UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997.
Commission File Number 0-13627.
CTC COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2731202
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
360 Second Avenue, Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
(617) 466-8080
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock.
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
IV of this Form 10-K or any amendment to this Form 10-K. [ ]
Based on the closing sale price on June 17, 1997, the aggregate
market value of the voting stock held by non-affiliates of the
Registrant was approximately $55,690,000.
At June 17, 1997, 9,924,152 shares of the Registrant's Common
Stock were outstanding.
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PART I
In addition to historical information, this Annual Report
contains forward-looking statements made in good faith by the
Company pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 including, but not
limited to, those statements regarding the Company's intent to
expand its non-facilities based reseller operations, its intent
to expand its sales force, its expectation that commission
payments under its agreement with NYNEX will not be materially
reduced over the remainder of the term of the agreement and the
Company's ability to meet its cash requirements for the next 12
months. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in
the section entitled "Risk Factors that May Affect Future
Results" at the end of this Item 1. and in Management's
Discussion and Analysis of Financial Condition and Results of
Operations. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's
analysis as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof.
ITEM 1. BUSINESS
GENERAL OVERVIEW
CTC Communications Corp. (the "Company") was organized under the
laws of the Commonwealth of Massachusetts under the name
"Computer Telephone Corp." in 1980 and in September 1996, changed
its name to "CTC Communications Corp."
The Company is engaged in the sale of local communication
services under non-exclusive agency agreements with NYNEX (since
1984), Southern New England Telephone (1990), Pacific Bell
Telephone (1990), and Ameritech Corporation (1990), and long
distance services on the networks of Cable and Wireless
Communications, Inc. (1992), Wiltel, Inc. (1993), Frontier
Communications International, Inc. (1995), and IXC Communications
Inc. (1996). In addition, the Company markets Internet access on
behalf of NETCOM On-line Communications Services, Inc., wireless
communications services on the GEOTEK Communications network and
frame relay data services on the Intermedia Communications, Inc.
platform. The Company also markets a variety of specialized
products, including prepaid calling cards, broadcast fax and
conference calling, to its customer base.
Under its agency agreements, the Company acts as a distribution
channel for these companies and markets discount telephone
calling plans, 800 services, Centrex systems, data transport and
long distance services, and performs other management services on
a commission basis. The Company operates under written
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agreements which are generally for terms of one to three years
and can be canceled by either party on 30 to 60 days notice. The
agreements generally provide for automatic one year renewals
provided certain minimum sales goals are satisfied. The
Company's primary market for the sale of such network services
consist of commercial customers with annual telephone billings
between $10,000 and $250,000.
The Company presently records as network service commission
income the commissions and fees it earns from the Regional Bell
Operating Companies ("RBOCs") and other carriers as an
independent sales agent. The agency agreements with the RBOCs
generally provide for payment of commissions based on unit
product sales, and in some cases, the commission is based on the
actual usage of the network by the customer. In addition, under
contracts with NYNEX and Southern New England Telephone, the
Company is paid residual fees to manage communication networks on
behalf of these carriers. Currently the Company performs account
management services for over 5,000 accounts that annually
generate more than $250 million in telecommunications revenues.
These contracts also provide for bonuses that are based on sales
volume levels or the achievement of certain quality levels.
Effective April 1, 1994, the Company began to record long
distance usage income earned under resale agreements as a
separate revenue category. This income first became significant
to the Company during the fiscal year ended March 31, 1995. In
October 1995, the Company entered into a non-exclusive agreement
with NETCOM On-line Communications, Inc. to resell NETCOM's
Internet access services. The Company offers these Internet
services to its current subscriber base, as well as new
customers, who are targeted as consumers of other
telecommunication services offered by the Company. The revenues
received by the Company from the resale of communications
services are recorded at their retail value with corresponding
expense items for the costs of the services, which include the
costs of billing and collections. It is the Company's strategy
to continue to add additional telecommunications services to this
platform, in which the Company purchases services at wholesale
price levels and markets them to its subscribers at competitive
marked up prices.
In November 1995, the Company initiated its own home page on the
World Wide Web (ctcnet.com) where visitors to the website can
obtain information about the Company and its products, and
general information about the telecommunications industry. The
website also contains an investor relations section which
provides financial information about the Company, as well as the
text of all press releases and the transcript of the Company's
most recent analyst conference call.
In February 1996, the Company entered into a new agency contract
with NYNEX covering the New England and New York marketplaces.
In addition, the Company and NYNEX continue to develop an
electronic bonding project which, upon completion, will provide
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the Company with access to internal NYNEX databases and systems
associated with customer records, ordering, provisioning, and
repair. This project, when completed, will permit the Company to
provide customer service in a more efficient and cost effective
manner.
In March 1997, the Company entered into a non-exclusive agreement
with Intermedia Communications, Inc. ("ICI") to resell ICI's
frame relay data services, which is a more efficient, cost
effective means of connecting multiple locations. Frame relay is
an important addition to the Company's data network product line
and to the Company's existing extensive customer base of dial-up
and leased line networks.
For the fiscal year ended March 31, 1997, the Company had total
revenues of $40,290,000 of which NYNEX accounted for
approximately $25,193,000 (63%) and the resale of network
services accounted for approximately $11,095,000 (28%).
SALES OFFICES AND MARKETING
The Company maintains its corporate headquarters in Waltham,
Massachusetts, with sales offices strategically located in
Lexington, Springfield, North Attleboro, Marlboro and Braintree,
Massachusetts; Meriden and Fairfield, Connecticut; Bedford, New
Hampshire; Portland, Maine; Colchester, Vermont; New York City,
Long Island, Elmsford, Albany and Kings Park, New York; Columbus,
Ohio; and Los Angeles and Sacramento, California. The Company
believes that its present facilities are adequate for the
foreseeable future.
Sales offices are staffed by full-time Company sales personnel
and are supported by an administrative staff located at the
Company's corporate headquarters. The marketing force is divided
into two basic groups: account executives, who act as outside
sales personnel and are responsible for overall account
management, and the network coordinators, who expedite the
provisioning, service and billing issues for the accounts.
Sales efforts are directed to companies, professional
organizations and others requiring network services such as
discounted calling plans, 800 services, Centrex and data
circuits, long distance services, Internet access, frame relay
data services, and other secondary services. At present, the
Company does not market to residential customers. The typical
customer is a middle market commercial account with approximately
$50,000 in annual telecommunications expenses. This customer
usually does not employ a full time telecommunications manager on
its staff, and utilizes a full array of telecommunication
services.
It is the strategy of the Company to build long-term
relationships with its customers, in order to become the network
provider for as many of the customers' communication needs as
possible.
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COMPETITION
The Company competes with many other companies selling the same
and similar services. The market for these services is highly
competitive and the Company competes with established companies
with substantially greater personnel, financial and other
resources than those of the Company. The Company's competitors
in the sale of network services include AT&T, MCI, Sprint, other
long line companies, numerous long-distance resellers, by-pass
companies, the Regional Bell Operating Companies, and other
agents. In addition, secondary services such as Internet access,
broadcast fax and conference calling are marketed directly by the
service providers. Although the Company may compete at a scope
and scale disadvantage with these companies, it has been
successful in its marketing efforts as a non-exclusive
independent agent for several of these competing companies in the
marketing of their products as well as a non facilities based
provider of both long distance services and other of its
customers' communication products, by developing long term
relationships with its commercial accounts and providing value
added customer service and support.
EMPLOYEES
At May 31, 1997, the Company employed 235 persons, including
seven senior management personnel, 205 sales personnel (including
managers and network coordinators), and 23 administrative
personnel. The employees are not represented by any labor union
and management believes that its relationships with its employees
are excellent.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Development of Reseller Operations
A crucial component of the Company's strategy is its
continuing development as a non-facilities based provider, or
reseller, of local, long distance and Internet access services.
For the fiscal year ended March 31, 1997, network service resale
income constituted 28% of the Company's total revenues. The
success of the Company's reseller expansion plan is subject to a
number of risks including its ability to negotiate additional
reseller agreements on commercially reasonable terms, the
availability of adequate capital, the increasingly competitive
nature of the telecommunications industry, including the effect
of the development and introduction of new technologies and the
ability to attract additional personnel.
Historical Dependence on Agency Contract
Commission revenue derived under the Company's agency
agreement with NYNEX represented 63%, 69% and 63% of the
Company's total revenues for the fiscal years ended March 31,
1997, 1996 and 1995, respectively. The Company's agreement with
NYNEX expires on December 31, 1998. In addition, the commission
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rates and fees payable to the Company under the NYNEX agreement
are adjusted annually which resulted, in 1996, in a material
reduction in commission rates. The loss of this agency
relationship with NYNEX, or a further material reduction in
commission rates under the NYNEX agreement, would have a material
adverse effect on the Company's operations.
Dependence on Facilities Based Carriers and Internet Access
Providers
The Company is dependent upon certain long distance
carriers, Internet access providers, and regional and local
telephone companies to provide access to long distance telephone
and Internet service on a cost-effective basis. The Company has
entered into agreements with long distance carriers and Internet
access providers to provide access to telephone lines and
transmission facilities necessary to transmit customer calls.
Although the Company believes that it currently has access to
transmission facilities and long distance networks on favorable
terms and believes that its relationships with its carriers and
Internet access providers are satisfactory, any increase in the
rates charged by such carriers or providers could have a material
adverse effect on the Company's operations. Failure to obtain
continuing access to such facilities and networks would also have
a material adverse effect on the Company.
In addition, the Company's operations require that its
carrier switching facilities and long distance networks operate
on a continuous basis. Although these networks are designed to
be redundant and incorporate disaster recovery plans, there can
be no assurance that third-party switching facilities and long
distance networks will not from time to time experience service
interruptions or equipment failure, which could have a material
adverse effect on the Company's reseller business.
Dependence on Supplier Provided Timely and Accurate Call Data
Records; Billing and Invoicing Disputes
In its reseller business, the Company is dependent upon the
timely receipt and accuracy of call data records provided to it
by its suppliers. There can be no assurance that accurate
information will consistently be provided by suppliers or that
such information will be provided on a timely basis. Failure by
suppliers to provide timely and accurate detail would increase
the length of the Company's billing and collection cycles and
adversely effect its operating results. The Company pays its
suppliers according to the Company's calculation of the charges
applicable to the Company based on supplier invoices and computer
tape records of all such calls provided by suppliers which may
not always reflect current rates and volumes. Accordingly, a
supplier may consider the Company to be in arrears in its
payments until the amount in dispute is resolved. There can be
no assurance that disputes with suppliers will not arise or that
such disputes will be resolved in a manner favorable to the
Company. In addition, the Company is required to maintain
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sophisticated billing and reporting systems to service the large
volume of services placed over its networks. As resale volumes
increase, there can be no assurance that the Company's billing
and management systems will be sufficient to provide the Company
with accurate and efficient billing and order processing
capabilities.
Customer Attrition
The Company's operating results may be significantly
affected by its reseller customer attrition rates. There can be
no assurance that customers will continue to purchase long
distance or other services through the Company in the future or
that the Company will not be subject to increased customer
attrition rates. The Company believes that the high level of
customer attrition in the industry is primarily a result of
national advertising campaigns, telemarketing programs and
customer incentives provided by major competitors. There can be
no assurance that customer attrition rates will not increase in
the future, which could have a material adverse effect on the
Company's operating results.
Competition, Evolving Industry Standards, Technological Trends
and Changing Regulation.
The Company faces intense competition in the marketing and
sale of its services and products. The Company's local access,
long distance, prepaid long distance calling cards, Internet and
other services and products compete for consumer recognition with
other firms offering similar or like products which have achieved
significant international, national and regional consumer
recognition. Many of these services and products are marketed by
companies which are well established, have reputations for
success in the development and sale of services and products and
have significantly greater financial, marketing, distribution,
personnel and other resources than the Company. These resources
permit such companies to implement extensive advertising and
promotional campaigns, both generally and in response to efforts
by additional competitors to enter into new markets and introduce
new services and products. Certain of these competitors,
including AT&T, MCI Telecommunications Corporation ("MCI") and
Sprint Corporation ("Sprint"), dominate segments of the industry
and have the financial resources to enable them to withstand
substantial price competition which is continuing. These and
other large telephone companies have also entered or have
announced their intention to enter into the prepaid phone card
and Internet segments of the telecommunications industry.
Because there are minimal barriers to entry, competition from
smaller resellers in the Company's target markets is also
expected to continue to increase significantly. These markets
for telecommunications services and products are also
characterized by rapidly changing technology and evolving
industry standards, often resulting in product obsolescence or
short product life cycles. The proliferation of new
telecommunications technologies, including personal communication
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services, cellular telephone services and products and prepaid
phone cards employing alternative "smart" card technologies, may
reduce demand for traditional land-line telephone services. The
Company's success will depend on the Company's ability to
anticipate and respond to these and other factors affecting the
industry, including changes in technology, customer preferences,
business and demographic trends, unfavorable general economic
conditions and discount pricing strategies by competitors.
Recent regulatory changes may also result in significantly
increased competition. The Telecommunications Act of 1996 is
designed to introduce increased competition in domestic
telecommunications markets by facilitating the entry of any
entity (including cable television companies and utilities) into
both the long distance and local telecommunications markets.
Consequently, such act increases the potential for increased
competition by permitting long distance and regional carriers to
compete in local markets and well-established and well-
capitalized Regional Bell Operating Companies and local exchange
carriers to compete in the long distance markets. There can be
no assurance that the Company will be able to continue to compete
successfully, particularly as it seeks to enter into new markets
and market new services and products.
Dependence on Key Personnel
The Company's future success will depend in significant part
upon the continued service of certain key personnel (including
Robert J. Fabbricatore, the Company's Chairman and Chief
Executive Officer), and the ability of the Company to attract and
retain highly qualified managerial and sales and marketing
personnel in the telecommunications field. Competition for such
personnel is intense, and there can be no assurance that the
Company can retain its existing key managerial, technical and
other personnel or that it can attract and retain such employees
in the future. The loss of key personnel or the inability to
hire or retain qualified personnel in the future could have a
material adverse effect upon the Company's results of operations.
The Company does not have employment agreements with its key
personnel.
Possible Volatility of Stock Price
In recent years, the stock market in general, and the market
for shares of small capitalization companies (such as the
Company) in particular, have experienced extreme price
fluctuations which have been unrelated to changes in the
operating performance of the affected companies. Such
fluctuations could adversely affect the market price of the
Company's Common Stock.
ITEM 2. PROPERTIES
The Company's executive offices are located at 360 Second Avenue,
Waltham, Massachusetts 02154, in approximately 20,000 square feet
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of leased space from an unaffiliated lessor, under a lease
expiring in 1999 at a net annual rent of approximately $161,000
(before sublease income), including taxes and insurance.
The Company rents office space in each of the locations where it
maintains branch sales offices. The aggregate annual lease
rentals for these locations approximated $840,000 for the year
ended March 31, 1997. Certain facilities are leased from
affiliates of the Chairman of the Company. See Item 13. Certain
Relationships and Related Transactions.
ITEM 3. LEGAL PROCEEDINGS
(a) Pending Legal Proceedings.
The Company is party to suits arising in the normal course
of business which management believes are either individually or
in the aggregate not material.
(b) Legal Proceedings Terminated in the Fourth Quarter.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY SECURITIES AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on the Nasdaq National Market
under the symbol "CPTL". The following tables set forth the
ranges of the high and low sale prices for the Company's
outstanding Common Stock for the periods indicated.
Three Months Ended High Sale Low Sale
- ------------------ --------- --------
June 30, 1995 $ 5.21 $ 2.96
September 30, 1995 $10.00 $ 4.59
December 31, 1995 $19.50 $ 9.75
March 31, 1996 $15.50 $ 8.50
June 30, 1996 $18.00 $ 9.75
September 30, 1996 $13.75 $ 8.00
December 31, 1996 $11.75 $ 6.38
March 31, 1997 $ 9.13 $ 6.38
The above stock prices have been adjusted to give retroactive
effect to the stock dividends and stock splits described below.
As of June 17, 1997, there were 339 holders of record of the
Company's Common Stock. The Company believes there were in
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excess of 1,500 beneficial holders of the Common Stock as of such
date.
The Company has never paid a cash dividend on its Common Stock
and management has no present intention of paying dividends in
the foreseeable future. The policy of the Company is to retain
earnings and utilize the funds for Company operations and
expansion. Any change to the dividend policy will be determined
by the Board of Directors based on the Company's earnings,
financial condition, capital requirements and other existing
conditions.
On January 18, 1995, the Company declared a twenty-five percent
(25%) stock split, effected in the form of a dividend, payable to
shareholders of record on March 1, 1995. A total of 623,359
shares of Common Stock were issued in connection with the split.
On July 13, 1995, the Company declared a three-for-two stock
split, payable to shareholders of record on July 25, 1995. A
total of 1,560,742 shares of Common Stock were issued in
connection with the split.
On October 10, 1995, the Company declared a two-for-one stock
split, payable to shareholders of record on October 23, 1995. A
total of 4,718,172 shares of Common Stock were issued in
connection with the split.
From April 5, 1996 through March 28, 1997, the Company issued
36,571 shares of unregistered Common Stock in the aggregate to 22
non-executive employees upon the exercise of stock options at
exercise prices ranging from $.53 to $2.71 per share, pursuant to
the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY.
The following selected financial data have been derived from the
Company's financial statements which have been audited by Ernst &
Young LLP, independent auditors. The following data should be
read in conjunction with the Company's financial statements and
related notes appearing elsewhere in this Report on Form 10-K.
All earnings per share and weighted average share information
included in the accompanying financial statements have been
restated to reflect the 25% stock split effected in Fiscal 1995,
and the three-for-two stock split and the two-for-one stock split
effected in Fiscal 1996.
STATEMENT OF INCOME DATA:
Year Ended March 31,
1997 1996 1995 1994 1993
(in Thousands Except Per Share)
Revenues $40,290 $30,876 $21,936 $14,945 $15,952
Net Income (Loss) 4,683 4,094 1,472 75 545
Earnings (Loss) Per Share
Primary $ 0.43 $ 0.38 $ 0.17 $ 0.01 $ 0.07
Fully Diluted $ 0.43 $ 0.38 $ 0.16 $ 0.01 $ 0.07
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BALANCE SHEET DATA:
At March 31,
1997 1996 1995 1994 1993
(in Thousands)
Current Assets $17,804 $10,890 $ 6,420 $ 4,063 $ 3,871
Current Liabilities 5,895 3,014 2,200 1,528 1,957
Working Capital 11,909 7,876 4,220 2,535 1,914
Total Assets 20,186 12,509 7,726 5,399 5,710
Total Long-Term Debt 0 0 0 0 0
Total Liabilities 5,895 3,014 2,200 1,528 1,957
Stockholders' Equity 14,292 9,495 5,526 3,871 3,753
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Financial Statements and Notes set forth elsewhere in this
Report.
RESULTS OF OPERATIONS - FISCAL YEAR ENDED MARCH 31, 1997 AS
COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996.
Total revenues for the fiscal year ended March 31, 1997 ("Fiscal
1997") increased 30% to $40,290,000 as compared to $30,876,000
for the fiscal year ended March 31, 1996 ("Fiscal 1996").
Network service commission income, which represents fees earned
by the Company in its capacity as an agent for various local and
long distance telephone companies, increased 15% to $29,195,000
as compared to $25,493,000 for Fiscal 1996 due to the addition of
new customers, increased sales to existing customers and the
addition of new products to the Company's portfolio. Effective
January 1996, NYNEX reduced certain fees and commissions payable
under its 1996 agency agreement with the Company. As a result,
although unit sales of Centrex and Data Products, two flagship
NYNEX products, increased 30% and 66%, respectively, revenues
increased only 15% as stated above. Although there can be no
assurance, the Company believes that there will be no further
material reductions in commission rates and fees payable under
the NYNEX agreement, which extends through December 1998.
Network service resale income, which represents the gross
billings to mid-sized commercial accounts for the Company's long
distance and Internet access network services, increased 106% to
$11,095,000 for Fiscal 1997 from $5,383,000 for Fiscal 1996.
This increase can be attributed to the addition of new customers
to the service, as well as the introduction of new products,
primarily Internet access. It is the Company's strategy to
continue to add new services to this platform to further leverage
these long term customer relationships.
Selling, general, and administrative expenses increased 19% to
$23,820,000 for Fiscal 1997 from $20,009,000 for Fiscal 1996.
As a percentage of revenues, these expenses were 59% for Fiscal
1997, as compared to 65% for Fiscal 1996. This increase is
attributable to the increase in variable sales commission and
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bonus expenses incurred in connection with the substantial
increase in revenues. In addition, the Company has increased the
number of sales offices, particularly in the Northeast, and hired
additional account executives. The Company also expanded the
facilities at several of its existing sales branches. The
Company currently has the office space capacity to expand its
sales force to its goal of approximately 170 account executives
by March 31, 1998, from its current sales force of 125.
The Company also made additional investments in its information
systems in Fiscal 1997.
Net income increased to $4,683,000 in Fiscal 1997 from $4,094,000
in Fiscal 1996, as a result of revenue growth primarily in the
Northeast, combined with a continuing effort to control operating
expenses.
RESULTS OF OPERATIONS - FISCAL YEAR ENDED MARCH 31, 1996 AS
COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995.
Total revenues for Fiscal 1996 increased 41% to $30,876,000 from
$21,936,000 for the fiscal year ended March 31, 1995 ("Fiscal
1995"). Network service commission income increased 35% to
$25,493,000 from $18,898,000 for Fiscal 1995. Network service
resale income increased 77% to $5,383,000 for Fiscal 1996 from
$3,038,000 for Fiscal 1995.
The increase in revenues is attributable to an increase in the
business in the Northeastern United States, which is a direct
result of the additional account executives hired by the Company
in Fiscal 1996, as well as increased penetration into the
Company's existing customer base by the introduction of new
products, including both local and long distance services.
Selling, general, and administrative expenses increased 16% to
$20,009,000 for Fiscal 1996 from $17,319,000 for Fiscal 1995.
As a percentage of revenues, selling, general, and administrative
expenses were 65% for Fiscal 1996, as compared to 79% for Fiscal
1995. This decrease in expenses as a percentage of revenues
reflects the continuing efforts by the Company to control
operating expenses as well as the increased profitability of
multiple sales to the Company's existing customer base. The
overall increase in selling, general, and administrative expenses
is the direct result of the increase in variable sales commission
and bonus expenses due to the sharp increase in revenues.
Net income increased to $4,094,000 in Fiscal 1996 from $1,472,000
in Fiscal 1995, an increase of $2,622,000. The increase is a
result of revenue growth primarily in the Northeast, combined
with a continuing effort to control operating expenses and
leverage customer opportunities.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1997 was $11,909,000 as compared to
$7,876,000 at March 31, 1996, an increase of $4,033,000 or 51%.
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At March 31, 1997, the Company had cash and cash equivalents
totalling $6,406,000.
Accounts receivable increased to $10,905,000 at March 31, 1997
from $6,557,000 at March 31, 1996. This increase reflects a 30%
increase in revenues from Fiscal 1996 to Fiscal 1997, as well as
increased long distance revenues, which are recorded at the gross
retail value.
On September 26, 1996, the Company amended its revolving line of
credit agreement with Fleet Bank, which is available under
certain conditions, to provide for an increase in the credit line
to $5,000,000 from $3,000,000 at the prime rate of interest, with
LIBOR rates available at the Company's election.
The Company presently has no bank debt (other than $300,000
outstanding as of March 31, 1997 under the Fleet Bank line of
credit to finance certain letters of credit) and expects that the
revolving credit line, together with cash flows from operations,
will be sufficient to meet the cash requirements of the Company
for the next twelve months under its current operating plan.
However, any substantial increase in reselling operations and
related asset investment may require additional financing.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to pages F-1 through F-21 comprising a
portion of this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Other Capacities
Period Served in Which
Age as Director Currently Serving
--- -------------- ------------------
Robert J. Fabbricatore 54 Since 1980 Chairman and
Chief Executive
Officer
Philip J. Richer 61 Since 1989 None
Richard J. Santagati 53 Since 1991 None
J. Richard Murphy 53 Since 1995 None
Henry Hermann 55 Since 1996 Consultant
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Mr. Fabbricatore, a founder of the Company and a Director
since its inception in 1980, became Chairman of the Board of
Directors in March 1983 and served as President from October 1993
to August 1995. Mr. Fabbricatore also served as Treasurer of the
Company from April 1987 until May 1988. Prior to April 1, 1986,
Mr. Fabbricatore did not devote a substantial portion of his time
to the Company's business.
Mr. Richer joined the Company as Vice President-Sales in
July 1989 and became a Director and Vice Chairman in August 1989.
Mr. Richer retired as an officer and employee of the Company
effective December 31, 1995. Prior to joining the Company, Mr.
Richer served as director of Sales Channel Management for New
England Telephone. During his career with New England Telephone,
Mr. Richer served in a variety of other management positions. In
addition, Mr. Richer was formerly Data Communications
Superintendent for New England Telephone and performed numerous
sales and sales management functions.
Mr. Santagati became a director of the Company in September
1991. He has been the President of Merrimack College in North
Andover, Massachusetts since 1994. Mr. Santagati was a partner
of Lighthouse Management, Inc., a private investment firm located
in Boston, Massachusetts from 1991 to 1993 and, from 1991 to
February 1994, the Chairman of the Board, Chief Executive Officer
and President of Artel Communications Corp., a publicly held data
communications firm located in Hudson, Massachusetts. From 1986
to 1991, Mr. Santagati was the Chief Executive Officer and a
member of the Executive Committee of Gaston & Snow, a Boston,
Massachusetts based law firm. From 1983 to 1986, Mr. Santagati
was employed by NYNEX Corp., first as Vice President of
Marketing, and then as President and Chairman of NYNEX Business
Information Systems Co. From 1977 to 1983, Mr. Santagati held a
number of executive level positions with New England Telephone,
including Vice President of Marketing and Assistant Vice
President of Sales. Mr. Santagati is a member of the Board of
Trustees of Lawrence General Hospital. He is also a director of
ESP, Inc., a privately held communications company located in
Hingham, Massachusetts.
Mr. Murphy became a Director of the Company in August 1995.
Mr. Murphy has been the Director of the Financial Consulting
Group of Moody, Cavanaugh and Company, LLP, a North Andover,
Massachusetts public accounting firm, since April 1996. Since
1992, Mr. Murphy has also been President and sole stockholder of
Bradford Capital Corporation, an investment banking and corporate
finance firm located in North Andover, Massachusetts. Mr. Murphy
was an officer, director and principal stockholder from 1990 to
1995 of Arlington Data Corporation, a systems integration company
located in Haverill, Massachusetts; since 1992 of Arlington Data
Consultants, Inc., a company engaged in the installation and
maintenance of computer systems and hardware; and, since 1994 of
Computer Emporium, Inc., a company engaged in processing parking
violations for municipalities. These three companies are
privately-held affiliated companies and are located in Haverill,
14
<PAGE>
<PAGE>
Massachusetts. From 1989 to 1991 Mr. Murphy was an officer,
director and principal stockholder of Financial Perspectives
Incorporated, an investment banking and corporate finance firm
located in North Andover, Massachusetts. Mr. Murphy was President
and Chief Executive Officer of Shawmut Arlington Trust Company in
Lawrence, Massachusetts, from 1988 to 1989 and from 1968 to 1988
held a variety of management positions, the most recent being
President and Chief Executive Officer with the Arlington Trust
Company, also in Lawrence, Massachusetts. From 1987 to 1995, Mr.
