirs, successors and assigns, each
of whom shall have the same rights, remedies, powers, authorities and
privileges as he would have had had he originally signed this lease as
Landlord. Any such person, whether or not named herein, shall have no
liability hereunder after he ceases to hold title to the Premises except
for obligations which may have theretofore accrued. Neither Landlord nor
any principal of Landlord nor any owner of the Building or the Lot, whether
disclosed or undisclosed, shall have any personal liability with respect to
any of the provisions of this lease or the Premises, and If Landlord is In
breach or default with respect to Landlord, obligations under this lease or
Otherwise, Tenant shall look solely to the equity of Landlord-in the
Premises for the satisfaction of Tenant's remedies.
(b) "Tenant". The word "Tenant" is used herein to include the
Tenant named above as well as its successors and assigns, each of which
shall be under the same obligations, liabilities and disabilities and each
of which shall have the same rights, privileges and powers as it would have
possessed had it originally signed this lease- as Tenant. Each and every
of the persons named above as Tenant shall be bound formally and severally
by the terms, covenants and agreements contained herein. However, no such
rights. privileges or powers shall inure to the benefit of any assignee of
Tenant immediate or remote, unless the assignment to such assignee is
permitted or has been approved in writing by Landlord. Any notice required
or permitted by the terms of this lease may be given by or to any one of
the persons named above as Tenant, and shall have the same force and effect
as if given by or to all thereof.
(c) "Mortgage" and "Mortgagee". The word "mortgage" is used
herein to include any lien or encumbrance on the Premises or the Property
or on any part of or interest in or appurtenance to any of the (ongoing,
including without limitation any ground lease or ground lease if Landlord's
interest is or becomes a leasehold estate. The word .'mortgagee" is used
herein to include the holder of any mortgage, including any ground lessor
if Landlord's interest is or becomes a leasehold estate. Wherever any
right is given to a mortgagee, that right may be exercised on behalf of
such mortgage" by any representative or servicing agent of such mortgagee.
(d) "Person". The word "person" is used herein to include a
natural person, a partnership, a corporation, an association, and any other
form of business association or entity.
(e) "Date of this Lease". The "date of this lease" shall be the
date upon which this lease has been fully executed by both parties.
(f) "Index". The work "index" is used herein to mean the U.S.
City Average Consumer Price Index for Urban Wage Earners and Clerical
Workers (revised series) 1982-1984 = 100 issued from time to time by the
Federal Bureau of Labor Statistics or any successor agency that shall issue
the index or any other measure hereafter employed by the Federal Bureau of
Labor Statistics or any successor agency in lieu of such index. If there
be any controversy as to the measure to be substituted, then the
controversy shall be resolved by arbitration. The arbitrators shall be
guided by the intention of the parties hereto to modify the minimum annual
rent to reflect upward changes in the cost of living. The fees and
expenses of the arbitration shall be borne by Landlord and Tenant.
30. Notices. All notices, demands, requests, consents, certificates
and waivers required or permitted hereunder from either party to the other
shall t in writing and sent by United States certified mail, return receipt
requested, postage prepaid. Notices to Tenant shall be addressed to
Systems & Computer Technology Corporation, four Country View Rd., Malvern,
PA 19355 attention Chief Financial Officer, copy t General Counsel at the
same address. Or after the Commencement Date, to the Premises. Notices to
Landlord shall be addressed to 65 Valley Stream Parkway, Suite 100,
Malvern, PA 19355 with a copy to any mortgagee or other party designated by
Landlord. Either party may at any time, in the manner set forth for giving
notices to the other, specify a different address to which notices to it
shall be sent.
31. Security Deposit. At the time of signing this lease Tenant shall
deposit with Landlord the sum of Fifty Nine Thousand Eighty Seven Dollars
and 00/100 ($59,087.00) to be retained by Landlord as cash security for the
faithful performance and 'observance by Tenant of the covering, agreements
and conditions of this lease. Notwithstanding anything to the contrary
contained in any law or statute now existing or hereafter passed (i) Tenant
shall not be entitled to any interest whatever on the cash security, (ii)
Landlord shall not be obligated to hold the cash security in trust or in a
separate account, and (iii) Landlord shall have the right to commingle the
cash security with its other funds. Landlord may use, apply or retain the
whole or any part of the cash security to the extent required for the
payment of any minimum rent, any additional rent or any ()(her slims
payable hereunder as to which Tenant is in default or to the extent
required for the reimbursement to Landlord of any sum which Landlord may
expend or may be required to expend by reason of Tenant's default in
respect to any of the covenants, agreements or conditions of this lease.
If Tenant shall fully and faithfully comply with all or the covenants,
agreements and conditions of this lease, the cash security shall be
returned to Tenant after the date Fixed as the expiration of the term of
this lease and surrender of the Premises to Landlord. If the Premises are
sold to a bona ride purchaser, Landlord shall have the right to transfer
the aforesaid cash security to such purchaser, by which transfer Landlord
shall be released from all liability for the return thereof, and Tenant
shall look solely to the new landlord for the return thereof.
32. Additional Articles. The following Additional Articles 33 through
39 attached hereto are hereby made a part and continuation and replacement
of some of the Articles set forth above, which are incorporated herein by.
reference.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
lease and for other good and valuable consideration, and intending to be
legally bound, each party hereto has caused this agreement to be duly
executed under seal.
Date signed:
Landlord: Liberty Property Limited Partnership
7/9/95 By: Liberty Property Trust, Sole General Partner
- ----------------- ---------------------------------------------------
By:
---------------------------------------------------
James J. Mazzarelli, Senior Vice-President
Date signed: Tenant:
July 12, 1995 Systems & Computer Technology Corporation
---------------------------------------------------
By: Eric Haskell, Sr. Vice President
---------------------------------------------------
[Corporate Seal]
CERTIFICATION OF ASSISTANT SECRETARY
ROBIN L. ROSENBERG, as Assistant Secretary of Systems & Computer Technology
Corporation (the "Company"), does hereby certify that Eric Haskell is the
duly elected Senior Vice President, Finance and Administration of the
Company; that in such capacity, Eric Haskell is duly authorized to execute
agreements on behalf of the Company and that the Company shall be bound by
the terms of agreements so executed; and that Eric Haskell is authorized to
so act on behalf of the Company in his capacity as Senior Vice President,
Finance and Administration and of the Company until such time as his
successor has been duly elected and qualified.
CERTIFIED this 12th day of July, 1995 in the County of Chester,
Commonwealth of Pennsylvania.
Robin L. Rosenberg
Assistant Secretary
SWORN AND SUBSCRIBED BEFORE
ME THIS 12TH DAY OF JULY, 1995
NOTARIAL SEAL -
ROSE MARIE M. O'KEEFE, Notary Public
East Whiteland Twp., Chester County
My Commission Expires Sept. 18, 1997
EXHIBIT "C"
BUILDING IMPROVEMENTS
1. Landlord to repair roof.
2. Landlord to bring building exterior, including entrances, to ADA
standards and resurface and line the parking lot with handicapped
spaces placed per ADA standards.
3. Landlord will replace the steps and landings from the building
perimeter to the curb in a manner consistent with the existing exposed
concrete steps between Buildings Two and Four Country View.
D:\tAREB\84115.EXC
EXHIBIT "D"
CLEANING SCHEDULE
All services and materials specified in this Exhibit shall be furnished at
the sole cost and
expense of Landlord.
I. OFFICE AREA:
A. Nightly (Monday through Friday - Holidays excepted):
1. Empty wastepaper baskets, ashtrays, and refuse receptacles.
2. Dust sweep hard surface flooring.
3. Vacuum carpeted areas and rugs.
4. Hand dust and wipe clean -with treated cloths all horizontal
surfaces including furniture, desk equipment, telephones,
windowsills and induction unit tops within normal f each.
5. Clean and sanitize all drinking fountains.
B. Weekly:
1. Remove finger marks from stairways, elevator and utility
closet doors and light switches.
C. Monthly
1. Wash and wax resilient tile floors.
D. Quarterly
1. Do high dusting not reached in daily cleaning, to include:
a) pictures, frames, charts, graphs, and similar wall
hangings; and
b) all vertical surfaces, such as walls, partitions, doors and
bucks not reached in nightly cleaning.
E. Annually:
1. Wash all light fixtures
2. Dry clean drapes or wash venetian blinds, whichever is
supplied by Landlord on exterior windows.
II. LAVATORIES:
A. Nightly:
1. Sweep and wash floors with approved germicidal detergent
solution
2. Wash and polish all mirrors, powder shelves, dispensers,
receptacles, bright work, flushometers, piping and toilet
seat hinges.
3. Wash both sides of toilet seats, wash basins, bowl and
urinals with approved germicidal detergent solution
4. Remove finger marks and smudges from toilet partitions,
ventilating grills, and tile walls.
5. Empty and clean towel and sanitary disposal receptacles,
remove waste to disposal areas.
6. Replenish paper towel, toilet tissue, soap and sanitary
napkin dispensers..
III. WINDOW WASHING:
A. Quarterly:
1. Wash all exterior window glass, inside and outside surfaces,
and all interior glass partitions.
IV. PEST EXTERMINATION:
A. Maintain pest extermination as needed.
RULES AND REGULATIONS
1. The sidewalks, lobbies, passages, elevators and stairways shall
not be obstructed by Lessee or used by Lessee for any purpose other than
ingress and egress from and to Lessee's offices. Lessor shall in all cases
retain the right to control or prevent access thereto of all persons whose
presence, in the judgment of Lessor, shall be prejudicial to the safety,
peace, character, or reputation of the Building or of any of the tenants.
2. The toilet rooms, water closets, sinks, faucets, plumbing or
other service apparatus of any kind shall not be used by Lessee for any
purposes other than those for which they were installed, and no sweepings,
rubbish, rags, ashes,chemicals or other refuse or injurious substances
shall be placed therein or used in connection therewith by Lesseeor left by
Lessee in the lobbies, passages, elevators or stairways.
3. Nothing shall be placed by Lessee on the outside of the Building
or on its window sills or projections. Skylights, windows, doors and
transoms shall not be covered or obstructed by Lessee, and no window
shades, blinds, curtains, screens, storm windows, awnings or other
materials shall be installed or placed on any of the windows or in any of
the window spaces, except as approved in writing by Lessor. If Lessor has
installed or hereafter installs any shades, blinds or curtains in the
Premises, Lessee shall not remove them without the prior written consent of
Lessor.
4. No signs, lettering, insignia, advertisement, or no - tice, shall
be inscribed, painted, installed, erected or placed in any portion of the
Premises which may be seen from outside the Building, or on any windows or
on any window spaces or any other part of the outside or inside of the
Building, unless first approved in writing by Lessor. Names on suite
entrances shall be provided by Lessee by Lessor and not otherwise, and at
Lessee's expense. In all instances the lettering is to be of design and
form consistent with the other lettering in the Building, and must first be
approved in writing by Lessor. Lessee will not erect or place or cause or
allow to be erected or placed any stand, booth or showcase or other article
or matter in or upon the Premises and/or the Building without the prior
written consent of Lessor.
5. Lessee shall not place additional locks upon any doors and shall
surrender all keys for all locks at the end of the tenancy.
6. Lessee shall not do or commit, or suffer to be done or committed,
any act or thing whereby, or in consequence whereof, the rights of other
tenants will be obstructed or interfered with, or other tenants will in any
other way be injured or annoyed, or whereby the Building will be damaged.
Lessee shall not use nor keep nor permit to be used or kept in the Building
any matter having an offensive odor, nor any kerosene, gasoline, benzine,
camphene, fuel or other explosive or highly flammable material. No birds,
fish or other animals shall be brought into or kept in or about the
Premises.
7. In order that the Premises may be kept in a good state of
preservation and cleanliness, Lessee shall, during the continuance of its
possession, permit Lessor's employees and contractors and no one else to
clean the Premises unless Lessor otherwise consents in writing. Lessor
shall be in no way responsible to Lessee for any damage done to furniture
or other effects of Lessee or others by any of Lessor's employees, or any
other person, or for any loss of Lessee's employees, or for any loss of
property of any kind in or from the Premises, however occurring. Lessee
shall see each day that the windows are closed and the doors securely
locked before leaving the Premises.
8. If Lessee desires to introduce signalling, telegraphic,
telephonic, protective alarm or other wires, apparatus or devices, Lessor
shall direct where and how the same are to be placed, and except as so
directed, no installation, boring or cutting shall be permitted. Lessor
shall have the right to prevent and to cut off the transmission of
excessive or dangerous current of electricity or annoyances into or through
the Building or the Premises and to require the changing of wiring
connections or layout at Lessee's expense, to the extent that Lessor may
deem necessary, and further to require compliance with such reasonable
rules as Lessor may establish relating thereto, and in the event of non-
compliance with the requirements or rules, Lessor shall have the right
immediately to cut wiring or to do what it considers necessary to remove
the danger, annoyance or electrical interference with apparatus in any part
of the Building. All wires installed by Lessee must be clearly tagged at
the distributing boards and junction boxes and elsewhere where required by
Lessor, with the number of the office to which said wires lead, and the
purpose for which the wires respectively are used, together with the name
of the concern, if any, operating same.
9. A directory on the ground floor of the Building will be provided
by Lessor, on which the name of Lessee may be placed.
10. No furniture, packages, equipment, supplies or merchandise of
Lessee will be received in the Building, or carried up or down in the
elevators or stairways, except during such hours as shall be designated by
Lessor, and Lessor in all cases shall also have the exclusive right to
prescribe the method and manner in which the same shall be brought in or
taken out of the Building. Lessor shall in all cases have the right to
exclude from the Building heavy furniture, safes and other articles which
may be hazardous or to require them to be located at designated places in
the Premises. Lessee shall not place weights anywhere beyond the safe
carrying capacity of the Building. The cost of repairing any damage to the
Building or the @act caused by taking in or out furniture, safes or any
articles or any damage caused while the same shall be in the Premises,
shall be paid by Lessee.
11. It Without Lessor's prior written consent, nothing shall be
fastened to, nor shall holes be drilled or nails or screws driven into
walls or partitions; nor shall walls or partitions be painted, papered or
otherwise covered or moved in any way or marked or broken; nor shall any
connection be made to electric wires for running fans or motors or other
apparatus, devices or equipment; nor shall machinery of any kind other than
customary small business machines be allowed in the Premises; nor shall
Lessee use any other method of heating, air conditioning or air cooling
than that provided by Lessor. Telephones, switchboards and telephone
wiring and equipment shall be placed only where designated by Lessor, which
approval will not be unreasonably withheld. No mechanics shall be allowed
to work in or about the Building other than those employed by Lessor
without the prior written consent of Lessor first having been obtained.
12. Access may be had by Lessee to the Premises at any reasonable
time. Lessor shall, in no case, be responsible for the admission or
exclusion of an person. In case of invasion hostile attach, insurrection,
mob violence, riot, public excitement or other commotion, explosiojn, fire
or any casualty, Lessor reserves the right to bar or limit access of the
Building for hte safety of occupants or protection of property.
13. Lessor reserves the right to rescind, suspend or modify any rules
or regulations and to make such other reules or regulations as, in Lessor's
reasonable judgment, may from time to time by needful for the safety, care,
maintenance, operation and cleanliness of hte Building, or for the
preservation of good order therein. Notice of any action by Lessor
referred to in this paragraph, given to Lessee, shall have the same force
and effect as if originally made a part of the foregoing lease. But new
rules or regulations will not, however, be unreasonable inconsistent with
the proper and rightful enjoyment of hte Premises by Lessee under the
lease.
14. The use of rooms as sleeping quarters is strictly prohibited at
all times.
15. Lessee shall keep the windows and doors of the Premises,
including those opening on corridors and all doors between rooms or spaces
entitled to receive heating or air conditioning service and rooms and
spaces not entitled to receive such service, closed during the respective
times that the heating or air conditioning system is operating, in order to
conserve the service and effectiveness of theheating or air conditioning
system as the case may be. Lessee shall comply with all reasonable rules
and regulations from time to time promulgated by Lessor to conserve such
services.
16. These rules and regulations are not intended to give Lessee any
rights or claims in the event that Lessor does not enforce any of them
against other tenants or if Lessor does not have the right to enforce them
against any other tenants and such non-enforcement will nto copnstitute a
waiver as to Lessee.
ADDITIONAL ARTICLES ATTACHED TO AND MADE PART OF
AGREEMENT OF LEASE BY AND BETWEEN
LIBERTY PROPERTY LIMITED PARTNERSHIP ("Landlord")
AND SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Tenant")
1. For the purposes of this Lease, the "Occupied Premises" shall
mean. for the twenty-one month period beginning or., the Commencement Date
(the "Preliminary Period") the portion of the Building shown as the
"Initial Premises" outlined in red on Exhibit A attached hereto, and after
the Preliminary Period, the entire Building and Property. The portion of
the Premises other than the Occupied Premises is hereinafter called the
"Unoccupied Premises." Tenant shall have no right of occupancy in the
Unoccupied Premises except for the purpose of performing fit out work to
prepare it for occupancy, provided, however, that Tenant shall have the
right to use and occupy portions of the Building beyond the Initial
Premises, upon written notice to Landlord, at which time the Unoccupied
Premises included in the notice shall become part of the Occupied Premises.
The area of the Unoccupied Premises into which Tenant expands during the
Preliminary Period is hereinafter called the "Expansion Area." Tenant's
right to expand the Occupied Premises shall be subject to the following
terms and conditions:
(1) such portions of the Expansion Area which Tenant occupies shall
be in increments of not less than 500 rentable square feet;
(2) Tenant shall pay minimum annual rent for the Expansion Area at
the following, rates per rentable square foot per year:
August 1. 1995 - July 1, 1 996 $9.00
August 1, 1996 - April 30, 1997 $9.25
In addition, Tenant shall pay its share of operating costs in accordance
with clause (3) below. and Article 5 (c) of this lease, provided, however,
that Tenant's minimum annual rent payable pursuant to Articles 5(a) and 33
of this lease for such Expansion Area shall be reduced by $0.33 per month
multiplied by the approximate rentable square footage in the Expansion
Area.
By way of illustration, if the Commencement Date of the lease is
August 1, 1995, and on January 1, 1996 Tenant takes occupancy of
approximately 1000 rentable square feet of Expansion Area, effective on
that date (and until August 1, 1996, when rent is to be adjusted), Tenant
shall pay minimum annual rent for such Expansion Area of $9000.00 per year
(or $750.00 per month), plus Base Operating Cost of $5500.00 per year (or
$458.33) per month) [subject to adjustment as provided for by this lease],
and the monthly pavement on account of minimum annual rent calculated under
Article 33 below shall be reduced by $330.00.
(3) Tenant shall pay an adjusted proportionate share of operating
costs for the Building, based upon the applicable ratio of the approximate
rentable square footage of the Occupied Premises (including the Expansion
Area) to 48,900. the approximate rentable square footage of the Building;
(4) Landlord and Tenant shall execute a memorandum or amendment to
the lease confirming the expansion of the Occupied Premises, and the
changes in minimum annual rent and operating costs payable by Tenant
following the expansion.
Landlord represents that it owns the Building and has the right to
lease the Premises to Tenant, and that Landlord has received no notice that
the Building and the Premises do not currently comply with all applicable
laws, rules and regulations, with the exception of certain deficiencies
under the Americans With Disabilities Act, which deficiencies the parties
have agreed to cure as otherwise provided for in this lease.
2. Landlord represents that as of the date of this lease, the
mechanical, electrical, structural, and heating, ventilation and air
conditioning systems in the Building are in good working order, provided,
however, that the forecoinq shall not limit Tenant's responsibility for all
maintenance expenses incurred and payable pursuant to Article 5 of this
lease.
Landlord further represents and warrants to Tenant, to the best of
Landlord's knowledge, as of the Commencement Date, that:
(a) the Building is in compliance with all federal, state and local
laws, ordinances related to the protection of the environment
(collectively "Environmental Laws"), and Landlord has received no
notice that the Building is in violation of any Environmental Laws, or
that Landlord is liable for damages or other remedies with respect to
any adverse environmental condition at the Building;
(b) There are no underground storage tanks on the Premises:
(c) There exists no uncured release or threatened release of any
contaminant or hazardous substance, including petroleum.
Landlord shall indemnify and hold harmless Tenant from and against any
and all claims, costs and/or judgments arising out of or relating to
environmental conditions at the Premises involving the release or
threatened release of asbestos or PCB'S, unless the condition is one
which arises after the Commencement Date, or was caused by Tenant or
parties acting at Tenant's direction.
Landlord covenants to remove and replace at its sole cost and expense
any fire doors containing friable asbestos materials, if such doors,
because of their damaged condition, pose a danger of releasing asbestos
fibers.
3. Term. The term of this lease shall commence on August 1. 1995,
provided that the present tenant of the Premises, Joy Environmental
Technologies, Inc. ("Joy") has vacated the Premises by such date;
otherwise, the term shall commence on the date Joy has vacated (the date of
commencement of the term being hereinafter called the "Commencement
Date"]). On the Commencement Date, Landlord and Tenant shall execute a
certificate confirming (1) the Commencement Date, and (2) the dates
encompassing the Preliminary Period and the beginning and end of the term.
Landlord represents that Joy has executed a lease termination
agreement obligating it to vacate the Premises not later than August 15
1995; in the event Joy has not vacated the Premises within sixty (60) days
following such date, then Tenant shall have the option to terminate this
lease by delivering to Landlord written notice of its election to do so not
later than ten (10) days following the expiration of such sixty (60) day
period. Unless sooner terminated in accordance with the terms hereof, the
term of this lease shall end without the necessity for notice from either
party to the other at 12:01 a.m. local time on the tenth anniversary of the
first day of the first full calendar month during the term (herein called
the "Expiration Date").
5. (c) For the purposes of payment of Tenant's share of annual
operating costs for the Preliminary Period, Tenant's share shall be 51.12%
of the annual operating costs for the Property; thereafter Tenant shall pay
100% of annual operating costs for the Property. Accordingly, the
annualized Base Operating Cost payable by Tenant on account of annual
operating costs in monthly installments during the Preliminary Period shall
be $137,487.24, subject to adjustments when actual annual operating costs
are calculated for such period.
8. (d) For the purposes of this lease, the parties agree that any
single expenditure in excess of $50,000.00 for repair or replacement of any
mechanical, electrical and/or structural component of the Premises, shall
be deemed a capital improvement to the Premises, without regard to the
nature or purpose of such expenditure, and such amount shall be recoverable
by Landlord in accordance with Article I I (b) of this lease.
9. Utility Charges. Tenant shall be solely responsible for and shall
pay promptly all rents, costs and charges for electricity, light, power,
telephone and other communication services rendered or supplied upon or in
connection with the Premises, by making direct arrangements with the
provider of such utilities. Tenant shall pay all costs and charges for
water service and sewer service as part of annual operating costs in
accordance with Section 5.(c) above.
16.(e) During the term of this Lease, Landlord shall, at all times,
maintain insurance against loss or damage to the Building by fire and other
casualties as may be included within fire and extended coverage insurance
or all-risk insurance, together with a rental coverage endorsement or other
comparable form of coverage. Such insurance shall be for the full
replacement cost of the Building, subject to such deductibles as Landlord
shall determine, provided that Landlord shall reduce the deductible if
Tenant requests, and Tenant shall pay the cost of repairs up to the amount
of the deductible.. Tenant will receive an abatement of its annual rent to
the extent the premises are rendered rentable by reason of a fire or other
insurance casualty as reasonably determined by the carrier providing the
rental coverage endorsement.
16.(f) Notwithstanding anything to the contrary contained in
Article 16 above, Landlord within thirty (30) days from the date of
destruction shall give Tenant written notice if Landlord anticipates that
the restoration of the Premises will take more than one hundred eighty
(180) days to complete, measured from the date of destruction, subject to
delays for "Force Majeure" as set forth in Article 2 of this lease. In the
event Landlord provides such notice, Tenant shall have the option to
terminate this lease effective as of the date of destruction by giving
Landlord written notice of its exercise of its option to terminate within
ten (10) days following Landlord's notification to Tenant of Landlord's
inability to restore the Premises within one hundred eighty (I 80) days as
aforesaid.
19.(c) Award. In the event of a condemnation of the Premises
affecting Tenant, Tenant shall have the right to make a claim against the
condemnor for removal expenses, business dislocation damages and moving
expenses; provided and to the extent, however, that such claims and/or
payment do not reduce the sums otherwise payable by the condemnor to be
allocated among Landlord and Tenant as hereinafter set forth. Landlord and
Tenant shall share in the net proceeds of any condemnation awards, after
deduction of any and all costs incurred by Landlord in connection with the
condemnation, including legal fees, appraisers' fees and other expert
witness and consultant fees, in proportion to the respective investment of
the Landlord and Tenant in the Premises. In furtherance of the foregoing,
Landlord shall remit to Tenant, from the net condemnation proceeds
received, a portion thereof which equals the total net condemnation
proceeds received, multiplied by a fraction, the numerator of which shall
be the depreciated value of Tenant's capital improvements in the Premises,
and the denominator of which shall be the sum of the numerator plus the
depreciated value of Landlord's acquisition and improvement costs with
respect to the Premises. Within six (6) months following Tenant's
occupancy, Tenant shall provide Landlord with evidence of its capital
improvements to the Premises, and shall thereafter on an annual basis, or
otherwise as may be requested by Landlord, provide Landlord with the then
depreciated value of Tenant's capital improvements in the Premises. Except
as aforesaid, Tenant hereby waives all claims against Landlord and against
the condemnor, and Tenant hereby assigns to Landlord all claims against the
condemnor including, without limitation, all claims for leasehold damages
and diminution in value of Tenant's leasehold interest. Tenant hereby
appoints Landlord as Tenant's agent and attorney in fact, which power is
coupled with an interest, to pursue, collect and compromise any and all
condemnation claims (with the exception of the removal expenses, business
dislocation damages and moving- expenses of Tenant), and Landlord shall
have full authority with respect to the management of any condemnation
proceedings. Tenant hereby relieves Landlord of any liability in
connection with Landlord's prosecution or settlement of any condemnation
proceedings. except if Landlord's action in connection therewith
constitutes gross negligence or wanton and willful misconduct.
21.(a) Notwithstanding the foregoing, Tenant shall have the right
to sublet all or a portion of the Premises without the prior written
consent of Landlord. to an entity wholly controlled by, controlling, or
under common control with Tenant. In addition, approval by Landlord of an
assignment of this lease by Tenant as a matter of law in connection with a
merger or consolidation of Tenant, or a sale of all or substantially all of
Tenant's assets or capital stock, shall not be withheld or delayed by
Landlord, provided that the surviving company or acquirer of Tenant's
assets has a net worth and creditworthiness equal to or better than that of
Tenant as of the date of this lease, as reasonably determined by Landlord.
26.(d) Notwithstanding anything herein above stated, except in the
event of any default ownership in Paragraphs (a)(111), (iv) and (v) of this
Article, Landlord shall not exercise the remedies set forth in Article
26(b)(ii) permitting acceleration of rent, or in Article 26 (b) (vii)
permitting confession of judgment for money damages, until the expiration
of thirty (30) days following written notice from Landlord to Tenant of the
occurrence of a default, and Tenant's failure to cure the default within
such period.
33. It is understood that Tenant shall pay minimum annual rent in
accordance with the provisions of Article 5(a) of this Lease pursuant to
the following schedule:
Monthly Annually
---------- -----------
August 1, 1995 - October 31, 1995 $18,750.00
November 1, 1995 - July 31, 1996 $26,716.67
August 1, 1996 - April 30, 1997 $27,237.50
May 1, 1997 - July 31, 1997 $37,693.75
August 1, 1997 - July 31, 1998 $38,305.00 $459,660.00
August 1, 1998 - July 31, 1999 $38,916.25 $466,955.00
August 1, 1999 - July 31, 2000 $39,527.50 $474,330.00
August 1, 2000 - July 31, 2001 $40,138.75 $481,665.00
August 1, 2001 - July 31, 2002 $41,361.25 $496,335.00
August 1, 2002 - July 31, 2004 $41,972.50 $503,670.00
August 1, 2004 - July 31, 2005 $42,583.75 $511,005.00
If the Commencement Date is other than August 1, 1995, each of the calendar
dates set forth in the rent schedule above and in Article 1 (2) of this
lease shall be extended by the period of time between August 1, 1995 and
the Commencement Date, and, if the Commencement Date is other than the
first day of a month. the monthly rental set forth above for the period
from August 1, 1995 through October 31, 1995 shall apply from the
Commencement Date through the end of the third full calendar month
following the Commencement Date, and be appropriately pro-rated for the
partial month.
34. Tenant's Right to Renew.
(a) Provided Tenant is not then in default under any of the terms,
covenants and conditions of this lease, prior to the end of the initial ten
(10) year term of this lease (the "Initial Term"), Tenant shall have the
right and privilege at its election to extend the term for one (1) further
period of five (5) years to commence on the expiration of the Initial Term
("Renewal Term"), by giving Landlord written notice (the "Renewal Notice")
of its election to renew at least nine (9) months prior to the expiration
of the Initial Term; it being agreed that time is of the essence. Such
renewal shall be on the same terms and conditions as herein provided except
that: (i) there shall be no p options to renew; and (ii) the rent payable
shall be adjusted as set forth in subparagraph (b) below-
(b) Within thirty (30) days following receipt of a Renewal Notice,
Landlord shall advise Tenant in writing of the proposed rent for the
Renewal Term representing Landlord's good faith determination as to the
fair market rental for such Renewal Term; if Tenant does not agree to such
amount (or such other amount as may be acceptable to Landlord) by executing
a written lease amendment agreement incorporating such rental payment terms
within forty-five (45) days following receipt of Landlord's proposed rent
notice, Tenant shall be deemed to have revoked its election to renew, and
the Lease shall terminate, without notice, upon expiration of the Initial
Term.
35. Tenant's Option to Purchase.
(a) Subject to the provisions of Article ')6 below, provided
Tenant is not then in default under any of the terms, covenants and
conditions of this Lease, at any time during the term of this lease after
the fourth anniversary of the Commencement Date, Tenant shall have the
option to purchase the Property, by giving Landlord written notice (the
"Purchase Notice") of its election to purchase the Property not earlier
than four (4) years after the Commencement Date, nor later than nine (9)
months prior to the expiration of the Initial Term; it being agreed that
time is of the essence, for a purchase price as determined in accordance
with subsection (b) below.
(b) Within thirty (' )O) days following receipt of a Purchase
Notice, Landlord shall advise Tenant in writing of the proposed purchase
price for the Property representing Landlord's good faith determination as
to fair market value ("Landlord's Purchase Price Notice"). If Tenant does
not agree to such amount (or such other amount as may be acceptable to
Landlord), Tenant shall have the right to require the purchase price to be
determined by an average of three appraisals to be performed by appraisers
having the MAI designation, one of which appraisers shall be designated by
Landlord, the second of which shall be designated by Tenant, and the third
of which shall be appointed by the first two appraisers. Tenant's election
shall be made by advising Landlord in writing within ten (10) days
following receipt of Landlord's Purchase Price Notice, which notice from
Tenant shall designate Tenant's suggested appraiser. Each of the
appraisers shall appraise the Property utilizing the income approach, the
comparable sale approach, and the replacement cost approach; provided,
however, that in utilizing the income approach, the appraisers shall apply
the income approach a payment of rent by a credit tenant leasing the
Premises at the then current fair market rent under a five year lease,
without any options to purchase or rights of first refusal.
Notwithstanding the foregoing, in no event shall the purchase price be less
than the Minimum Price established in the subsection (c) below. Landlord
and Tenant shall each pay the fees of its own designated appraiser, and the
parties shall each pay one half of the fees of the third appraiser.
(c) Notwithstanding anything contained herein to the contrary,
the purchase price to be paid by Tenant shall not be less than $5,D-
00,000.00, increased by five (5%) percent per annum for each year or pro-
rated portion of a year, compounded annually, between the fourth
anniversary of the Commencement Date and the date of closing on the sale to
Tenant (the "Minimum Price").