Murphy was a trustee of Merrimack College in North Andover,
Massachusetts and from 1994 to 1995 served as Chairman of the
Board of Trustees. Mr. Murphy is a trustee of Holy Family
Hospital, a director and Clerk of Mary Immaculate Health Care
Services, located in Lawrence, Massachusetts, and a member of
Covenant Health Systems, Inc., a Lexington, Massachusetts based
network of religious sponsored providers of long term care and
geriatric services. He is also a director of Stickney & Poor
Spice Company, Inc., a privately held food manufacturing and
distributing company located in Chelmsford, Massachusetts.
Mr. Hermann became a director of the Company in September
1996. Since May 1997, he has been employed by Kuhns Brothers &
Company, Inc., as a principal and Executive Vice President. For
the previous nine years, he was employed by WR Lazard, Laidlaw
and Luther, Inc., a securities brokerage firm, as Vice President,
Securities Analyst and Portfolio Manager. Mr. Hermann has been
an NASD Board of Arbitrators Member since 1991. Mr. Hermann is a
Chartered Financial Analyst with over 30 years experience as an
investment professional. Mr. Hermann has provided financial
consulting services to the Company since 1993.
All directors are elected to hold office until the next
Annual Meeting of Stockholders and until their successors are
elected and qualified. There are no arrangements or
understandings between any directors of the Company and any other
person pursuant to which such person was selected as a Director
of the Company.
(b) Identification of Executive Officers
Name Age Current Office Held
- ------------- --- -------------------
Robert J. Fabbricatore 54 Chairman, Chief Executive
Officer
Steven P. Milton 43 President, Chief Operating
Officer
John D. Pittenger 43 Vice President-Finance,
Chief Financial Officer,
Treasurer and Clerk
David E. Mahan 55 Vice President-Market
Planning and Development
15<PAGE>
<PAGE>
Currently, there is no fixed term of office for any
executive officer and all officers serve at the discretion of the
Board of Directors. Each person selected to become an executive
officer has consented to act as such and there are no
arrangements or understandings between the executive officers or
any other persons pursuant to which he was or is to be selected
as an officer.
Mr. Milton has been employed by the Company since 1984 and
has served as President and Chief Operating Officer since August
1995. Prior to that, he held various positions within the
Company including Branch Manager, District Manager, Regional
Manager and, most recently, Vice President-Sales and Marketing.
Mr. Pittenger has served as Treasurer, Chief Financial
Officer and Clerk of the Company since August 1989 and as Vice
President-Finance since September 1991. Since 1980, Mr.
Pittenger has been Treasurer and a director of Comm-Tract Corp.,
a company which installs and services voice and data
communications systems.
Mr. Mahan joined the Company in October 1995 as Vice
President-Market Planning and Development and in June 1996 Mr.
Mahan became an executive officer of the Company. From 1982 to
1995, Mr. Mahan held a number of senior management level
positions with NYNEX, most recently Vice President-Sales Channel
Management.
For a description of the business background of Mr.
Fabbricatore see "Identification for Directors".
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Philip J. Richer, a director of the Company, failed to file
a Form 4 on a timely basis on one occasion with respect to the
January 28, 1997 sale of 5,500 shares of the Company's Common
Stock at a selling price of $8.00 per share. The required Form 4
with respect to said transaction was filed with the Securities
and Exchange Commission on March 6, 1997.
Item 11. EXECUTIVE COMPENSATION
The following table provides certain summary information
concerning the compensation paid or accrued by the Company to or
on behalf of the Company's Chief Executive Officer and each
executive officer of the Company whose remuneration exceeded
$100,000 ("named executive officers") during the fiscal year
ended March 31, 1997.
16
<PAGE>
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
---------------------------- ----------------------- -------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Salary Bonus Compen- Awards Options/ Payouts Compen-
Position Year ($)(1) ($)(2) sation($) ($) SARs(#) ($) sation(3)
- ------------------ ---- -------- -------- --------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore, 1997 240,000 60,000 - - 0 - 18,075
Chairman and Chief 1996 240,000 60,000 - - 0 - 16,100
Executive Officer 1995 240,000 60,000 1,500 - 124,306 - 11,636
Steven P. Milton, 1997 100,000 40,000 5,200 - 0 - 4,075
President and Chief 1996 100,000 40,000 5,200 - 0 - 4,200
Operating Officer 1995 100,000 52,000 5,200 - 126,750 - 4,440
David E. Mahan, Vice 1997 100,000 40,000 5,004 - 0 - 4,075
President - Market 1996(4) 50,000 20,000 2,500 - 100,000 - 0
Planning & Development
John D. Pittenger, 1997 86,100 34,000 - - 0 - 3,437
Vice President - Finance 1996 84,800 32,000 - - 0 - 3,504
Chief Financial Officer, 1995 83,600 26,000 1,200 - 54,750 - 3,228
Treasurer and Clerk
<FN>
(1) For the fiscal year ended March 31, 1997, Messrs. Fabbricatore, Milton, Mahan and Pittenger's salaries
included pre-tax contributions made by such officers to the CTC Communications Corp. 401(k) Savings Plan.
(2) Includes bonuses accrued for Messrs. Fabbricatore, Milton, Mahan and Pittenger for the fiscal year
ended March 31, 1997 in the amounts of $15,000, $10,000, $10,000 and $10,000 respectively, which were paid
during the first quarter of Fiscal 1998.
(3) All Other Compensation includes 50% matching contributions in the amounts of $4,500, $4,075, $4,075 and
$3,437 accrued on behalf of Messrs. Fabbricatore, Milton, Mahan and Pittenger, respectively, to the CTC
Communications Corp. 401(k) Savings Plan. Also included is the actuarial benefit in the amount of
approximately $13,575 on the "split-dollar" life insurance policy for the benefit of Mr. Fabbricatore.
(4) Mr. Mahan commenced employment with the Company on October 1, 1995.
</FN>
</TABLE>
During the fiscal year ended March 31, 1997 the Company did
not grant options or stock appreciation rights to any named
executive officer.
The following table sets forth information concerning option
exercises and option holdings for the fiscal year ended March 31,
1997 with respect to the named executive officers.
17
<PAGE>
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value
Realized
(Market
price at Value of Unexercised in-
exercise the-money options at FY-
Shares less Number of Securities End (Market price of
acquired on exercise Underlying Unexercised shares at FY-End ($7.25)
exercise(#) price ($) Options at FY-End (1) less exercise price) (1)
----------- ---------- -------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore - - 16,778 16,778 $71,642 $71,642
Steven P. Milton - - 18,000 18,000 $81,738 $81,738
David E. Mahan - - 25,000 75,000 - -
John D. Pittenger - - 18,000 18,000 $81,738 $81,738
<FN>
(1) All shares and amounts, as necessary, have been adjusted to reflect the 25% Common Stock dividend
effected in March 1995, the three-for-two stock split effected in July 1995 and the two-for-one stock split
effected in October 1995.
</FN>
</TABLE>
The Company made no Long-Term Incentive Plan Awards during
the fiscal year ended March 31, 1997.
The Company has no defined benefit or actuarial plan.
The Company did not adjust or amend the exercise price of
options previously awarded to the named executive officers.
The Company has no compensation committee interlocks or
insider participation.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of June 23,
1997 with respect to each stockholder known by the Company to
beneficially own more than 5% of the outstanding shares of the
Company's Common Stock, the beneficial ownership of the Company's
Common Stock by each director and named executive officer of the
Company, and by all of the directors and officers of the Company
as a group. Based on the information furnished by the
beneficial owners of the Common Stock listed below, the Company
believes that each such stockholder exercises sole voting and
investment power with respect to the shares beneficially owned.
18
<PAGE>
<PAGE>
Number of Shares
Beneficially Percent
Name of Beneficial Owner Owned of Class
- ------------------------------------------------------------
Robert J. Fabbricatore (1)(2) 2,732,750 27.5%
Van Wagoner Capital Management, Inc.(3) 545,350 5.5%
Philip J. Richer 362,773 3.7%
Henry Hermann (4) 206,588 2.1%
Richard J. Santagati (5) 78,000 *
J. Richard Murphy (6) 11,000 *
Steven P. Milton (7) 408,932 4.1%
John D. Pittenger (8) 216,588 2.2%
David E. Mahan (9) 61,000 *
All Officers and Directors
as a Group (eight persons)(10) 4,077,631 40.7%
- ------------------------------
* = Less than 1%.
(1) Mr. Fabbricatore's address is c/o CTC Communications Corp.,
360 Second Avenue, Waltham, MA 02154.
(2) Includes 62,498 shares owned by Mr. Fabbricatore as trustee
of a trust for his children and 1,133,239 shares as a
general partner of a family partnership; also includes
16,776 shares issuable upon exercise of the vested portions
of stock options at an option price of $2.98 per share.
(3) Van Wagoner Capital Management, Inc.'s address is One Bush
Street, Suite 1150, San Francisco, CA 94104.
(4) Includes 9,750 shares held by Mr. Hermann's spouse and 3,000
shares issuable upon the exercise of currently exercisable
options at $2.708 per share.
(5) Includes 3,000 shares issuable upon the exercise of
currently exercisable options at $2.708 per share.
(6) Includes 1,000 shares owned by Mr. Murphy as trustee of a
trust for his spouse and 10,000 shares issuable upon the
exercise of currently exercisable options at $6.125 per
share.
(7) Includes 4,500 shares owned by Mr. Milton as trustee of a
trust for his children and 18,000 shares issuable upon the
exercise of currently exercisable options at $2.708 per
share.
(8) Includes 18,000 shares issuable upon the exercise of
currently exercisable options at $2.708 per share.
(9) Includes 25,000 shares issuable upon the exercise of
currently exercisable options at $10.125 per share.
(10) Includes the shares described in footnotes (2) through (9)
above.
19
<PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases from trusts, of which Robert J.
Fabbricatore, the Company's Chairman and Chief Executive Officer,
is a beneficiary, office space in Springfield, Massachusetts and
southern New Hampshire. Rental payments under the leases
totalled approximately $133,000 in Fiscal 1997. The Company
subleases part of its Waltham facility at its cost to Comm-Tract
Corp., a company in which Mr. Fabbricatore is a principal
stockholder. Sublease income totalled $80,416 for Fiscal 1997.
The Company also contracts with Comm-Tract Corp. for the
installation of telephone lines and for the service and
maintenance of equipment marketed by the Company. During Fiscal
1997, Comm-Tract Corp. provided the Company with services,
inventory and equipment aggregating $97,190. The Company
believes that the payments to Mr. Fabbricatore and Comm-Tract
Corp. are comparable to the costs for such services, inventory
and equipment, and for rentals of similar facilities, which the
Company would be required to pay to unaffiliated individuals in
arms-length transactions.
In connection with the exercise of Company stock options in
Fiscal 1995, Steven P. Milton was advanced the sum of $135,825 by
the Company, which remained outstanding at March 31, 1997. The
loan is payable on demand and bears interest at 8.0% per annum.
20
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 10-K.
(a)(1) The Following financial statements are included in Part
II, Item 8:
Balance Sheets
March 31, 1997 and 1996
Statements of Income
Years Ended March 31, 1997, 1996 and 1995
Statements of Stockholders' Equity
Years Ended March 31, 1997, 1996 and 1995
Statements of Cash Flows
Years Ended March 31, 1997, 1996 and 1995
Notes to Financial Statements
(a)(2) The following financial statement schedule for the years
ended March 31, 1997, 1996 and 1995 is submitted
herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the
fourth quarter of the fiscal year ended March 31, 1997.
(c) EXHIBITS.
NUMBER DESCRIPTION OF EXHIBIT
3.1 Restated Articles of Organization, as amended (1)
3.2 By-Laws of Registrant (2)
4.1 Form of Common Stock Certificate (5)
10.1 1996 Stock Option Plan (3)
10.1A 1993 Stock Option Plan (5)
10.1B Employee Stock Purchase Plan (4)
10.2 Lease for premises at 360 Second Ave., Waltham MA (5)
10.3 Sublease for premises at 360 Second Ave., Waltham MA (5)
10.4 Lease for premises at 110 Hartwell Ave., Lexington MA (5)
10.5 Lease for premises at 120 Broadway, New York, NY (5)
10.6 Agreement dated February 1, 1996 between NYNEX and the
Company (5)
21
<PAGE>
<PAGE>
10.7 Agreement dated May 1, 1997 between Pacific Bell and
the Company (5)
10.8 Agreement dated January 1, 1996 between SNET America,
Inc. and the Company (5)
10.9 Agreement dated June 23, 1995 between IXC Long
Distance, Inc. and the Company, as amended (5)
10.10 Agreement dated August 19, 1996 between Innovative
Telecom Corp. and the Company (5)
10.11 Agreement dated October 20, 1994 between Frontier
Communications International, Inc. and the Company, as
amended (5)
10.12 Agreement dated January 21, 1997 between Intermedia
Communications Inc. and the Company (5)
11 Statement re: Computation of Per Share Earnings (5)
23.1 Consent of Ernst & Young LLP (5)
27 Financial Data Schedule (5)
- ----------------------------
(1) Incorporated by reference to an Exhibit filed as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996.
(2) Incorporated by reference to an Exhibit filed as part of the
Registrant's Registration Statement on Form S-18 (Reg. No.
2-96419-B).
(3) Incorporated by reference to an Exhibit filed as part of the
Registrant's Registration Statement on Form S-8 (File No.
333-17613).
(4) Incorporated by reference to an Exhibit filed as part of the
Registrant's Registration Statement on Form S-8 (File No.
33-44337).
(5) Filed herewith.
22
<PAGE>
<PAGE>
Audited Financial Statements and Schedule
CTC Communications Corp.
Years ended March 31, 1997 and 1996
F-1
<PAGE>
<PAGE>
CTC Communications Corp.
Audited Financial Statements and Schedule
Years ended March 31, 1997 and 1996
Contents
Report of Independent Auditors.............................. F-3
Audited Financial Statements
Balance Sheets.............................................. F-4
Statements of Income........................................ F-5
Statements of Stockholders' Equity.......................... F-6
Statements of Cash Flows.................................... F-7
Notes to Financial Statements............................... F-8
Schedule.................................................... F-21
F-2
<PAGE>
<PAGE>
Report of Independent Auditors
Board of Directors
CTC Communications Corp.
We have audited the accompanying financial statements of CTC
Communications Corp., formerly Computer Telephone Corp., as of
March 31, 1997 and 1996, and the related statements of income,
stockholders' equity, and cash flows for each of the three years
in the period ended March 31, 1997. 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 financial position
of CTC Communications Corp. at March 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the
three years in the period ended March 31, 1997, 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.
ERNST & YOUNG LLP
May 12, 1997
F-3
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1997 1996
------------- -------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 6,405,670 $ 3,941,876
Accounts receivable, less allowance for
doubtful accounts of $377,000 in 1997
and $190,215 in 1996 10,904,820 6,557,229
Prepaid expenses and other current assets 447,441 344,958
Amounts due from officers and employees 46,112 24,806
Income tax receivable 21,125
------------- -------------
Total current assets 17,804,043 10,889,994
Equipment:
Equipment 7,268,372 6,046,493
Accumulated depreciation (5,565,650) (4,822,755)
------------- -------------
1,702,722 1,223,738
Deferred income taxes 566,000 277,000
Other assets 113,685 118,485
------------- -------------
Total assets $ 20,186,450 $ 12,509,217
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,238,416 $ 1,176,804
Accrued income taxes 225,948
Accrued salaries and related taxes 2,423,825 1,828,288
Deferred revenue 6,588 9,302
------------- -------------
Total current liabilities 5,894,777 3,014,394
Stockholders' equity:
Series Preferred Stock--par value $1.00
per share; authorized 1,000,000 shares,
none outstanding
Common Stock, par value $.01 per share;
authorized 25,000,000 shares, issued
9,629,407 and 9,584,122 shares in
1997 and 1996, respectively 96,294 95,841
Additional paid in capital 4,758,454 4,644,988
Retained earnings 9,572,750 4,889,819
------------- -------------
14,427,498 9,630,648
Amounts due from stockholders (135,825) (135,825)
------------- -------------
Total stockholders' equity 14,291,673 9,494,823
------------- -------------
Total liabilities and
stockholders' equity $ 20,186,450 $ 12,509,217
============= =============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended March 31
1997 1996 1995
------------- ------------ ------------
Network service revenues:
<S> <C> <C> <C>
Commissions $29,195,261 $25,492,511 $18,898,539
Resale 11,094,838 5,383,414 3,037,661
------------ ------------ ------------
40,290,099 30,875,925 21,936,200
Costs and expenses:
Cost of resale revenue 8,709,122 4,241,575 2,451,256
Selling, general and
administrative expenses 23,819,714 20,009,432 17,318,883
------------ ------------ ------------
32,528,836 24,251,007 19,770,139
------------ ------------ ------------
Income from operations 7,761,263 6,624,918 2,166,061
Other:
Interest income 201,369 195,979 53,935
Interest expense (17,753) (604) (7,330)
Other 15,052 9,631 109,803
------------ ------------ ------------
198,668 205,006 156,408
------------ ------------ ------------
Income before income taxes 7,959,931 6,829,924 2,322,469
Provision for income taxes 3,277,000 2,736,000 850,000
------------ ------------ ------------
Net income $ 4,682,931 $ 4,093,924 $ 1,472,469
============ ============ ============
Net income per common share:
Primary $ .43 $ .38 $ .17
============ ============ ============
Fully diluted $ .43 $ .38 $ .16
============ ============ ============
Weighted average number of
common shares:
Primary 10,773,563 10,712,425 8,764,518
============ ============ ============
Fully diluted 10,789,980 10,727,641 9,361,485
============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
<PAGE> CTC COMMUNICATIONS CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained- Amounts
----------------- Paid-in Earnings Treasury Due from
Shares Par Value Capital (Deficit) Stock Stockholders Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 2,007,608 $20,076 $4,536,046 $(668,961) $(15,751) $3,871,410
Issuance of stock 11,939 119 29,025 29,144
Exercise of employee stock options 576,925 5,769 1,581,546 $(159,825) 1,427,490
Acquisition of treasury stock (1,274,378) (1,274,378)
Retirement of treasury stock (95,394) (954) (1,275,315) 1,276,269
Stock split effected in the form of a
25% stock dividend 623,359 6,234 (6,774) (540)
Net income 1,472,469 1,472,469
----------------------------------------------------------------------------------------
Balance at March 31, 1995 3,124,437 31,244 4,871,302 796,734 (13,860) (159,825) 5,525,595
Issuance of stock 9,082 91 58,153 58,244
Exercise of employee stock options 197,143 1,971 121,053 123,024
Acquisition of treasury stock (329,125) (329,125)
Retirement of treasury stock (25,454) (254) (342,731) 342,985
Settlement of amounts due from
stockholders 24,000 24,000
Issuance of stock upon 3 for 2 stock
split 1,560,742 15,607 (15,607) (839) (839)
Issuance of stock upon 2 for 1 stock
split 4,718,172 47,182 (47,182)
Net income 4,093,924 4,093,924
----------------------------------------------------------------------------------------
Balance at March 31, 1996 9,584,122 95,841 4,644,988 4,889,819 0 (135,825) 9,494,823
Issuance of stock 8,714 87 70,088 70,175
Exercise of employee stock options 36,571 366 43,378 43,744
Net income 4,682,931 4,682,931
----------------------------------------------------------------------------------------
Balance at March 31, 1997 9,629,407 $96,294 $4,758,454 $9,572,750 $ 0 $(135,825) $14,291,673
========================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended March 31
1997 1996 1995
------------ ------------ ------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $4,682,931 $4,093,924 $1,472,469
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 742,895 660,338 655,617
Provision for doubtful accounts 316,669 61,763 80,000
Deferred income taxes (289,000) (124,000) (30,000)
Changes in operating assets and liabilities:
Accounts receivable (4,664,260) (2,979,772) (1,502,326)
Other current assets (123,789) (231,642) 167,103
Income tax receivable 21,125 (21,125) 50,000
Other assets 4,800 (90,200) 4,000
Accounts payable, accrued expenses,
accrued salaries and related taxes 2,657,149 1,103,061 538,893
Accrued income taxes 225,948 (281,569) 150,956
Deferred revenue and other (2,714) 1,128 (6,959)
------------ ------------ ------------
Net cash provided by operating activities 3,571,754 2,191,906 1,579,753
INVESTING ACTIVITIES
Additions to equipment, net (1,221,879) (759,204) (599,474)
------------ ------------ ------------
Net cash used in investing activities (1,221,879) (759,204) (599,474)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 113,919 119,467 182,256
Repayment of notes payable and capital lease
obligations (10,260)
Cash paid for fractional shares in connection
with stock splits (839) (540)
------------ ------------ ------------
Net cash provided by financing activities 113,919 118,628 171,456
------------ ------------ ------------
Increase in cash and cash equivalents 2,463,794 1,551,330 1,151,735
Cash and cash equivalents at beginning of year 3,941,876 2,390,546 1,238,811
------------ ------------ ------------
Cash and cash equivalents at end of year $6,405,670 $3,941,876 $2,390,546
============ ============ ============
</TABLE>
See accompanying notes.
F-7
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
1. Summary of Significant Accounting Policies
The Company's Business
CTC Communications Corp., formerly Computer Telephone Corp., (the
Company) is primarily engaged in selling network services of the
Regional Bell Operating Companies and other telephone operating
companies on a commission basis and the resale of long distance
and other network services to customers in the United States.
The significant expense associated with selling network services
on a commission basis is compensation to sales personnel whereas
the significant costs related to the resale of long distance and
other network services are obligations under network service
resale agreements (see Note 5).
Revenues derived from two customers in 1997, 1996 and 1995
represented, respectively, 65%, 78% and 77% of the Company's
total revenues. Accounts receivable from these significant
customers amounted to 77% and 72% of total accounts receivable at
March 31, 1997 and 1996, respectively.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities
of less than three months at the date of acquisition as cash
equivalents.
Equipment
Equipment is stated on the basis of cost. Depreciation,
including amortization of capitalized leases, is computed using
the straight-line method. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are
removed from the accounts, and any resulting gain or loss is
recognized in income for the period. The cost of maintenance and
repairs is charged to expense as incurred; significant renewals
and betterments are capitalized.
F-8
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Commissions from the sale of network services are recognized when
ordered and, if commissions are based on usage, revenues are
recognized as earned. Provisions for cancellations are made at
the time revenue is recognized and actual experience has
consistently been within management's estimates. Network service
resale revenue is recognized as the usage accrues on the network.
Income Taxes
The Company provides for income taxes under the liability method
prescribed by Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Under this method, deferred
income taxes are recognized for the future tax consequences of
differences between the tax and financial accounting bases of
assets and liabilities at each year end. Deferred income taxes
are based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected
to be realized. Income tax expense is the tax payable for the
period and the change during the period in deferred tax assets
and liabilities.
Net Income Per Share
Net income per share is computed based on the weighted-average
number of common and, if dilutive, common equivalent shares
outstanding each year. Common equivalent shares result from the
assumed exercise of common stock options using the treasury stock
method. All income per share and weighted average share
information included in the accompanying financial statements has
been restated to reflect the common stock splits disclosed in
Note 6.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be
adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded.
F-9
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies (continued)
Risks and Uncertainties
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of cash and cash
equivalents and trade receivables. The carrying amount of cash
and cash equivalents approximates fair value due to the short
maturity of these instruments.
Significant Estimates and Assumptions
The financial statements have been prepared in conformity with
generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make significant
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant estimates and assumptions made by management
affect the Company's provision for doubtful accounts,
cancellation of orders and certain accrued expenses. Actual
results could differ from those estimates.
Accounting for the Impairment of Long-Lived Assets
Effective April 1, 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", which requires impairment losses
to be recognized for long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amount.
The impairment loss is measured by comparing the fair value of
the asset to its carrying amount. The adoption of SFAS No. 121
did not have any effect on the carrying value of long-lived
assets.
F-10
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies (continued)
Accounting for Stock Issued to Employees
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the
shares at the date of the grant. The Company has elected to
follow Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value
accounting provided for under SFAS No. 123, "Accounting for
Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
Reclassifications
Certain amounts in the financial statements for the years ended
March 31, 1996 and 1995 have been reclassified to conform with
1997 classifications.
2. Related-Party Transactions
The installation of telephone systems is generally subcontracted
to a company controlled by the Chairman of the Company. Amounts
paid to this subcontractor which are based on fair market value
amounted to $28,217, $1,089 and $868 in 1997, 1996 and 1995,
respectively. Additionally, inventory and equipment purchased
from this subcontractor at fair market value amounted to $68,973,
$39,791 and $67,753 in 1997, 1996 and 1995, respectively.
The Company leases office space from companies in which the
Chairman is a principal. Rent expense for these facilities
aggregated $132,656, $133,949 and $213,105 in 1997, 1996 and
1995, respectively. These office space leases expire in
fiscal 1998.
Effective July 1, 1994, the Company began subleasing a part
of its Waltham facility to a company controlled by the
Chairman of the Company. Terms of the sublease are
identical with those included in the Company's lease.
Sublease income totaled $80,416, $73,417 and $55,181 in
1997, 1996 and 1995, respectively.
F-11
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
3. Note Payable
The Company has a revolving line of credit agreement with a bank
which provides for borrowings and standby letters of credit with
an aggregate principal or available stated amount at one time not
to exceed $5,000,000. This revolving credit agreement, as
amended, expires on August 31, 1998 and bears interest at the
prime rate of interest, with LIBOR rates available at the
Company's election. The agreement provides for compliance with
certain covenants, including the maintenance of specified
financial ratios. Borrowings are secured by substantially all
the assets of the Company. During the years ended March 31, 1997,
1996 and 1995 there were no borrowings under the line of credit
and standby letters of credit of $300,000 are outstanding at
March 31, 1997.
Interest paid for the years ended March 31, 1997, 1996 and 1995
approximates interest expense.
4. Leases
The Company leases office facilities under long-term lease
agreements classified as operating leases. The following is a
schedule of future minimum lease payments, net of sublease
income, for operating leases as of March 31, 1997:
Operating Sublease
Leases Income Net
-------------------------------------
Year ending March 31:
1998 $984,291 $(96,437) $887,854
1999 904,776 (96,437) 808,339
2000 510,839 (43,266) 467,573
2001 381,738 (25,542) 356,196
2002 352,592 (25,542) 327,050
Thereafter 331,100 (57,470) 273,630
Net future minimum -------------------------------------
lease payments $3,465,336 $(344,694) $3,120,642
=====================================
Rental expense for operating leases amounted to $1,001,919,
$673,321 and $697,787 in 1997, 1996 and 1995, respectively.
Sublease income amounted to $90,016, $82,217 and $55,181 in 1997,
1996 and 1995, respectively.
F-12
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
5. Network Service Resale Agreements
On January 15, 1996, the Company entered into a four year non-
exclusive agreement with a long-distance service provider for the
right to provide long distance service to its customers at prices
affected by volume attainment levels during the term of the
agreement. The Company is not obligated to purchase any minimum
levels of usage over the term of the agreement, but rates may be
adjusted if there is a failure to achieve certain volume
commitments. These provisions had no effect on the financial
statements for the year ended March 31, 1997.
On October 20, 1994, the Company entered into a three-year non-
exclusive agreement with a long-distance service provider for the
right to provide long distance service to its customers at fixed
prices by service during the term of the agreement. On October
11, 1996, the Company entered into an amendment to the agreement
which extended the term of the agreement by 5 years from the date
of the amendment. Over such extension period, the Company shall
be liable for a minimum aggregate usage commitment of $25
million. Furthermore, the rates set forth under the
aforementioned amendment may be adjusted if there is a failure to
meet certain periodic volume commitments. Due to existing and
expected usage, these provisions had no effect on the financial
statements for the year ended March 31, 1997.