(d) Landlord shall have the night to require the purchase of the
Property by Tenant pursuant to this Article 35 to be structured as a tax
deferred exchange under Section 1031 of the Internal Revenue Code and the
regulations adopted thereunder, or such substantially equivalent provision
of Internal Revenue Code as is then applicable to sales of property; Tenant
shall execute such documents and instruments as may be required by Landlord
to facilitate a tax deferred exchange under applicable law, at no
additional cost or expense to Tenant. Landlord hereby agrees to indemnify
Tenant for any such cost or expense that Tenant may incur in connection
with such tax deferred exchange, and from and against any claims,
liabilities, costs or expenses answering out of any acquisition agreement
executed by Tenant pursuant to this subsection (d). Further, Tenant shall
not be required to answer any other liability of Landlord in connection
with such tax deferred exchange, except that Tenant shall execute an
acquisition agreement if requested by Landlord in order to facilitate an
exchange, so long as Tenant has no liability under such agreement beyond
the deposit monies payable thereunder, which deposit monies shall be paid
by Landlord, not Tenant. . In addition, if at the time of Tenant's exercise
of its option to purchase, there is a mortgage against the Premises,
Landlord shall have the right to require Tenant to accept title under and
subject to such mortgage, and Tenant shall execute such mortgage assumption
agreements as the holder of the mortgage may require, and the principal
balance of the mortgage loan, as of the date of settlement, shall be
credited against the purchase price calculated in accordance with
subparagraph (b) above.
(e) Upon exercise by Tenant of its option to purchase, this
lease and the aforesaid notice of Tenant's exercise of its option shall
constitute an agreement of sale between the parties, whereby Landlord
agrees to sell and Tenant agrees to purchase the Premises upon the
following terms and conditions (in addition to the terms and conditions set
forth above):
(i) Settlement shall be held at the office of Landlord at
65 Valley Stream Parkway,. Malvern, Pennsylvania.
(ii) The purchase price calculated above shall be reduced
by any net condemnation proceeds received by Landlord and not applied to
restoration of the Premises or other improvements which from a portion of
the Premises at any time during the time of this lease with respect to the
taking or condemnation of any portion of the Premises.
(iii) The purchase price shall be paid by Tenant to
Landlord at the time of settlement by wire transfer or immediately
available federal funds, or by cashier's check or certified check or the
plain check of a title insurance company insuring Tenant's title, except
that Tenant shall be entitled to a credit at settlement in the amount of
$120,000.00.
(iv) Landlord and Tenant shall share equally in the
payment for any documentary stamps to be affixed to the deed of conveyance
and any realty transfer taxes imposed upon or in connection with the
conveyance. No settlement shall occur unless and until Tenant shall have
paid all sums owed under the lease to Landlord applicable to the period of
time prior to the date of settlement. All amounts prepaid by Landlord for
Impositions, taxes, utilities, insurance premiums, and any other charges
which are applicable to the period of time after settlement and which have
not been previously paid by Tenant shall be paid by Tenant to Landlord at
the time of settlement. Rents, including Tenant's share of operating
costs, shall be pro rated as of the date of settlement.
(v) Landlord shall convey to Tenant a good and marketable
fee simple title to the Premises by Special Warranty Deed, which shall be
in sufficient form to be recorded, in which Landlord shall covenant and
agree therein that the grantor has not done, committed or knowingly or
willingly suffered to be done or committed, any act, matter or thing
whatsoever whereby the Premises thereby granted, or any part thereof, is
charged or encumbered (except for "Permitted Title Objections" [as
hereinafter defined]). Tenant shall accept title to the Premises, subject
to this lease and any subleases made pursuant to this lease; any and all
Impositions (which, if due and payable on or before the date of settlement,
shall be paid by Landlord); all restrictions, encumbrances and exceptions
of record existing on the date of this lease; all liens, restrictions,
encumbrances and exceptions hereafter created by Landlord with the written
consent of Tenant (provided, however, that the lease itself shall not be
deemed to constitute Tenant's written consent with respect to the creation
of any such liens, restrictions, encumbrances and/or exceptions); any
mortgage as described in subparagraph (iv) above; all utility easements and
public road rights-of-way hereafter created by Landlord which are
reasonably desirable for the development and/or maintenance of the
Premises, lands adjacent to the Premises, or both; any violations of
building codes, fire laws and other laws and regulations; any liens,
encumbrances and exceptions not created by or resulting from the act,
omission or default of Landlord; all zoning rules, regulations,
restrictions or ordinances; all standard title objections of the title
insurance company insuring Tenant's title; and any liens, encumbrances and
exceptions created or suffered by Tenant (collectively the "Permitted Title
Objections"); provided, however, that if Landlord cannot convey title as
aforesaid at the time of settlement, Landlord shall have the right, at its
option, to postpone the date of settlement for sixty (60) days during which
time Landlord shall attempt to cure or satisfy the title defects. Landlord
shall not be required to bring any action or proceeding or otherwise incur
any expense to cure or satisfy the title defects. If Landlord is unable to
deliver title as required above, Tenant shall either accept such title as
Landlord can deliver, without abatement of the purchase price, or rescind
its exercise of its purchase option, and this lease shall continue in
effect, except that Tenant shall thereafter have no option to purchase.
Tenant's title shall be insurable as aforesaid at ordinary rates by any
reputable title insurance company.
36. Tenant's Right of First Refusal.
Provided Tenant is not then in default under any of the terms,
covenants and conditions of this Lease, prior to the end of the Initial
Ten-n of this Lease, or if the same is renewed, the Renewal Term, if
Landlord receives an offer to purchase the Property which Landlord is
inclined to accept, Landlord shall notify Tenant in writing of the purchase
price, closing date and other material terms of such offer ("Landlord's
Notice"), and Tenant shall have the night to purchase the Property on the
terms of such offer by notifying Landlord in writing not later than ten (I
0) days following the date of Landlord's Notice of Tenant's desire to match
the offer stated in Landlord's Notice ("Tenant's Acceptance"). Thereafter,
Landlord shall tender to Tenant an agreement to sell the Property to Tenant
on the terms contained in Landlord's Notice. If Tenant does not issue a
Tenant's Acceptance within ten (10) days following receipt of Landlord's
Notice, or having issued a Tenant's Acceptance, does not execute an
agreement of sale tendered by Landlord within ten days of after submission
of the same by Landlord for signature by Tenant, or having signed an
agreement of sale, does not close in accordance with the terms thereof,
Tenant's rights 'purchase the Property pursuant to this Article ' ) 6 and
Article ' ) 5 above shall terminate, and Landlord shall thereafter have no
obligation to provide to Tenant a Landlord's Notice, and Tenant's option to
purchase shall terminate and thereafter be of no force and effect. All
times set forth herein are of the essence.
37. Allowance.
Landlord will pay Tenant an allowance of $74,625.00 ninety (90) days
after the Commencement] Date, to compensate Tenant for completion of
interior ADA improvements and installation of a sprinkler system in the
Building.
38. Broker.
Tenant represents and warrants to Landlord that all of Tenant's
dealings with regard to the Premises have been solely with The Binswanger
Companies ("Broker") and Landlord, and that no other broker, agent or party
has shown the Premises to Tenant or negotiated with Tenant in regard
thereto. Tenant shall have no liability to pay any commission to Broker
arising, out of this lease.
39. Landlord and Tenant Approval.
In each and every instance under this lease in which Landlord or
Tenant is required to obtain the consent of the other, the parties agree
that such consent shall not be unreasonably withheld or delayed.
D:\U\REB\84115RID-SCT
07/12/95 12:16 PM
OFFICE LEASE
THIS OFFICE LEASE made and is entered into by and between Landlord and
Tenant (as defined below) on the lease date (as defined below). Landlord
and Tenant agree:
1. BASIC LEASE INFORMATION
1.1 Basic Lease Information. In addition to the terms that are
defined elsewhere in this lease, these terms are used in this
lease:
(a) LEASE DATE: April 1, 1994
(b) LANDLORD: IBM Corporation
(c) LANDLORD'S ADDRESS: Attn: Regional Manager
IBM Plaza, Suite 3100
Chicago, IL 60611
With a copy to: Attn: IBM Counsel
208 Harbor Plaza
Stamford, CT 06904
(d) TENANT: SCT Public Sector, Inc.
(e) TENANTS ADDRESS: 4 Country View Road
Malvern, PA 19355
Attn: Tenants General Counsel
With a copy to: President
1733 Harrodsburg Road
Lexington, KY 40503
(f) BUILDING ADDRESS: 1733 Harrodsburg Road
Lexington, KY 40503
(g) PREMISES: The premises shown on Exhibit A to this lease,
known as Suite 100 located on the first floor
(h) RENTABLE AREA OF THE PREMISES: 28,623 rentable square feet
(i) RENTABLE AREA OF THE BUILDING: 61,969 rentable square feet
(j) TENANT'S SHARE: 47%
(k) TERM: 5 years (60 months)
(l) COMMENCEMENT DATE: April 1, 1994
(m) TERM EXPIRATION DATE: March 31, 1999
(n) MONTHLY RENT: Year 1 = $30,411.94
Year 2 = $31,008.25
Year 3 = $31,008.25
Year 4 = $31,008.25
Year 5 = $31,008.25
(o) ABATEMENT: One (1) month to be received the month of
April, 1994
(p) RATE: $12.75 PSF/Year 1
$13.00 PSF/Years 2 through 5
(q) OPERATING EXPENSES BASE: 1994 Actuals
(r) SECURITY DEPOSIT: One (1) month's rent due upon execution
of lease. To be applied as a credit to
Tenant's 12th month rental.
(s) PARKING SPACES: 130 unreserved spaces
(t) BROKER: The Galbreath Company
The Haymaker Company - Tenant Broker
1.2 Definitions:
(a) ADDITIONAL RENT: Any amounts that this lease requires Tenant
to pay in addition to monthly rent.
(b) BUILDING: The building located on the land known as 1733
Harrodsburg Road, and of which the premises is located.
Landlord Initials:____________ Tenant Initials:____________
INTERNATIONAL BUSINESS MACHINES CORPORATION
LANDLORD
AND
SCT PUBLIC SECTOR, INC.
TENANT
LEASE TO PREMISES
Dated:___________
TABLE OF CONTENTS
TITLE PARAGRAPH PAGE
Alterations......................................... 4
Assignment, Subletting and Recapture................ 3
Brokerage Commission................................ 32
Care of Premises.................................... 2
Casualty............................................ 18
Certain Rights Reserved to Landlord................. 9
Condition of Premises............................... 21
Default............................................. 15
Default Under other Leases.......................... 10
Eminent Domain...................................... 17
Estoppel Certificate................................ 31
Hazardous Material.................................. 28
Holding Over........................................ 12
Insurance........................................... 29
Increase or Decrease of Base Rent................... 20
Landlord's Title.................................... 8
Limitation on Liability............................. 30
Mechanics' Liens.................................... 16
Miscellaneous....................................... 25
Notice.............................................. 7
Parties............................................. 1
Possession.......................................... 23
Premises............................................ 1
Quiet Enjoyment..................................... 24
Rent................................................ 1
Restrictions on Use................................. 26
Rules............................................... 13
Save Harmless....................................... 22
Security............................................ 27
Services and Utilities.............................. 6
Signs............................................... 5
Subordination....................................... 14
Term................................................ 1
Use................................................. 1
Waiver of Claims.................................... 11
Waiver of Subrogation............................... 19
Rider A - Rules and Regulations
Rider C - Tenant Improvement Agreement
Exhibit A - Floor Plan
Parties This Lease, made the 25th day of October, 1993, between
International Business Machines Corporation, a New York
corporation, having its principal office at Armonk, New
York, hereinafter called the Landlord, and SCT PUBLIC
SECTOR, INC. hereinafter called the Tenant.
W I T N E S S E T H
Premises That the Landlord hereby leases to the Tenant, and the
Tenant hereby hires and takes from the Landlord the
following described premises (hereinafter called the
"Premises") outlined an Exhibit A (28,623 Rentable Square
Feet) hereto, in the Building (hereinafter called the
"Building") located on the 1ST floor of 1733 Harrodsburg
Road, Lexington, Kentucky 40503.
Use To be used and occupied by the Tenant for use as a
software/data processing sales office and for no other
purpose,
Tenant shall, at its sole cost and expense, obtain all
governmental licenses and permits required to allow Tenant
to conduct Tenant's permitted uses.
Term For a term to commence on April 1,1994, and to end on March
31,1999, unless sooner terminated as hereinafter provided.
Without limiting the foregoing however, Tenant shall have
the option to renew this lease upon all terms and conditions
herein, for an additional five (5) year term (Renewal
Option), by advising Landlord in writing at least six months
Prior to the expiration, of the initial term that Tenant is
so exercising the renewal option. The annual base rent
during the Renewal option term shall be an amount equal to
ninety percent (90%) of the then current fair market value
for the premises as determined in good faith by both
parties. In no event shall the renewal rate be leas than
the initial rental rate.
Parking Landlord shall make available to the Tenant and their
visitors the use of not more than 130 unreserved surface
parking spaces located within the attached surface lot, at
no additional fee therefore.
Rent The parties hereto do hereby agree and covenant as follows:
1. (a) The Tenant shall pay during the first year of the
initial lease term the annual base rent of
$364,943.25 payable in monthly installments in
advance of $30,411.94. (The first monthly rental
payment due for April 1994 shall be abated by
Landlord.)
(b) The Tenant shall pay during the remaining initial
lease term (months 13 thru 60) the annual base
rent of $372,099.00 payable in monthly
installments in advance of $31,008.25 each on the
first day of every calendar month during the term
hereof (said payment shall not be considered late
until the 5th day of any calendar month); except
that the rent for the first month of the term, and
for any period prior to the first complete
calendar 'month, shall be payable upon execution
of this Lease. The last monthly installment
payment shall include rent for the last calendar
month plus rent for the remaining days to the end
of the term. Rent for any period of less than one
month shall equal 1/30 of the monthly rent for
each day of such period.
(c) The Tenant will pay said rent without deduction,
set off or demand to Scribcor Inc., Agent for IBM
Lease Administration, 400 North Michigan Ave.,
Chicago, Illinois 60611 or to such other person
or at such other place as the Landlord may
designate in writing. Checks for the payment of
rent shall be made payable to IBM CORPORATION. No
payment by Tenant or receipt by Landlord of a
lesser amount than the correct 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 to effect or evidence 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 or in equity
provided.
Care of 2. (a) The Tenant will take good care of the Premises
Premises and the Building fixtures and appurtenances, and
all alterations, additions and improvements to
them; will repair all damage to the same resulting
from the negligent or willful acts of the Tenant,
its employees, agents, or invitee; will suffer no
waste, or injury; will execute and comply with all
laws, rules, orders, ordinances and regulations,
at any time issued or enforced by any lawful
authority, applicable to the Tenant's use or
occupancy of the Premises; and will repair, at or
before the end of the term, all injury done by the
installation or removal of furniture and property.
(b) At any time or times, the Landlord, either
voluntarily or pursuant to governmental
requirements, may, at the Landlord's own expense,
make repairs, alterations or improvements in or to
the Building or any part thereof, including the
Premises, and, during operations, may close
entrances, doors, corridors, elevators or other
facilities, all without any liability to the
Tenant by reason of interference inconvenience, or
annoyance. The Landlord shall not be liable to
the Tenant for any expense, injury, loss or damage
resulting from work done in or upon, or the use
of, any adjacent or nearby Building, land, street,
or alley.
(c) In no event shall the Tenant assume any financial
participation in Landlord cost of structural
repairs and or maintenance.
Assignment, 3. (a) Without the prior written consent of Landlord,
Subletting Tenant shall not, either voluntarily or by
and Recapture operation of law assign, encumber or otherwise
transfer this Lease or any interest herein, or
sublet the Premises or any part thereof, or permit
the Premises to be occupied by anyone other than
Tenant or Tenant's employees. For purposes of
this section, an assignment shall include any
transfer of any interest in this Lease or the
Premises by Tenant pursuant to a merger, division,
consolidation with any entity other than a legal
entity controlled by, controlling, or under common
control with Systems and Computer Technology
Corporation ("Parent") of which Parent Tenant is a
wholly owned subsidiary, or liquidation, or
pursuant to change in ownership of Tenant
involving a transfer of voting control in Tenant
(whether by transfer of partnership interests,
corporate stock or otherwise). If Tenant desires
to assign this Lease or any interest herein, or to
sublet all or any part of the Premises, then at
least sixty (60) days prior to the effective date
of the proposed assignment or subletting, Tenant
shall submit to Landlord in connection with
Tenants request for Landlord consent:
(1) A statement containing: (i) the name and
address of the proposed assignee or
subtenant; (ii) such financial and other
information with respect to the proposed
assignee or subtenant as Landlord shall
reasonably require; (iii) the type of use
proposed for the Premises; and (iv) all of
the principal terms of the proposed
assignment or subletting; and
(2) All documentation then available related to
the proposed assignment or sublease (copies
of final executed documentation to be
furnished by Tenant prior to the effective
date).
At any time within thirty (30) days after
Landlord's receipt of all (but not less than all)
of the information and documents described above,
Landlord may, at its option by written notice to
Tenant, elect to: (i) sublease the Premises or the
portion thereof proposed to be sublet by Tenant
upon the same terms as those offered to the
proposed subtenant; (ii) take an assignment of the
Lease upon the same terms as those offered to the
proposed assignee; or (iii) terminate the Lease in
its entirety or as to the portion of the Premises
proposed to be assigned or sublet, with a
proportionate adjustment in the rent payable
hereunder if the Lease is terminated as to less
than all of the Premises. If Landlord does not
exercise any of the options described in the
proceeding sentence, then, during the above
described thirty (30) day period, Landlord shall
either consent or deny its consent to the proposed
assignment or subletting.
Landlord's consent shall not be unreasonably
withheld or delayed; but, in addition to any other
grounds for denial, Landlord's consent shall be
deemed reasonably withheld if, in Landlord's good
faith judgment: (i) the proposed assignee or
subtenant does not have the financial strength to
perform its obligations under this Lease or any
proposed sublease; (ii) the business and
operations of the proposed assignee or subtenant
are not of comparable quality to the business and
operations being conducted by other tenants in the
Building; (iii) the proposed assignee or subtenant
intends to use any part of the Premises for a
purpose not permitted under this Lease; (iv)
either the proposed assignee or subtenant, or any
person which directly or indirectly controls, is
controlled by, or is under common control with the
proposed assignee or subtenant occupies space in
the Building, or is negotiating with Landlord to
lease space in the Building; (v) the proposed
assignee or subtenant is disreputable; or (vi) the
use of the Premises or the Building by the
proposed assignee or subtenant would, in
Landlord's reasonable judgment, signifi-cantly
increase the pedestrian traffic in and out of the
Building, increase the utility or service
requirements of Landlord or otherwise impact the
common facilities or other tenants in the
Building, or would require any alterations to the
Building to comply with applicable laws.
(b) Any subletting or assignment hereunder shall not
release or discharge the Tenant of or from any
liability, whether past, present or future, under
this Lease and the Tenant shall continue fully
liable hereunder and shall be liable to the
Landlord for all costs incurred by the Landlord at
the request of and for a subtenant or assignee.
The subtenant or subtenants or assignee or
assignees shall agree to comply with and be bound
by all the terms, covenants, conditions,
provisions and agreements of this Lease to the
extent of the space sublet or assigned, and shall
not assign the sublease or sublet the Premises or
any part thereof, or allow any transfer thereof,
or any lien upon the subtenant's interest, without
the prior written consent of International
Business Machines Corporation, which consent IBM
shall not unreasonably withhold or delay, and the
Tenant shall deliver to the Landlord promptly
after execution, an executed copy of each such
sublease or assignment and an agreement of
compliance by each such subtenant or subtenants or
assignee or assignees.
(c) Any sale, assignment, mortgage, transfer, or
subletting of this Lease which is not in
compliance with the provisions of this Paragraph
shall be of no effect and void.
(d) The Landlord may assign this Lease and shall not
be liable for obligations thereafter accruing
hereunder; provided that the Landlords assignee
shall assume the Landlord's obligations hereunder
accruing on or after the date of assumption.
(e) In the event that Landlord consents to any
assignment or sublease of any portion of the
Premises, as a condition of Landlord's consent, if
Landlord so elects to consent, Tenant shall pay to
Landlord any reasonable attorney fees and
reasonable related expenses incurred by Landlord
in connection with each such assignment or each
sublease consented to by Landlord.
If for any proposed assignment or sublease Tenant
receives rent or other consideration, either
initially or over the term of the assignment or
sublease, in excess of the rent called for
hereunder, or, in case of the sublease of a
portion of the Premises, in excess of such rent
fairly allocable to such portion, after
appropriate adjustments to assure that all other
payments called for hereunder are taken into
account, Tenant shall pay to Landlord as
additional rent hereunder the excess of each such
payment of rent or other consideration received by
Tenant promptly after its receipt.
(f) The consent by Landlord to any assignment or
subletting shall not relieve Tenant, or any person
claiming through or by Tenant, of the obligation
to obtain the consent of Landlord to any further
assignment or subletting. In the event of an
assignment or subletting, Landlord may collect
rent from the assignee or the subtenant without
waiving any rights hereunder, and collection of
the rent from a person other than Tenant shall not
be deemed a waiver of any of Landlord's rights
under this Paragraph, an acceptance of the
assignee or subtenant as Tenant, or a release of
Tenant from the performance of Tenant's
obligations under this Lease.
Alterations 4. (a) With the express exception of the improvements
hereinafter described (which Improvements Landlord
shall provide the Tenant from the fit-up allowance
of $15.00 per square foot provided for
hereinafter), the Tenant shall not make or permit
anyone to make any material alterations in or
additions or improvements to the Premises or
install any equipment of any kind that will
require any alteration or addition to, or the use
of, the water, heating, air conditioning or
electrical or other Building systems or equipment,
without the Landlord's advance written consent in
each instance. The Landlord's decision to refuse
such consent shall be conclusive. If the Landlord
consents to such alterations or additions and, in
the course of the improvements, before
commencement of the work or delivery of any
materials onto the Premises or into the Building,
the Tenant shall furnish the Landlord with plans
and specifications, names and addresses of
contractors, copies of contracts, necessary
permits, waivers of lien, and indemnification in
form and amount satisfactory to use Landlord
against claims, costs, damages, liabilities, and
expenses. All additions and alterations shall be
installed in a good, workmanlike manner and only
new, high grade materials which are in accordance
with the Building standards shall be used whether
the Tenant furnishes the Landlord the foregoing or
not, the Tenant hereby agrees to indemnify and
hold the Landlord harmless from and against any
and all claims, costs, damages, liabilities and
expenses of every kind and description which may
arise out of or be connected in any way with said
alterations or additions or the installation
thereof. Before commencing any work in the
Premises, the Tenant shall furnish the Landlord
with certificates of insurance from all
contractors performing labor or furnishing
materials insuring the Landlord against any and
all claims, costs, damages, liabilities and
expenses, which may arise out of or be connected
in any way with said additions or alterations or
the installation thereof, Except as otherwise
provided for hereinabove, the Tenant shall pay the
cost of all such alterations and additions and
also the cost of decorating the Premises
occasioned by such alterations and additions.
Upon completing any alterations or additions, the
Tenant shall furnish the Landlord with contractors
affidavits and full and final waivers of lien and
receipted bills covering all labor and materials
expended and used. All alterations and additions
shall comply with all insurance requirements and
with all local ordinances and regulations, and
with the requirements of all statutes and
regulations of the State (or any department or
agency thereof) in which the Building is located.
The Tenant shall permit the Landlord to supervise
construction operations in connection with these
alterations or additions if the Landlord requests
to do so. The privilege herein granted to the
Tenant to make alterations or additions to the
Premises is conditioned upon the Tenant's
contractors, workmen and employees working in
harmony and not interfering with the workmen,
employees and contractors of the Landlord or of
any other tenant. All alterations, additions,
hardware, nontrade fixtures and all improvements,
temporary or permanent, in or upon the Premises,
whether placed there by the Landlord or the
Tenant, shall, unless the Landlord requests their
removal, became the Landlord's property and shall
remain upon the Premises at the termination of
this Lease by lapse of time or otherwise without
compensation or allowance or credit to the Tenant.
If the Landlord requests removal of work (other
than Building standard items as described in the
Landlord's standard form of workletter in use at
the time of execution of this Lease) whether
installed by the Landlord or this Tenant before or
after the start of the term, or if the Landlord
requests removal of additions, alterations,
hardware, nontrade fixtures or improvements
installed or made by the Tenant, the Tenant shall
remove the same prior to the conclusion of the
term and the Tenant shall repair all damage to the
Premises caused by such removal. The Tenant shall
not be required to remove pipes and wires
concealed in the floors, walls, or ceilings,
provided that the Tenant properly cuts and caps
the sane and seals them off in a safe, lawful, and
workmanlike manner. If, upon the Landlord's
request, the Tenant does not remove said things,
the Landlord may remove the same and repair all
damage and the Tenant shall pay to the Landlord
upon demand the cost of such removal and repair of
all damage. The Tenant shall remove the Tenant's
furniture, machinery, safe or safes, trade
fixtures and other items of personal property of
every kind and description from the Premises prior
to the end of the term, however ended. If not so
removed, the Landlord may request their removal,
and if the Tenant does not remove them, the
Landlord may do so and the Tenant shall pay the
Landlord upon demand the cost of such removal and
repair of all damage. If the Landlord does not
request their removal, all such items shall be
conclusively presumed to have been conveyed by the
Tenant to the Landlord under this Lease as a bill
of sale without further payment or credit by the
Landlord to the Tenant.
Except in connection with the improvements
(initial space fit-up) for which the Tenant shall
contract independently with a construction
manager, Tenant shall also pay to Landlord a
percentage of the cost of such work sufficient to
reimburse Landlord for all overhead, general
conditions, fees and other costs and expenses
arising from Landlord involvement with such work.
(b) Landlord to make available without cost or
warranty to the Tenant a Liebert unit, computer
room flooring and miscellaneous materials used in
the construction of the current computer room
located on the second floor of 1733 Harrodsburg
Road.
Signs 5. The Tenant, at Tenant's sole cost is hereby permitted
to affix reasonable corporate signage to displayed
outside the Tenants main entrance or inside the Tenant
suite. All such signage must be approved by the Owner/
Landlord and meet with all governmental signage
ordinance.
The Tenant's name shall be affixed to the directory
board to be provided by the Landlord and on the
entrance doors of the Premises, but only in such size,
color and style as the Landlord may approve.
Upon Tenant occupancy 1733 Harrodsburg Road (the
Building) will no longer be identified as the IBM
Building and shall be renamed by Landlord to a generic
identity.
Services and 6. (a) The Landlord shall provide:
Utilities
(1) JANITOR SERVICE in and about the Premises,
Saturdays, Sundays and holidays recognized by
the Landlord excepted. The Tenant shall not
provide any janitor service without the
Landlord's written consent. If the
Landlord's consent be given, such janitor
service shall be subject to the Landlord's
supervision but at the Tenant's sole cost and
responsibility. The Tenant shall not provide
any janitor service in the Premises except
through a janitor contractor or employees
satisfactory to the Landlord.
(2) HEAT AND AIR CONDITIONING daily from 8:00
a.m. to 9:00 p.m., Saturdays, Sundays and
holidays recognized by the Landlord excepted,
whenever heat or air conditioning shall, in
the Landlord's sole judgment, be required for
the comfortable occupation and use of the
Premises,. Whenever heat generating machines
or equipment or lighting fixtures other than
Building standard lighting fixtures are used
in the Premises and affect the temperature
otherwise maintained by the Building air
conditioning system, the Landlord may install
supplementary air conditioning units in or
for the benefit of the Premises, and the cost
of installation, operation and maintenance
thereof shall be paid by the Tenant to the
Landlord upon billing by the Landlord as
additional rent.
(3) WATER from municipal mains for drinking,
lavatory and toilet purposes, drawn through
fixtures installed by the Landlord or by the
Tenant with the Landlord's written consent.
The Tenant shall pay, at rates fixed by the
Landlord, for water used for supplementary
air conditioning or refrigeration installed
by or for the Tenant, or for any purpose
other than drinking, lavatory and toilet
purposes.
(4) ADEQUATE PASSENGER ELEVATOR SERVICE (if the
Building contains an elevator) in common with
other tenants at all times, and FREIGHT
ELEVATOR SERVICE in common with other tenants
daily from 8:00 a.m. until 6:00 p.m.,
Saturdays, Sundays, and holidays recognized
by the Landlord excepted, subject to
scheduling by the Landlord. Freight elevator
service at other times and elevators with
attendants shall be optional with the
Landlord, and if provided, shall never be
deemed a continuing obligation of the
Landlord.
(5) ELECTRICITY for Building standard lighting
fixtures and for the Tenant's incidental
uses, daily from 8:00 a.m. to 9:00 p.m.,
Saturdays, Sundays and holidays recognized by
the Landlord excepted. With respect to such
incidental uses, electricity, will be
furnished in the Premises by the Landlord to
the Tenant without charge provided that (1)
the connected electrical load of the
incidental use equipment does not exceed an
average of one watt per square foot of the
Premises; (2) the electricity so furnished
for incidental uses will be at nominal 120
volt single phase and that no electrical
circuit for the supply of such incidental use
will have a current capacity exceeding 15
amperes and (3) such incidental electricity
will be used only f or equipment and
accessories normal to office usage such as
typewriters, calculating machines, and other
standard machines of similar low electrical
consumption. If the Tenant's requirements
for electricity are in excess of those set
forth in the preceding sentence, including
electricity for machines such as electronic
data processing equipment, special lighting
fixtures or HVAC, the Tenant shall pay the
Landlord upon billing for the cost of such
excess electricity as additional rent. The
Landlord reserves the right to require the
Tenant to procure any excess requirements at
the Tenant's expense by arrangement with the
local utility furnishing electricity to the
Building. The Tenant shall also pay the
Landlord for the cost of installing an
electrical mater if reasonably deemed
necessary by the Landlord or any additional
risers or other facilities that may be
necessary to furnish such excess electricity
to the Premises.
(b) The Landlord does not warrant that any of the
services above mentioned will be free from
interruption caused by war, insurrection, civil
commotion, riots, acts of God or the enemy of
Government action, repairs, renewals,
improvements, alterations, strikes, lockouts,
picketing, whether legal or illegal, accidents,
inability of the Landlord to obtain fuel or
supplies, or any other cause or causes beyond the
reasonable control of the Landlord. Any such
interruption of service shall never be deemed an
eviction or disturbance of the Tenant's use and
possession of the Premises or any part thereof, or
render the Landlord liable to the Tenant for
damages, or relieve the Tenant from performance of
the Tenant's obligations under this Lease.
Notwithstanding anything to the contrary in this
Paragraph or elsewhere in this Lease, Landlord shall
have the right to reasonably institute such policies,
programs and measures as may be necessary or desirable,
in Landlord's discretion, for the conservation and/or
preservation of energy or energy-related services, or
as may be required to comply with any applicable codes,
rules and regulations, whether mandatory or voluntary.
Notice 7. Any notice, request, communication or demand under this
Lease shall be in writing and shall be considered
properly delivered when addressed as hereinafter
provided, given or served personally or by registered
or certified mail (return receipt requested) and
deposited in the United States general or branch post
office. Any notice, request, communication or demand
by the Landlord to the Tenant shall be addressed to the
Tenant in care of its President at the Premises (or,
prior to the date the Tenant first occupies any portion
of the Premises, at the address of the Tenant set forth
on Page 1 of this Lease) until otherwise directed in
writing by the Tenant. A copy of all such notices to
Tenant shall also be sent to Tenant's general counsel,
at 4 Country View Road, Malvern, PA 19355, or at such
other address as Tenant may hereinafter direct. Any
notice, request, communication or demand by the Tenant
to the Landlord shall be addressed to the Landlord's
Building Manager at the Building with copies addressed
simultaneously to the Landlord, attention of the IBM
Division Counsel, Corporate Real Estate Staff, 208
Harbor Drive, Stamford, Connecticut 06904 and
simultaneously to the attention of the Regional
Manager, One IBM Plaza, Suite 3100, Chicago, Illinois
60611 until otherwise directed in writing by the
Landlord. Rejection or other refusal to accept a
notice, request, communication or demand or the
inability to deliver the same because of a changed
address of which no notice was given shall be deemed to
be receipt of the notice, request, communication or
demand or the inability to deliver the same because of
a changed address of which no notice was given shall be
deemed to be receipt of the notice, request,
communication or demand sent.