Prior to the execution of the agreements described above, and
through March 31, 1997, the Company also provided long distance
service to customers under an informal non-exclusive arrangement
with another long distance service provider. The Company is not
obligated to purchase any minimum level of usage on the network,
and there are no other performance obligations.
6. Stockholders' Equity
Common Stock
The Board of Directors approved a 25% stock dividend, declared as
of January 18, 1995, payable to shareholders of record on March
1, 1995. For financial reporting purposes, this transaction has
been accounted for as a stock split, effected in the form of a
dividend. A total of 623,359 shares of common stock were issued
and $540 in cash was paid for fractional share amounts in
connection with the split.
F-13
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
6. Stockholders' Equity (continued)
On July 13, 1995, the Board of Directors approved a 3 for 2 stock
split to shareholders of record on July 25, 1995. A total of
1,560,742 shares of common stock were issued and $839 in cash was
paid for fractional share amounts in connection with the split.
On October 10, 1995, the Board of Directors approved a 2 for
1 stock split to shareholders of record on October 23, 1995.
A total of 4,718,172 shares of common stock were issued in
connection with the split.
Preferred Stock
The dividends, liquidation preference, voting rights and other
rights of each series of preferred stock, when issued, are to be
designated by the Board of Directors prior to issuance.
7. Benefit Plans
Defined Contribution Plan
In September 1993, the Company established a defined contribution
plan (401(k) plan) covering all employees who meet certain
eligibility requirements. Participants may make contributions to
the plan up to 15% of their compensation (as defined) up to the
maximum established by law. The Company may make a matching
contribution of an amount to be determined by the Board of
Directors, but subject to a maximum of 6% of compensation
contributed by each participant. Company contributions vest
ratably over three years. Company contributions to the plan were
$230,079, $210,063 and $154,748 in 1997, 1996 and 1995,
respectively. Administrative costs paid by the Company were
$1,275, $7,982 and $2,377 in 1997, 1996 and 1995, respectively.
F-14
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
7. Benefit Plans (continued)
The Company has an employee stock purchase plan (the "ESPP")
which enables participating employees to purchase Company shares
at 85% of the lower of the market prices prevailing on the
valuation dates as defined in the ESPP. Individuals can
contribute up to 5% of their base salary. The Company made no
contributions to the ESPP during the three years in the period
ended March 31, 1997. Indicated below is a summary of shares of
common stock purchased by the ESPP. All share and per share
amounts indicated below have been presented to reflect the stock
dividend and stock splits described above.
In July 1996 and February 1997, the ESPP purchased 2,998 shares
at $11.05 per share and 5,716 shares at $6.48 per share,
respectively.
In July 1995 and January 1996, the ESPP purchased 7,011 shares at
$3.26 per share and 2,345 shares at $11.05 per share,
respectively.
In July 1994 and January 1995, the ESPP purchased 25,324 shares
at $0.55 per share and 19,448 shares at $0.78 per share,
respectively.
Stock Option Plans
Under the terms of its Employees Incentive Stock Option Plan, as
amended, the 1985 Stock Option Plan, the 1993 Incentive Stock
Option Plan and the 1996 Stock Option Plan, the Company may grant
qualified incentive stock options for the purchase of Common
Stock to employees, officers and directors who are employees of
the Company for a minimum of six months. In addition, under the
terms of its 1985 Stock Option Plan, the Company may grant non-
qualified incentive stock options for the purchase of Common
Stock to non-employees of the Company. The Plans generally
provide that the option price will be fixed by a committee of the
Board of Directors but will not be less than 100% (110% for 10%
stockholders) of the fair market value per share on the date of
grant. Nonqualified options may also be granted under the plan
to directors, consultants or agents who are not employees and to
employees who own more than 10% of the Company's voting
securities. Nonqualified options are granted at no less than 85%
(110% for 10% stockholders) of the fair market value per share on
the date of grant. No options have a term of more than ten years
and options to 10% stockholders may not have a term of more than
five years.
F-15
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
7. Benefit Plans (continued)
In the event of termination of employment, other than by reason
of death, disability or with the written consent of the Company,
all options granted to employees are terminated. Vesting is
determined by the Board of Directors.
On October 11, 1994, unvested options for the purchase of 949,131
shares, which were initially exercisable in annual installments,
were made exercisable in full.
Stock Based Compensation
Pro forma information regarding net income and earnings per share
is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee stock options and shares
issued pursuant to the ESPP using the fair value method
prescribed by that Statement. The fair value for these options
and shares issued pursuant to the ESPP were estimated at the date
of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions:
Options ESPP
------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
Expected life (years) 3.98 3.49 0.50 0.50
Interest rate 6.28% 6.12% 5.40% 6.48%
Volatility 87.88% 87.88% 93.03% 80.93%
Dividend yield 0.00% 0.00% 0.00% 0.00%
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
F-16
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
7. Benefit Plans (continued)
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting
period. The Company's pro forma net income and net income per
share is as follows:
1997 1996
Pro forma net income $4,094,000 $3,550,000
Pro forma net income per share $ 0.39 $ 0.34
The effects on 1997 and 1996 pro forma net income and net income
per share of expensing the estimated fair value of stock options
and shares issued pursuant to the ESPP are not necessarily
representative of the effects on reporting the results of
operations for future years as the periods presented include only
one and two years of option grants under the Company's plans.
A summary of the Company's stock option activity, and related
information for the years ended March 31 follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------ ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
-----------------------------------------------------------
Outstanding at
<S> <C> <C> <C> <C> <C> <C>
beginning of year 1,995,878 $4.01 1,526,850 $1.45 2,456,814 $0.64
Options granted 280,539 9.67 1,000,250 8.06 1,305,693 1.74
Options terminated (286,734) 7.54 (290,689) 2.37 (72,189) 0.53
Options exercised (36,571) 1.20 (240,533) 0.51 (2,163,468) 0.73
---------- ---------- -----------
Outstanding at end
of year 1,953,112 $4.36 1,995,878 $4.01 1,526,850 $1.45
========== ========== ===========
Exercisable at end
of year 772,282 613,824 512,793
========== ========== ===========
Weighted-Average fair
value of options
granted during the
year $6.43 $5.09
========== ==========
</TABLE>
F-17
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
7. Benefit Plans (continued)
The following table presents weighted-average price and life
information about significant option groups outstanding at March
31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- -----------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------ ------------ ----------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.25 187,500 1.1 years $ 0.25 187,500 $ 0.25
0.53 181,618 6.5 years 0.53 87,376 0.53
0.90 - 1.10 488,688 6.1 years 1.04 322,666 1.01
2.70 - 2.98 269,056 7.9 years 2.74 131,528 2.74
6.00 - 8.25 417,500 4.7 years 6.50 5,000 6.13
9.12 - 13.00 399,750 4.4 years 10.65 38,212 10.32
$16.25 9,000 5.1 years $16.25 0 $ 0.00
--------- -------
1,953,112 772,282
========= =======
</TABLE>
8. Income Taxes
The provision for income tax expense consisted of the following:
1997 1996
----------------------------
Current payable:
Federal $2,660,000 $2,135,000
State 906,000 725,000
----------------------------
3,566,000 2,860,000
Deferred tax benefit (289,000) (124,000)
----------------------------
$3,277,000 $2,736,000
============================
F-18
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
8. Income Taxes (continued)
Significant components of the Company's deferred tax liabilities
and assets as of March 31, are as follows:
1997 1996
----------------------
Deferred tax assets:
Depreciation $191,000 $107,000
Accruals and allowances 445,000 220,000
----------------------
Total deferred tax asset 636,000 327,000
Deferred tax liability:
Prepaid expenses (31,000) (11,000)
Cash surrender value of life
insurance policy (39,000) (39,000)
----------------------
Total deferred tax liability (70,000) (50,000)
----------------------
Net deferred tax asset $566,000 $277,000
======================
The income tax expense is different from that which would be
obtained by applying the statutory federal income tax rate to
income before income taxes. The items causing this difference
are as follows:
1997 1996 1995
----------------------------------
Tax at U.S. statutory rate $2,706,000 $2,322,000 $790,000
State income taxes, net of
federal benefit 552,000 466,000 151,000
Tax benefit of the utilization
of NOL carryforwards and
alternative minimum tax
credits (107,000)
Other 19,000 (52,000) 16,000
----------------------------------
$3,277,000 $2,736,000 $850,000
==================================
Income taxes paid in 1997, 1996 and 1995 amounted to $3,319,000,
$3,163,000 and $679,000, respectively.
F-19
<PAGE>
<PAGE>
CTC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
9. Supplemental Cash Flow Information
On March 22, 1996, the Company received shares of common stock
with an aggregate fair market value of $251,771 in lieu of cash
for settlement of amounts due from an officer. These shares and
the related amount were accounted for as treasury stock and were
subsequently retired.
On September 15, 1995, the Company received shares of common
stock with an aggregate fair market value of $25,039 in lieu of
cash for settlement of amount due from a non-employee of $24,000
plus accrued interest of $1,039. These shares and the related
amount were accounted for as treasury stock and were subsequently
retired.
During the year ended March 31, 1996 and in connection with the
exercise of employee stock options, the Company received shares
of common stock with an aggregate fair market value of $52,315 in
lieu of cash upon the exercise of these options. These shares
and the related amount were accounted for as treasury stock and
were subsequently retired.
During the year ended March 31, 1995, the Company loaned an
aggregate of $159,285 to certain stockholders who utilized the
funds to exercise stock options. Also, in connection with the
exercise of employee stock options, the Company received shares
of common stock with an aggregate fair market value of $1,274,378
in lieu of cash upon the exercise of these options. These shares
and the related amount were accounted for as treasury stock and
were subsequently retired.
These non-cash transactions have been excluded from the
statements of cash flows for the years ended March 31, 1996 and
1995.
F-20
<PAGE>
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CTC COMMUNICATIONS CORP.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------
ADDITIONS
--------------------
(1) (2)
Charged to
Balance at Charged to Other Balance
Beginning Costs and Accounts- Deductions- at End
DESCRIPTION of Period Expenses Describe Describe of Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1997:
Allowance for doubtful accounts $190,215 $316,669(b) $129,884(a) $377,000
Year ended March 31, 1996:
Allowance for doubtful accounts $128,452 $ 61,763 $190,215
Year ended March 31, 1995:
Allowance for doubtful accounts $ 70,401 $ 80,000 $ 21,949(a) $128,452
<FN>
(a) = Bad debts written off net of collections.
(b) Increase in provision in 1997 compared to 1996 and 1995 attributable to a
significant increase in network service resale income for which bad debt write-offs are
significantly higher than commission income.
</FN>
</TABLE>
F-21
<PAGE>
<PAGE>
FORM 10-K FOR THE PERIOD ENDED MARCH 31, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by
the undersigned thereunto duly authorized.
CTC COMMUNICATIONS CORP.
/S/ ROBERT J. FABBRICATORE
---------------------------
Robert J. Fabbricatore,
Chairman and CEO
/S/ JOHN D. PITTENGER
---------------------------
John D. Pittenger,
Vice President, Finance,
Treasurer, and Chief
Financial Officer
Date: June 25, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.
/S/ ROBERT J. FABBRICATORE
--------------------------------
Robert J. Fabbricatore, Chairman
/S/ PHILIP J. RICHER
--------------------------------
Philip J. Richer, Director
/S/ RICHARD J. SANTAGATI
-------------------------------
Richard J. Santagati, Director
/S/ J. RICHARD MURPHY
-------------------------------
J. Richard Murphy, Director
/S/ HENRY HERMANN
-------------------------------
Henry Hermann, Director
Date: June 25, 1997
EXHIBIT 4.1
[TEXT OF FACE OF STOCK CERTIFICATE]
[Logo]
COMMON STOCK CTC COMMUNICATIONS CORP. COMMON STOCK SHARES
Number S SEE REVERSE FOR CERTAIN DEFINITIONS
COMMON STOCK CUSIP 126418 10 2
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MA AND NEW YORK, NY
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF ONE
CENT ($.01) CENT EACH OF CTC COMMUNICATIONS CORP.
(hereinafter called the "Company") transferable upon the books of the Company
by the holder hereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be subject to all the provisions of
the Articles of Organization and By-Laws of the Company as from time to time
amended (copies of which are on file with the Company) to all of which the
holder, by acceptance hereof, assents. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
the facsimile signatures of its duly authorized officers and its facsimile
corporate seal to be hereunto affixed.
Dated:
/s/ John D. Pittenger [corporate seal] /s/ Steven P. Milton
Treasurer President
Countersigned and Registered:
STATE STREET BANK AND TRUST COMPANY (Boston)
By Transfer Agent and Registrar
Authorized Signature
[TEXT OF REVERSE OF STOCK CERTIFICATE]
The following abbreviations, when used in the inscription of the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT _______Custodian___
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act_________ (state)
survivorship and not as tenants UNIF TRF MIN ACT _____Custodian
in common (until age__)______ under Uniform
Transfers to Minors Act __(state)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
_______________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint___________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated____________ X________________________________________________________
X________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By______________________
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
EXHIBIT 10.1A
COMPUTER TELEPHONE CORP.
1993 STOCK OPTION PLAN
I. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's
business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"nonqualified stock options," at the discretion of the Board and as reflected
in the terms of the written option agreement. In addition, shares of the
Company's Common Stock may be Sold hereunder independent of any Option grant.
II. Definitions. As used herein, the following definitions shall apply:
A. "Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company, if no Committee is appointed.
B. "Code" shall mean the Internal Revenue Code of 1986, as amended.
C. "Common Stock" shall mean the Common Stock of the Company.
D. "Company" shall mean COMPUTER TELEPHONE CORP., a Massachusetts
corporation.
E. "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section IV, Paragraph A1 of the Plan, if one is
appointed.
F. "Consultant" shall mean any person who is engaged by the Company
or any Subsidiary to render consulting services and is compensated for such
consulting services and any director of the Company whether compensated for
such services or not.
G. "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided, however, that such leave is
for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
H. "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
I. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
J. "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
K. "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
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L. "Option" shall mean a stock option granted pursuant to the Plan.
M. "Optioned Stock" shall mean the Common Stock subject to an Option.
N. "Optionee" shall mean an Employee or Consultant who receives an
Option.
O. "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
P. "Plan" shall mean this Stock Option Plan.
Q. "Sale" or "Sold" shall include, with respect to the sale of Shares
under the Plan, the sale of Shares for consideration in the form of cash or
notes, as well as a grant of Shares without consideration, except past or
future services.
R. "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section XI of the Plan.
S. "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
III. Stock Subject to the Plan. Subject to the provisions of Section XI of
the Plan, the maximum aggregate number of Shares which may be optioned and/or
Sold under the Plan is 750,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future Option grants and/or Sales under the Plan. If Shares Sold under the Plan
or purchased upon the exercise of an Option are repurchased by the Company
pursuant to restrictions applicable to such Shares, the number of Shares
repurchased shall, unless the Plan shall have been terminated, become available
for future Option grants and/or Sales under the Plan.
IV. Administration of the Plan.
A. Procedure. The Plan shall be administered by the Board of
Directors of the Company.
1. Subject to Paragraph A2 of this Section IV, the Board of
Directors may appoint a Committee consisting of not less than two (2) members
of the Board of Directors to administer the Plan on behalf of the Board of
Directors, subject to such terms and conditions as the Board of Directors may
prescribe. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board of Directors. From time to time the Board of
Directors may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
Members of the Board who are either eligible for Options
and/or Sales or have been granted Options or Sold Shares may vote on any
matters affecting the administration of the Plan or the grant of any Options
or Sale of any Shares pursuant to the Plan, except that no such member shall
act upon the granting of an Option or Sale of Shares to himself, but any such
member may be counted in determining the existence of a quorum at any meeting
of the Board during which action is taken with respect to the granting of
Options or Sale of Shares to him.
2. Notwithstanding the foregoing Paragraph A1 of this Section
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IV, if and in any event the Company registers any class of any equity security
pursuant to Section 12 of the Securities Exchange Act of 1934, from the
effective date of such registration until six (6) months after the termination
of such registration, any grants of Options to officers or directors shall only
be made by the Board if each member of the Board is a disinterested person, or
if every member of the Board is not a disinterested person, by a committee of
two or more directors, each of whom is a disinterested person. A "disinterested
person" is a director who has not, during the one year period prior to service
as an administrator of the Plan, or during such service, been granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any of its affiliates, with these qualifications:
a. participation in a formula plan meeting the conditions
in paragraph (c)(2)(ii) of SEC Rule 16b-3 shall not
disqualify a director from being a disinterested person;
b. participation in an ongoing securities acquisition plan
meeting the conditions in paragraph (d)(2)(i) of SEC Rule
16b-3 shall not disqualify a director from being a
disinterested person;
c. an election to receive an annual retainer fee in either
cash or an equivalent amount of securities, or partly in cash
and partly in securities, shall not disqualify a director
from being a disinterested person; and
d. participation in a plan shall not disqualify a director
from being a disinterested person for the purpose of
administering another plan that does not permit participation
by directors.
B. Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion:
1. to grant Incentive Stock Options in accordance with Section
422 of the Code, or Nonqualified Stock Options;
2. to authorize Sales of Shares of Common Stock hereunder;
3. to determine, upon review of relevant information and in
accordance with Section VIII, Paragraph B of the Plan, the fair market value
of the Common Stock;
4. to determine the exercise/purchase price per Share of Options
to be granted or Shares to be Sold, which exercise/purchase price shall be
determined in accordance with Section VIII, Paragraph A of the Plan;
5. to determine the Employees or Consultants to whom, and the
time or times at which, Options shall be granted and the number of Shares to
be represented by each Option;
6. to determine the Employees or Consultants to whom, and the
time or times at which, Shares shall be Sold and the number of Shares to be
Sold;
7. to interpret the Plan;
8. to prescribe, amend and rescind rules and regulations
relating to the Plan;
9. to determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option;
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10. to determine the terms and provisions of each Sale of Shares
(which need not be identical) and, with the consent of the purchaser thereof,
modify or amend each Sale;
11. to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option;
12. to accelerate or defer (with the consent of the Optionee or
purchaser of Shares) the vesting restrictions applicable to Shares Sold under
the Plan or pursuant to Options granted under the Plan;
13. to authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option or Sale of Shares
previously granted or authorized by the Board;
14. to determine the restrictions on transfer, vesting
restrictions, repurchase rights, or other restrictions applicable to Shares
issued under the Plan;
15. to effect, at any time and from time to time, with the
consent of the affected Optionees, the cancellation of any or all outstanding
Options under the Plan and to grant in substitution therefor new Options under
the Plan covering the same or different numbers of Shares, but having an Option
price per Share consistent with the provisions of Section VIII of this Plan as
of the date of the new Option grant;
16. to establish, on a case-by-case basis, different terms and
conditions pertaining to exercise or vesting rights upon termination of
employment, whether at the time of an Option grant or Sale of Shares, or
thereafter; and
17. to make all other determinations deemed necessary or
advisable for the administration of the Plan.
C. Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan or Shares Sold under
the Plan.
V. Eligibility.
A. Persons Eligible. Options may be granted and/or Shares Sold only
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he is otherwise eligible, be granted an additional Option or
Options or Sold additional Shares.
B. $100,000 Limitation. No Incentive Stock Option may be granted to
an Employee which, when aggregated with all other Incentive Stock Options
granted to such Employee by the Company or any Parent or Subsidiary, would
result in Shares having an aggregate fair market value (determined for each
Share as of the date of grant of the Option covering such Share) in excess of
$100,000 becoming first available for purchase upon exercise of one or more
Incentive Stock Options during any calendar year.
C. Section V, Paragraph B Limitations. Section V, Paragraph B of the
Plan shall apply only to an Incentive Stock Option evidenced by an "Incentive
Stock Option Agreement" which sets forth the intention of the Company and the
Optionee that such Option shall qualify as an Incentive Stock Option. Section
V, Paragraph B of the Plan shall not apply to any Option evidenced by a
"Nonqualified Stock Option Agreement" which sets forth the intention of the
Company and the Optionee that such Option shall be a Nonqualified Stock Option.
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D. No Right to Continued Employment. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship
at any time.
VI Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders
of the Company as described in Section XVII of the Plan. It shall continue in
effect for a term of ten (10) years, unless sooner terminated under Section
XIII of the Plan.
VII. Term of Option. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement. The term of each Nonqualified Stock
Option shall be ten (10) years and one (1) day from the date of grant thereof
or such other term as may be provided in the Stock Option Agreement. However,
in the case of an Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, (a)
if the Option is an Incentive Stock Option, the term of the Option shall be
five (5) years from the date of grant thereof or such shorter time as may be
provided in the Stock Option Agreement, or (b) if the Option is a Nonqualified
Stock Option, the term of the Option shall be five (5) years and one (1) day
from the date of grant thereof or such other term as may be provided in the
Stock Option Agreement.
VIII. Exercise/Purchase Price and Consideration.
A. Exercise/Purchase Price. The per-Share exercise/purchase price for
the Shares to be issued pursuant to exercise of an Option or a Sale (other than
a Sale which is a grant for which no purchase price is payable) shall be such
price as is determined by the Board, but shall be subject to the following:
1. In the case of an Incentive Stock Option
a. granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than one hundred ten
percent (110%) of the fair market value per Share on the date
of the grant.
b. granted to any other Employee, the per Share exercise
price shall be no less than one hundred percent (100%) of the
fair market value per Share on the date of grant.
2. In the case of a Nonqualified Stock Option or Sale
a. granted or Sold to a person who, at the time of the
grant of such Option or authorization of such Sale, owns
stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise/purchase price shall
be no less than one hundred ten percent (110%) of the fair
market value per Share on the date of the grant or
authorization of Sale, unless otherwise expressly determined
by the Board of Directors.
b. granted or sold to any other person, the per Share
exercise/purchase price shall be no less than eighty-five
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percent (85%) of the fair market value per Share on the date
of grant or authorization of Sale, unless otherwise expressly
determined by the Board of Directors.
c. Any determination to sell stock at less than fair
market value on the date of the grant or authorization of
Sale shall be accompanied by an express finding by the Board
of Directors specifying that the sale is in the best interest
of the Company, and specifying both the fair market value and
the grant or sale price of the stock.
3. In the case of an Option granted or Sale authorized on or
after the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six (6) months
after the termination of such registration, the per Share exercise/purchase
price shall be no less than one hundred percent (100%) of the fair market value
per Share on the date of grant or authorization of Sale.
B. Fair Market Value. The fair market value per Share shall be
determined by the Board in its discretion, said fair market value to be
determined in good faith at the time of the grant of such Option by the Board;
provided, however, that where there is a public market for the Common Stock,
the fair market value per Share shall be the closing price of the Common Stock
for the date of grant or authorization of Sale, as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation (NASDAQ) System) or, in
the event the Common Stock is listed on a stock exchange, the fair market value
per Share shall be the closing price on such exchange on the date of grant of
the Option or authorization of Sale, as reported in The Wall Street Journal.
C. Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option or pursuant to a Sale, including the method
of payment, shall be determined by the Board and may consist in whole or part
of:
1. cash;
2. check;
3. promissory note;
4. transfer to the Company of Shares having a Fair Market Value
at the time of such exercise equal to the Option exercise price; or
5. delivery of instructions to the Compa4.any to withhold from
the Shares that would otherwise be issued on the exercise that number of Shares
having a Fair Market Value at the time of such exercise equal to the Option
exercise price.
If the Fair Market Value of the number of whole Shares transferred
or the number of whole Shares surrendered is less than the total exercise price
of the Option, the shortfall must be made up in cash or by check.
IX. Exercise of Option.
A. Procedure for Exercise: Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
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An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section VIII, Paragraph C
of the Plan. Each Optionee who exercises an Option shall, upon notification of
the amount due (if any) and prior to or concurrent with delivery of the
certificate representing the Shares, pay to the Company amounts necessary to
satisfy applicable federal, state and local tax withholding requirements. An
Optionee must also provide a duly executed copy of any stock transfer agreement
then in effect and determined to be applicable by the Board. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section XI of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
B. Termination of Status as an Employee or Consultant. If an Employee
or Consultant ceases to serve as an Employee or Consultant (as the case may
be), he may, but only within three (3) months (or such other period of time not
exceeding the limitations of Section VII above as is determined by the Board
at the time of grant of an Option or thereafter) after the date he ceases to
be an Employee or Consultant (as the case may be) of the Company, exercise his
Option to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
C. Disability of Optionee. Notwithstanding the provisions of
Paragraph B of this Section IX above, in the event an Employee or Consultant
is unable to continue his employment or consulting relationship (as the case
may be) with the Company as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, but only within twelve (12)
months (or such other period of time not exceeding the limitations of Section
VII above as is determined by the Board at the time of grant of an Option or
thereafter) from the date of termination, exercise his Option to the extent he
was entitled to exercise it at the date of such termination. To the extent that
he was not entitled to exercise the Option at the date of termination, or if
he does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
D. Death of Optionee. In the event of the death of an Optionee during
the term of the Option who is at the time of his death an Employee or
Consultant of the Company and who shall have been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the Option may
be exercised, at any time within twelve (12) months (or such other period of
time not exceeding the limitations of Section VII above as is determined by the
Board at the time of grant of an Option or thereafter) following the date of
death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise as of the date of death.
X. Nontransferability of Options. An Option may not be sold, pledged,
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assigned, hypothecated, transferred or disposed of in any manner other than by
will, or by the laws of descent and distribution, and may be exercised during
the lifetime of the Optionee only by the Optionee or, if incapacitated, by his
or her legal guardian or legal representative.
XI. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or Sales made or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock, or
any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the
right to exercise his Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice or such shorter period as the Board may specify in the notice, and
the Option will terminate upon the expiration of such period.
XII. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
XIII.Amendment and Termination of the Plan.
A. Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided, however, that if required to qualify the Plan under Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended, no amendment shall be made more than once every six months that would
change the amount, price or timing of the option grants, other than to comport
with changes in the Code, or the rules and regulations promulgated thereunder;
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and provided, further, that, if required to qualify the Plan under Rule 16b-3,
no amendment shall be made without the approval of the stockholders of the
Company in the manner described in Section XVII of the Plan if the amendment
would:
1. increase the number of Shares subject to the Plan, other than
in connection with an adjustment under Section XI of the Plan;
2. make a change in the designation of the class of Employees
or Consultants eligible to be granted Options; or
3. if the Company has a class of equity security registered
under Section 12 of the Exchange Act at the time of such revision or amendment,
cause any material increase in the benefits accruing to participants under the
Plan.
B. Stockholder Approval. If any amendment requiring stockholder
approval under Section XIII, Paragraph A of the Plan is made subsequent to the
first registration of any class of equity security by the Company under Section
12 of the Exchange Act, such stockholder approval shall be solicited as
described in Section XVII, Paragraph A of the Plan.
C. Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
XIV. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option or a Sale unless the exercise of such Option or
consummation of the Sale and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, applicable state securities
laws, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange (including NASDAQ) upon which the Shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
As a condition to the exercise of an Option or a Sale, the Company may
require the person exercising such Option or to whom Shares are being Sold to
represent and warrant at the time of any such exercise or Sale that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
XV. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
XVI. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
XVII. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before or
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after the date the Plan is adopted. if such stockholder approval is obtained
at a duly held stockholders' meeting, it may be obtained by the affirmative
vote of the holders of a majority of the outstanding shares of the Company,
such holders being present or represented and entitled to vote thereon. If and
in the event that the Company registers any class of any equity security
pursuant to Section 12 of the Exchange Act, the approval of such stockholders
of the Company shall be:
A. Solicitation.
1. solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or
2. solicited after the Company has furnished in writing to the
holders entitled to vote substantially the same information concerning the Plan
as that which would be required by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished;
and
B. Time. Obtained at or prior to the first annual meeting of
stockholders held subsequent to the first registration of any class of equity
securities of the Company under Section 12 of the Exchange Act.