Landlord's 8. The Landlord's title is and always shall be paramount
Title to the title of the Tenant, and nothing herein
contained shall empower the Tenant to do any act which
shall encumber the title of the Landlord.
Certain Rights 9. (a) The Landlord reserves the following rights:
Reserved to
Landlord (1) To change the name or street address of the
Building without notice or liability of the
Landlord to the Tenant.
(2) To install and maintain a sign or signs on
the exterior of the Building.
(3) During last ninety (90) days of the term, if
during or prior to that time the Tenant
vacates the Premises, to decorate, remodel,
repair, alter or otherwise prepare the
Premises for reoccupancy.
(4) To constantly have pass keys to the Premises.
(5) To grant to anyone the exclusive right to
conduct any particular business or
undertaking in the Building; excepting
specifically that, during the term (or any
extension thereof), Landlord shall not permit
any person or entity to lease, occupy or
otherwise possess a subordinate interest in
or to the premises, the building, or any
portion(s) thereof, whose primary business is
to provide software and/or data processing
services to the local government, utility
and/or higher education marketplaces other
than TMD or any of its wholly owned
subsidiaries.
(6) To exhibit the Premises to others.
(7) To take any and all measures, including
inspections, impairs, alterations, additions
and improvements to the Premises or to the
Building, as may be reasonably necessary or
desirable for the safety, protection or
preservation of the Premises or the Building
or the Landlord's interests, or as may be
necessary or desirable in the operation of
the Building.
(8) To approve the weight, size and location of
safes, vaults, vertical files and other heavy
equipment and articles in and about the
Premises and the Building so as not to exceed
the legal live load per square foot
designated by the structural engineers for
the Building, and to require all such items
and furniture and similar items to be moved
into or out of the Building and Premises only
at such times and in such manner as Landlord
shall direct in writing. Tenant shall not
install or operate machinery or any
mechanical devices of a nature not directly
related to Tenant's ordinary use of the
Premises without the prior written consent of
Landlord. Movements of Tenant's property
into or out of the Building or Premises and
within the Building are entirely at the risk
and responsibility of Tenant, and Landlord
reserves the right to require permits before
allowing any property to be moved into or out
of the Building or Premises.
(9) To establish controls for the purpose of
regulating all property and packages, both
personal and otherwise, to be moved into and
out of the Building and Premises and all
persons using the Building after normal
office hours.
(10) To regulate delivery and service of supplies
and the usage of the loading docks,
receiving; areas and freight elevators.
(b) The Landlord may enter upon the Premises and may
exercise any or all of the foregoing rights hereby
reserved 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.
Default Under 10. If the term of any lease made by the Tenant for any
Other Leases space in the Building, other than this Lease, shall be
terminated or terminable after the making of this Lease
because of any default by the Tenant under such other
lease, such fact shall constitute a default under this
Lease and shall empower the Landlord, at the Landlord's
sole option, to terminate this Lease by notice to the
Tenant.
Waiver of 11. To the extent permitted by law, the Tenant
Claims releases the Landlord and the Landlord's agents,
servants and employees, and the Landlord's manage-ment
contractor for the Building, and its agents, servants
and employees from, and waives all claims for, damage
to person or property sustained by the Tenant or any
occupant of the Building or Premises resulting from the
Building or Premises or any part of either or any
equipment or appurtenance becoming out of repair, or
resulting from any accident in or about the Building,
or resulting directly or indirectly from any act or
neglect of any tenant or occupant of the Building or of
any other person, including the Landlord and the
Landlord's agents, servants and employees, and the
Landlord's management contractor for the Building, and
its agents, servants and employees. This Paragraph 11
shall apply especially, but not exclusively, to the
flooding of basements or other subsurface areas, and to
damage caused by refrigerators, sprinkling devices, air
conditioning apparatus, water, snow, frost, steam,
excessive heat or cold, falling plaster, broken glass,
sewage, gas, odors or noises, or the bursting or
leaking of pipes or plumbing fixtures, and shall apply
equally whether any such damage results from the act or
neglect of the Landlord or of other tenants, occupants
or servants in the Building or of any other person, and
whether such damage be caused or results from any thing
or circumstance above mentioned or referred to, or any
other thing or circumstance whether of a like nature or
of a wholly different nature. If any such damage,
whether to the Premises or to the Building or any part
thereof, or whether to the Landlord or to other tenants
in the Building, results from any act or neglect of the
Tenant, the Landlord may, at the Landlord's option,
repair such damage and the Tenant shall, upon demand by
the Landlord, reimburse the Landlord forthwith for the
total cost of such repairs. The Tenant shall not be
liable for any damages caused by its act or neglect if
the Landlord or the Tenant has recovered the full
amount of the damages from insurance, and the insurance
company has waived in writing its rights of subrogation
against the Tenant. All property belonging to the
Tenant or any occupant of the Premises that is in the
Building or the Premises shall be there at the risk of
the Tenant or other occupant only, and the Landlord
shall not be liable for damages thereto or theft or
misappropriation thereof.
Holding Over 12. If the Tenant retains possession of the Premises or any
part thereof after the termination of the term by lapse
of time or otherwise, the Tenant shall pay the Landlord
rent at double the rate of rental specified in this
Lease for the time the Tenant thus remains in
possession, and in addition thereto, shall pay the
Landlord all damages sustained by reason of the
Tenant's retention of possession. If the Tenant
remains in possession of the Premises, or any part
thereof, after the termination of the term by, lapse of
time or otherwise, such holding over shall, at the
election of the Landlord expressed in a written notice
to the Tenant and not otherwise, in lieu of double
rent, constitute a renewal of this Lease for one year.
The provisions of this Paragraph do not waive the
Landlord's rights of reentry or any other rights
hereunder.
Rules 13. The Tenant shall observe faithfully and comply strictly
with the rules and regulations attached to this Lease
and made a part thereof as Rider A, and such other
rules and regulations, promulgated from time to time by
the Landlord, as in the Landlord's judgment are
necessary for the safety, care and cleanliness of the
Building or for the preservation of good order therein.
The Landlord will not be liable to the Tenant for
violation of such rules and regulations by any other
tenant, its servants, employees, agents, visitors,
customers, invitee, or licensees.
Subordination 14. This Lease shall be subordinate and subject at all
times to all ground or underlying leases and to any
mortgage or deed of trust covering the Premises or
which at any time thereafter shall be made, and to all
renewals, modifications, consolidations, or
replacements thereof, and to all advances made, or
hereafter to be made, upon the security of any such
mortgage or deed of trust, and the Tenant shall execute
such further instruments subordinating this Lease to
any such mortgage or deed of trust as the Landlord
shall request.
In the event of any act or omission by Landlord which
would give Tenant the right to damages from Landlord or
the right to terminate this Lease, Tenant will not sue
for such damages or exercise any such right to
terminate until (i) it shall have given written notice
of the act or omission to Landlord and to the
holders(s) of the indebtedness or other obligations
secured by any mortgage or deed of trust affecting the
Premises or of any ground or underlying lease, if the
name and address of such holder(s) have been furnished
to Tenant, and (ii) a reasonable period of time, in
light both of the time required to effect a remedy and
of the impact of the act or omission on Tenant's
business operations on the Premises, for remedying the
act or omission has elapsed following the giving of the
notice, during which time Landlord and such holder(s),
or either of them, and their agents or employees, will
be entitled to enter upon the Premises and do therein
whatever may be necessary to remedy the act or
omission.
Default 15. (a) All rights and remedies of the Landlord herein
enumerated shall be cumulative, and none shall
exclude any other (a) The occurrence of any one or
more of the following events shall constitute a
default by the Tenant and a breach of this Lease:
(i) The Tenant fails to make a payment of rent or
any other payment of money as and when the same
shall become due and payable hereunder and such
failure shall continue for more than five (5)
consecutive days after notice by the Landlord, or
(ii) the Tenant fails to promptly and fully
perform or observe any of the other covenants,
agreements, rules and regulations, terms or
conditions in this Lease to be performed or
observed by the Tenant and such failure shall
continue for more than twenty (20) consecutive
days after notice by the Landlord Specifying the
nature of such failure, or if the failure so
specified shall be of such a nature that the sane
cannot be reasonably cured or remedied within said
twenty (20) day period, the Tenant shall not in
good faith have commenced to curl or remedy such
failure within such twenty (20) day period and
thereafter diligently proceed therewith to
completion, (unless the act or omission of the
Tenant or occurrence involves a hazardous or
emergency condition which shall be cured by the
Tenant forthwith upon the Landlord's demand) or
(iii) the leasehold interest or property of the
Tenant be levied upon under execution or be
attached by process of law, or (iv) the Tenant
fails to take possession of the Premises within
fifteen (15) consecutive days after the
commencement of the term hereof, or (v) the Tenant
discontinues the conduct of its business in the
Premises, or (vi) the Tenant makes an assignment
for the benefit of creditors, or a receiver be
appointed for any property of the Tenant, or at
any time prior to or during the term of this Lease
any voluntary or involuntary petition or similar
pleading under any section or sections of any
bankruptcy law shall be filed by or against the
Tenant, or any voluntary or involuntary proceeding
in any court or tribunal shall be instituted to
declare the Tenant insolvent or unable to pay the
Tenant's debts, and in the case of any involuntary
petition or proceeding, the petition or proceeding
is not dismissed within thirty (30) consecutive
days from the date it is filed.
(b) In the event of any default of the Tenant
hereunder, and at any time thereafter, (i) if the
term of this Lease shall not have commenced, the
Landlord may cancel and terminate this Lease by
notice to the Tenant, or (ii) if the term of this
Lease shall have commenced, the Landlord may serve
upon the Tenant a notice that this Lease and the
term hereof will terminate an a date to be
specified therein, (which shall not be less than
five (5) consecutive days after the date such
notice is given), and upon the date so specified
by the Landlord in such notice, this Lease and the
then unexpired term hereof shall terminate and
come to an end as fully and completely as if the
date specified in the Landlord's notice was the
day herein definitely fixed for the end and
expiration of this Lease and the term hereof, and
the Tenant shall then quit and surrender the
Premises to the Landlord, but the Tenant shall
remain liable as hereinafter set forth; provided,
however, that if the Tenant shall fail to make
timely payment of rent, and such failure shall
continue for two (2) consecutive months, or if the
Tenant shall fail to perform a covenant of this
Lease, including the timely payment of rent, two
(2) or more tines in any period of six (6) months
then, notwithstanding that each act or omission
shall have been cured within the period after the
giving of notices as herein provided, any further
similar act or omission shall be deemed' to be
deliberate and the Landlord thereafter may serve
the aforesaid notice of termination without
affording to the Tenant a further opportunity to
cure.
(c) Upon termination of this Lease by the Landlord as
hereinabove provided; or if the Premises became
vacated or deserted, the Landlord may, without
notice, terminate all services and reenter the
Premises either by force or otherwise, and by
summary proceedings or otherwise, dispossess the
Tenant and the legal representatives of the Tenant
or any other occupant of the Premises, and remove
their effects without being deemed in any manner
guilty of trespass, eviction or forcible detainer,
and hold the Premises as if this Lease had not
been made.
(d) In the event of any default by Tenant as provided
in this Paragraph, Landlord shall have the right,
without notice or demand to Tenant (Tenant hereby
irrevocably waiving all notices and demands,
statutory or otherwise, including without
limitation, any notice otherwise required in
connection with any forcible entry and detainer
action), to terminate this Lease, and Tenant's
right to possession of the Premises without
terminating this Lease, in which event Landlord
shall be entitled to receive from Tenant:
(1) The worth at the time of award of any unpaid
rent which has been earned at the time of
such termination; plus
(2) The worth at the time of award of the amount
by which the unpaid rent which would have
been earned after termination until the time
of award exceeds the amount of such rental
loss Tenant proves could have been reasonably
avoided; plus
(3) The worth at the time of award of the amount
by which the unpaid rent which would have
been earned after termination until the time
of award exceeds the amount of such rental
loss that Tenant proves could be reasonably
avoided; plus
(4) Any other amount necessary to compensate
Landlord for all the detriment proximately
caused by Tenant's failure to perform its
obligations under this Lease or which in the
ordinary course of things would be likely to
result therefrom; and
(5) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as
may be permitted from time to time by
applicable law.
As used in subparagraphs (1) and (2) above, "worth
at the time of award" shall be the then highest
lawful rate, but in no event to exceed one percent
(1%) per annum, plus the rate established by the
Federal Reserve Bank of Chicago on advances made
to member banks under Sections 13 and 13a of the
Federal Reserve Act ('discount rate') prevailing
on the date of execution of this Lease by
Landlord. As used in paragraph (3) above, "worth
at the time of award" shall be computed by
discounting such amount at the discount rate of
the Federal Reserve Bank of Chicago at the time of
award, plus one percent (1%).
(e) Any and all property which may be removed from the
Premises by the Landlord pursuant to the authority
of this Lease or of law, to which the Tenant is or
may be entitled, may be handled, removed or stored
by the Landlord at the risk, cost and expense of
the Tenant, and the Landlord shall in no event be
responsible for the value, preservation or
safekeeping thereof. The Tenant shall pay to the
Landlord upon demand any and all expenses incurred
in such removal and all storage charges against
such property so long as the same shall be in the
Landlord's possession or under the Landlord's
control. Any such property of the Tenant not
removed from the Premises or retaken from storage
by the Tenant within thirty (30) days after the
end of the term, however, terminated, shall be
presumed to have been conveyed by the Tenant to
the Landlord under this Lease as a bill of sale
without further payment or credit by the Landlord
to the Tenant.
(f) The Tenant shall pay upon demand all the
Landlord's costs, charges and expenses, including
the fees of counsel, agents and others retained by
the Landlord, incurred in enforcing ca carrying
out the' Tenant's obligations hereunder or
incurred by the Landlord in any litigation,
negotiations or transactions in which the Tenant
causes the Landlord, without the Landlord's fault,
to become involved or concerned, plus interest
from the date of payment at the annual rate of one
and one-half percent (1.5%) above the prime
interest rate established, from time to time, by
the largest commercial bank in the State in which
the Building is located, which amount shall be
deemed to be additional rent due and payable by
the Tenant at once without notice or demand (but
in no event, at a rate which is more than the
highest rate which is at the time lawful in the
State where the Building is located).
(g) The Tenant hereby expressly reserves the right to
receive notice of the service of notice of
intention to reenter or to institute legal
proceedings to that end and any and all rights of
redemption granted by or under any present or
future laws in the event of the Tenant being
evicted or dispossessed for any cause, or in the
event of the Landlord obtaining possession of the
Premises by reason of the violation by the Tenant
of any of the covenants and conditions of this
Lease or otherwise. The words "reenter", "enter"
and "reentry" as used in this Lease are not
restricted to their technical legal meaning.
(h) In the event of a breach or threatened breach by
the Tenant of any of the covenants or provisions
hereof, the Landlord may have the right of
injunction and the right to invoke any remedy
allowed at law or in equity as if reentry, summary
proceedings and other remedies were not herein
provided for. Mention in this Lease of any
particular remedy shall not preclude the Landlord
from pursuing any other remedy in law or in
equity.
(i) The delivery of keys to any agent or employee of
the Landlord shall not be considered as a
termination of this Lease or a surrender of the
Premises.
(j) The Landlord and the Tenant hereby waive trial by
jury in any action, proceeding or counterclaim
brought by either of them against the other an any
matters not relating to personal injury or
property damage but otherwise arising out of or in
any way connected with this Lease, the
relationship of the Landlord and the Tenant, the
Tenant's use or occupancy of the Premises, or any
emergency statutory remedy. The Tenant further
agrees that is shall not interpose any
counterclaim or counterclaims in a summary
proceeding or in any action based on nonpayment of
rent or any other payment required of the Tenant
hereunder.
Mechanics' 16. The Tenant shall not permit any mechanics, or
Liens mechanic's liens to be filed against the fee of the
real property on which the Building is located nor
against the Tenant's leasehold interest in the
Premises. The Landlord shall have the right, at all
reasonable times to post and keep posted on the
Premises any notices which it deems necessary for
protection from such liens. If any such liens are so
filed, the Landlord, at its election, may pay and
satisfy the same and in such event the sums so paid by
the Landlord, with interest from the date of payment at
the annual rate of one and one-half percent (1.5%)
above the prime interest rate established, from time to
time, by the largest commercial bank in the State in
which the Building is located, shall be deemed to be
additional rent due and payable by the Tenant at once
without notice or demand.
Eminent Domain 17. (a) In the event that the whole or any part of the
Premises shall be lawfully condemned or taken in
any manner for any public or quasi-public use, at
the Landlord's option, this Lease and the term
hereby granted shall forthwith cease and terminate
on the date of the taking of possession by the
condemning authority and the Landlord shall be
entitled to receive the entire award without any
payment to the Tenant, the Tenant hereby assigning
to the Landlord the Tenant's interest in the
award, if any, and the rent shall be apportioned
as of such date.
(b) In the event that a part of the Building shall be
so condemned or taken and if in the opinion of the
Landlord, the Building should be restored in such
a way as to alter the Premises materially, or the
Building should be demolished, the Landlord may
terminate this Lease and the term and estate
hereby granted without compensation to the Tenant
by notifying the Tenant of such termination within
sixty (60) days following the date of the taking
of possession by the condemning authority, and
this Lease and the term and estate hereby granted
shall expire on the date specified in the notice
of termination not less than sixty (60) days after
the giving of such notice, as fully and completely
as if such date were the date hereinbefore set for
the expiration of the term of this Lease, and the
rent shall be apportioned as of such date.
Casualty 18. In the event of damage or destruction of the Premises
during the term by fire, the elements, or casualty, the
Landlord shall forthwith repair the same, provided such
repairs can be made, in the Landlord's opinion, within
one hundred twenty (120) days, but such damage or
destruction shall in nowise annul or void this lease,
except that the Tenant shall be entitled to at
proportionate reduction of rent while such repairs are
being made, such proportionate reduction to be based
upon the extent that the Premises, or part thereof, may
be untenantable. If, in the Landlord's opinion, such
repairs cannot be made within one hundred twenty (120)
days the Landlord may, at its option to be exercised
within thirty (30) days from the date of such damage or
destruction, make the same as soon as possible
thereafter, this Lease continuing in full force and
effect and the rent to be proportionately reduced as
aforesaid in this Paragraph provided. In the event
that the Landlord does not so elect to make such
repairs which cannot be made within said one hundred
twenty (120) day period, this Lease may be terminated
at the option of either party. In the event that the
Building be damaged, this Lease shall continue in full
force and effect, but the Landlord shall forthwith
repair such damage; except that if the Building is
severely damaged or destroyed, as determined by the
Landlord, the Landlord, at its option to be exercised
within thirty (30) days from the date of such damage or
destruction, may terminate this Lease. The Tenant
shall be entitled to a proportionate reduction of rent
only if the Premises are untenantable as aforesaid and
no such rent reduction shall be allowed by reason of
inconvenience, annoyance or injury to the Tenant's
business because of such damage or destruction, or the
necessity of repairing any Portion of the Building, or
the making of such repairs, and the Landlord shall not
be liable to the Tenant because of such inconvenience,
annoyance or injury.
Waiver of 19. Each party hereto waives all claims for recovery from
Subrogation the other party for any loss or damage to any of its
property insured under valid and collectible insurance
policies covering loss by fire or any of the peril's
insured under the standard extended coverage rider.
Increase or 20. (a) The operating expense base cost contained within
Decrease of annual rent described in Paragraph 1 (and in any
extension or renewal provision) shall be increased
or decreased annually, as the case may be, for
each Comparison Year, by not more than 5% capped
excluding those uncontrollable Landlord expenses
of taxes, insurance and utilities. In the event
the Building is not fully assessed for tax
purposes for the Base Year or a Comparison Year
because for tax purposes it is not considered
fully completed, the Real Estate Taxes for the
Base Year or Comparison Year, as the case may be,
shall be adjusted by the Landlord to such figure
as the Landlord in its reasonable discretion
determines would reflect the Real Estate Taxes as
if the Building were fully completed and fully
assessed for tax purposes.
(b) For the purpose of this Paragraph 20:
(1) The term "Base Year" means calendar year 1994
(2) The term "Comparison Year" means each
calendar year during the tern of this Lease
subsequent to the Base Year of 1994.
(3) The term "Real Estate Taxes" means all taxes
and assess-ments, special or otherwise,
levied upon or with respect to the Building
and the land upon which it is located, or
either of them, imposed by Federal, State or
local governments, (but shall not include
income, franchise, capital stock, estate or
inheritance taxes unless the Landlord
equitably determines that such taxes are in
lieu of Real Estate Taxes), and use or
occupancy taxes, and excise and other taxes
(other than general income taxes) on rent and
other income from the Building, (computed, in
case of a graduated tax, as if the Landlord's
income from the Building were the Landlord's
sole taxable income), and any substitutions
for Real Estate Taxes, and amounts in the
year paid, for fees for consultants and
attorneys and all other costs incurred by
Landlord in seeking to obtain a reduction of,
or a limit on the increase in any Real Estate
Taxes, regardless of whether any reduction or
limitation is obtained. The term Real Estate
Taxes for the Base Year or for any Comparison
Year means Real Estate Taxes paid or falling
due during the Base Year or such Comparison
Year. In the case of special taxes and
assess-ments payable in installments only the
amount of each installment due and payable
during a calendar year shall be included in
Real Estate Taxes for that year.
(4) The term "Operating Expenses" with respect to
the Base Year or a Comparison Year means
those expenses incurred during such year in
respect of the operation and maintenance of
the Building in accordance with accepted
principles of sound management and accounting
practices are applied to the ownership,
management, operation, maintenance and repair
of first class office buildings, including
premiums for insurance carried by the
Landlord and personal property taxes in
connection with property used in the
maintenance and operation of the Building,
plus those additional expenses which the
Landlord reasonably determines it would have
so incurred during such year had the Building
been 100% occupied. If the Landlord shall
eliminate the payment of any wages or other
labor costs, costs of supplies, costs of
subcontractor services, or other management
costs, as a result of the installation of
labor saving devices, (whether or not
categorized as capital improvements) or by
any other means, or if the Landlord shall,
through installation during the term of
energy saving devices, (whether or not
categorized as capital improvements) affect
savings in energy or other utility costs,
then in computing Operating Expenses the
corres-ponding item or items of such wages or
other costs saved, or the utility cost saving
differential, shall be deducted from Base
Year Operating Expenses. The cost of these
devices, plus interest at the annual rate of
one-half percent (1.5%) above the prime
interest rate established, from time to tine,
by the largest commercial bank in the state
in which the Building is located, may be
amortized over a reasonable period of time as
determined by the Landlord in accordance with
accepted principals of sound management and
accounting practices, and included as an item
of Operating Expenses; provided, that such
amortized cost plus interest in any
comparison Year shall not exceed in that
Comparison Year the savings generated by the
device. Operating Expenses shall not include
expenses for repairs or other work occasioned
by fire or other insured casualty; expenses
incurred in leasing or procuring new tenants
such as lease commissions, advertising
expenses and expenses of renovating space for
new tenants; legal expenses in enforcing the
terms of any lease; interest or amortization
payments on any mortgage or mortgages, and
rental under any ground or underlying lease
or leases: wages, salaries or other
compensation paid to any executive employees
above the grade of Building Manager; wages,
salaries or other compensations paid for
clerks or attendants in concessions or
newsstands operated if the Landlord, and
expenses in connection with maintaining and
operating any garage separately operated by
the Landlord.
(c) If by reason of complaint against valuation,
protest of tax rates, or otherwise, Real Estate
Taxes for the Base Year or any Comparison Year are
affected in such a way as would result in a rent
increase or decrease hereunder, the Real Estate
Taxes for Use affected Base Year or Comparison
Year shall be recalculated accordingly and the
resulting increase or decrease in rent, less the
expenses incurred in effecting any such reduction,
shall be paid simultaneously with or applied as a
credit against the rent next becoming due. Any
personal property taxes or any increase in Real
Estate Taxes by reason of capital improvements,
nonstandard or special installa-tions, alterations
or fixtures made to the Premises by or for the
benefit of the Tenant shall be paid for by the
Tenant.
(d) If the term of this lease shall terminate on a
date other than a December 31st, the annual rent
described in Paragraph 1 (and in any extension or
renewal provision) as previously adjusted by this
Paragraph 20, shall to increased or decreased, as
the case may be, for the period commencing on the
January 1st following the last full calendar year
of the term and continuing to the end of the term
of this Lease, at the same rate as the rent for
the Comparison Year immediately prior to such
period is increased or decreased by reason of this
Paragraph 20, and the adjustment for such period
shall be made within twenty (20) days after the
Landlord shall render its statement for the last
monthly installment of the annual rent payable
under this Lease, or if that is not reasonably
feasible as soon thereafter as is reasonably
feasible, and this obligation shall survive the
expiration or earlier termination of this Lease.
(e) Statements of the amount of the Tenant's pro rata
share of increase or decrease in Real Estate Taxes
and Operating Expenses shall be rendered by the
Landlord to the Tenant as soon as reasonably
feasible after the first Comparison Year and each
ensuing Comparison Year thereafter, except as
otherwise provided in subparagraph (d) hereof with
respect to any fractional period at the end of
this Lease and except as hereinafter provided.
Delay in computation of the increase or decrease
in Real Estate Taxes and Operating Expenses shall
not be deemed a default hereunder or a waiver of
Landlord's right to collect the increase or
decrease in Real Estate Taxes and Operating
Expenses. On the first day for the payment of
rent under this Lease following the, furnishing of
a statement for a Comparison Year (1) the Tenant,
in the event of an increase, shall pay the
Landlord a shall equal to one-twelfth (1/12) of
the Tenant's share of such increase multiplied by
the number of months then elapsed commencing with
January 1st of the preceding calendar year and, in
advance, one-twelfth (1/12) of such share in
respect of the then current month; and
correspondingly, in the case of a decrease, the
Tenant shall be entitled to a credit against the
rent next becoming due of a sum equal to one-
twelfth (1/12) of the Tenant's share of such
decrease multiplied by the number of months then
elapsed commencing January 1st of the preceding
calendar year, and (2) thereafter, until the next
Comparison Year statement shall be rendered, the
monthly installments of rent payable under this
Lease shall be increased or decreased, as the case
may be, by an amount equal to one-twelfth (1/12)
of the Tenant's share of such increase or
decrease. The Landlord may, in its discretion,
make a reasonable estimate of the Tenant's share
of anticipated increases in Real Estate Taxes and
Operating Expenses in the first Comparison Year
and require the Tenant to pay each month during
the first Comparison Year one-twelfth (1/12) of
such estimated amount at the time of payment of
monthly installments of rent, subject to
adjustment as hereinabove provided. Any payment,
refund, or credit shall be made without prejudice
to any right of the Tenant to dispute or of the
Landlord to correct any item oar items in such
statements pursuant to subparagraph (f) hereof
Notwithstanding anything to the contrary
hereinabove provided, the monthly rent shall never
be decreased by operation of this Paragraph 20
below the monthly annual rent described in
Paragraph 1 (or in any extension or renewal
provision).
(f) If the Tenant shall dispute in writing any
specific item or items included by the Landlord in
determining Operating Expenses or the additional
expenses which would have been incurred had the
Building been 100% occupied or the amount of any
Real Estate Taxes, and such dispute is not
amicably settled between the Landlord and the
Tenant within thirty (30) days after statements
therefor have been rendered, either party may
during the thirty (30) days next following the
expiration of the first mentioned thirty (30) days
refer such disputed items or items to an
independent certified public accountant selected
by the Landlord, for decision, and the decision of
such accountant shall be final, conclusive and
binding upon the Landlord and the Tenant. In no
event shall Tenant be entitled to withhold, deduct
or offset any monetary obligation of Tenant to
Landlord under the Lease pending the completion of
and regardless of the results of any review of
records under this Paragraph. The right of Tenant
under this Paragraph may only be exercised once
for any Landlord's Statement, and if Tenant fails
to meet any of the above conditions as a
prerequisite to the exercise of such right, the
right of Tenant under this Paragraph for a
particular Landlord's Statement shall be deemed
waived. Any adjustment required by such decision
shall be made within thirty (30) days after such
decision has been rendered. The expenses involved
in such determination shall be borne by the party
against whom a decision is rendered by said
accountant or, if more than one item is disputed,
the expenses shall be apportioned according to the
number of items decided against each party. If
the Tenant shall not so dispute any item or items
of any such statement within sixty (60) days after
such statement has been rendered, the Tenant shall
be deemed to have approved such statement. The
Landlord shall have the right, for a period of
twenty-four (24) months after the rendering of any
statements, (or for a longer period, if reasonably
required in order to ascertain the facts as to any
change in Real Estate Taxes or in any operating
Expenses), to send corrected statements to the
Tenant, and any rent adjustments requited thereby
shall be made within thirty (30) days thereafter.
This provision shall survive the expiration or
earlier termination of the term of this Lease.
(g) The Landlord shall keep and make available to the
Tenant at the business office of the Landlord
where such records are stored, for a period of
sixty (60) days after statements are rendered as
provided in this Paragraph 20, records in
reasonable detail of the payment of Real Estate
Taxes and operating Expenses for the period
covered by such statement or statements and shall
permit the Tenant's CPA consultant to examine and
audit such of its records as may be reasonably be
required to verify such statements, at reasonable
times during business hours.
Condition of 21. No later than February 1, 1994 the Landlord shall make
Premises available to the Tenant the leased premises for the
purpose of the Tenant's construction of Tenant's fit-
up. The Tenant's taking possession shall be conclusive
evidence as against the Tenant that the Premises were
in good order and satisfactory condition when the
Tenant took possession. No promise of the Landlord to
alter, remodel or improve the Premises or the Building
and no representations respecting the condition of the
Premises, or the Building have been made by the
Landlord to the Tenant, unless the same is contained
herein, or made a part hereof. Tenant shall accept the
space in an "as is" condition.
If for any reason Landlord delays said date of February
1,1994, causing Tenant's inability to complete fit-up
by the lease commencement date, Landlord shall then
agree to offset rent proportionally until fit-up is
substantially completed.
At the termination of this Lease, by lapse of time or
otherwise, the Tenant shall return the Premises
including .the improvements made prior to initial
occupancy in as good condition as when the lease
commenced, ordinary wear and loss by fire or other
casualty insured under valid and collectible fire and
standard extended coverage insurance policies excepted,
failing which the Landlord may restore the Premises to
such condition and the Tenant shall pay the cost
thereof and this obligation shall survive the
expiration or earlier termination of this Lease.