If such stockholder approval is obtained by written consent, it
must be obtained by the written consent of stockholders of the Company in
compliance with the requirements of applicable state law.
XVIII. Six Month Holding Period for Affiliates. If the Company registers
any class of any equity security pursuant to Section 12 of the Exchange Act,
then from the effective date of such registration until six (6) months after
the termination of such registration (the "Public Period"), these limits will
apply to each officer, director and beneficial owner of ten percent (10%) or
more of any class of equity securities of the Company ("Affiliates"). During
the Public Period, any Affiliate shall hold Shares Sold hereunder at least six
months from the date of Sale. During the Public Period, at least six months
must elapse from the date of grant of an Option to an Affiliate to the date the
Affiliate disposes of the Shares acquired upon exercise of the Option, or (if
the Option is disposed of other than by exercise) to the date of disposition
of the Option itself.
EXHIBIT 10.2
WITNESS this lease hereby made on the 16th day of February, 1994 by and
between HILLSIDE ASSOCIATES, a co-partnership, having it place of business at
100 Ring Road West, Garden City, New York 11530 hereinafter known as the
Landlord which expression shall include its heirs, successors and assigns and
COMPUTER TELEPHONE CORP. having its place of business at 360 Second Avenue,
Waltham, Massachusetts, a Massachusetts corporation, hereinafter known as the
Tenant, which expression shall include its successors and assigns.
1. Premises and Use: The Landlord hereby leases to the Tenant the
premises described as follows: Approximately Nineteen Thousand Five Hundred
and Eighty Two Square Feet (19,582 SF) of space as shown on the annexed sketch
in the building known as Tech Center 128, Building #1, 360 Second Avenue,
Waltham, Massachusetts, and Two Thousand (2,000) Square Feet of outside
storage space to be fenced by the Tenant, together with the use in common with
other Tenants in the building of outside parking and yard areas in the land on
which the leased premises are situated for the parking of automobiles and
trucks. Parking or storage of office trailers in the lot is prohibited. Tech
Center 128, Building #1 is located on Lot B-1 as shown in plan entitled "Plan
of Land in Waltham, Massachusetts owned by Bear Hill Industrial Development
Trust, scale 1 inch equals 40 feet, October 5, 1960 survey by MacCarthy
Engineering Service, Inc., Natick, Mass.", recorded with the Middlesex South
Registry of Deeds as Plan 1851 of 1960, and a portion of Lot B, which lot is
shown on a plan entitled "Plan of Land in Waltham, Massachusetts owned by Bear
Hill Industrial Development Trust, scale 1 inch equals 100 feet, March 17th,
1959, Plan by MacCarthy Engineering Service, Inc., Natick, Mass.", recorded
with said deeds as Plan 1157 of 1959. The premises may be used by the Tenant
for offices, manufacturing, engineering and warehousing or other lawful
purposes.
2. Term:
(a) The initial term of this Lease shall be for period of five (5)
years, commencing on the Commencement Date and ending at midnight on the last
day of the month in which the fifth anniversary of the Commencement Date (the
"Expiration Date") takes place.
(b) Tenant shall have one (1) option to extend the term of this Lease
from the dates upon which it would otherwise expire for one (1) renewal period
of five (5) years. If Tenant: elects to exercise said option, it shall do so
by giving notice of such election to Landlord at any time on or before the
date which is 180 days before the expiration of the Term of this Lease, as to
which time, time shall be of the essence. The term of the extended period
shall be upon the same terms and conditions as are in effect hereunder
immediately preceding the commencement of the extended period, except that the
rent for the extended period shall be at 95% of the then current market rate.
(c) The renewal option contained in subsection (b) above shall be
effective only if this Lease is in force and effect on the day prior to the
effective date of the renewal and no default by Tenant is existing under this
Lease on the date the renewal option is exercised and on the date the renewal
term begins. The Tenant will provide a renewal notice in accordance with
subsection (b) above the Landlord and Tenant will further evidence the
acceptance of the renewal term by executing a lease renewal document which
will describe the terms of such lease extension.
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3. Basic Rent: The basic rent for the premises shall be the sum of One
Hundred Twenty Seven Thousand Two Hundred and Eighty Three and 00/100
($127,283.00) Dollars per annum, payable in advance in equal monthly
installments of Ten Thousand Six Hundred and Six and 92/500 ($10,606.92)
Dollars on the first day of each and every month of the Lease term at the
office of the Landlord as stated in Paragraph 30 of this Lease.
If the lease term should commence and end on any day except that first
day of the calendar month, then the first and the last monthly rent
installment shall be pro rated for the portion of the calendar month covered
by the Lease term.
4. Real Estate Taxes and Betterments: (a) The Tenant agrees to pay to
the Landlord, as additional rent, nineteen and thirty nine one hundredths
(19.39%) Percent of the real estate taxes and betterments and other municipal
assessments, on the lot and building in which the leased premises are
situated. The real estate taxes shall be payable in advance on a monthly
basis for the lease period covered by same. The basic rent and the
betterments and municipal assessments shall be paid upon submission of a bill.
The Landlord shall submit to the Tenant an invoice accompanied by a copy of
the Real Estate Tax Bill, Bill for Betterments and/or municipal assessments
which bill will be conclusive evidence of those charges. The current annual
Real Estate Tax is $157,590.00 from July to June which computes to $2,546.39
per month.
(b) Both the Landlord and the Tenant shall have the right to apply for
real estate tax abatement. In the event that Landlord elects to file a claim
for real estate tax abatement .or the entire building, Tenant shall pay its
proportionate share of any expenses incurred and shall share in any refund or
adjustment accordingly. In the event that a portion of the expenses incurred
are for the tax period subsequent to the expiration of the term or extended
term of this Lease, the Tenant shall be excused from the prorata portion of
the expense and accordingly shall not share in any refund or adjustment for
said period.
5. Utilities: (a) The Tenant's demised premises shall be directly
metered for electrical service. The tenant shall pay directly to the utility
company for said service.
(b) Water and sewerage and gas service for the premises are not
separately metered. The Tenant shall pay its proportionate share of water
charges (and sewer charges, should such be instituted) and gas charges for the
Building as additional rent within thirty (30) days following receipt by it of
the Landlord's bill for such charges. The Landlord reserves the right to
install a sub-meter for the purpose of measuring the Tenant's water and gas
consumption.
6. Repairs, Maintenance and Operation of the Premises: The Landlord
shall be responsible for the structural repairs, exterior repairs and roof
surface repairs as well as repairs to the parking lot. All repairs which are
the responsibility of the Landlord and shall be made promptly and at the
earliest possible opportunity.
The Landlord shall not be responsible for any repairs or replacements to
the premises caused by the willful acts or negligence of the Tenant, its
agents, employees, invitees or licensees, nor shall the Landlord be
responsible for any repairs or replacements caused by vandalism or malicious
mischief caused by the Tenant, its agents, employees, invitees or licensees.
The Tenant shall be responsible for all maintenance, repairs or
replacements to the premises not hereinbefore stated as the Landlord's
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obligation. The Tenant agrees either by its employees, servants or agents or
by executing contracts with acceptable service companies to furnish regular
maintenance of the heating, ventilating and air conditioning equipment
furnished by the Landlord or by others for the leased premises, any equipment
that is under warranty, that warranty will be assigned to the Tenant.
The Tenant shall keep its premises, including the driveway and yard
abutting same neat and clean, free of ice and snow and maintain appropriate
trash collection and removal services. The Landlord shall arrange snow and
ice removal service and landscaping maintenance. The Tenant agrees to pay to
the Landlord nineteen and thirty nine one hundredths (19.39%) Percent of the
cost for snow and ice removal and landscaping maintenance as additional rent.
The Landlord shall submit to the Tenant an invoice accompanied by a copy of
the snow and ice bill or landscaping bill which bill will be considered
evidence of these charges.
7. Alterations: The Tenant shall make no alterations or additions to
the premises nor replace buildings equipment, except in accordance with plans
and specifications theretofore first approved in writing by the Landlord.
Tenant agrees to pay promptly, when due, the entire cost of any work done on
the premises by Tenant, its agents, employees or contractors and not to cause
or permit any liens for labor or materials performed or furnished in
connection therewith to attach to the premises and within thirty days to
discharge or cause the discharge or cancellation of any such liens which may
so attach, whether or not such liens are proper and justified.
8. Insurance: (a) The Tenant agrees to pay to the Landlord, as
additional rent, in advance monthly, on the first day of each and every month,
one-twelfth (1/12) of nineteen and thirty nine one hundredths (19.39%) Percent
of the annual insurance premiums for the Landlord's fire and extended
insurance coverage for the building including vandalism and malicious mischief
in which the leased premises are situated. Said insurance shall also include
loss of rental value for a twelve month period for said building together with
comprehensive general liability coverage insuring the Landlord's risks in the
following amounts: One Million Dollars per claim for bodily injury, Three
Million Dollars per accident for bodily injury, One Million Dollars for
property damage. The additional rent due pursuant to this paragraph shall be
calculated on the basis of the most recent insurance premiums charged with
reference to insurance coverage on the building. Should the premium charges
change, an adjustment is to be made with reference to the additional rent
charged herein to reflect the change. The current annual insurance premium
for the entire building covering a period from April 1, 1992 to March 31, 1993
is $24,700.00. The Landlord shall furnish a copy of the insurance premium
bills to the Tenant at the beginning of each year.
(b) The Tenant agrees, at its own expense, to carry comprehensive
general liability insurance concerning same for the premises and to add the
Landlord's name and that of Omnibus Management, Ltd., as managing agent to the
policy as additional insured in the following amounts: One Million Dollars per
claim for bodily injury, Three Millions per accident for bodily injury, One
Million Dollars property damage. Should the Tenant fail to provide the
aforesaid insurance coverage or to pay the premiums therefor, the Landlord at
its option, may obtain said coverage, pay the premiums therefor and the Tenant
shall promptly reimburse the Landlord as additional rent, for the premium
costs for said insurance coverage.
(c) All insurance policies which are to be provided and the premiums
therefore in accordance with the terms of this clause, shall be placed with
insurance carriers qualified to do business in Massachusetts, subject to the
reasonable approval of the Landlord and the institution holding the first
mortgage on the premises.
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(d) Tenant shall assume risk of damage or loss to any of the Tenant's
fixtures, goods, inventory, equipment, furniture or other property which may
be on the premises.
(e) In the event that there is vandalism and/or malicious mischief
committed on the premises, the Landlord shall make available to the Tenant,
all insurance proceeds that it receives with regard to the claims made by it
with regard to the above mentioned insured hazards provided that the Tenant
has made all necessary repairs to the premises to eliminate the damages caused
by an vandalism or malicious mischief.
(f) The Landlord shall make available to the Tenant for inspection all
of its insurance policies covering the premises.
9. Fire Protection: Tenant agrees to maintain approved, labelled fire
extinguishers within the leased premises as recommended by the New England
Fire Insurance Rating Association for protection credit. Tenant agrees not to
obstruct the fire sprinkler system in any way and to comply in all reasonable
ways with fire prevention requests of City officials, the insurance company
insuring the premises and the Landlord.
10. Indemnification:
(a) The Tenant agrees to and shall hold and save harmless and indemnify
the Landlord and its employees, agents, contractors, invitees and other
persons designated by Landlord from and for any and all payments, expenses,
costs, attorney fees and from and for any and all claims and liability for
losses or damage to property or injuries to persons occasioned wholly or in
part by or resulting from any negligent or intentional or willful acts or
omissions by the Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors.
(b) The Landlord shall indemnify and hold harmless Tenant and its
agents, employees, contractors and invitees for all losses, costs and expenses
(including reasonable attorney's fees), settlement payments, and all
liabilities, damages, or fines paid, incurred or suffered by Tenant (i) by
reason of any breach, violation and/or nonperformance by Landlord or
Landlord's employees, agents, licensees, invitees or visitors, of any
covenants or provision of this Lease; and/or (ii) .rom any other cause due to
the negligence or intentional act or omission of Landlord and/or Landlord's
contractors, servants, employees, agents, licensees and/or invitees.
11. Inability to Repair or Provide Service: Landlord shall not be
liable to Tenant for any damages, consequential or otherwise reduction of rent
by reason of inconvenience, annoyance or loss of business arising from the
necessity of Landlord's entering the premises for any purpose authorized in
this lease or for repairing the premises or any portion of the building;
however, the necessity may occur, subject to Tenant's security regulations as
stated in Paragraph 16. If the Landlord is prevented or delayed from making
any repairs, alterations or improvements, furnishing services or performing
any covenant under this lease by reason of any cause beyond Landlord's
controls, Landlord shall not be liable for, nor shall Tenant be entitled to
any reduction of rent.
12. Assignment or Sublet: The Tenant shall not have the right to assign
this lease or sublet the premises in whole or in part without the written
approval of the Landlord which approval will not be unreasonably withheld or
delayed. If there has been an assignment of this lease or a subletting of the
premises in whole or in part, the Tenant shall, however, remain liable for the
performance of all the covenants and conditions which it is obligated to so
perform under this lease. In lieu of consenting to an assignment of this
Lease or a subletting of the premises in whole or in part, the Landlord
reserves the right to terminate this Lease and enter into a Lease with another
prospective Tenant or Tenants.
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The Landlord acknowledges and approves Comm-Tract as a subtenant of
Computer Telephone.
13. Signs: The Tenant shall have the right to erect signs on the
outside of the premises subject to the review and prior approval of the
Landlord and subject to the Tenant's compliance with all applicable laws
governing sign erection.
14. Surrender: At the termination of this lease, the Tenant shall
peacefully yield up the demised premises and all additions thereto in good
order, repair and condition, first removing all goods and effects except those
of the Landlord and leaving the premises clean and tenantable, excepting,
however, reasonable wear and tear damage which the Landlord is obligated to
repair and damage not caused by the negligence of the Tenant, its agents,
employees, invitees or licensees. All fixtures, machinery and equipment which
may, at any time, be brought upon and permanently installed in the premises
may not be removed without the written approval of the landlord. The Tenant
shall have the right to remove all other machinery, equipment and/or fixtures
provided repairs are made for damages caused by such removal by the Tenant and
the Tenant will restore the premises to the same condition that existed prior
to the removal of the machinery, equipment and/or fixtures, reasonable wear
and tear excepted.
15. Misuse and Compliance with all Government Laws Orders, Ordinances
and Regulations: (a) The Tenant agrees not to damage, deface, strip, overload
or waste the premises as described in Clause 1, nor to permit on said premises
any flammable fluids or chemicals or any nuisance or the emission therefrom of
any objectionable noise or odor, nor to permit the use thereof for any purpose
other than the Tenant's business, nor any use thereof which is improper,
offensive, contrary to law or ordinance, or liable to render necessary any
alterations or additions to the building, or liable to invalidate or increase
the premises for any insurance on the building unless Tenant pays such
increased premiums on its contents. The Tenant agrees to comply with all
governmental laws, orders, rules and ordinances and regulations which affect
the premises and to promptly remove or correct any violations affecting the
premises cited by the governmental body or agency except for those caused by
the initial construction of the premises.
(b) Prohibition Against Hazardous Waste - As used in this paragraph, the
terms "Hazardous Waste", "Hazardous Materials" or "Oil" shall be defined as
provided in Section 2 of Chapter 21C, Section 2 of Chapter 21D and Section 2
of Chapter 21E of the General Laws of Massachusetts, and the regulations
promulgated thereunder, as such laws and regulations may be amended from time
to time. As of January 21, 1984, such terms were defined in such laws as
follows:
"Hazardous Waste", a waste or combination of wastes, which because of
its quantity, concentration, or physical, chemical or infectious
characteristics may cause, or significantly contribute to an increase in
mortality or any increase in serious irreversible, or incapacitating
reversible illness or pose a substantial present or potential hazard to human
health safety or welfare or to the environment, when improperly treated,
stored, transported, used, disposed of, or otherwise managed, however not to
include solid or dissolved material in domestic sewage, or solid or dissolved
materials in irrigation return flows or industrial discharges which are point
sources subject to permits under Section 402 of the Federal Water Pollution
Control act of 1967 as amended, or source, special nuclear, or by-product
material as defined by the Atomic Energy Acts of 1954;
"Hazardous Material", material including but not limited to, any
material, in whatever form, which because of its quantity, concentration,
chemical, corrosive, flammable, reactive, toxic, infectious, or radioactive
characteristics, either separately or in combination with any substance
constitutes a present or potential threat to human health, safety, welfare, or
to the environment, when improperly stored, treated, transported, disposed of,
used, or otherwise managed.
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The term shall not include oil. The term shall also include all those
substances which are included under 42 USC 9601(14), but it is not limited to
those substances;
"Oil", insoluble or partially soluble oils of any kind of origin or in
any form, including, without limitation, crude or fuel oils, lube oil or
sludge, asphalt, insoluble or partially insoluble derivatives of mineral,
animal or vegetable oils. The term shall not include waste oil, and shall not
include those substances which are included in 42 USE Section 9601(14).
(1) Tenant shall not use, maintain, generate or bring on the demised
premises, the Building or the Lot or transport or dispose of on or from the
demised premises, the Building or the Lot (whether through the sewer or septic
system or into the ground or by removal off-site or otherwise) any Hazardous
Waste, Hazardous Material, Oil or radioactive material; and Tenant shall
prevent any agent, servant, employee, contractor, supplier, guest, visitor,
customer or invitee of Tenant, and of such parties, and any other party
claiming under Tenant, from using, maintaining, generating or bringing to the
demised premises, the Building or the Lot or transporting or disposing of, on
or from the demised premises, the Building or the Lot (whether through the
sewer or septic systems or into the ground or by removal off site or
otherwise) any Hazardous Waste, Hazardous Material, Oil or radioactive
material.
(2) Tenant shall deliver to Landlord, within ten (10) days after Tenant
receives same, copies of all letters, inquiries, summons, subpoenas,
complaints, restraining orders and any other written communication received by
Tenant, and written notice of any oral communication received by Tenant, and
written or oral communication related to Tenant's compliance or noncompliance,
or the compliance or noncompliance of any activities being conducted on or
from the demised premises, with any laws, orders, regulations and the like to
any governmental authorities or any public body relating to Hazardous Waste,
Hazardous Material, Oil or radioactive material.
(3) Tenant shall be solely responsible for becoming informed of any
amendments made from time to time to the laws and regulations referred to in
this paragraph of this Lease; and Landlord shall not be obligated to notify
Tenant of any of said amendments.
(4) Any breach of the provisions of this paragraph shall be deemed to be
a breach and default of a material obligation of Tenant under this Lease, and
Landlord shall have with respect thereto all remedies provided in this Lease
for defaults of Tenant.
16. Access: The Tenant agrees to permit the Landlord or the Landlord's
agent to examine the premises at reasonable times during usual business hours,
subject to Tenant's reasonable security requirements, and if the Landlord
shall so elect, to allow the Landlord, at the expense of the Landlord, to make
any repairs or additions the Landlord may deem necessary which additions shall
not interfere with the Tenant's use of the premises and at the expense of the
Tenant, to remove any alterations, additions, signs, awnings, aerials or flag
poles or the like, not consented to in writing according to the terms of this
Lease and to show the premises during Tenant's normal and usual business
hours; and without interfering with Tenant's use of the premises at any
reasonable time to prospective purchasers and tenants and to keep affixed to
any suitable part of the premises during the six months proceeding the
expiration of the term as described in Clause 2 or any extension thereof
appropriate notices for letting or selling.
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17. Enforcement: Both the Tenant and the Landlord agree to pay each
others expenses including reasonable attorney fees incurred in enforcing any
obligations of this Lease which are violated by the other party provided that
either party has given, to the other, written notice of such violation and
that the party to whom the notice was directed has not rectified said
violation within thirty (30) days after such notice provided however if
correction has been commenced within said thirty (30) day period and the other
obligated would have made such correction completing the work with all due
diligence, it shall not be deemed a violation. If said violation be for
non-payment of the basic or additional rent, then and in that event, this
clause shall be applicable if said violation has not been rectified within
fourteen (14) days of such written notice.
18. Tenant to Enforce: The Tenant agrees not to permit any employee,
servant or agent of the Tenant to violate any covenant or obligation of the
Tenant herein set forth.
19. Destruction by Fire or Other Casualty: It is further agreed by and
between the parties hereto that in case the said premises or a substantial
pa,t thereof shall, during the initial term or any extended term, be destroyed
or rendered unusable by fire or other casualty so that a substantial part
thereof, which shall consist of more than twenty (20%) percent of same, be
destroyed or rendered unusable for Tenant's purposes during the initial term
or any extended term of this lease, then, and in such case, the rent payable
hereunder or a just and proportionate part thereof in accordance with the
nature and extent of the injury sustained, shall be abated until the said
premises shall have been reconstructed to substantially as good a condition as
before. If said damages should cause the premises to be rendered reasonably
unfit for use and habitation, then and in that event, the Landlord shall have
the option, within thirty (30) days after the occurrence of said damages, to
terminate this lease. Moreover, if said damages should cause the premises to
be rendered reasonably unfit for use and habitation, then, in that event, the
Tenant shall have the option to terminate this lease within thirty (30) days
after the occurrence of said damages provided the Landlord does not elect, by
written notice to the Tenant given within the aforementioned thirty (30) day
period, to repair or restore the premises. In the event that the Landlord
elects to repair or restore, the Tenant may terminate this lease if such
repair or restoration is not accomplished within twenty-six (26) weeks of the
occurrence of said damages, provided said Tenant makes this election in
writing within ten (10) days subsequent to the passing of the aforementioned
twenty-six (26) week period.
20. Eminent Domain: (a) If the whole of the demised premises shall be
taken by condemnation proceedings or right of eminent domain then, and in that
event, the terms of this.lease shall terminate and end as of the date when the
possession of the demised premises shall be required for such use and purpose
and the parties shall be released from further obligations hereunder.
(b) If only part of the demised premises shall be taken by condemnation
proceedings or right of eminent domain, then, and in that event, the term of
this lease shall terminate and end as of the date when the possession of the
demised premises shall be required for such use and purpose. This clause
shall only be applicable if the premises become unusable and the Landlord
elects not to replace, rebuild or restore the premises in accordance with
sub-paragraph C of this paragraph.
(c) If only part of the demised premises, including common areas, shall
be taken by condemnation proceedings or right of eminent domain, then, and in
that event, the rent shall abate in proportion to the value of the loss of use
of the Tenant, but with the right of the Landlord to replace, rebuild and to
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restore the original use of the demised premises by replacing or rebuilding
even though such replacing or rebuilding shall require the relocation of same
in the building in which these premises are situated. It is expressly
understood, however, that in the event any taking by condemnation or eminent
domain shall leave the demised premises not reasonably suitable for the
conduct of Tenant's business in the sole determination of Tenant, Tenant my at
its option, terminate this lease. If only part of the demised premises shall
be taken by condemnation proceedings or right of eminent domain, then, in that
event, the rent shall abate in proportion to the value of use to the Tenant
but with the right of the Landlord to replace, rebuild and restore the
original use of the demised premises by replacing or rebuilding, even though
such replacing or rebuilding shall require the relocation of same. It is
expressly understood, however, that in the event any taking by condemnation or
eminent domain shall leave the demised premises not reasonably suitable for
the conduct of Tenant's business is the sole determination of Tenant, Tenant
may, at its option, terminate this lease.
(d) Nothing in this lease shall be deemed or construed to prevent the
Tenant from interposing and prosecuting in any condemnation proceeding, a
claim for the value of the fixtures and improvements installed in or made to
the premises by the Tenant, or the Tenant's relocation or any other costs or
damages imposed upon or suffered by the Tenant on account of the
aforementioned condemnation.
21. Default and Bankruptcy: (a) In the event of any failure of Tenant
to pay any rent due hereunder, including additional rent, within fourteen (14)
days after written notice of such default has been given to Tenant or any
failure to perform any other of the terms, conditions or covenants of this
lease to be observed or performed by Tenant for more than.thirty (30) days
after written notice of such default shall be given to Tenant or if Tenant
shall have declared bankruptcy or insolvency or filed any debtor proceedings
or if there shall have been taken against Tenant, and the Tenant shall have
not applied to a court of competent jurisdiction within thirty (30) days and
shall not have had the same discontinued or terminated within ninety (90) days
subsequent to said filing in any court pursuant to any statute either of the
United States or of any State, a petition of bankruptcy or insolvency or for
reorganization or for the appointment of a receiver of trustee of all or any
part of Tenant's property, or if Tenant makes an assignment for the benefit of
creditors or petitions for or enters into an arrangement or if Tenant shall
abandon the demised premises or suffer this lease to be taken under any writ
of execution, then Landlord, in addition to any and all other rights or
remedies it may have, shall have the immediate right of re-entry and may
remove all persons and property from the demised premises and such property
may be removed and stored in a public warehouse or elsewhere at the cost of
and for the account of Tenant all without service of notice or resort to legal
process and all without being deemed guilty of trespass or becoming liable for
any loss which may be occasioned thereby.
(b) Should Landlord elect to re-enter as herein provided or should it
take possession pursuant to legal proceedings or pursuant to any notice
provided by law, it may either terminate this lease or may, from time to time,
without terminating this lease, make such alterations and repairs as may be
necessary to relet the demised premises and relet said demised premises or any
part thereof for such term or terms and at such rental or rentals and upon
such other terms and conditions as Landlord in its discretion deemed
advisable. Upon each such reletting, all rentals received by the Landlord
from such reletting shall be applied in the order set forth below:
(1) To the payment of any indebtedness, other than rent due hereunder
from Tenant to Landlord.
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(2) To the payment of any costs and expenses of such reletting including
brokerage fees, attorney's fees and costs of such alterations and repairs.
(3) To the payment of rent due and unpaid hereunder.
(4) The balance, if any, shall be held by Landlord and applied in
payment of future rents or expenses if the same may become due and payable in
accordance with the order set forth above.
If such rentals received from such reletting during any month shall be less
than the amount to be paid during that month by Tenant pursuant to this lease,
then Tenant shall pay to Landlord any such deficiency, said deficiency to be
calculated and paid monthly. No such re-entry or taking possession of the
demised premises by Landlord shall be construed as an election on its part to
terminate this lease unless a written notice of such intention shall be given
to Tenant or unless the termination of this lease shall be decreed by a court
of competent jurisdiction.
(c) Notwithstanding any such reletting without termination, Landlord
may, at any time thereafter, elect to terminate this lease for such previous
breach. Should Landlord at any time terminate this lease for any breach, in
addition to any other remedies it may have, it may recover from Tenant all
damages it may incur by reason of such breach including the cost of recovering
the demised premises reasonable attorney's fees and including the worth at the
time of such termination of the excess, if any, of the amount of rent,
including additional rent, reserved in this lease for the remainder of the
stated term, all of which amounts shall be immediately due and payable by
Tenant to the Landlord.
22. Subordination: The Tenant hereby agrees that its rights under this
lease shall be subordinate to any and all mortgages existing on or hereinafter
placed from time to time on said premises and the Tenant further agrees to
execute any and all documents relating to said subordination to be recorded in
the applicable Registry of Deeds or Mortgages when requested to do so by the
Landlord. The Tenant further appoints the Landlord, as its attorney in fact
to execute any such document on its behalf.
23. Financial Statement of Tenant: The Tenant will furnish to the
Landlord, a copy of its annual financial report.
24. Tenant's Certificates: The Tenant agrees at any time, and from time
to time, upon not less than ten (10) days prior written request by the
Landlord, to execute, acknowledge and deliver to the Landlord, a statement in
writing that this lease is unmodified and in full force and effect (or if
there should have been modification that the same are in full force and effect
as modified and stating such modifications) and that the Landlord is not in
default in accordance with the terms and conditions thereof and the dates to
which basic rent and other rent or charges have been paid in advance if any;
it being intended that any such statement or certificate delivered pursuant to
this clause, may be relied upon by any prospective purchaser of the premises
or mortgagee or assignee of any mortgagee with regard to the demised premises.
25. Landlord's Right to Remedy Tenant's Default: If the Tenant fails to
pay for, maintain or deliver any insurance policies which it is obligated to
so pay, maintain and deliver to should fail to make any other payment or
perform any other act on its part to be made or performed as provided for in
this Lease, then the Landlord may, but shall not be obligated to do so and
without waiving or releasing the Tenant from any obligations of the Tenant
under this Lease contained, pay for and/or effect any such insurance coverage,
make any other payment or perform any other act on the part of the Tenant to
be performed as in this lease provided in such manner and to such extent as
the Landlord may deem desirable and may exercise any such rights to pay
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necessary and incidental costs and expenses, employ counsel and incur and pay
reasonable attorney's fees. All sums so paid by the Landlord and all
necessary and incidental costs and expenses in connection with the performance
of any such act by the Landlord together with interest thereon at the prime
rate of the Bank of Boston chargeable to its customers for unsecured loans,
plus an additional two (2%) percent per annum from the date of the making of
such expenditure by the Landlord, shall be deemed additional rent hereunder
and, except as otherwise in this Lease expressly provided, shall be payable to
the Landlord on demand or at the option of the Landlord may be added to any
additional rent than due or thereafter becoming due under this Lease and the
Tenant covenants to pay such sum or sums with interest as aforementioned and
the Landlord shall have in addition to any other right or remedy of the
Landlord the same rights and remedies in the event of the non-payment thereof
by the Tenant as in the case of default by the Tenant in the payment of the
basic rent.
26. Improvements to the Leased Premises: The Landlord agrees to make
alterations to the leased premises as shown on Exhibits A and B attached. The
Tenant is given the right, during the course of the construction of those
improvements contemplated by this Lease, to have access to the premises for
the purpose of inspecting same during normal business hours.
27. Landlord's Warranties: The Landlord represents that it is the fee
owner of the premises described in this Lease; that it has the capacity to
lease the premises to the Tenant and to deliver the premises with all
improvements contemplated in this Lease to the Tenant and that at all times
during which the Tenant is in compliance with its covenants and obligations in
accordance with this Lease, the Tenant may quietly enjoy said premises for the
purpose contemplated hereby during the original term or any extended term of
this Lease.
28. Holding Over: Upon the expiration or other termination of the Term
of this Lease, Tenant shall quit and surrender to Landlord the Leased
Premises. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease. If the last day of
the Term of this Lease or renewal thereof, falls on Sunday, this Lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day. Should Tenant
hold over in possession of the Leased Premises after the expiration of this
Lease, by operation of law or otherwise, such holding over shall not be deemed
to extend the Term or renew this Lease; but the tenancy thereafter shall
continue as a tenancy from month to month, cancelable by either party with
thirty (30) days' prior written notice, upon the same terms and conditions
herein contained, except for the monthly rent which shall increase to two
hundred (150%) percent of the Basic Annual Rent and all other reimbursable
expense immediately payable preceding the expiration date.
29. Brokerage: The parties agree and represent to each other that
Neelon Associates of 255 Bear Hill Road, Waltham, Massachusetts 02154 and
Lynch, Murphy, Walsh and Partners, 1 Financial Center, Boston, Massachusetts
02111, are the sole brokers which brought about this transaction. The
Landlord agrees to pay to said brokers, all commissions due to it in
accordance with a separate agreement. The Tenant agrees to indemnify the
Landlord against said Landlord for commissions for this transaction, which
claims may be brought by any other brokers or parties claiming to have dealt
with the Tenant.
30. Notices: Any notices, requests or demands under this Lease to or
from any Landlord or the Tenant shall be in writing and shall be given by
Certified or Registered Mail, Postage Prepaid, Return Receipt Requested, and
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shall be deemed given as on the date received by or attempted to be delivered
to the party address and shall be addressed to the Landlord at 100 Ring Road
West, Garden City, New York 11530, or at such other addresses as the Landlord
may, in writing, furnish to the Tenant and addressed to the Tenant at 360
Second Avenue, Waltham, Massachusetts or at such other addresses as the Tenant
may, in writing furnish to the Landlord.
31. Failure to Insist Upon Strict Performance: The failure of the
Landlord to insist upon the strict performance by the Tenant of any one of the
terms, covenants or conditions of this Lease or to exercise any option herein
conferred, in any one or more instances, shall not be construed as a waiver or
relinquishment for the future of any such terms, covenants, conditions or
options, but the same shall continue and remain in full force and effect. The
receipt by the Landlord of rent with knowledge of the breach of any covenant
herein contained shall not be deemed a waiver of such breach. No provisions
of this Lease shall be deemed to have been waived by Landlord, unless such
waiver be in writing, signed by the Landlord or its successors or assigns
during the term hereby granted and no agreement to accept a surrender of this
Lease or of said premises shall be valid unless the same be in writing and
subscribed by the Landlord.
32. Limits of Landlord's Liability: In the event of a breach by the
Landlord or its successors or assigns for any covenants or conditions of this
Lease, the Tenant shall look solely to the equity of the Landlord in the
premises for the satisfaction of its remedies.
33. Merger and Succession: This Lease contains all of the agreements of
the parties heretofore made and the covenants and agreements herein contained
shall bind and inure to the benefit of the Landlord, its heirs, successors and
assigns and to the Tenant, its successors and assigns.
IN WITNESS WHEREFORE, the parties hereto by their duly authorized
officers or representatives have hereunto set their hands and day and year
first above written.
HILLSIDE ASSOCIATES
By: /s/ Fredric Oliver
COMPUTER TELEPHONE CORP.
By: /s/ John D. Pittenger
11
Exhibit 10.3
SUBLEASE AGREEMENT
The parties agree as follows:
Date of this
Sublease: June 15, 1994
Parties to this Overtenant: COMPUTER TELEPHONE CORP.
Sublease: Address for notices: 360 Second Avenue
Waltham, Massachusetts 02154
You, the Undertenant: COMM-TRACT CORP.
Address for notices: 360 Second Avenue
Waltham, Massachusetts 02154
If there is more than one Overtenant or Undertenant,
the words "Overtenant" and "Undertenant" used in this
Sublease include them.
Information from Landlord: HILLSIDE ASSOCIATES
Over-Lease: Address for notices: 100 Ring Road West
Garden City, New York
Overtenant: COMPUTER TELEPHONE CORP.
Address for notices:
Date of Over-Lease: February 16, 1994
Term: Five years From: July 1, 1994
To: June 30, 1999
A copy of the Over-Lease is attached as an important
part of the Sublease.
Term: 1. Five (5) years: months:
Beginning: July 1, 1994 Ending: June 30, 1999
Premises rented: 2. Approximately 8600 square feet in the building
known as Tech Center 128, Building #1, 360
Second Avenue, Waltham, Massachusetts on the
annexed sketch.
Use of premises: 3. The premises may be used for offices,
manufacturing, engineering and warehousing only.
Rent: 4. The basic yearly rent for the premises is
$55,899.96. You, the Undertenant, will pay this
yearly rent to the Overtenant in twelve equal
monthly payments of $4,658.33. In addition, the
Undertenant will be responsible for 43.92% of
All other expenses associated with the lease.
These expenses include, but are not limited to,
real estate taxes, insurance, utilities, etc.
Payments shall be paid in advance on the first
day of each month during the Term.
Security: 5. The security for the Undertenant's performance
is $0.00. Overtenant states that Overtenant has
received it. Overtenant shall hold the security
in accordance with Paragraph ____ of the
Over-Lease.
Agreement to lease 6. Overtenant sublets the premises to you, the
and pay rent: Undertenant, for the Term. Overtenant states
that it has the authority to do so. You, the
Undertenant, agree to pay the Rent and other
charges as required in the Sublease. You, the
Undertenant, agree to do everything required of
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you in the Sublease.
Notices: 7. All notices in the Sublease shall be sent by
certified mail, "return receipt requested".
Subject to: 8. The Sublease is subject to the Over-Lease. It
is also subject to any agreement to which the
Over-Lease is subject. You, the Undertenant,
state that you have read and initialed the
Over-Lease and will not violate it in any way.
Overtenant's 9. The Over-Lease describes the Landlord's duties.
duties: The Overtenant is not obligated to perform the
Landlord's duties. If the Landlord fails to
perform, you, the Undertenant, must send the
Overtenant a notice. Upon receipt of the
notice, the Overtenant shall then promptly
notify the Landlord and demand that the
Over-Lease agreements be carried out. The
Overtenant shall continue the demands until the
Landlord performs.
Consent: 10. If the Landlord's consent to the Sublease is
required, this consent has been received. If
the Landlord's consent is not received within
this time, the Sublease will be void. In such
event all parties are automatically released and
all payments shall be refunded to you, the
Undertenant.
Adopting the 11. The provisions of the Over-Lease are part of
Over-Lease this Sublease. All the provisions of the Over-
and Lease applying to the Overtenant are binding on
Exceptions: you, the Undertenant, except these:
a) These numbered paragraphs of the
Over-Lease shall not apply:
Inapplicable.
b) These numbered paragraphs of the
Over-Lease are changed as follows:
Inapplicable.
No authority: 12. You, the Undertenant, have no authority to
contact or make any agreement with the Landlord
about the premises or the Over-Lease. You, the
Undertenant, may not pay rent or other charges
to the Landlord, but only to the Overtenant.
Successors: 13. Unless otherwise stated, the Sublease is binding
on all parties who lawfully succeed to the
rights or take the place of the Overtenant or
you, the Undertenant. Examples are an assign,
heir, or a legal representative such as an
executor of your will or administrator of your
estate.
Changes: 14. This sublease can be changed only by an
agreement in writing signed by the parties to
the Sublease.
Signatures: OVERTENANT:
COMPUTER TELEPHONE CORP.
/s/ Philip J. Richer
You, the UNDERTENANT:
Witness: COMM-TRACT CORP.
/s/ Karen G. Dumaine /s/ John F. Polmonari
EXHIBIT 10.4
This lease made as of the 31 day of January, 1994 by and between Phoenix Home
Life Mutual Insurance Company (hereinafter called the "Landlord"), and
Computer Telephone Company (hereinafter called the "Tenant").
ARTICLE I
DEMISED PREMISES
Subject to the provisions of this Lease, Landlord hereby demises and leases to
Tenant, and Tenant hereby leases from Landlord, the following described
premises (hereinafter referred to as "demised Premises" or Leased premises):
that portion of the first floor of the building numbered 110 Hartwell Avenue,
Lexington, Massachusetts, (the "Building"), containing an area deemed to be
7,316 rentable square feet all as more particularly shown on plan attached
hereto as Exhibit "A."
This lease is subject to existing easements and party wall agreements, if any,
and to rights and encumbrances of record, and the Landlord excepts and
reserves hallways, stairways and shaftways and elevators, if any, serving
other parts of said building and the right to maintain use, repair and replace
pipe ducts, wires, meters and any other equipment, machinery, apparatus and
fixtures serving other parties thereof. Tenant shall have access to the
building and their offices on a 24 hour basis, 7 days per week.
The demised premises are Leased herewith, together with the right to use, in
common with others entitled thereto, the hallways, stairways, and elevator(s),
if any, necessary for access to the demised premises, the lavatories nearest
thereto, and the parking lot.
Landlord's building, in which the demised premises are situated, is numbered
110 Hartwell Avenue in said Lexington and may be referred to herein as
"Landlord's Building" or the "Building." Said Building, together with the land
on which it is situated, may be referred to herein as " Landlord's Property."
Tenant accepts the premise in an "AS IS" condition, except that Landlord will
at its sole expense improve the demised premises in accordance with Exhibit
"B" attached hereto and made a part hereof by reference.
ARTICLE II
INITIAL TERM. The term of this Lease shall be for sixty-two (62) months, (the
"Term") beginning on the later to occur of (i) the date the Premises are
Substantially Complete as defined in Article XXI or (ii) February 1, 1994 (the
"Lease Commencement Date"). Landlord and Tenant shall confirm the Lease
Commencement Date in writing within ten (10) days after the Premises are
Substantially Complete."
RENEWAL OPTION. Thereafter, so long as Tenant is not in default hereunder,
(following any applicable grace periods) Tenant shall have the right and the
option to extend this Lease for one extended term of five (5) years (the
Extended Term). Tenant shall exercise its option to extend for the Extended
Term by giving written notice to Landlord at least 120 days prior to the end
of the Initial term. If Tenant fails to give such notice exercising its
option for the Extended Term, this Lease shall automatically expire at the end
of the Initial Term, and Lessee shall have no further option to extend the
term of the Lease. The Initial Term and the Extended Term hereinafter
collectively referred to as the "Term" of this Lease. Basic Annual Rent for
Extended Term to be 95% of the then Fair Market Value determined as of ninety
(90) days prior to the expiration of the initial term mutually agreed upon
based on the effective rents, inclusive of all rental concessions (i.e. free
rent) for comparable office space in the Lexington submarket. If a Fair
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Market Value is not agreed to then it is mutually agreed that both parties
will go to arbitration.
ARTICLE III
RENT
3.1 Tenant agrees to pay Landlord basic annual rent ("Basic Annual Rent") in
accordance with the following provisions, payable in equal monthly
installments on the first day of each calendar month of the Term (subject to
the following sentence), in advance, without deduction or set-off, except as
expressly set forth herein. For any portion of a calendar month, at the
beginning or end of the Term, Tenant shall pay Basic Annual Rent, at the rate
payable for such portion.
Tenant shall pay Basic Annual Rent at an annualized rate of ninety-five
Thousand One Hundred Eight Dollars and no cents ($95,108.00) for months three
through thirty-eight, in advance in equal monthly installments of $7,925.67 on
or before the first day of every month; and, ninety-six Thousand Nine Hundred
Thirty-Seven Dollars and no cents for months thirty-nine through sixty-two, in
advance in equal month installments of $8,078.08 on or before the first day of
each month. No rent is due during the first two months of the Term.
3.2 In addition to the Basic Annual Rent, the Tenant will pay to
the Landlord, as additional rent, 13.91% of any increase in the real estate
taxes (excluding interest and/or penalties) assessed with respect to the land
and the buildings of the demised premises are a part, above the taxes for the
Fiscal Year 1994 ("Base Taxes"). The Landlord shall notify the Tenant in
writing, as to the amount of such an increase, if any, and the amount of
Tenant's proportionate share of such increase, enclosing therewith a copy of
the applicable tax bill from the Town of Lexington and payment shall be made
by Tenant within ten (10) days after receipt of such notice.
Reference to "real estate taxes" shall include, without limitation,
betterments or other assessments, which may be imposed on or with respect to
Landlord's Property and similar or other taxes, which may be subsequently
imposed, in lieu of or in addition to real estate taxes as now assessed.
Federal, State and Municipal income taxes, gift, estate, succession,
inheritance, excess profits and franchise and transfer taxes, if any shall not
be considered real estate taxes.
In the event of a reduction or abatement in real estate taxes for any year as
to which Tenant has made a payment in accordance with the provisions of the
Section 3.2, then Tenant shall be entitled to a credit equal to 13.91% of such
reduction after deduction of all expenses paid in connection with such
reduction or abatement, to be applied to the next rental payments due.
Tenant's payment of additional rent under Section 3.2 shall be made on the
basis of taxes as assessed with subsequent adjustment on the basis of taxes as
finally determined.
Landlord may bill Tenant monthly on account of increase in real estate taxes
over the base taxes of one-twelfth of estimated real estate taxes increased
over said base for the preceding tax year.
3.3 In addition to the Basic Annual Rent, Tenant will also pay to the
Landlord, as additional rent 13.91% of any increase in the costs of operating
and maintaining, but not replacing any portion of, Landlord's Building above
the operating costs for the calendar year ending 1994 (the "Operating Expense
Base"). Said expenses will include , but are not limited to electricity,
water, other utilities, insurance, maintenance, repairs, security, cleaning
and management fees, employment taxes and health benefits of employees, and
snow removal. Payment of the amount due shall be made by the Tenant within
ten (10) days after demand therefore by Landlord.
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Not withstanding the foregoing, if with respect to any year during the Term
(except for the first year of the Term), Landlord shall determine that the
operating costs for Landlord's Building will exceed the Operating Expenses
Base, then, upon written notice from Landlord, Tenant shall pay, as additional
rent, on the date monthly rental payments are due, estimated monthly
escalation payment equal the l/12th of the annualized operating costs for
Landlord's Building for the next previous year of the Term. Appropriate
additional payments by the Tenant or refunds by the Landlord shall be made in
accordance with the next paragraph thereof.
Not later than ninety (90) days after the end of each year or fraction thereof
during the Term (except for the first year of the Term), Landlord shall render
Tenant a statement in reasonable detail prepared in accordance with generally
accepted accounting principles consistently applied, certified by
representative of Landlord, showing for the preceding calendar year or
fraction thereof, as the case may be, the operating costs for Landlord's
Building, the operating costs allocable to the demised premises and the
Operating Expenses Base. The statement shall also show for the preceding year
or fraction thereof, as the case may be, the amounts of operating costs
already paid by Tenant as additional rent and the amount of operating costs
remaining due from, or overpaid by, Tenant for the year or other period
covered by the statement. Within ten (10) days after the date of delivery of
such statement, Tenant shall pay to Landlord, or Landlord shall pay to Tenant,
as the case may be, the balance of amount , if any, required to be paid,
pursuant to the above provisions of this subparagraph, with respect to the
preceding year or fraction thereof, except that Landlord may, at its option,
credit any amounts due from Tenant to Landlord under this Lease.
3.4 Any amount payable by Tenant on account of tax increase, operating costs
or with respect to the year during which this Lease expires, shall be prorated
on the basis of the proportion of the year during which the lease term is in
effect.
3.5 If any installment of Basic Annual Rent or other charges payable to
Landlord pursuant to the terms of this Lease is paid more than ten (10) days
after the date the same was due, such unpaid amount(s) shall bear interest
from the said due date at the then rate of interest announced by the United
States Trust
Company (UST) at its main office as its "Best Lending Rate", as such "Best
Lending Rate" may be adjusted from time to time.
3.6 All rent and other charges payable to Landlord pursuant to the provisions
of this lease shall be sent to Phoenix Home Life Mutual Insurance Company in
care of The Codman Company, Inc., 211 Congress Street, Boston, MA 02210,
unless otherwise directed, by written notice, to Tenant.
3.7 For purposes of pro-rata share percentage used above, the total Building
rentable area is 52,590 square feet.
ARTICLE IV
BUILDING SERVICES AND UTILITIES
Landlord agrees to furnish, at its sole cost and expense to the extent of the
Operating Expense Base as defined in Article 3.3, to the Leased premises heat
and air conditioning (reserving the right, at any time, to change energy
sources) sufficient to maintain the Leased Premises at comfortable temperature
(in accordance, however, with applicable governmental guidelines or
regulations relating to such temperatures, hours of operation and the like),
during such hours of the day and days of the year that the Building is
normally open. The Building is open 7:00 A.M. to 6:00 P.M. Monday through
Friday and 8:00 A.M. to 12:00 P.M. on Saturday, holidays excepted. Tenant
agrees to cooperate with Landlord and to abide by all Building regulations
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which Landlord may, from time to time, prescribe for the proper functioning
and protection of any heating and air conditioning systems and in order to
maximize the effect thereof. Notwithstanding anything to the contrary set
forth in this Article IV or otherwise in the Lease, Landlord may institute
such policies, programs and measures as may be necessary, required or
expedient for the conservation or preservation of energy or energy services,
or as may be necessary or required to comply with applicable codes, rules,
regulations or standards.
Landlord agrees to furnish, at its sole cost and expense to the extent of the
Operating Expense Base as defined in Article 3.3, to the Leased Premises hot
and cold water for ordinary drinking, cleaning, lavatory and toilet
facilities.
Landlord agrees to cause the Leased Premises to be kept clean, at its sole
cost and expense to the extent of the Operating Expense Base as defined in
Article 3.3, (provided the same are kept in order and are properly maintained
by Tenant) in accordance with the cleaning and janitorial standards for the
Building including, at least, nightly cleaning and vacuuming of leased
premises, common areas, lavatories and nightly emptying of trash and semi-
annually washing windows inside and outside.
Landlord, in its sole discretion, will either (i) furnish 120 volt electric
current to the Leased Premises for normal business office purposes (exclusive,
however, of Tenant's electrical needs for computers and similar equipment
having special power or environmental requirements), charging the Tenant's
Electricity Charge for such service, such charges to be paid by Tenant in
equal monthly installment without set off or deduction (and without reduction
in the event Tenant elects to occupy less than the entire Leased Premises or
occupies the Leased Premises for shorter periods than the Leased Premises are
made available hereunder) in the same day in each month that rental payments
are due and payable hereunder (Landlord reserving, however, the right from
time to time, and at Landlord's sole discretion, to increase the Tenant's
Electricity Charge to reflect the actual costs per square foot from time to
time for such electricity), or (ii) may elect to cause electricity furnished
to the Leased Premises to be separately metered, in which event all charges
for electricity consumed on the Leased Premises will be billed directly to,
and paid by, Tenant. Landlord and Tenant agree that the current Tenant's
Electricity Charge is equal to $.85 per rentable square foot per year. Said
Tenant's electricity charge shall remain fixed for year one of the lease Term
and thereafter any increase to be proportionate to other Tenant's increase, if
any.
Landlord shall furnish and install the bulbs required within the Leased
Premises, at its sole cost and expense to the extent of the Operating Expense
Base as defined in Article 3.3.
Landlord shall be under no responsibility or liability for failure or
interruption of any of the above described services, including utilities,
repairs or replacements caused by breakage, accident, strikes, repairs,
inability to obtain supplies, labor or materials, or for any other causes
beyond the reasonable control of the Landlord, nor in any event for any
indirect or consequential damages but Landlord acknowledges an affirmative
obligation to utilize best efforts to remedy the problem and provide such
services; utilities, repairs and replacements and to effect a reasonable
remedy within a reasonable period of time; and failure or omission the part of
the Landlord to furnish any of same shall not be construed as an eviction of
Tenant, actual or constructive, nor entitle Tenant to an abatement of rent,
nor render the Landlord liable in damages, nor release Tenant from prompt
fulfillment of any of its covenants under this Lease. Landlord reserves the
right to temporarily interrupt, curtail, stop or suspend the furnishing of
heating, air conditioning, or the operation of such systems, when necessary by
reason of unforeseen accident or emergency, or for repairs.
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ARTICLE V
SECURITY DEPOSIT
Upon the execution of this Lease, the Tenant shall pay to the Landlord the
amount of Seven Thousand Nine Hundred Twenty-Five Dollars and Sixty-Seven
cents ($7,925.67), which shall be held by Landlord as security for the
Tenant's performance of the terms and conditions of this Lease and refunded to
the Tenant at the end of this Lease, subject to the Tenant's satisfactory
compliance with the conditions hereof (the "Security Deposit").
ARTICLE VI
USE
Tenant shall use the leased premises for an office purposes and for no other
purposes.
ARTICLE VII
COMPLIANCE WITH LAWS
Tenant agrees that no trade or occupation shall be conducted in the demised
premises or use made thereof, which will be unlawful, improper, noisy or
offensive, or contrary to any law or any municipal by-law or ordinance in
force in the city or town in which the premises are situated.
ARTICLE VIII
CASUALTY INSURANCE
Tenant shall not permit any use of the demised premises which will make void
or voidable any insurance on the property of which the demised premises are a
part, or on the contents of property, or which shall be contrary to any law
ordinance, or contrary to any regulations from time to time established by the
New England Fire Insurance Rating Association, or any similar association, and
shall reimburse Landlord, and all other tenants, for all extra insurance
premiums caused by Tenant's use of the demised premises. Tenant shall also
comply with all present and future rules, regulations, recommendations, orders
and the like of said Rating Association, any insurer of said property, the
Board of Health, or any other public agency having jurisdiction, whether
directed to Landlord or Tenant.
ARTICLE IX
MAINTENANCE OF PREMISES
9.1 The Landlord agrees to maintain the following portions of the Building at
its sole cost and expense to the extent of the Operating Expense Base as
defined in Article 3.3 of which the demised premises form a part, in good
repair and condition: the roof, foundation and exterior walls, and the
Building systems, including; the heating, ventilating, air conditioning and
electrical servicing the demised premises. There shall be excepted from
Landlord's obligations hereunder any maintenance or repairs required because
of the negligence or willful. act or omission of Tenant or those for whose
conduct the Tenant is responsible.
9.2 Tenant shall, at all times during the Term, and at its own expense, keep
and maintain the demised premises in the same order, repair and condition as
they are in on the Commencement Date, or may be put during the Term,
reasonable wear and tear, damage by fire and other casualty and taking only
excepted and whenever necessary to replace plate glass and other glass
therein, acknowledging that the demised premises are now in good order and the
glass whole. Tenant shall not permit the demised premises to be overloaded,
damaged, stripped, or defaced, nor suffer any waste. Tenant shall obtain
written consent of Landlord before erecting any sign on the premises.
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ARTICLE X
ALTERATIONS; ADDITIONS
Tenant shall not make structural alterations, or additions, to the demised
premises, but may make non-structural alterations to the demised premises with
the prior written consent thereto of Landlord, which consent shall not be
unreasonably withheld or delayed. All such permitted alterations shall be at
Tenants' expense, in conformity with all laws, ordinances, and regulations of
municipal or other authorities and shall be in quality at least equal to the
present construction. Tenant shall not permit any mechanics' liens or similar
liens to remain upon the demised premises for labor and material furnished to
Tenant or claimed to have been furnished to Tenant in connection with work of
any character performed or claimed to have been performed at the direction of
Tenant and shall cause any such lien to be released of record forthwith
without cost to Landlord. To the extent that they become permanent fixtures,
any alterations or improvements, made by Tenant, shall become the property of
Landlord at the termination of occupancy, as provided herein.
Landlord shall, at its sole cost and expense, provide a listing on the
building directory for Tenant.
ARTICLE XI
ASSIGNMENT; SUBLEASING
Tenant shall not assign this Lease, or sublet the whole or any part of the
demised premises, without Landlord's prior written consent, which shall not be
unreasonably withheld or delayed. Notwithstanding any permitted assignment,
or subletting, Tenant shall remain fully and primarily liable to Landlord for
the payment of all rent and all other charges, and for the full performance of
the covenants and conditions of this Lease, notwithstanding any recognition
(by acceptance of rent or otherwise), or indulgence or waiver at any time
granted by Landlord to Tenant or any assignee, or sublease; and Tenant, in the
case of an assignment, shall be deemed to have waived all defenses otherwise
available to Tenant, as guarantor or surety.