Save Harmless 22. The Tenant agrees to indemnify and save harmless the
Landlord and the Landlord's management contractor
against an from any and all claims by or on behalf of
any person or persons, firm or firms, corporation or
corporations, arising from the Tenant's use or
occupancy of the Premises or the conduct of its
business or from any activity, work, or thing done,
permitted or suffered by the Tenant, in or about the
Premises, (or any parking lot or structure, if
applicable) and will further indemnify and save the
Landlord and the Landlord's management contractor
harmless against and from any and all claims arising
from any breach or default on the Tenant's part in the
performance or observance of any covenant or agreement
on the Tenant's part to be performed or observed
pursuant to the terms of this Lease, or arising from
any act or negligence of the Tenant; or any of its
agents, contractors, servants, employees or licensees,
and from and against all costs, counsel fees, expenses
and liabilities incurred in connection with any such
claim or action or proceeding brought thereon; and will
further indemnify and save the Landlord and Landlord's
management contractor harmless against and from any and
all environmental damages which arise from: (1) the
Handling of any Tenant's Hazardous Materials, as
defined in this Lease, or (ii) the breach of any of the
provisions of this Lease. For the purpose of this
Lease, "environmental damages" shall mean: (a) all
claims, judgments, damages, penalties, fines, costs
liabilities and losses (including, without limitation,
diminution in the value of the Premises or any portion
of the Building, and from any adverse impact of
Landlord's marketing of space); (b) all reasonable sums
paid for claims, attorneys' fees, consultants fees and
experts' fees; and (a) all costs incurred by Landlord
in connection with investigation or resediation
relating to the Handling of Tenant's Hazardous
Materials, whether or not required by the Environmental
Laws, necessary for Landlord to make full economic use
of the Premises or any portion thereof the Building, or
otherwise required under this Lease. To the extent
that Landlord is strictly liable under any
Environmental Laws, Tenant's obligations to Landlord
and the other indemnities under the foregoing
indemnification shall likewise be without regard to
fault on Tenant's part with respect to the violation of
any Environmental Law which results in liability to the
indemnity. Tenant's obligations and liabilities
pursuant to this Paragraph shall survive the expiration
or earlier termination of this Lease and in case any
action or proceeding be brought against the Landlord or
the Landlord's management contractor by reason of any
such claim, the Tenant upon notice from the Landlord
covenants to resist or defend at the Tenant's expense
such action or proceeding by counsel reasonably
satisfactory to the Landlord. The Tenant, as a
material part of the consideration to the Landlord,
hereby ass all risk of damage to property in, upon or
about the Premises and Building (and any motor
vehicles, if applicable) from any source and to
whomever belonging, and the Tenant hereby waives all
claims in respect thereof against the Landlord and the
Landlord's management contractor and agrees to defend
and save the Landlord and the Landlord's management
contractor harmless from and against any such claims by
others.
Possession 23. In the event of the failure of the Landlord to deliver
possession of the Premises at the time of the
commencement of the term of this lease, neither the
Landlord nor its contractors, subcontractors,
employees, agents or management contractor shall be
liable for any damage caused thereby, nor shall this
Lease thereby became void or voidable, nor shall the
tern herein specified be in any way extended, but in
such event the term shall begin when the Landlord does
deliver possession of the Premises and the Tenant shall
not be liable for any rent until the time that the
Landlord delivers such possession.
Quiet 24. The Landlord covenants and agrees that the Tenant on
Enjoyment paying the rent, including additional rent, and
performing and observing the covenants on the Tenant's
part to be performed and observed hereunder, shall and
may peaceably and quietly hold and enjoy these Premises
for the term of this Lease, subject to the provisions
of this Lease.
Miscellaneous 25. (a) No receipt of money by the Landlord from the
Tenant after the termination of this Lease or
after the service of any notice or after the
commencement of any suit, or after final Judgment
for possession of the Premises shall renew,
reinstate, continue or extend the term of this
Lease or affect any such notice, demand or suit.
(b) No waiver of any default of the Tenant hereunder
shall be implied from any omission by the Landlord
to take any action on account of such default if
such default persists or be repeated, and no
express waiver shall affect any default other than
the default specified in a written waiver and then
only for the time and to the extend therein
stated. The invalidity or unenforceability of any
provision hereof shall not affect or impair any
other provision and the invalid or unenforceable
provision shall be deemed restated to comply with
local law.
(c) The word "Tenant" wherever used in this Lease
shall be construed to mean Tenants in all cases
where there is more than one Tenant, and the
necessary grammatical changes required to make the
provisions hereof apply either to corporations or
individuals, men or women, shall in all cases be
assumed as though in each case fully expressed.
(d) Provisions inserted herein or affixed hereto shall
not be valid unless appearing in the duplicate
original hereof held by the Landlord.
(e) Each provision hereof shall extend to and shall,
as the case may require, bind and inure to the
benefit of the Landlord and the Tenant and their
respective heirs, legal representatives,
successors, and assigns in the event this Lease
has been assigned with the written consent of the
Landlord.
(f) The headings of Paragraphs are for convenience
only and do not limit or construe the contents of
the Paragraphs.
(g) Submission of this instrument for examination does
not Constitute a reservation of or option for the
Premises. The instrument becomes effective as a
lease upon execution and delivery by both the
Landlord and the Tenant.
(h) All amounts (other than annual rent and escalation
payments) owed by the Tenant to the Landlord
hereunder shall be paid within ten (10) days from
the date the Landlord renders statements of
account therefor, but in no event shall rent
payment be due prior than the date provided for in
Section 1, and all such amounts as well as rents
and escalation payments shall bear interest from
their respective due date until paid at the annual
rate of one and one-half percent (1.5%) above the
prime interest rate established, from time to
time, by the largest commercial bank in the state
in which the Building is located. All such
amounts other than annual rent shall be deemed
additional rent or rents.
(i) The Tenant may occupy the Premises prior to the
commencement of the term of this Lease with the
Landlord's written consent, and in such case all
the provisions of this Lease shall be in full
force and effect as soon as the Tenant occupies
the Premises, and the Tenant shall pay rent for
the period prior to the stated commencement of the
tern at the rate per month set forth herein.
(j) Where access to a Building vending room through
the Premises the Tenant will permit the company
licensed by the Landlord to operate vending
machines in such vending room and its agents or
employees to have access to such vending room
during the Tenant's normal business hours.
(k) No rights to any view or to light or air over any
property, whether belonging to Landlord or any
other person, are granted to Tenant by this Lease.
(1) All rights and remedies of Landlord under this
Lease shall be cumulative and none shall exclude
any other rights and remedies allowed by law.
(m) Landlord shall have the right to apply payments
received from Tenant pursuant to this Lease
(regardless of Tenant's designation of such
payments) to satisfy any obligations of Tenant
hereunder, in such order and amounts, as Landlord
in its sole discretion, may elect.
(n) Time is of the essence of this Lease and each of
its provisions.
Restrictions 26. (a) Tenant shall not use the Premises, or permit the
on Use Premises to be used, in any manner which: (i)
violates any law, ordinance, regulation or
directive of any governmental authority having
jurisdiction, including, without limitation, any
certificate of occupancy., or any covenant,
condition or restriction affecting the Building or
the Premises; (ii) causes or is reasonably likely
to cause damage to the Building or the Premises;
(iii) violates a requirement or condition of any
fire and extended insurance policy covering the
Building and/or the Premises, or increases the
cost of such policy; (iv) constitutes or: is
reasonably likely to constitute a nuisance,
annoyance or inconvenience to other tenants or
occupants of the Building or interferes with the
use and occupancy of any portion of the Building
for other tenants or occupants; (v) impairs or is
reasonably likely to impair the property
maintenance, operation or repair of the Building
or its equipment, facilities or systems; (vi)
interferes with, or is reasonably likely to
interfere with, the transmission or reception of
microwave, television, radio, telephone or other
communication signals by antennae or other
facilities located in the Building; or (vii)
violates the Rules and Regulations described in
Rider A.
(b) In addition to any other amounts payable by Tenant
to Landlord hereunder, Tenant shall pay to
Landlord, as and when billed by Tenant and as
additional rent, Tenant's pro rata share of the
cost of improvements, capital expenditures,
repairs or replacements to the Building, or any
equipment or machinery used in connection with the
Building, if any such item is required under
governmental laws, regulations, ordinances, or
interpretations thereof, which were not applicable
to the Building at the time the Building was
constructed; provided, however, that any such
costs which are properly charged to a capital
account shall not be payable in a single year, but
shall instead be amortized over their useful
lives, as determined by the Landlord in accordance
with generally accepted accounting principles, and
only the annual amortization amount (prorated
based on the number of days of the Lease term in
the calendar year) shall be payable by the Tenant
with respect to any calendar year.
Security 27. The Tenant has deposited with the Landlord the sum of
$30,411.94 as security for the faithful performance and
observance by the Tenant of the terms, provisions and
conditions of this Lease to be applied to Tenant's 12th
month rent. In the event the Tenant defaults in
respect of any of the terms, provisions and conditions
of this Lease including, but not limited to, the
payment of rent and additional rent, the Landlord may
use, apply or retain the whole or any part of the
security so deposited to the extent required for the
payment of any rent and additional rent or any other
sum as to which the Tenant is in default or for any sum
which the Landlord may expend or nay be required to
expend by reason of the Tenant's default in respect of
any of the terms, covenants and conditions of this
Lease, including, but not limited to, any damages or
deficiency in the reletting of the Premises, whether
such damages or deficiency accrued before or after
summary proceedings or other reentry by the Landlord.
In the event that the Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and
conditions of this, Lease, the security shall be
returned to the Tenant after the date fixed as the end
of this Lease and after delivery of possession of the
entire Premises to the Landlord. In the event of a
sale of the Building or leasing of the Building, the
Landlord shall have the right to transfer the security
to the vendee or lessee and the Landlord shall
thereupon be released by the Tenant from all liability
for the return of such security; and the Tenant agrees
to look solely to the new Landlord for the return of
said security; and is agreed that the provisions hereof
shall apply to every transfer or assignment made of the
security to a new Landlord. The Tenant further
covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited
herein as security and that neither the Landlord nor
its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or
attempted encumbrance.
Hazardous 28. (a) No Hazardous Materials, as defined herein, shall
Materials be Handled, as also defined herein, upon, about,
above or beneath the Premises or any portion of
the Building by or on behalf of Tenant, its
subtenants or its assignees, or their respective
contractors, clients, officers, directors,
employees, agents or invitee. Any such Hazardous
Materials so Handled shall be known as Tenant's
Hazardous Materials. Notwithstanding the
foregoing, normal quantities of those Hazardous
Materials customarily used in the conduct of
general administrative and executive office
activities (e.g., copier fluids and cleaning
supplies) may be used and stored at the Building
without Landlord's prior written consent, but only
in compliance with all applicable Environmental
Laws, as defined herein.
(b) Notwithstanding the obligation of Tenant to
indemnify Landlord pursuant to this Lease, Tenant
shall, at its sole cost and expense, promptly take
all actions required by any federal, state or
local government agency or political subdivision,
or necessary for Landlord to make full economic
use of the Building or any portion of the
Building, which requirements or necessity arises
from the Handling of Tenant's Hazardous Materials
upon, about, above or beneath the Premises or any
portion of the Building. Such actions shall
include, but not be limited to, the investigation
of the environmental condition of the Building or
any portion of the Building, the preparation of
any feasibility studies or reports and the
performance of any cleanup, remedial, removal or
restoration work. Tenant shall take all actions
necessary to restore the Building or any portion
of the Building to the condition existing prior to
the introduction of Tenant's Hazardous Materials,
notwithstanding any less stringent standards or
remediation allowable under applicable
Environmental Laws. Tenant shall nevertheless
obtain Landlord's written approval prior to
undertaking any actions required by this
Paragraph, which approval shall not be
unreasonably withheld so long as such actions
would not potentially have a material adverse
long-term or short-term effect on the Premises or
any portion of the Building.
(c) "Environmental Laws" means and includes all now
and hereafter existing statutes, laws, ordinances,
codes, regulations, rules, rulings, orders,
decrees, directives, policies and requirements by
any federal, state or local governmental authority
regulating, relating to or imposing liability or
standards of conduct concerning public health and
safety or the environment.
(d) "Hazardous Materials" means (i) any material or
substance: (i.a) which is defined or becomes
defined as "hazardous substance," "hazardous
waste," "infectious waste," "chemical mixture or
substance," or "air pollutant" under Environmental
laws; (i.b) containing petroleum, crude oil or any
fraction thereof which is liquid at standard
conditions of temperature and pressure; (i.c)
containing polychlorinatedbiphenyls ("PCBs");
(i.d) containing asbestos, (i.e) which is
radioactive; or (ii) any other pollutant or
contaminant or hazardous, toxic, flammable or
dangerous chemical, waste, material or substance,
as all such terms are used in their broadest
sense, and defined, regulated or become regulated
by Environmental Laws, or which cause a nuisance
upon or waste to the Premises or any portion of
the Building.
(e) "Handle," "Handled," or "Handling," shall mean any
installation, handling, generation, storage,
treatment, waste disposal, discharge, release,
manufacture, refinement, presence, migration,
emission, abatement, removal, transportation, or
any other activity of any type in connection with
or involving Hazardous Materials.
Insurance 29. Tenant shall purchase and maintain insurance during the
entire term for the benefit of Tenant and Landlord (as
their interest may appear) with terms, coverage and in
companies satisfactory to Landlord, and with such
increases in limits as Landlord may from time to time
request, but initially Tenant shall maintain the
following coverage in the following amounts:
(i) Comprehensive General Liability Insurance naming
Tenant, Landlord, Landlord's beneficiary and
Landlord's management agent covering any liability
for bodily injury, personal injury and property
damage arising out of Tenant's operations, assumed
liabilities or use of the Premises, for limits of
liability not less than:
Bodily Injury Liability $1,000,000 each occurrence
$3,000,000 annual aggregate
Personal Injury Liability $3,000,000 each occurrence
$3,000,000 annual aggregate
Property Damage Liability $1,000,000 each occurrence
$3,000,000 annual aggregate
(ii) Physical Damage Insurance covering all office
furniture, trade fixtures, office equipment,
merchandise and all other items of Tenant's
property on the Premises. Such insurance shall be
written on an "all risks" of physical loss or
damage basis, for the full replacement cost value
of the covered items and in amounts that meet any
coinsurance clause of the policies of insurance.
Tenant shall, prior to the commencement of the term,
furnish to Landlord certificates evidencing such
coverage, which certificates shall state that such
insurance coverage may not be changed or cancelled
without at least ten (10) days prior written notice to
Landlord and Tenant.
Tenant shall comply with all applicable laws and
ordinances, all orders and decrees of court and all
requirements of other governmental authorities, and
shall not, directly or indirectly, make any use of the
Premises which nay thereby be prohibited or be
dangerous to person or property or which may jeopardize
any insurance coverage or may increase the cost of
insurance or require additional insurance coverage. If
by reason of the failure of Tenant to comply with the
provisions of this Paragraph, any insurance coverage is
jeopardized or insurance premiums are increased,
Landlord shall have the option either to terminate this
Lease or to require Tenant to make immediate payment of
this increased insurance premium.
Limitation 30. It is expressly understood and agreed by and between
on Liability the parties hereto, anything herein to the contrary
notwithstanding, that each and all of the
representations., covenants, undertakings and
agreements herein made on the part of the Landlord,
while in form purporting to be representations,
covenants, undertakings and agreements of the Landlord,
are, nevertheless, each and every one of them, made and
intended not as personal representations, covenants,
undertakings and agreements by the Landlord or for the
purpose or with the intention of binding said Landlord
personally, but are made and intended for the purpose
of binding only Landlord's interest in the Premises to
the terms of this Lease and for no other purpose
whatsoever, and in the event of a default by Landlord,
Tenant shall look solely to the interest of Landlord in
the Premises. No duty shall rest upon Landlord to
sequester the Premises or the rents, issues and profits
arising therefrom, or the proceeds arising from the
sale or other disposition thereof. No personal
liability or personal responsibility is assumed by nor
shall at any time be asserted or enforceable against
Landlord on account of this Lease or on account of any
representation, covenant, undertaking or agreement of
the Landlord in this Lease contained, either expressed
or implied, all such personal liability, if any, being
expressly waived and released by the Tenant herein and
to all persons claiming by, through or under said
Tenant. The foregoing limitation on Landlord's
liability shall inure to and for the benefit of
Landlord and its successors and assigns and their
shareholders, officers, directors, partners, agents and
employees.