As an alternative to consenting to any proposed sublease, or assignment,
Landlord may elect, by notice to Tenant, within fifteen (15) days after
receipt of notice from Tenant, accompanied by a copy of the proposed sublease,
or assignment, and a copy of the most recent financial statement for the
proposed assignee, or sublease, to terminate this Lease for the period of the
proposed sublease, if a sublease; or for the period of this Lease, of an
assignment; and make a direct lease with the proposed assignee, or sublease,
for Landlord's own account, but only as to the premises which Tenant proposed
to sublet, if Tenant proposed a sublease of less than all of the demised
premises. In this event, Tenant shall have no obligation for rent or other
charges which accrue after the date of termination of this Lease, and
thereupon, Tenant shall be released from such obligations, but shall continue
to be liable for rent and other obligations which accrue prior to termination,
pro rated as of the date of termination.
ARTICLE XII
RIGHTS OF MORTGAGEE
12.1 LIABILITY. Upon the taking of the title to the Landlord's Property by a
Mortgagee by foreclosure or otherwise, such Mortgagee shall have all the
rights of Landlord, and shall be liable to perform all the obligations of
Landlord arising and accruing after such taking by such Mortgagee.
12.2 RIGHT TO CURE. No act or failure to act on the part of Landlord, which
would entitle Tenant under the terms of this Lease,or by law, to be relieved
of Tenant's obligations hereunder, or to terminate this Lease, shall result in
a release or termination of such obligations, or a termination of this Lease,
unless: (i) Tenant shall have first given written notice of Landlord's act or
failure to act to the mortgagee, specifying the act or failure to act on the
part of Landlord, which could or would give basis to Tenant's rights; and (ii)
such Mortgagee, after receipt of such notice, fails or refuses to correct to
cure the condition complained of, within a reasonable time thereafter, but
nothing contained in this paragraph shall be deemed to impose any obligation
on any such Mortgagee to correct or cure any such condition. "Reasonable
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time," as used above, means and includes a reasonable time to obtain
possession of the leased premises, if any such Mortgagee elects to do sos and
a reasonable time to correct or cure the condition, if such condition is
determined to exist.
12.3 DUTY TO CONSTRUCT. Notwithstanding any other provision to the contrary
contained in this Lease, if prior to substantial completion of Landlord's
work, pursuant to Article I hereof, any holder of a Mortgage enters and takes
possession of Landlord's Property for the purpose of foreclosing such
Mortgage, such holder may elect, by written notice given to Tenant and
Landlord at any time within ninety (90) days after such entry and taking
possession, not to perform Landlord's work hereunder, and, in such event, such
holder and all persons claiming under it shall be relieved of all obligations
to perform, and all liability for failure to perform, said Landlord's work and
Tenant may, without waiver of any rights, which Tenant may have against
Landlord, terminate this Lease, and all its obligations hereunder, by written
notice to Landlord, and such holder given within thirty (30) days after the
day on which such holder shall have given its notice of aforesaid. If
Landlord has not delivered Premises sixty (60) days from Lease execution by
both Parties then Tenant shall receive a rental abatement on a day to day
basis for each day the delivery of the space is prolonged going forward from
the occupancy date. If Landlord has not delivered the Premises after ninety
(90) days from Lease execution, then Tenant has the option to terminate this
Lease.
12.4 PREPAID RENT. No rent or other charge hereunder shall be paid more than
sixty (60) days prior to the due dates thereof, and, as to a Mortgagee,
payments made in violation of this provision shall (except to the extent that
such rents are actually received by such Mortgagee) be a nullity as against
such Mortgagee, and Tenant shall be liable for the amount of such payments to
such Mortgagee.
12.5 CONTINUING OFFER. The covenants and agreements contained on this Lease,
with respect to the rights, powers and benefits of a Mortgagee, constitute a
continuing offer to any person, corporation or other entity, which, by
accepting or requiring an assignment of this Lease, or by entry or
foreclosure, assumes the obligations herein set forth, with respect to such
Mortgagee; every such Mortgagee is hereby constituted a party to this Lease,
as an oblige hereunder, to the same extent as though its name was written
hereon, as such; and such Mortgagee shall be entitled to endorse such
provisions in its own name.
12.6 SUBORDINATION. This Lease is subject to and subordinate to any Mortgage
on the Property and Tenant agrees, at the request of Landlord or any
Mortgagee, to execute and deliver, promptly, any certificate, or other
instrument, which Landlord, or such Mortgagee, may request, subordinating this
Lease and all rights of Tenant hereunder to any Mortgage, and to all advances
made under such Mortgagee, and/or agreeing to attorn to such Mortgage, in the
event that it succeeds to Landlord's interest in the Property, provided that
the holder of any such Mortgage shall execute and deliver to Tenant a
non-disturbance agreement to the effect that, in the event of any foreclosure
of such Mortgage, such holder, and its successors, and assigns, will not name
Tenant as a party defendant to such foreclosure, nor disturb its possession,
nor abrogate its other rights under this Lease. Landlord shall give Tenant a
non-disturbance and atonement agreement for Landlord's present and future
mortgagees.
12.7 LIMITATIONS ON LIABILITY. Nothing contained in this Article XII, or in
any such non-disturbance agreement, or non-disturbance provision, shall
however, affect the prior rights of the holder of any Mortgage, with respect
to the proceeds of any award in condemnation (except any award specifically
reimbursing Tenant for moving or relocation expenses), or of any fire
insurance policies affecting the Demised Premises, or impose upon any such
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holder any liability (i) for the erection or completion of Landlord's
Property, or premises by fire or other casualty for any repairs, replacements,
rebuilding or restoration, except such repairs, replacements, rebuilding or
restoration as can reasonably be accomplished from the net proceeds or
insurance actually received by, or made available to, such holder, or (ii) for
any default by Landlord under the Lease occurring prior to any date upon which
such holder shall obtain title to Landlord's Property, or (iii) for any
credits, offsets or claims against the rent under the Lease, as a result of
any acts or omissions or Landlord committed, or omitted, prior to such date,
or (iv) for return of any security deposit or other funds, unless the same
shall have been received by such holder, and any such agreement or provision
may so state.
ARTICLE XIII
LANDLORD'S ACCESS
Landlord, and/or its agents, may, at reasonable times, and after notice to
Tenant, except in the event of emergency, enter to view the demised premises,
and may remove placards and signs not approved and affixed as herein provided,
and may show the demised premises to others, and at any time within six (6)
months before the expiration of the Term, may affix to any suitable part of
the demised premises, a notice for letting, or selling, the demised premises
or property, of which the demised premises are a part, and keep the same so
affixed, without hindrance, or molestation.
In addition, Landlord reserves the right, at its sole election,to make such
repairs, alterations, additions, or improvements, to or in the demised
premises, or the Building, of which they are a part, as Landlord deems
desirable or convenient, and, in connection therewith, to place, replace and
maintain in the demised premises such pipes, wires, conduits, fixtures,
apparatus and structural parts, as it may elect, provided always that
Landlord, upon reasonable notice, shall take reasonable measures not to
interfere with Tenant's business activities.
ARTICLE XIV
INDEMNIFICATION AND LIABILITY
(A) TENANT'S INDEMNITY. Tenant agrees to defend, indemnify and save harmless
Landlord from and against all claims, loss, liability, costs and damages of
whatever nature whenever arising from any default by Tenant under this Lease
and the following: (i) from any accident, injury or damage whatsoever to any
person, or to the property of any person, in or about the Premises, except
those due to the act or omission of Landlord, its agents, employees, invitees
and contractors; or (ii) from any accident, injury or damage occurring outside
of the Premises but on the Property or in the Building, where such accident,
damage or injury results or is claimed to have resulted from an act or
omission on the part of Tenant or Tenant's agents, employees, invitees and
contractors in either case, occurring at any time from the execution of this
Lease through the end of the Term or any extended Term of this Lease. This
indemnity and hold harmless agreement shall include indemnity against all
reasonable costs, expenses and liabilities incurred in, or in connection with,
any such claim or proceeding brought thereon and the defense thereof,
including, without limitation, reasonable attorneys' fees at both the trial
and appellate levels and shall survive the expiration or sooner termination of
the Term of this Lease. This indemnity shall not apply to protect Landlord
from acts in breach of this Lease; or (iii) from any loss sustained by
Landlord from any violation by Tenant of Articles VI and VIII of this Lease.
(B) LANDLORD'S INDEMNITY. Landlord agrees to defend, indemnify and save
harmless Tenant from and against all claims, loss, liability, costs and
damages of whatever nature whenever arising from any default by Landlord under
this lease and the following: (i) from any accident, injury or damage
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whatsoever to any person, or to the property of any person, in or about the
Property or the Building, except those due to the act or omission of Tenant,
its agents, employees, invitees and contractors; or (ii) from any accident,
injury or damage occurring in or about the Premises where such accident,
damage or injury results or is claimed to have resulted from any act or
omission on the part of Landlord or Landlord's agents, employees, invitees and
contractors in either case, occurring at any time from the execution of this
Lease through the end of the Term or any Extended Term of this Lease. This
indemnity and hold harmless agreement shall included indemnity against all
reasonable costs, expenses and liabilities incurred in, or in connection with,
any such claim or proceeding brought thereon and the defense thereof,
including, without limitation, reasonable attorneys' fees at both the trial
and appellate levels and shall survive the expiration or sooner termination of
the Term of this Lease. This indemnity shall not apply to protect Tenant from
acts in breach of this Lease.
ARTICLE XV
TENANT'S LIABILITY INSURANCE
Tenant shall maintain with respect to the demised premises, and to the
property of which the demised premises are a part, comprehensive public
liability insurance in limits of not less than $500,000/500,000, with property
damage insurance in limits of not less than $100,000 in responsible companies
qualified to do business in Massachusetts, and in good standing therein,
insuring against injury to persons or damage to property, as herein provided,
and naming Landlord and Tenant as insureds as their interests may appear.
Tenant shall deposit with Landlord certificates of each policy of insurance
required by this Lease at, or prior to, the commencement of the Term, and
thereafter, within thirty (30) days prior written notice to each insured named
therein.
ARTICLE XVI
FIRE, CASUALTY; EMINENT DOMAIN
Should the demised premises, or the Building, of which they are a part, be
damaged substantially by fire, or other casualty, or be taken in whole, or
part, by eminent domain, Lessor or Tenant may elect within thirty (30) days
after such casualty, or taking (notwithstanding that Landlord's entire
interest may have been divested by any such taking) to terminate this Lease.
When such fire, casualty, or taking, renders the demised premises
substantially unsuitable for their intended use, a just and proportionate
abatement of rent shall be made, according to the nature and extent of the
damage, until the demised premises shall be restored by Landlord and Tenant
may elect to terminate this Lease, if Landlord fails to restore the demised
premises to a condition substantially suitable for their intended use, within
one hundred twenty (120) days after said fire, casualty, or taking; provided
that Tenant's notice shall be given within fifteen (15) days after said one
hundred twenty (120) day period. Landlord's obligation to restore shall be
limited to insurance, or taking proceeds recovered, or recoverable, and made
available by Landlord's Mortgagees.
Landlord reserves, and Tenant hereby grants and assigns to Landlord, all
rights, which Tenant may have, for damages or injury to the demised premises,
or to the leasehold hereby created for any taking by eminent domain, except
for moving expenses, which may be separately awarded to Tenant, by taking the
authority. Tenant shall execute and deliver to Landlord such confirmatory
instruments of this assignment as Landlord may, from time to time, request.
Each policy of insurance maintained by Landlord, or Tenant (whether or not
required under the provisions of this Lease), with respect to the demised
premises, or with respect to such party's property or improvements therein,
shall include provisions by which the insurance carrier(s); (a) waive(s) all
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rights of subrogation against the other party (and against all those for whom
it may be legally responsible), on account of any loss payable under the
policy, and (b) agree(s) that the policy will not be invalidated because the
insured (in writing, and prior to the occurrence of any loss under the policy)
has waived part, or all, of its rights) of recovery against any party on
account of any loss or damage covered by the policy. If either party is
unable to procure the inclusion of either of the clauses described in the
preceding sentence, without additional cost to it, it shall name the other
party as an additional insured in the policy, at its election, the other party
to pay an additional cost to be so added.
ARTICLE XVII
TENANT'S DEFAULT AND BANKRUPTCY
In the event that:
(a) Tenant shall default in the payment of any installment of rent, or other
sum herein specified, and such default shall continue for ten (10) days after
receipt of written notice; or
(b) Tenant shall default in the observance, or performance, of any other
Tenant's covenants, agreements, or obligations hereunder and such default
shall not be corrected within twenty (20) days after receipt of written notice
thereof; or
(c) Tenant, or any guarantor of Tenant's obligations here under, shall be
declared bankrupt, or insolvent, according to law, or, if any assignment shall
be made of Tenant's property for the benefit of creditors, or by other process
of law, or if any proceedings for reorganization, or for an arrangement with
creditors, shall be commenced under any bankruptcy, or insolvency law, by, or
against Tenant, or any such guarantee, or any person or entity occupying the
demised premises, through or under Tenant (and as to involuntary proceedings
shall remain pending for at least ninety (90) days), then Landlord shall have
the right, at its sole election, either (i) without necessity or requirement
for making any entry, provide Tenant, which termination shall take effect on
the date, prior to the expiration of the Term, specified in Landlord's notice,
or (ii) to enter and take possession of the demised premises (or any part
thereof in the name of the whole) without demand or notice and repossess the
same as of Landlord's former estate, expelling Tenant and those claiming under
it, forcibly, if necessary, without being deemed guilty of any manner of
trespass, provided that such repossession shall not be construed to effect a
termination of this Lease, unless Landlord so declares as part of such entry,
or sends Tenant a written notice of termination, as provided above. Any such
termination or entry shall be without prejudice to any remedy for arrears of
rent or preceding breach of contract.
If Landlord shall terminate this Lease, or take possession of the demised
premises, as aforesaid, Tenant, and those claiming under Tenant, shall
forthwith remove their goods and effects from the demised premises, and Tenant
agrees that in case of such termination, it shall, at the election of Landlord
(i) indemnify Landlord from, and against, any loss and damage sustained by
reason of any termination caused by the default of, or the breach by, Tenant.
Landlord's damages hereunder shall include, but shall not be limited to, any
loss of rents, reasonable broker's commissions for the re-letting of the
demised premises, advertising costs, the reasonable cost incurred in cleaning
and repainting the premises, in order to re-let the same; and moving and
storage charges incurred by Landlord in moving Tenant's belongings, all of
which Tenant agrees Landlord shall have the right to do or incur; and (ii) at
any time after such termination forthwith pay to Landlord, upon request, as
damages hereunder a sum equal to the present value of the amount by which the
rent and other payments called for hereunder for the remainder of the Term, or
any extension or renewal thereof.
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Not more than seven (7) days after receipt of Landlord's bill therefore,
Tenant shall pay for Landlord all costs and expenses (including, without
limitation, reasonable attorney's fees) incurred by Landlord, at any time, in
enforcing tenant's obligations, or Landlord's rights, under this Lease.
ARTICLE XVIII
NOTICE
Any notice from Landlord to Tenant relating to the demised premises, or to the
occupancy thereof, shall be deemed duly served, if hand delivered to the
demised premises, or mailed to said premises, registered or certified mail,
return receipt requested, postage prepaid, addressed to Tenant, or to such
other address as may designate from time to time. Any notice from Tenant to
Landlord relating to the demised premises shall be deemed duly served, if
mailed to Landlord by registered or certified mail, return receipt requested,
postage prepaid, and addressed to Landlord at the place where rent is payable
hereunder, or to such other address as Landlord may, from time to time,
designate in like manner.
Any notice, which is mailed in accordance with the provisions of this Article,
shall be deemed to have been received on the third business day following the
date of mailing.
ARTICLE XIX
SURRENDER; YIELD UP
Tenant shall, at the expiration or other termination of this Lease, remove all
of Tenant's goods and effects from the demised premises, (including, without
hereby limiting the generality of the foregoing, all signs and lettering
affixed or painted by Tenant, either inside or outside the demised premises)
and shall leave the same in broom clean condition. Tenant shall deliver to
Landlord the demised premises and all keys, locks thereto, and other fixtures
connected therewith, and all alterations and additions made to, or upon, the
demised premises except those alterations or additions consented to by
Landlord, in the same order, repair and condition as they are in on the
Commencement Date, or they have been put during the Term hereof, reasonable
wear and tear, and damage by fire or other casualty, and taking only excepted.
In the event of Tenant's failure to remove any of Tenant's property from the
demised premises, Landlord is hereby authorized, without liability to Tenant,
for loss or damage thereto, and, at the sole risk of Tenant, to remove and
store any of the property at Tenant's expense, or to retain the same under
Landlord's control, or to sell, at public or private sale, without notice, any
or all of the property not so removed and to apply the net proceeds of such
sale to the payment of any sum due hereunder, or to destroy such property.
ARTICLE XX
BROKERAGE
Each party warrants, and represents to the other, that it has not dealt with
any broker, other than Lynch, Murphy, Walsh & Partners and The Codman Company,
Inc. in connection with the consummation of this Lease, and each party shall
save harmless and indemnify the other party on account of loss, cost or
damage, which may arise by reason of such party's representation being untrue.
Landlord will be solely responsible for any compensation to Lynch, Murphy,
Walsh & Partners and The Codman Company in connection with this Lease.
ARTICLE XXI
LANDLORD IMPROVEMENTS
Landlord shall, at its expense, perform the work described in Article I
hereof. Landlord agrees to assign to Tenant any guarantees furnished to
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Landlord by any contractor, or subcontractor, in connection with such work,
such assignment to be furnished at the commencement of the Lease Term.
Tenant agrees that Landlord may make any changes in such work, which may
become reasonably necessary or advisable, other than substantial changes,
without the prior approval of Tenant, provided notice thereof is promptly
given to Tenant, and Landlord may make substantial changes in such work, with
the prior written approval of Tenant.
Landlord covenants that (i) the demised premises shall be completed in a good
and workmanlike manner in accordance with the plans and specifications
referenced in Exhibit B hereto, and (ii) the demised premises and Building and
the means of access hereto shall be put in compliance with all applicable laws
and regulations, compliance with which is a condition precedent to the
Tenant's lawful occupancy of the demised premises. The demised premises shall
be deemed to be Substantially Complete when the standards set forth in clauses
(i) and (ii) above are met, other than (with respect to clause (i)) completion
of items not reasonably necessary for the use of the demised premises for the
purpose for which it is leased hereunder, but the Landlord covenants to use
diligence to complete such items promptly an din any event no later than
thirty (30) days after the Commencement Date.
Landlord shall notify Tenant when Landlord's Improvements have advanced
sufficiently to permit Tenant to install its equipment and furnishings or to
perform any other work to be done by Tenant. Entry by Tenant or its agents
for performing any other work shall be permitted by Landlord prior to the
commencement date of this Lease.
The cost of Landlord's Improvement as described in this section and the plans
and specifications attached hereto and marked Exhibit B, including without
limitation all labor and materials, electricity during the construction
period, building permits, charges of architects and engineers retained by
Landlord, and insurance relating to such work shall be paid by the Landlord,
or, if the Building is sold during construction, Landlord will provide to its
successor in interest to this Lease, funds sufficient to cover the costs of
Landlord's Improvements.
ARTICLE XXII
MISCELLANEOUS PROVISIONS
22.1 OFFSET STATEMENTS. Within five (5) days after receipt of Landlord's
written request therefore, Tenant shall execute and deliver to any mortgagee
of Landlord, present or future, and to any prospective purchaser of Landlord's
property, a statement acknowledging (if such be the case) that Landlord's
obligations hereunder have been fully performed to the date of such statement
(or, alternatively, specifying those matters as to which Tenant claims
Landlord is in default) and stating, also, the date, or dates, to which (or
the periods with respect to which) the payments required of Tenant hereunder
have been made and the then balance, according to Tenant's records, of any
Security Deposit held by Landlord hereunder.
22.2 WAIVER. Tenant's failure to complain of any act or omission on the part
of the Landlord, or to complain of any deficiency in any payment or
performance tendered, (however long the same may continue), nor the payment or
acceptance of all or a part of the rent, nor the performance, either complete
or partial, of any other obligation, regardless of an accompanying
qualification at the time the payment of performance is tendered shall never
be deemed to waive, or to preclude, the exercise of any rights hereunder. No
waiver, or any breach of any provision of this Lease, shall be deemed a waiver
of a breach of any other provision of this Lease, or a consent to any
subsequent occasion. Each right and remedy under this Lease, or by operation
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of law, shall be distinct and separate from every other right and remedy; all
such rights and remedies shall be cumulative, and none of them shall be deemed
inconsistent with, or exclusive of, any other, whether or not exercised; and
any two or more, or all such, rights and remedies may be exercised at the same
time, or successively.
22.3 "TENANT" DEFINED, SUCCESSORS. The Term "Named Tenant", (as well as the
term "Tenant") and-the pronouns referring thereto, shall mean the party, or
parties, named originally in this Lease as such. The term "Tenant" shall also
mean any assignee of the lessee interest in this Lease and party, or parties,
succeeding by operation of law to the interest of the Named Tenant and any
party, or parties, responsible for Tenant's obligations under this Lease. If
there is more than one party named, or responsible, as Tenant, at any time,
the covenants of Tenant shall be joint and several obligations of each of the
partners and the obligations of the firm.
Except as expressly otherwise provided by any provisions of this Lease, the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the heirs, devisees, personal representatives, successors and
assigns, respectively, of the Landlord and Tenant.
22.4 LIMITATION OF LANDLORD'S LIABILITY. If, at any time during the Term of
this Lease, the Landlord's interest hereunder shall be held by anyone acting
in a fiduciary capacity, then, notwithstanding any other provision of this
Lease, Landlord's obligations hereunder shall not be binding upon such
fiduciary individually, or upon any beneficiary or shareholder for whom such
fiduciary acts, but only upon such fiduciary in that capacity and upon the
trust estate.
The covenants of Landlord contained in this Lease shall be binding upon each
party holding the lessor interest herein only with respect to breaches
occurring during the time of that party's ownership of the Landlord's interest
hereunder. In addition, Tenant specifically agrees to look solely to
Landlord's interest in the property of which the demised premises are a part
for the satisfaction of any claim or judgment against Landlord, it being
specifically agreed that neither Landlord, any partner, or other beneficial
owner of Landlord, nor anyone claiming under Landlord, shall ever be otherwise
liable for any such judgment. In no event shall Landlord be liable for
indirect, or consequential, damages.
22.5 RULES AND REGULATIONS. Tenant and its employees shall comply with all
rules and regulations promulgated by Landlord for the management of Building,
so long as the same shall be generally applicable to all occupants thereof.
(Rules and Regulations, attached hereto as Exhibit C).
22.6 PRONOUNS. Any pronoun shall be read in the singular, or plural, number,
and in such gender as the context may require.
22.7 HOLDING OVER. If Tenant continues in occupancy of the demised premises
after the end of the Term, such occupancy shall be deemed a tenancy at
sufferance, terminable at Landlord's election, without notice to Tenant, or
anyone claiming under
Tenant, whether or not Landlord receives any payments for use and occupancy,
after the Term of this Lease ends, shall be calculated at the rate of one
hundred-fifty (150%) percent of the monthly rental for the last month of the
Leased Term, in addition to any other remedies of Landlord.
22.8 SEVERABILITY. If any term, or provision, of this Lease, or the
application thereof to any person, or circumstance, shall, to any extent, be
invalid, or unenforceable, the remainder of this Lease, or the application of
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such term, or provision, to persons, or circumstances, other than those as to
which it is held invalid, or unenforceable, shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
22.9 ENTIRE AGREEMENT. The parties acknowledge and agree that, at all times,
they have intended that no preliminary agreements (either singly, or in
combination), oral statements, or representations, or prior written matter,
shall be binding on either party, or have any force, or effect, whatsoever,
and that they shall be bound to each other only by a single, formal,
comprehensive document containing all of the agreements of the parties, in
final form, which has been duly executed by Landlord, and by Tenant.
22.10 SIGNS. Tenant shall not place, or erect, any sign on or about the
demised premises, or upon the outside of the Building, or which the demised
premises form a part, without the prior written consent of Landlord.
Landlord agrees to furnish and install building standard signage on the lobby
directory and tenant entry.
Landlord shall provide street signage identifying the Building and Landlord
may, at its sole discretion, provide Tenant signage on the street directory.
22.11 FORCE MAJEURE. Whenever Landlord or Tenant shall be delayed in the
performance of any of its obligations hereunder, by reason of fire, strike,
labor difficulty, or other casualty, or other difficulties beyond Landlord's
control, the time for the performance of such obligations shall be extended
for the period of delay.
IN WITNESS WHEREOF, the parties hereto have executed this Lease, as of the
date first above written, to take effect as a sealed instrument.
LANDLORD: PHOENIX HOME LIFE MUTUAL INSURANCE CO.
By: /s/ [its Managing Director]
TENANT: COMPUTER TELEPHONE CORPORATION
By: /s/ [its Treasurer]
(Signature page to Lease dated January, 1994, covering 7,316 Rentable Square
Feet on the 1st floor of 110 Hartwell Avenue, Lexington, Massachusetts.)
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CLERK'S CERTIFICATE
The undersigned hereby certifies that he/she is the Clerk of Computer
Telephone Corp., a Massachusetts corporation, and that the execution and
delivery of the foregoing Lease by Robert Fabbricatore, the Chairman of the
Corporation, has been duly authorized by a vote of the directors and
shareholders of the Corporation which is in full force and effect as of this
day and that Robert Fabbricatore has in fact signed the foregoing Lease.
SEAL ATTEST
/s/ John D. Pittenger, Clerk
Date: January 20, 1994
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EXHIBIT A
[DRAWING OF GROUND LEVEL FLOOR PLAN
110 Hartwell Ave., Lexington, MA]
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EXHIBIT B
Page 1 of 3
PROPOSED TENANT IMPROVEMENTS
FOR COMPUTER TELEPHONE CORP.
110 HARTWELL AVENUE, LEXINGTON
11-4-93
1. New Interior Partitions:
3-5/8" metal studs with 1/2" gypsum wallboard both sides Partitions will
extend to just above finish ceilings.
2. New Doors, Frames and Hardware:
a. Doors within tenant space will be solid core flush, red oak wood veneer.
Widths per plan, height 7'-0", with passage sets and 1-1/2 pair of hinges per
door.
b. All new frames to be hollow metal with 2" face dimension.
c. Existing doors and frames will be reused wherever possible
3. Acoustical Ceilings: Existing tile and grid to remain and be reused
wherever possible. Existing damaged tile and grid will be replaced.
4. Light Fixtures:
2' x 4' recessed fluorescent fixtures with acrylic prismatic lenses. Each
room to be individually switched. Existing fixtures to remain and be reused
wherever possible.
5. Electrical: a. Standard 115v duplex outlets as required for normal
business use, dispersed throughout premises.
b. 220V receptacle at copy/fax area.
c. 8 - 20A circuits and junction boxes at open office areas for Tenant
furnished partition systems.
d. Dedicated 20A receptacles for communications equipment.
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EXHIBIT B
Page 2 of 3
Computer Telephone Corp.
110 Hartwell Avenue
Page 2
11-4-93
6. HVAC:
a. Ducted supply air system to spaces through perforated ceiling diffusers
with a (above finish ceiling) return air plenum.
b. Relocate diffusers as required by new layout.
c. System to be as required by the BOCA National Mechanical Code.
7. Window Treatment:
Existing window blinds to remain and be repaired as required for proper
operation. All exterior windows shall have blinds.
8. Floor Finishes:
a. New STRATTON Synergy 28 oz. loop pile carpet vinyl tile at all areas
except as noted below.
b. Vinyl tile at lunchroom.
c. New 4" vinyl base throughout.
9. Paint:
a. One primer and two finish coats of an eggshell finish latex paint on all
walls throughout premises. Color to match existing.
b. One primer and two finish coats of an alkyd semi-gloss paint on all door
frames and wood surfaces only. Color to match existing.
10. Sprinklers:
Exposed head sprinklers as required by NFPA 13 and Article 10 of the state
building code.
11. Casework:
New plastic laminate clad counter and base and wall cabinets at lunchroom.
12. Plumbing:
a. Hot & cold water and ss sink at lunchroom.
13. Items By Tenant:
a. Open office partition systems and furnishings.
c. Telephone and computer wiring
END<PAGE>
<PAGE>
EXHIBIT B Page 3 of 3
GUSTAFSON CONSTRUCTION, INC.
General Contractors
250 North Street - Suite A6
Danvers, MA 01923
phone 508/774-1234
fax 508/774-1632
November 8, 1993
Leo H. Daley, Jr.
The Codman Company, Inc.
211 Congress Street
Boston, MA 02110
Re: Computer Telephone
110 Hartwell Ave., Lexington, MA
Dear Toby:
The following is a budget estimate per drawing and work letter by Walsh/Cochis
dated 11/04/93:
$6,000 DEMOLITION
$2,380 DRYWALL
$ 700 DOORS & HARDWARE
$10,320 FLOOR COVERINGS
$4,800 ACOUSTICAL CEILINGS
$3,800 PAINTINGS
$1,750 CASEWORK
$2,500 SPRINKLER
$700 PLUMBING
$1,800 HVAC
$5,500 ELECTRICAL
$4,050 GENERAL CONDITIONS
$4,430 10% OH&P
$48,730 TOTAL
If you have any questions concerning this estimate, please give me a call.
Sincerely,
GUSTAFSON CONSTRUCTION, INC.
/s/ Eric Gufstason, President
cc: George Walsh<PAGE>
<PAGE>
EXHIBIT B-1
GUSTAFSON CONSTRUCTION, INC.
General Contractors
250 North Street - Suite A6
Danvers, MA 01923
phone 508/774-1234
fax 508/774-1632
PROJECT SCHEDULE
December 28, 1993
Computer Telephone Corp.
110 Hartwell Ave.
January
3-7 10-14 17-21 24-28 31-4 7-11
First Floor
Permits xxxx
Demolition xxxxx
Rough Electrical xxx
Framing & Drywall xx
Acoust. Ceiling xxxx
Lighting/HVAC/Sprinkler xxxxx
Painting xxxxx
Misc. Finishes xxx
Carpet xxx
Final Cleaning xx
Tenant Move------------------------->
1. Schedule is based upon having a notice to proceed on or before January 3,
1993.
2. Changes made after construction begins will be subject to overtime costs in
order to maintain the completion date.
<PAGE>
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or used for
any purpose other than for ingress to and egress from the demised premises and
for delivery of merchandise and equipment in a prompt and efficient manner,
using elevators and passageways designated for such delivery by Landlord.
There shall not be used in any space, or in public hall of the building,
either by any Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and
sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed o- constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from
the violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3 No carpet, rug or other article shall be hung or shaken out of any window of
the building; and no Tenant shall sweep or throw or permit to be swept or
thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building, and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the building by reason of
noise, odors and/or vibrations, or interfere in any way with other tenants or
those having business therein, nor shall any animals or birds be kept in or
about the building. Smoking or carrying lighted cigars or cigarettes in the
elevators of the building is prohibited.
4. No awnings, antennae, or other projections shall be attached to the
outside walls of the building.
5. No curtains, blinds, shades, or screens other than those furnished by
Landlord shall be attached to, hung in or used in connection with any window
or door of the Premises without the prior written consent of Landlord.
6. No advertisement, notice or other lettering shall be exhibited, inscribed,
painted or affixed by any Tenant on any part of the outside of the demised
premises or the building or on the inside of the demised premises if the same
is visible from the outside of the premises without the prior written consent
of Landlord, except that the name of Tenant may appear on the entrance door of
the premises. In the event of the violation of the foregoing by any Tenant,
Landlord may remove same without any liability, and may charge the expense
incurred by such removal to
Tenant or Tenants violating this rule. Interior signs on doors and directory
tablet shall be inscribed, painted or affixed for each Tenant by Landlord at
the expense of such Tenant, and shall be of a size, color and style acceptable
to Landlord.
7. No Tenant shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. No Tenant shall lay
linoleum, or other similar floor covering, so that the same shall come in
direct contact with the floor of the demised premises, and, if linoleum or
other similar floor covering is desired to be used in interlining of builder's
deadening felt shall be first affixed to the floor, by a paste or other
material, soluble in water; the use of cement or other similar adhesive
material being expressly prohibited.
<PAGE>
<PAGE>
8. No additional locks or bolts of any kind shall be placed u-con any of the
doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
tenancy, restore to Landlord all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such Tenant, and in the event
of the loss of any keys, so furnished, such Tenant shall pay to Landlord the
cost thereof.
9. Freight, furniture, business equipment, safes, merchandise and bulky
matter of any description shall be delivered to and removed from the premises
only on the freight elevators and through the service entrances and corridors,
and only during hours and in a manner approved by Landlord. Landlord reserves
the right to inspect all freight to be brought into the building and to
exclude from the building all freight which violates any of these Rules and
Regulations of the Lease of which these Rules and Regulations are a part.
10. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
11. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the building
or its desirability as building for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinuing such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any flammable, combustible or explosive fluid, material,
chemical of substance or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or
emanate from the demised premises.
13. Tenant shall comply with all security measures from time to time
established by Landlord for the Building.
14. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and any other means
of entry to the Premises closed and secured.
15. Tenant shall comply with all applicable federal, state and municipal
laws, ordinances and regulations and building rules and shall not, directly or
indirectly, make any use of the Premises which may be prohibited by any
thereof or which shall be dangerous to person or property or shall increase
the cost of insurance or require additional insurance coverage.
16. Tenant: shall not waste electricity, water, heat or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air conditioning, and shall refrain from
attempting to adjust any controls other than room thermostats installed for
Tenant's use.
17. Tenant shall not install And operate machinery or any mechanical devices
of a nature not directly related to Tenant's ordinary use of the Premises
without the written permission of Landlord.
18. No person or contractor not employed or approved by Landlord shall be
used to perform window washing, cleaning, repair or other work in the
Premises.
19. No vending machines other than those furnished by the Landlord are to be
placed in any hallways or building common areas.
20. No parking in front of the main entrance of the buildings is permitted.
EXHIBIT 10.5
BROADPINE REALTY HOLDING COMPANY, INC.
LANDLORD
AND
COMPUTER TELEPHONE CORP.
TENANT
_____________
L E A S E
_____________
Premises: Portion of the 20th Floor
120 Broadway
New York, New York
<PAGE>
<PAGE>
TABLE OF CONTENTS
Article Page
1. Definitions; Demise of Premises. . . . . . . . . . . . . . 1
2. Commencement of Term; Landlord's Contribution. . . . . . . 3
3. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Alterations; Liens; Tenant's Property. . . . . . . . . . . 7
6. Repairs and Maintenance. . . . . . . . . . . . . . . . . . 11
7. Compliance with Law. . . . . . . . . . . . . . . . . . . . 12
8. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 14
9. Damage or Casualty . . . . . . . . . . . . . . . . . . . . 16
10. Assignment and Subletting. . . . . . . . . . . . . . . . . 17
11. Non-Liability; Indemnification . . . . . . . . . . . . . . 23
12. Condemnation . . . . . . . . . . . . . . . . . . . . . . . 25
13. Access; Building Name. . . . . . . . . . . . . . . . . . . 26
14. Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 27
15. Defaults, Remedies, Damages. . . . . . . . . . . . . . . . 27
16. Curing Tenant's Defaults; Reimbursement. . . . . . . . . . 30
17. Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . 31
18. Building Services . . . . . . . . . . . . . . . . . . . . 31
19. Taxes; Operating Expenses. . . . . . . . . . . . . . . . . 33
20. Electricity . . . . . . . . . . . . . . . . . . . . . . . 39
21. Broker . . . . . . . . . . . . . . . . . . . . . . . . . . 43
22. Subordination. . . . . . . . . . . . . . . . . . . . . . . 43
23. Estoppel Certificate . . . . . . . . . . . . . . . . . . . 45
24. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 45
25. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . 45
26. Rules and Regulations. . . . . . . . . . . . . . . . . . . 47
27. Persons Bound . . . . . . . . . . . . . . . . . . . . . . 47
28. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 47
29. Partnership Tenant . . . . . . . . . . . . . . . . . . . . 48
30. No Waiver; Entire Agreement. . . . . . . . . . . . . . . . 48
31. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 50
32. Inability to Perform; Severability . . . . . . . . . . . . 51
33. Security . . . . . . . . . . . . . . . . . . . . . . . . . 53
34. Renewal Option . . . . . . . . . . . . . . . . . . . . . . 54
35. Tenant's Communication Equipment . . . . . . . . . . . . . 56
EXHIBIT "A" - Floor Plans. . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT "B" - Commencement Date Agreement. . . . . . . . . . . . B-1
EXHIBIT "C" - Landlord's Work. . . . . . . . . . . . . . . . . . C-1
EXHIBIT "D" - Description of Land. . . . . . . . . . . . . . . . D-1
EXHIBIT "E" - Cleaning Specifications. . . . . . . . . . . . . . E-1
EXHIBIT "F" - Rules and Regulations. . . . . . . . . . . . . . . F-1
EXHIBIT "G" - Letter of Credit . . . . . . . . . . . . . . . . . G-1
EXHIBIT "H" - Certificate of Occupancy . . . . . . . . . . . . . H-1
EXHIBIT "I" - Taxpayer Identification Number and Certification . I-1
<PAGE>
<PAGE>
INDENTURE OF LEASE made as of this ____ day of February,
1996, between BROADPINE REALTY HOLDING COMPANY, INC.,
a New York corporation having an office c/o J.P. Morgan Investment
Management Inc., 522 Fifth Avenue, New York, New York 10036
(hereinafter referred to as "Landlord"), and COMPUTER TELEPHONE
CORP., a Massachusetts corporation having an office at 111 Broadway,
New York, New York 10006 (hereinafter referred to as "Tenant").
W I T N E S S E T H :
ARTICLE 1
DEFINITIONS; DEMISE OF PREMISES
Section 1.01. For the purposes of this Lease (including all of the
schedules, riders and exhibits, if any, annexed to this Lease), the terms
set forth below shall have the definitions which immediately follow such
terms, and such definitions are hereby incorporated into this Lease
wherever used:
Alterations - The term "Alterations" shall mean and include all
installations, changes, alterations, restorations, renovations,
replacements, additions, improvements and betterments made in or to the
Demised Premises or the Building, and shall include Tenant's Initial
Work.
Authorized Use - The "Authorized Use" shall be for executive,
administrative and general business offices, but subject to the provisions
of this Lease and the certificate of occupancy for the Building, a copy of
which is attached hereto as Exhibit "H."
Base Operating Year - The "Base Operating Year" shall mean the
calendar year 1996.
Base Tax Amount - The "Base Tax Amount" shall mean the amount of
Taxes with respect to calendar year 1996. The Base Tax Amount shall
be determined by averaging the Taxes with respect to (i) the fiscal year
commencing July 1, 1995, and ending June 30, 1996, and (ii) the fiscal
year commencing July 1, 1996, and ending June 30, 1997. By way of
example only, if the Taxes for the 1995/96 fiscal year were $100,000,
and the Taxes for the 1996/97 fiscal year were $120,000, the Base Tax
Amount would be equal to $110,000.
Building - The "Building" shall mean and include the structure and other
improvements constructed or as may in the future be constructed on the
Land, known by the address "120 Broadway", New York, New York.
Building Systems - The term "Building Systems" shall mean and include
such heating, ventilating and air-conditioning systems, and such
elevators, water, sewerage, toilet, plumbing, sprinkler, electric, wiring
and mechanical systems, now or hereafter installed in the Building, and
the fixtures, equipment and appurtenances thereof, and all other
mechanical devices, fixtures, equipment, appurtenances and systems
installed by Landlord in the Building.
Commencement Date - The "Commencement Date" shall mean the date
set forth in Subsection 2.01A below.
Demised Premises - The "Demised Premises" shall mean that portion of
the 20th floor in the Building which is shown on the hatched portion of
the plan annexed hereto as Exhibit "A" and made a part hereof.
Designated Broker - The "Designated Broker" shall mean Silverstein
Properties Inc. and The Galbreath Company.
Electricity Abatement Program - The term "Electricity Abatement
Program" shall mean Article 2-I of the General City Law of the City of
New York.
Expiration Date - The "Expiration Date" shall mean the date set forth in
Subsection 2.01B below.
Fixed Rent - The "Fixed Rent" shall be Two Hundred Eighty-Three
Thousand Eight Hundred and 00/100 ($283,800.00) Dollars per annum,
to be paid by Tenant in equal monthly installments of $23,650.00 each;
Include and Including - The terms "include" and "including" shall each
be construed as if followed by the phrase "without being limited to."
Insurance Boards - The term "Insurance Boards" shall mean and include
the National Board of Fire Underwriters, the New York Board of Fire
Underwriters, and any other body having similar jurisdiction, and the
New York Fire Insurance Exchange, and any other body establishing
insurance premium rates.
Land - The "Land" shall mean the real property described in Exhibit
"D" annexed hereto.
<PAGE>
<PAGE>
Legal Requirements - The term "Legal Requirements" shall mean and
include all laws, orders, ordinances, directions, notices, rules and
regulations of the federal government and of any state, county, city,
borough and municipality, and of any division, agency, subdivision,
bureau, office, commission, board, authority and department thereof, and
of any public officer or official and of any quasi-governmental officials
and authorities having or asserting jurisdiction over the Land, Building
and/or the Demised Premises.
Mortgage - The term "Mortgage" shall mean any existing or future
mortgage and/or security deed affecting the Land and/or the Building,
alone or with other property, as the same may from time to time be
amended, modified, renewed, consolidated, substituted, spread, added to,
extended and/or replaced.
Mortgagee - The term "Mortgagee" shall mean the mortgagee under,
and/or the holder of, any Mortgage.
Overlandlord - The term "Overlandlord" shall mean the landlord under
any Underlying Lease, including the lease referred to in Subsection
22.01(b) below.
Persons Within Landlord's Control - The term "Persons Within
Landlord's Control" shall mean and include Landlord and Landlord's
principals, officers, agents, contractors, servants, employees and
licensees, but shall not include any tenants in the Building.
Persons Within Tenant's Control - The term "Persons Within Tenant's
Control" shall mean and include Tenant, all of Tenant's subtenants and
assignees, and all of their respective principals, officers, agents,
contractors, servants, employees, licensees, guests and invitees.
Rent Abatement Program - The term "Rent Abatement Program" shall
mean Section 11-704 of The Administrative Code of the City of New
York.
Repairs - The term "Repairs" shall mean and include repairs,
restorations and replacements.
Security Deposit Amount - The "Security Deposit Amount" shall mean
$70,950.00.
Square Feet of Rentable Area - The term "Square Feet of Rentable
Area" in the Demised Premises shall be deemed to be the equivalent of
13,003 square feet, as agreed to by the parties following Tenant's
inspection of (or opportunity to inspect) the Demised Premises. This
definition shall not be construed as any kind of representation by
Landlord as to the size of the Demised Premises or the Building.
Tax Abatement Program - The term "Tax Abatement Program" shall
mean Title 4 of The New York Real Property Tax Law.
Tenant's Initial Work - The term "Tenant's Initial Work" shall mean
such work (if any) as shall be performed by Tenant or Persons Within
Tenant's Control to prepare the Demised Premises for Tenant's initial
occupancy thereof.
Tenant's Proportionate Share - The term "Tenant's Proportionate
Share" shall mean .82%, so long as Landlord owns the entire Building.
If a portion(s) of the Building (but not the entire Building) shall be sold,
transferred or conveyed, Tenant's Proportionate Share shall be changed
to that percentage which shall be equal to a fraction, the numerator of
which shall be the Square Feet of Rentable Area, and the denominator of
which shall be the aggregate rentable square feet of office space in that
portion of the Building owned by Landlord at such time (and from time
to time), as determined by Landlord's architect. In the event of a sale,
transfer or conveyance of a portion of the Building, Landlord agrees that
Tenant's Operating Expense Payment (as defined in Section 19.04
hereof) and Tenant's Tax Payment (as defined in Section 19.03 hereof)
shall not exceed the amount that such Operating Expense Payment or
such Tax Payment, as the case may be, would have been had the
Building remained a single unit and Tenant's Proportionate Share not
been recalculated.
Term - The "Term" shall mean the period of years (and/or portions
thereof) that this Lease shall be in effect, commencing on the
Commencement Date and ending on the Expiration Date, unless sooner
terminated as provided in this Lease or by law.
Underlying Lease - The term "Underlying Lease" shall mean any
present or future ground or overriding or underlying lease and/or grant
affecting the Land, the Building and/or the Demised Premises, as the
same may from time to time be amended, modified, renewed, extended
and/or replaced.
Section 1.02. Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, the Demised Premises, together with the
right to use, in common with others, such portions of the lobbies,
elevators and other public portions of the Building as may be necessary
for access to the Demised Premises, for the Term, and for the Fixed
Rent and additional rent herein reserved, and subject to all of the
covenants, agreements, terms, conditions, limitations, reservations and
provisions hereinafter set forth.
-2-<PAGE>
<PAGE>
ARTICLE 2
COMMENCEMENT OF TERM; LANDLORD'S CONTRIBUTION
Section 2.01.
A. The term of this Lease shall commence on the date
(the "Commencement Date") that Landlord's Work (as such term is
defined in Section 2.02 below) shall be substantially completed.
B. The term of this Lease shall expire at noon of the
last day of the calendar month in which the day immediately preceding
the seventh (7th) anniversary of the Commencement Date shall occur on
(the "Expiration Date"), or shall end on such earlier date upon which
such term may expire or be canceled or terminated pursuant to the
provisions of this Lease or by law.
C. Promptly following the Commencement Date,
Landlord and Tenant shall execute and exchange a supplementary
agreement (in the form annexed hereto as Exhibit "B", and pertaining to
the matters set forth therein) setting forth the dates of the
Commencement Date, the Expiration Date but the failure to so execute
or exchange said supplementary agreement shall not in any way reduce
Tenant's obligations or Landlord's rights under this Lease.
Section 2.02.
A. Tenant agrees to accept possession of the Demised
Premises in "as is" and "where is" condition on the Commencement
Date; provided, however, (i) that Landlord shall deliver the Demised
Premises to Tenant vacant and free of all tenants and occupants, (ii)
Landlord shall remove from the Demised Premises all construction debris
resulting from Landlord's Work and (iii) the Building Systems shall be in
working order. Landlord shall not be obligated to perform any work
whatsoever to prepare the Demised Premises for Tenant, except as
specified in Exhibit "C" which is annexed hereto and made a part hereof
("Landlord's Work"). All materials, work, labor, fixtures and
installations required for completion of the Demised Premises and the
operation of Tenant's business thereat, other than Landlord's Work, shall
(subject to the provisions of Article 5 below) be promptly furnished and
performed by Tenant, at Tenant's own cost and expense.
B. In the event that Landlord shall not have
substantially completed the performance of Landlord's Work by the date
that shall occur one hundred eighty (180) days following the date hereof,
and such failure to substantially complete the performance of Landlord's
Work shall not be caused by or be attributable to (w) any of the reasons
set forth in Section 32.01 hereof, (x) any act or omission on the part of
Tenant or of Persons Within Tenant's Control, (y) any of the reasons set
forth in Paragraph H(2) of Exhibit C, or (z) Tenant's failure to comply
with the provisions of Exhibit C, then, for each day beyond said one
hundred eightieth (180th) day that Landlord shall fail to substantially
complete the performance of Landlord's Work, Tenant shall be entitled
to an abatement of Fixed Rent and recurring items of additional rent
pursuant to Article 19 hereof ("Recurring Additional Rent"), on a day-
for-day basis, for each such day beyond such one hundred eightieth
(180th) day that Landlord shall fail to substantially complete the
performance of Landlord's Work.
C. In the event that Landlord shall not have
substantially completed the performance of Landlord's Work by the date
that shall occur two hundred seventy (270) days following the date
hereof, and such failure to substantially complete the performance of
Landlord's Work shall not be caused by or be attributable to (w) any of
the reasons set forth in Section 32.01 hereof, (x) any act or omission on
the part of Tenant or of Persons Within Tenant's Control, (y) any of the
reasons set forth in Paragraph H(2) of Exhibit C, or (z) Tenant's failure
to comply with the provisions of Exhibit C, then, for each day beyond
said two hundred seventieth (270th) day that Landlord shall fail to
substantially complete the performance of Landlord's Work, Tenant shall
be entitled to an abatement of Fixed Rent and Recurring Additional Rent
at the rate of two days for each such day beyond such two hundred
seventieth (270th) day that Landlord shall fail to substantially complete
the performance of Landlord's Work.
D. In the event that Landlord shall have failed to
substantially complete the performance of Landlord's Work by the date
(the "Landlord's Work Termination Date") that shall occur on the first
(1st) anniversary of the date hereof, and to the extent that such failure
shall not have been caused by or be attributable to (w) any of the reasons
set forth in Section 32.01 hereof, (x) any act or omission on the part of
Tenant or of Persons Within Tenant's Control, (y) any of the reasons set
forth in Paragraph H(2) of Exhibit C, or (z) Tenant's failure to comply
with the provisions of Exhibit C, then, at Tenant's option and as
Tenant's sole and exclusive remedy, Tenant shall have the right to cancel
this Lease, which right to cancel shall be exercisable only by Tenant
having given written notice thereof to Landlord not later than the date
that shall occur thirty (30) days following the Landlord's Work
Termination Date, and in the event that Tenant timely exercises such
cancellation right, this Lease shall be deemed canceled and terminated as
of the date such notice shall be delivered to Landlord (the "Notice
Delivery Date"), and neither party shall have any further obligations
under this Lease; provided, however, that Landlord shall be obligated to
release to Tenant (i) the Security, if any, and (ii) any Fixed Rent
(including any Pre-Paid Fixed Rent) and Recurring Additional Rent paid
to Landlord by Tenant which shall be due and payable after the Notice
Delivery Date. In the event that Tenant shall have failed to timely
deliver notice of such cancellation to Landlord, then the provisions of
-3-<PAGE>
<PAGE>
this Lease shall remain in full force and effect, but Tenant shall be
entitled to an abatement of Fixed Rent and Recurring Additional Rent in
accordance with either Subsection 2.02B or Subsection 2.02C hereof (as
the case may be) until the date upon which Landlord shall substantially
complete the performance of Landlord's Work.
Section 2.03. If Landlord shall be unable to give possession of
the Demised Premises on the Commencement Date by reason of the fact
that the Demised Premises are not ready for occupancy, or by reason of
the failure of a prior tenant or occupant thereof to vacate the same or
deliver possession thereof to Landlord, or for any other reason, Landlord
shall not be subjected to any liability for the failure to give possession on
said date, except as expressly provided in Section 2.02 above. No such
failure to give possession on such specific date shall affect the validity of
this Lease or the obligations of Tenant hereunder or be deemed to extend
the Term, but the rent reserved and covenanted to be paid hereunder
shall not commence until possession of the Demised Premises shall be
given or shall be made available for occupancy by Tenant, except that if
such failure to give possession has been caused by any act or omission
on the part of Tenant or of any Person Within Tenant's Control, there
shall be no abatement of rent. If repairs, improvements or decorations
of the Demised Premises as may be expressly provided in this Lease to
be made by Landlord are not completed on or before such date, Landlord
shall not be subject to any liability for any delay in such completion
(except as provided in Section 2.02 above).
Section 2.04. Except as expressly provided in Section 2.02
above, the parties hereto agree that this Article 2 constitutes an express
provision as to the time at which Landlord shall deliver possession of the
Demised Premises to Tenant, and Tenant hereby waives any rights to
rescind this Lease which Tenant might otherwise have pursuant to
Section 223-a of the Real Property Law of the State of New York, or
pursuant to any other law of like import now or hereafter in force.
Section 2.05. Provided that the same shall not interfere with the
performance of Landlord's Work, Tenant may, prior to the
Commencement Date, have access to the Demised Premises for the
purpose of preparing the Demised Premises for Tenant's occupancy (the
"License Period"), subject to and in accordance with all of the terms and
provisions of this Lease (other than Tenant's obligation to pay Fixed
Rent and Recurring Additional Rent, as provided in Article 3 below).
Prior to the License Period, Tenant shall provide Landlord with such
proof as Landlord may reasonably require that all persons entering upon
the Demised Premises with Tenant's consent are covered by the
insurance required after the Commencement Date pursuant to Article 8
below. Tenant shall be liable for any and all damages and liability
resulting from any act or omission of Tenant and/or any Persons Within
Tenant's Control, and Tenant agrees to indemnify and hold Landlord
harmless from and against any and all claims, liability, cost and expense
(including reasonable attorney's fees and disbursements) arising from or
in connection with any acts or omissions of Tenant or any Persons
Within Tenant's Control during the License Period. In connection with
such indemnity: (i) Landlord shall endeavor to promptly notify Tenant
of the relevant claim or action (it being agreed that the timing of said
notice shall not be a condition to the effectiveness of the foregoing
indemnity), (ii) provided that Tenant gives Landlord prompt notice
thereof, Tenant may defend against such claim or action with counsel
afforded by the insurer providing the insurance required to be maintained
by Tenant pursuant to Section 8.03 hereof or by other counsel reasonably
satisfactory to Landlord, (iii) Landlord shall reasonably cooperate with
Tenant in Tenant's defense of such claim or action, provided that
Landlord shall not incur any cost or expense thereby, (iv) prior to
Landlord's settlement of any such claim or action, Landlord shall request
Tenant's consent thereto, such consent not to be unreasonably withheld
or delayed; provided, however, that if Tenant shall not consent to any
such settlement as aforesaid, then, unless such claim or potential
recovery is covered in full by Tenant's insurance, Landlord may proceed
to settle such claim or action without Tenant's consent if Tenant shall not
provide Landlord with adequate security, or reasonably satisfactory
evidence of Tenant's having available funds, in an amount sufficient to
cover any of Landlord's potential liabilities in connection with such claim
or action, and (v) if Tenant shall request that Landlord settle such claim
or action, and Tenant shall deliver to Landlord the necessary funds to do
so (together with all other amounts due or payable to Landlord in
connection with this indemnity), then Landlord shall accede to such
request in any case where the only relief being sought by the claimant or
plaintiff in any proposed settlement is monetary damages.
Section 2.06. Upon execution of this Lease by Tenant, Tenant
shall deliver to Landlord a request for Taxpayer Identification Number
and Certification in the form annexed hereto as Exhibit "I".
ARTICLE 3
RENT
Section 3.01. Tenant covenants and agrees that, during the entire
Term, Tenant shall pay to Landlord the Fixed Rent at the annual rate set
forth in Section 1.01, in equal monthly installments, in advance, on the
first day of each calendar month during the Term at the office of
Landlord or such other place as Landlord may designate, without any
abatement, reduction, setoff, counterclaim, defense or deduction
whatsoever, except as otherwise provided herein; it being agreed,
however, that if Tenant shall not then be in default (after notice and the
expiration of the applicable cure period, if any) of any of Tenant's
obligations under this Lease, Landlord hereby conditionally excuses
Tenant's obligation to pay Fixed Rent for the first seven (7) full calendar
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months of the Term. If, at any time during the Term, Tenant shall be in
default, beyond the expiration of the applicable cure period, if any, in the
performance of any of Tenant's obligations under this Lease, then the
total sum of such Fixed Rent so conditionally excused shall become
immediately due and payable by Tenant to Landlord. If, as of the
Expiration Date, Tenant shall not be in default in the performance of any
of Tenant's obligations under the terms of this Lease, Landlord shall
waive any payment of all such Fixed Rent so conditionally excused.