Estoppel 31. Tenant agrees, that, from time to time upon not less
Certificate than ten (10) days prior request by Landlord, Tenant,
or Tenant's duly authorized representative having
knowledge of the following facts, will deliver to
Landlord a statement in writing certifying (i) that
this Lease is unmodified and in full force and effect
(or if there have been modifications, a description of
such modifications and that the Lease as modified is in
full force and effect); (ii) the dates to which rent
and other charges have been paid; (iii) that the
Landlord is not in default under any provision of this
Lease, or, if in default, the nature thereof in detail;
and (iv) such further matters as may be requested by
Landlord, it being intended that any such statement may
be relied upon by any mortgagees or prospective
mortgagees thereof, or any prospective assignee of any
mortgagees thereof, or any prospective and/or
subsequent purchaser or transferee of all or at part of
Landlord's interest in the land and/or Building.
Tenant shall execute and deliver whatever instruments
may be required for such purposes, and in the event
Tenant fails so to do within ten (10) days after demand
in writing, Tenant shall be considered in default under
this Lease.
Brokerage 32. Tenant represents and warrant unto Landlord that Tenant
Commission has directly dealt with and only with Landlord's
management agent, The Galbreath Company, and The
Haymaker Company as Tenant broker in connection with
this Lease, and agrees to indemnify and hold harmless
Landlord from and against any and all claims or
demands, damages, liabilities and expenses of any type
or nature whatsoever arising from and against any and
all claims or demands, damages, liabilities and
expenses of any type or nature whatsoever arising by
reason of the Incorrectness or breach of the aforesaid
representation and warranty. Landlord shall pay, and
agrees to indemnify and hold harmless Tenant from and
against any claim by, Landlord's management agent and
the Tenant's Broker for its commission arising out of
the execution and delivery of this Lease. Both the
Tenant and Landlord indemnify each other should a claim
arise.
Miscellaneous 33. Landlord is providing Tenant with a $15.00 per square
foot fit-up allowance ($429,345.00) to be used as a
credit against the construction of the demised
premises. Said construction allowance may be applied
toward the cost of miscellaneous expenses to include
workstations, telephone and computer wiring, etc. All
such expenditures and or improvements shall remain the
property of the Landlord. All remaining fit-up
allowance following construction and Tenant's occupancy
shall revert back to the Landlord. In no event shall
any portion of the fit-up allowance be used for the
purpose and or cost of Tenant's relocation.
Rider A, C and Exhibit A are attached hereto and made a part thereof.
IN WITNESS WHEREOF, this instrument has been duly executed by the parties
hereto as of the day and year first above written.
INTERNATIONAL BUSINESS MACHINES CORPORATION
By:____________________________ Witness:___________________________
Title:________________________
SCT PUBLIC SECTOR, INC.
By:___________________________ Witness:___________________________
Title:________________________
RIDER A
Attached to and made part of
Lease Dated
made between
International Business Machines Corporation
and
SCT
Rules and Regulation
1. The sidewalks, halls, passages, elevators and stairways shall not to
obstructed by the Tenant or used for any purpose other than for
ingress to and egress from the Premises. The halls, passages,
entrances, elevators, stairways, balconies and roof are not for the
use of the general public, and the Landlord shall in all cases retain
the right to control and prevent access thereto of all persons whose
presence in the judgment of the Landlord shall be prejudicial to the
safety; character, reputation and interests of the Building and its
tenants, provided that nothing herein contained shall be construed to
prevent such access to persons with whom the Tenant normally deals in
the ordinary course of its business unless such persons are engaged in
illegal activities. The Tenant and its employees shall not go upon
the roof of the Building without the written consent of the Landlord.
2. The sashes, sash doors, windows, glass lights and any lights or
skylights that reflect or admit light into the halls or other places
of the Building shall not be covered or obstructed. The toilet rooms,
water and wash closets and other water apparatus shall not be used for
any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever, shall be thrown 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
clerk, agents, servants, or visitors, shall have caused it.
3. If the Landlord, by a notice in writing to the Tenant, shall object to
any curtain, blind, shade or screen attached to, hung in, or used in
connection with, any window or door of the Premises, such use of such
curtain, blind, shade or screen shall be forthwith discontinued by the
Tenant. No awnings shall be permitted on any part of the Premises.
4. No safes or other objects heavier than the lift capacity of the
freight elevators of the Building shall be brought into or installed
in the Premises. The Tenant shall not place a load upon any floor of
the Premises which exceed the load pen square foot which such floor
was designed to carry and which is allowed by law. The moving of
safes shall occur only between such hours as may be designated by, and
only upon previous notice, to the manager of the Building, and the
persons employed to move safes in or out of the Building must be
acceptable to the Landlord. No freight, furniture or bulky matter of
any description shall be received into the Building or carried into
the elevators except during hours and in a manner approved by the
Landlord.
5. The Tenant shall not use, keep, or permit to be used or kept in the
Premises any foul or noxious gas or substance, or permit or suffer the
Premises to be occupied or used in a manner offensive or Objectionable
to the Landlord or other occupants of the Building by reason of noise,
odors, and/or vibrations, or permit or suffer the Premises to be
occupied or used in a manner that, in the sole judgment of the
Landlord diminishes or threatens to diminish the quality or reputation
of the Building as a first class office structure or is not in keeping
with the reputation, integrity or standards of the Landlord, or
interfere in any way with other tenants or those having business
therein, nor shall any animals or birds (except Seeing Eye dog,) be
kept in or about the Building. The Tenant shall not place of install
any antennae or aerials or similar devices outside of or in the
Premises.
6. The Tenant shall not use or keep in the Building any inflammables
including, but not limited to kerosene, gasoline, naphtha and benzine,
(except cleaning fluids in small quantities and when in containers
approved by the Board of underwriters), or explosives or any other
articles of intrinsically dangerous nature, or use any method of
heating other than that supplied by the Landlord.
7. If the Tenant desires telephone or telegraph connections, the Landlord
will direct electricians as to where and how the wires are to be
introduced. No boring or cutting for wires or otherwise shall be made
without specific directions from the Landlord.
8. The Tenant, upon the termination of the tenancy, shall deliver to the
Landlord all the keys of offices, rooms and toilet rooms which shall
have been furnished the Tenant or which the Tenant shall have had
made, and in the event of loss of any keys so furnished shall pay the
Landlord therefor.
9. The Tenant shall not put down any floor covering in the Premises
without the Landlord's prior approval of the manner and method of
applying such floor covering.
10. On Saturdays, Sundays and holidays recognized by the Landlord and on
other day, between the hours of 6:00 p.m. and 8:00 a.m., access to the
Building, or to the halls, corridors, elevators or stairways in the
Building, or to the Premises may be refused unless the person seeking
access is known to the watchman of the Building in charge and has a
pass or is properly identified. The Landlord shall in no case be
liable for damages for the admission to or exclusion from the Building
of any person whom the Landlord has the right to exclude under Rule 1
above. In case of invasion, mob, riot, public excitement, or other
commotion, the Landlord reserves the right to prevent access to the
Building during the continuance of the same by closing the doors or
otherwise, for the safety of the tenants or the Landlord and
protection of property in the Building.
11. The Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage including, without limitation, keeping
doors locked and windows and other means of entry to the Premises
closed.
12. The Tenant shall not alter any lock or install a new or additional
lock or any bolt on any door of the Premises without prior written
consent of the Landlord. If the Landlord shall give its consent, the
Tenant shall in each case furnish the Landlord with a key for any such
lock.
13. Without the Landlord's prior written consent, the Tenant shall not use
the name of the Building (whether or not the Building is named or
commonly known as "The IBM Building" or the like) in its advertising
or other publicity or on its stationery or other correspondence or
otherwise and shall not use pictures of the Building in advertising or
publicity or otherwise.
14. The Tenant shall not make any room to room canvass to solicit business
from other tenants In the Building; and shall not exhibit, sell or
offer to sell, use, rent or exchange in or from the Premises unless
ordinarily embraced within the Tenant's use of the Premises specified
in the Lease.
15. The Tenant shall not waste electricity, water, or air conditioning and
agrees to cooperate fully with the Landlord to assure the most
effective operation of the Building's heating and air conditioning,
and shall not allow the adjustment (except by the Landlord's
authorized Building personnel) of any controls other than room
thermostats installed for the Tenant's use. The Tenant shall keep
corridor doors closed and shall not open any windows except that if
the air circulation shall not be in operation, windows which are
operable may be opened with the Landlord's consent.
16. The Tenant shall not do any cooking in the Premises or engage any
coffee cart or vending services.
17. Prior to removing furniture, equipment, or other items from the
Building, the Tenant must submit a written list of such items and
obtain approval thereof from the Office of the Building.
RIDER C
Attached to and made part of
Lease Dated _____
made between
International Business Machines Corporation
and
SCT
Gentlemen:
You (hereinafter called "Tenant") and we (hereinafter called "Landlord")
are executing simultaneously with this letter agreement, a written Lease
covering the space referred to above, as more particularly described in
said Lease (and hereinafter called the "Premises").
In consideration of the parties entering into the Lease and of the mutual
covenants hereinafter contained Landlord and Tenant agree as follows:
1. Tenant shall furnish its drawings and specifications to Landlord for
approval on or before October 30,1993, in sufficient detail so that
Landlord's architects and engineers can prepare the final drawings and
specifications at Tenant's expense. Tenant's drawings and
specifications shall be made subject to Landlord's approval, which
Landlord covenants it will not unreasonably withhold.
If Tenant shall desire work of a special nature to be performed in the
Premises by, Landlord or by Tenant, Tenant shall cause drawings and
specifications for such work to be drawn at Tenant's sole expense by
arranging therefor with the Landlord's architects and/or engineers.
All such drawings for special work shall be made subject to Landlord's
written approval which Landlord covenants it will not unreasonably
withhold.
2. Landlord agrees, at its sole expense and without charge to Tenant, to
supply and install in the Premises, the following building standard
items:
All ADA improvements necessary to meet the guidelines established by
the Federal Government. The above work to be completed at Landlord's
cost.
If, due to Tenant's requirements of special work or materials finishes
or installations other than Landlord's standard, Landlord incurs
additional costs in connection with the installation of the building
standard items which it has herein agreed to be installed, then Tenant
agrees to reimburse Landlord for the additional costs promptly upon
being billed therefor and the additional costs shall be due and
payable as additional rent under the Lease.
3. If Landlord should agree to perform, at Tenant's request, and upon
submission by Tenant of necessary drawings and specifications, any
special work other than that specified in Paragraph 2 hereof, such
work shall be performed by Landlord, at Tenant's sole expense, as a
Tenant's extra. Prior to commencing any such work requested by
Tenant, Landlord will submit to Tenant written estimates of the cost
of any such work. If Tenant shall fail to approve any such estimate
within one (1) week, the same shall be deemed disapproved in all
respects by Tenant and Landlord shall not be authorized to proceed
with such work. Tenant agrees to pay to Landlord, promptly upon being
billed therefor, the cost of all such work which shall be due and
payable as additional rent under the Lease.
4 It is agreed that, notwithstanding the date provided in the Lease for
the commencement thereof, Tenant's obligation for the payment of rent
thereunder shall commence April 1,1994.
Landlord, shall permit Tenant and its agents, at times approved in
advance by Landlord, to enter the Premises prior to the date specified
for the commencement of payment of rent under the Lease, in order that
Tenant may perform through its own subcontractors such work and
decorations as Tenant may desire at the same time that Tenant's
contractors are working in the space. The foregoing license to enter
prior to the commencement of the term, however, is conditioned upon
Tenant's contractors, workmen and employees working in harmony and not
interfering with the workmen, employees and contractors of Landlord or
any other tenant. If at any time such entry or work shall cause
disharmony or interference, this license may be withdrawn by Landlord.
Paragraph 4 of the Lease shall be deemed to be under all the terms,
covenants, provisions and conditions of the Lease except to the
covenant to pay rent. Landlord shall not be liable for any injury,
loss or damage which may occur to any of Tenant's decorations,
Fixtures, or installations so made prior to the commencement of the
term of the Lease, the same being solely at Tenant's risk.
If the foregoing correctly sets forth our agreement, kindly sign this
Workletter.
ACCEPTED:
SCT INTERNATIONAL BUSINESS MACHINES
CORPORATION
By:________________________________ By:_______________________________
___________________________________ __________________________________
Title Title
Date:______________________________ Date:_____________________________
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
SYSTEMS & COMPUTER TECHOLOGY CORPORATION AND SUBSIDIARIES
Year Ended September 30,
----------------------------
1995 1994 1993
-------- --------- -------
(Amounts in thousands,
except per share data)
Primary
Average shares outstanding 13,074 12,328 12,026
Net effect of dilutive stock options-based on the
treasury stock method using average market price 956 1,189 754
Total 14,030 13,517 12,780
====== ======= ======
Income before extrordinary credit $3,058 $11,646 $6,712
Extraordinary credit:
Utilization of net operating loss carryforwards 0 0 2,901
------ ------- ------
Net income (loss) $3,058 $11,646 $9,613
====== ======= ======
Income per share before extraordinary credit $0.22 $0.86 $0.53
====== ======= ======
Net income (loss) per share $0.22 $0.86 $0.75
====== ======= ======
Fully Diluted
Average shares outstanding 13,074 12,328 12,026
Net effect of dilutive stock options-based on the
treasury stock method using the year-end market
price, if higher than average market price 1,325 1,190 991
Assumed conversion of 6 1/4% convertible
subordinated debentures 0 2,300 179
------ ------- ------
Total 14,399 15,818 13,196
====== ======= ======
Income before extrordinary credit $3,058 $11,646 $6,712
Add 6 1/4 % convertible subordinated debenture
interest, net of federal income tax effect 0 1,521 112
Extraordinary credit: Utilization of net operating
loss carryforwards 0 0 2,901
------ ------- ------
Net income $3,058 $13,167 $9,725
====== ======= ======
Income per share before extraordinary credit $0.21 $0.83 $0.51
====== ======= ======
Net income per share $0.21 $0.83 $0.74
====== ======= ======
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
SCT Software & Resource Management Corporation
SCT Government Systems, Inc.
SCT Utility Systems, Inc.
SCT International Limited
SCT Manufacturing & Distribution Systems, Inc.
SCT Technologies (Canada) Inc.
SCT Property, Inc.
SCT Financial Corporation
SCT International Software & Services, Inc.
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-1343) pertaining to the various stock incentive plans of
Systems & Computer Technology Corporation listed therein and in the related
prospectus, in the Registration Statement (Form S-8 No. 33-43535)
pertaining to the 1990 Employee's Stock Option Plan of Systems & Computer
Technology Corporation and in the related prospectus, in the Registration
Statement (Form S-8 No. 33-56528) pertaining to the 401(k) Savings Plan of
Systems & Computer Technology Corporation and in the related prospectus, in
the Registration Statement (Form S-8 No. 33-60831) pertaining to the 1994
Long-Term Incentive Plan and the 1994 Non-Employee Director Stock Option
Plan of Systems & Computer Technology Corporation and in the related
prospectus, and in Amendment No. 3 to the Registration Statement (Form S-3
No.33-65974) pertaining to the registration of $34,500,000 of Convertible
Subordinated Debentures Due 2003 of Systems & Computer Technology
Corporation and in the related prospectus of our report dated October 20,
1995, with respect to the consolidated financial statements and financial
statement schedule of Systems & Computer Technology Corporation included in
this Annual Report (Form 10-K) for the year ended September 30, 1995.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 18, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information
extracted from the September 30, 1995 financial statements and is
qualified in its entirety by reference to such financial statements.
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<PERIOD-TYPE> YEAR
<CASH> 15,312,000
<SECURITIES> 0
<RECEIVABLES> 71,273,000
<ALLOWANCES> 1,003,000
<INVENTORY> 0
<CURRENT-ASSETS> 95,576,000
<PP&E> 44,115,000
<DEPRECIATION> 15,216,000
<TOTAL-ASSETS> 150,983,000
<CURRENT-LIABILITIES> 32,021,000
<BONDS> 31,790,000
<COMMON> 152,000
0
0
<OTHER-SE> 85,413,000
<TOTAL-LIABILITY-AND-EQUITY> 150,983,000
<SALES> 174,056,000
<TOTAL-REVENUES> 176,148,000
<CGS> 110,690,000
<TOTAL-COSTS> 163,136,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,696,000
<INCOME-PRETAX> 10,316,000
<INCOME-TAX> 7,258,000
<INCOME-CONTINUING> 3,058,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,058,000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
</TABLE>