Notwithstanding the foregoing, if at any time during the first seven (7)
full calendar months of the Term, Tenant shall be in default beyond the
expiration of the applicable cure period, if any, in the performance of
any of Tenant's obligations under this Lease, then Tenant shall be
obligated to immediately pay to Landlord the Fixed Rent so conditionally
excused for such period of time (the "Section 3.01 Default Period") as
such default shall continue. In the event that Tenant shall cure any such
default, Tenant shall be entitled to a credit against Fixed Rent in an
aggregate amount equal to the Fixed Rent paid by Tenant during the
Section 3.01 Default Period, which credit shall be applied against the
next installments of Fixed Rent payable by Tenant pursuant to this Lease,
provided that Tenant shall not then be in default, beyond the expiration
of the applicable cure period, if any, in the performance of Tenant's
obligations under this Lease. If, at any time this Lease is terminated due
to Tenant's default in the performance of any of Tenant's obligations
under this Lease, then Tenant shall be obligated to immediately pay
Landlord a portion of such Fixed Rent so conditionally excused in an
amount equal to the product of (i) the total amount conditionally excused,
and (ii) a fraction, the numerator of which is the number of whole or
partial calendar months remaining in the Term from and after the month
in which such default occurs and the denominator of which is eighty-four
(84) plus interest on the above sum at six (6%) percent per annum for
each year or partial year that has elapsed since the Commencement Date.
If, as of the Expiration Date or sooner termination of this Lease, Tenant
shall not be in default in the performance of any of Tenant's obligations
under the terms of this Lease, Landlord shall waive any payment of all
such Fixed Rent so conditionally excused. Upon the execution of this
Lease, Tenant shall pay to Landlord the installment of Fixed Rent due
hereunder for the eighth (8th) full calendar month of the Term (the "Pre-
Paid Fixed Rent"). In the event that Tenant's obligation to pay Fixed
Rent shall commence on a date which shall be other than the first day of
a calendar month, the same shall be prorated at the rental rate applicable
during the first year of the Term, and shall be paid by Tenant to
Landlord together with the first full monthly installment of Fixed Rent as
shall become due hereunder.
Section 3.02. All costs, charges, expenses and payments
(including the payments required to be made by Tenant pursuant to
Article 19 below) which Tenant assumes, agrees or shall be obligated to
pay to Landlord or others pursuant to this Lease (other than Fixed Rent)
shall be deemed additional rent, and, in the event that Tenant shall fail to
timely pay the same, Landlord shall have all of the rights and remedies
with respect thereto as are provided for herein or by applicable law in
the case of non-payment of rent.
Section 3.03. Tenant covenants to pay the Fixed Rent and
additional rent as in this Lease provided, when due and without notice or
demand, in lawful money of the United States which shall be legal tender
in payment of all debts and dues, public and private, at the time of
payment. If any installment of Fixed Rent or any additional rent shall
not be paid within seven (7) days after such installment of Fixed Rent or
additional rent shall have first become due, Tenant shall also pay to
Landlord (i) an administrative late charge in the amount of $100.00, and
(ii) interest thereon from the due date until such installment of Fixed
Rent or additional rent is fully paid at the "Interest Rate" (defined in
Article 16 below). Such administrative late charge and interest charge
shall be due and payable as additional rent with the next monthly
installment of Fixed Rent. If any check delivered to Landlord in full or
partial payment of any amounts due to Landlord pursuant to the terms of
this Lease shall not be honored by reason of insufficient or uncollected
funds or for any other reason, then (x) Tenant shall pay to Landlord a
service charge on account thereof in the amount of $100.00, which
service charge shall be due and payable as additional rent with the next
monthly installment of Fixed Rent, and (y) all subsequent payments of
any amounts due to Landlord pursuant to the terms of this Lease for the
next six (6) months shall, if Landlord so requests, be made by certified
check, official bank or teller's check, or money order. Notwithstanding
anything to the contrary contained herein, Tenant shall not be required to
pay the administrative late charge or service charge referred to above
unless Tenant shall have failed to timely make any payment of Fixed
Rent or additional rent, or any check so delivered by Tenant shall have
been dishonored, more than one time within any twelve (12) consecutive
month period, in which event from and after the second such occurrence,
Tenant shall be obligated to pay such administrative charges if required
by Landlord. Upon default in payment by Tenant of any of the
aforementioned charges, Landlord shall have all the rights and remedies
provided for upon default of the Fixed Rent. The foregoing obligations
on the part of Tenant shall not preclude the simultaneous or subsequent
exercise by Landlord of any and all other rights or remedies provided for
in this Lease or now or hereafter existing at law or in equity or by
statute or otherwise. No payment by Tenant or receipt by Landlord of a
lesser amount than the Fixed Rent or additional rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated
Fixed Rent or additional rent (unless Landlord, in Landlord's sole and
absolute discretion, shall otherwise and in writing so elect), nor shall any
endorsement or statement on any check or in any letter accompanying
any check or payment, as Fixed Rent or additional rent, be deemed an
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accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such
Fixed Rent and additional rent or pursue any other remedy provided in
this Lease, at law or in equity.
Section 3.04.
A. If all or any part of the Fixed Rent or additional
rent shall at any time become uncollectible, reduced or required to be
refunded by virtue of any Legal Requirements (including rent control or
stabilization laws), except if and to the extent the same shall be as a
result of the Incentive Program (as hereinafter defined), then for the
period prescribed by said Legal Requirements, Tenant shall pay to
Landlord the maximum amounts permitted pursuant to said Legal
Requirements, and Tenant shall execute and deliver such agreement(s)
and take such other steps as Landlord may reasonably request and as may
be legally permissible to permit Landlord to collect the maximum rent
which, from time to time during the continuance of such legal rent
restriction, may be legally permissible (and not in excess of the amounts
then reserved therefor under this Lease). Upon the expiration or other
legal termination of the applicable period of time during which such
amounts shall be uncollectible, reduced or refunded: (a) the Fixed Rent
and additional rent shall become and shall thereafter be payable in
accordance with the amounts reserved herein for the periods following
such expiration or termination, and (b) Tenant shall pay to Landlord as
additional rent, within thirty (30) days after demand, all uncollected,
reduced or refunded amounts that would have been payable for the
aforesaid period absent such Legal Requirements if and to the extent
legally permissible. The provisions of the immediately preceding
sentence shall survive the expiration or sooner termination of this Lease.
B. Landlord agrees to take any reasonable action
reasonably necessary in order for Tenant to receive the benefits under the
Tax Abatement Program, the Rent Abatement Program and the
Electricity Abatement Program (collectively, the "Incentive Program"),
including the execution of all applications and other documents required
by the applicable governmental authorities. Section 499-c of the Tax
Abatement Program contains, inter alia, the following provisions, and
requires that Tenant be advised that:
"(1) an application for abatement of real property taxes
pursuant to this title will be made for the premises;
(2) the rent, including amounts payable by the tenant for real
property taxes, will accurately reflect any abatement of
real property taxes granted pursuant to this title for the
premises;
(3) at least ten dollars per square foot or thirty-five dollars
per square foot must be spent on improvements to the premises
and the common areas, the amount being dependent upon the
length of the lease and whether it is a new or a renewal lease;
and
(4) all abatements granted with respect to a building pursuant to
this title will be revoked if, during the benefit period, real
estate taxes or water or sewer charges or other lienable charges
are unpaid for more than one year, unless such delinquent amounts
are paid as provided in subdivision four of section four hundred
ninety-nine-f of this title."
C. Landlord shall reduce Tenant's Recurring
Additional Rent and/or Fixed Rent by the amount of the abatement
permitted pursuant to the Tax Abatement Program (the "Tax
Abatement") in a manner mutually agreeable to Landlord and Tenant and
permitted by the Tax Abatement Program.
D. Tenant shall pay all application fees and other
charges imposed pursuant to the Incentive Program in connection with
obtaining the abatement and/or other benefits pursuant to the Incentive
Program.
E. Tenant shall notify Landlord of any vacation or
subletting of the Demised Premises or any portion thereof, or any
assignment of Tenant's interest in this Lease, which would result in the
revocation of any abatement or other benefits, or any portion thereof,
granted pursuant to the Incentive Program. Within thirty (30) days
following demand therefor, Tenant shall reimburse Landlord for any
interest or penalties imposed by any governmental authorities in
connection with the revocation of the abatement or other benefits
resulting directly from Tenant's failure to so notify Landlord of any such
vacation, subletting or assignment. Upon the revocation of any
abatement or other benefit, Landlord shall increase Tenant's Recurring
Additional Rent and/or Fixed Rent by the amount that such rents were
reduced pursuant to Subsection 3.04C hereof.
F. If reasonable modification to this Lease shall be
required in order to obtain the abatement and/or other benefits permitted
pursuant to the Incentive Program, Landlord and Tenant agree to make
such reasonable modifications to this Lease as are mutually acceptable to
the parties provided that such modifications shall not increase the
obligations of either party hereto.
Section 3.05. If Landlord shall direct Tenant to pay Fixed Rent
or additional rent to a "lockbox" or other depository whereby checks
issued in payment of Fixed Rent or additional rent (or both, as the case
may be) are initially cashed or deposited by a person or entity other than
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Landlord (albeit on Landlord's authority), then, for any and all purposes
under this Lease: (i) Landlord shall not be deemed to have accepted
such payment until ten (10) days after the date on which Landlord shall
have actually received such funds, and (ii) Landlord shall be deemed to
have accepted such payment if (and only if) within said ten (10) day
period, Landlord shall not have refunded (or attempted to refund) such
payment to Tenant. Nothing contained in the immediately preceding
sentence shall be construed to place Tenant in default of Tenant's
obligation to pay rent if and for so long as Tenant shall timely pay the
rent to the lockbox on the date required pursuant to this Lease in the
manner designated by Landlord.
ARTICLE 4
USE
Section 4.01. Tenant shall use and occupy the Demised Premises
for the Authorized Use (as defined in Section 1.01), and for no other
purpose.
Section 4.02. Without in any way limiting the restrictions on use
contained in Section 4.01, Tenant specifically agrees that Tenant shall not
permit any part of the Demised Premises to be used for banking or
lending purposes of any kind; or for a safe deposit business or the sale of
travelers checks and/or foreign exchange; or as a kitchen, restaurant or
cafeteria; or for manufacturing, storage, shipping or receiving (other than
that required for the conduct of Tenant's business and subject, however,
to the rules and regulations as set forth in Article 26 hereof); or for retail
securities brokerage purposes; or for any purpose that would violate
restrictive covenants with any tenant of the Building, provided Tenant
had notice of such restrictive covenants; or for any retail sales or as a
store; or for the sale of any food or beverage; or as a news and cigar
stand (or anything similar thereto); or for any sale of merchandise with
delivery at or from the Demised Premises; or for the production of
samples or workroom; or for any purpose other than the Authorized Use.
In addition, the Demised Premises may not be used by (i) an agency,
department or bureau of the United States Government, any state or
municipality within the United States, or any foreign government, or any
political subdivision of any of them, (ii) any charitable, religious, union
or other not-for- profit organization, or (iii) any tax exempt entity within
the meaning of Section 168(h)(2) of the Internal Revenue Code of 1986, as
amended, or any successor or substitute statute, or rule or regulation
applicable thereto (as same may be amended). Notwithstanding anything to the
contrary contained in this Section 4.02, subject to Tenant's compliance
with the certificate of occupancy for the Demised Premises and with all
of the other provisions of this Lease, and as an incident to Tenant's use
of the Demised Premises for the Authorized Use, Tenant shall be
permitted to install and operate a pantry or kitchenette in the Demised
Premises.
Section 4.03. Tenant expressly acknowledges that irreparable
injury will result to Landlord in the event of a breach of any of the
covenants made by Tenant in this Article 4, and it is agreed that, in the
event of such breach, Landlord shall be entitled, in addition to any other
remedies available, to seek an injunction to restrain the violation thereof.
Breach of any of Tenant's covenants under this Article shall also
constitute an Event of Default pursuant and subject to the provisions of
Article 15 hereof.
ARTICLE 5
ALTERATIONS; LIENS; TENANT'S PROPERTY
Section 5.01.
A. Tenant shall make no Alterations in or to the
Demised Premises, including removal or installation of partitions, doors,
electrical installations, plumbing installations, water cooling towers,
heating, ventilating and air conditioning or cooling systems, units or
parts thereof or other apparatus of like or other nature, whether
structural or non-structural, without Landlord's prior written consent and
then only by contractors or mechanics approved in writing by Landlord,
which consent, except with respect to any Alterations which (i) are
structural, (ii) affect the Building Systems, or (iii) violate, create a
condition which violates, or require Landlord to perform any work or
incur any expense to ensure compliance with any Legal Requirements (it
being agreed that, in any of such instances, Landlord may withhold its
consent in Landlord's sole and absolute discretion), shall not be
unreasonably withheld or delayed. Notwithstanding anything to the
contrary contained herein, subject to Tenant's compliance with all of the
terms and provisions of this Article 5, Tenant shall not be required to
obtain Landlord's consent to Alterations which are non-structural or
purely decorative in nature which Tenant shall desire to make in the
Demised Premises, provided that the same: (a) are located entirely
within the Demised Premises, (b) are non-structural, (c) do not require
the issuance of a building notice or building permit from the New York
City Department of Buildings, (d) do not affect the structure, exterior or
common areas of the Building or the Building Systems and (e) do not
cost in excess of $25,000, in the aggregate, over a twelve (12) month
period, but Tenant shall nonetheless be required to give Landlord not less
than five (5) Business Days' notice prior to the performance of such
Alterations.
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B. It shall be Tenant's responsibility and obligation to
ensure that all Alterations: (i) shall be made at Tenant's own cost and
expense and at such times and in such manner as Landlord may from
time to time reasonably designate (including rules governing Alterations
as Landlord may from time to time reasonably make as provided under
the provisions of Article 26 below), (ii) shall comply with all Legal
Requirements (including NYC Local Laws No. 5 of 1973, No. 16 of
1984 and No. 58 of 1988, each as amended from time to time, and all
Legal Requirements then in effect relating to asbestos and to access for
the handicapped or disabled) and all orders, rules and regulations of
Insurance Boards, (iii) shall be made promptly and in a good and
workmanlike manner using prime quality materials, and (iv) shall not
affect the appearance of the Building or be visible from the exterior of
the Building, it being Landlord's intention to keep the exterior
appearance of the Building reasonably uniform (and, in pursuance
thereof, Landlord shall have the right to approve the appearance of all
such Alterations, including ceiling heights, blinds, lighting, signs and
other decorations). In order to ensure, maintain and control the quality
and standards of materials and workmanship in and the effective security
of the Building, including the Demised Premises, Tenant acknowledges
that it is reasonable to require Tenant, and Tenant hereby covenants and
agrees, to use only contractors first approved in writing by Landlord.
Landlord expressly reserves the right to exclude from the Building any
person, firm or corporation attempting to perform any work or act as
construction contractor or manager without Landlord's prior written
consent.
C. Tenant agrees to pay to Landlord as a supervisory
fee an amount equal to ten (10%) percent of the cost of any Alterations
(other than Landlord's Work) to be performed by Tenant or by Persons
Within Tenant's Control. Such supervisory fee shall be paid by Tenant
to Landlord prior to the commencement of any such Alterations, based
on the estimated cost of such Alterations, and, upon the completion of
such Alterations, Tenant shall pay to Landlord the difference, if any,
between (i) 10% of the actual cost of such Alterations and (ii) the amount
previously paid as the estimated supervisory fee prior to the
commencement of such Alterations.
D. The provisions of this Article 5 shall apply to
Tenant's Initial Work, as well as to all future Alterations.
Section 5.02.
A. Prior to commencing the performance of any
Alterations, Tenant shall furnish to Landlord:
(i) If and to the extent required, plans and
specifications (to be prepared by a licensed architect or engineer engaged
by Tenant, at the sole cost and expense of Tenant), in sufficient detail to
be accepted for filing by the New York City Building Department (or
any successor or other governmental agency serving a similar function),
of such proposed Alterations, and Tenant shall not commence the
performance thereof unless and until Landlord has given written consent
to said plans and specifications in accordance with the provisions hereof;
(ii) A certificate evidencing that Tenant (or
Tenant's contractors) has (have) procured and paid for worker's
compensation insurance covering all persons employed in connection with
the work who might assert claims for death or bodily injury against
Overlandlord, Landlord, Tenant, the Land and/or the Building;
(iii) Such additional personal injury and property
damage insurance (over and above the insurance required to be carried
by Tenant pursuant to the provisions of Section 8.03 below), and
builder's risk, fire and other casualty insurance as Landlord may
reasonably require in connection with the work to be done for Tenant;
(iv) If the work to be undertaken is of such a
nature that it requires the approval of Overlandlord or any Mortgagee,
such approval shall be obtained by Landlord at Tenant's own cost and
expense and if the work requires expenditures by Tenant in excess of an
amount equal to three (3) monthly installments of the then prevailing
Fixed Rent, a surety company performance bond in form and substance
reasonably satisfactory to Landlord (procured at Tenant's own cost and
expense), issued by a surety company reasonably acceptable to Landlord,
or other security satisfactory to Landlord, in an amount equal to at least
120% of the estimated cost of such Alterations, guaranteeing to
Landlord, Overlandlord and any Mortgagee the completion thereof and
payment therefor within a reasonable time, free and clear of all liens,
encumbrances, chattel mortgages, security interests, conditional bills of
sale and other charges, and in accordance with the plans and
specifications approved by Landlord; and
(v) Such permits, authorizations or consents as
may be required by any applicable Legal Requirements (other than those
permits, authorizations or consents required in connection with the
performance of Landlord's Work), all of which shall be obtained at
Tenant's cost and expense; provided, however, that no plans,
specifications or applications shall be filed by Tenant with any
governmental authority without Tenant first obtaining Landlord's written
consent thereto in accordance with the provisions hereof.
B. In the event that Landlord shall submit the plans
and specifications referred to in clause (i) of Subsection 5.02A above to
Landlord's architects and/or engineers for review (other than to "in
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house" architects and/or engineers), Tenant shall reimburse Landlord as
additional rent for Landlord's reasonable out-of-pocket expenses of such
review within thirty (30) days after written notice to Tenant of the
amount of such expense.
C. Tenant shall keep reasonably accurate and complete
cost records of all Alterations performed by Tenant or by Persons Within
Tenant's Control, and shall furnish to Landlord true copies thereof
and/or of all contracts entered into and work orders issued by Tenant in
connection therewith within thirty (30) days following Landlord's written
request therefor. Landlord's review of, and/or any failure by Landlord
to object to, any such contract or work order shall not: (i) be construed
as an approval by Landlord of such contract or work order or the
contents thereof, (ii) impose any liability on Landlord in connection
therewith, or (iii) relieve Tenant of any obligation of Tenant with respect
to such Alterations or the Demised Premises as otherwise set forth in this
Lease.
Section 5.03.
A. In no event shall any material or equipment be
incorporated in or to the Demised Premises in connection with any
Alteration (other than Landlord's Work) which is subject to any lien,
encumbrance, chattel mortgage, security interest, charge of any kind
whatsoever, or is subject to any conditional sale or other similar or
dissimilar title retention agreement.
B. Tenant shall not create or permit to be created any
lien, encumbrance or charge (levied on account of any taxes or any
mechanic's, laborer's or materialman's lien, conditional sale, title
retention agreement or otherwise) which might be or become a lien, en-
cumbrance or charge upon the Land or Building or any part thereof or
the income therefrom, and Tenant shall not suffer any other matter or
thing whereby the estate, rights and interest of Landlord in the Land or
Building or any part thereof might be impaired. Tenant shall take all
steps necessary under local laws to prevent the imposition of such a lien,
encumbrance or charge on the Land or Building.
C. If any lien, encumbrance or charge referred to in
this Section 5.03 shall at any time be filed against the Land or Building
or any part thereof, then Tenant, within thirty (30) days after notice of
the filing thereof and at Tenant's own cost and expense, shall cause the
same to be discharged of record or shall post the required bond, and
Tenant shall indemnify Landlord against and defend and hold Landlord
harmless from all costs, expenses, liabilities, losses, fines and penalties,
including reasonable attorneys' fees and disbursements, resulting
therefrom. If Tenant shall fail to cause such lien to be discharged or
shall fail to post the required bond within the aforesaid period, then, in
addition to any other right or remedy, Landlord may, but shall not be
obligated to, discharge the same either by paying the amount claimed to
be due or by procuring the discharge of such lien by deposit or by
bonding proceedings, and in any such event Landlord shall be entitled, if
Landlord so elects, to compel the prosecution of an action for the
foreclosure of such lien by the lienor and to pay the amount of the
judgment in favor of the lienor with interest, costs and allowances. Any
amount so paid by Landlord and all costs and expenses incurred by
Landlord in connection therewith, together with interest thereon at the
Interest Rate, shall constitute additional rent payable by Tenant under this
Lease, which additional rent shall be paid by Tenant to Landlord within
twenty (20) days after written notice to Tenant of the amount thereof,
which notice shall be accompanied by evidence reasonably substantiating
such amount.
D. Nothing contained in this Lease shall be deemed or
construed in any way as constituting the consent or request of Landlord,
express or implied by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor
or the furnishing of labor or materials for the specific improvement,
alteration to or repair of the Demised Premises or any part thereof, nor
as giving Tenant any right, power or authority to contract for or permit
the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Land, Building,
Demised Premises or any part thereof. Notice is hereby given that,
other than for Landlord's Work, Landlord shall not be liable for any
work performed or to be performed at the Demised Premises for Tenant
or any subtenant, or for any materials furnished or to be furnished at the
Demised Premises for Tenant or any subtenant upon credit, and that no
mechanic's or other lien for such work or materials shall attach to or
affect the estate or interest of Landlord in and to the Land, Building or
Demised Premises. Landlord shall have the right to post and keep posted
on the Demised Premises any notices which Landlord may be required to
post for the protection of Landlord, the Land, Building and/or the
Demised Premises from any lien.
E. Tenant shall have no power to do any act or make
any contract which may create or be the foundation for any lien,
mortgage or other encumbrance upon the reversion or other estate of
Landlord or of any interest of Landlord in the Demised Premises.
Section 5.04. Tenant shall not at any time, either directly or
indirectly, use any contractors or labor or materials in the Demised
Premises if the use of such contractors or labor or materials would create
any work stoppage, picketing, labor disruption or any other difficulty
with other contractors or labor engaged by Tenant or Landlord or others
in the construction, maintenance or operation of the Building or any part
thereof. Tenant shall promptly stop any work or other activity if
Landlord shall notify Tenant that continuing such work or activity would
violate the provisions of the immediately preceding sentence.
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Section 5.05. Unless caused by the gross negligence or willful
misconduct of Landlord or Persons Within Landlord's Control, Landlord
shall not be liable for any failure or diminution of any Building Systems
or services, or for any damage to Tenant's property or the property of
any other person, caused by Alterations made by Tenant or by Persons
Within Tenant's Control, notwithstanding Landlord's consent thereto or
to the plans and specifications therefor. Landlord's consent to any such
plans or specifications shall not be deemed a representation of any kind
that the same conform to the applicable Legal Requirements. Tenant
shall promptly correct any faulty or improper Alteration made by Tenant
or by Persons Within Tenant's Control, and shall repair any and all
damage caused thereby. Upon Tenant's failure to promptly make such
corrections and repairs after Tenant's receipt of notice from Landlord of
such damage or of the need for such corrections or repairs within such
period of time as is appropriate under the circumstances (except in the
event of an emergency when no such notice shall be necessary), but in
any event not more than fifteen (15) days from Tenant's receipt of such
notice, Landlord may make such corrections and repairs and charge
Tenant for the actual, reasonable cost thereof. Such charge shall be
deemed additional rent, and shall be paid by Tenant to Landlord within
twenty (20) days after written notice to Tenant of the amount thereof,
which notice shall be accompanied by evidence reasonably substantiating
such amount.
Section 5.06.
A. All movable property, furniture, furnishings,
equipment, personal property and trade fixtures furnished by or at the
expense of Tenant, other than those affixed to the Demised Premises so
that they cannot be removed without damage and other than those
replacing an item theretofore furnished and paid for by Landlord or for
which Tenant has received a credit or allowance, shall remain the
property of Tenant, and may be removed by Tenant from time to time
prior to the expiration of the Term. Tenant shall notify Landlord in
writing not less than sixty (60) days prior to the expiration of the Term
specifying any such items of property which Tenant does not wish to
remove. If within thirty (30) days after the service of such notice
Landlord shall request Tenant to remove any of said items, Tenant shall,
at Tenant's expense, remove said items prior to the expiration of the
Term. Without limiting the generality of the provisions of this
Subsection 5.06A, Tenant expressly agrees that, at Landlord's request,
Tenant shall, at Tenant's own cost and expense and prior to the
expiration of the Term, remove any and all vaults located or installed in
the Demised Premises.
B. All Alterations made by either party (other than
Landlord's Work), including all paneling, decorations, partitions,
railings, mezzanine floors, galleries and the like, which are affixed to the
Demised Premises, shall become the property of Landlord and shall be
surrendered with the Demised Premises at the end of the Term.
Notwithstanding the foregoing, Landlord may elect to require Tenant to
remove such Alterations, at Tenant's expense, by giving written notice to
Tenant either prior to, or within thirty (30) days after, the expiration of
the Term; except that if Tenant shall submit to Landlord, not earlier than
one hundred eighty (180) days prior to the expiration of the Term, a
notice (the "Fixtures Notice") stating that Tenant shall not be required to
remove specified Alterations on or prior to the Expiration Date unless
Landlord shall notify Tenant within sixty (60) days after the receipt of
the Fixtures Notice that such Alterations shall be required to be removed
by Tenant on or prior to the Expiration Date, then Tenant shall not be
required to remove such Alterations made by Tenant with Landlord's
prior approval. The Fixtures Notice shall specify the Alterations that
Tenant is requesting not to remove and shall bear the following legend
typed in bold, capital letters at the top: "IF LANDLORD SHALL
FAIL TO NOTIFY TENANT WITH RESPECT TO THE REMOVAL OF THE ALTERATIONS
SPECIFIED HEREIN WITHIN SIXTY (60) DAYS FOLLOWING LANDLORD'S RECEIPT OF
THIS NOTICE, TENANT SHALL NOT BE REQUIRED TO REMOVE SUCH ALTERATIONS IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 5.06 OF THE LEASE."
Notwithstanding anything to the contrary contained in this Subsection 5.06B,
Tenant shall not be obligated to remove leasehold improvements from the
Demised Premises unless such leasehold improvements are not typical of those
installed by other tenants in the Building.
C. In any case where Tenant removes any property or
Alterations in accordance with Subsections A and B above, or otherwise,
Tenant shall promptly repair all damage caused by said removal and shall
restore the Demised Premises at Tenant's expense to the order and
condition existing on the Commencement Date, subject to normal wear
and tear, damage from fire or other casualty, condemnation or eminent
domain, and repairs which are not the responsibility of Tenant under the
terms of this Lease, and if Tenant fails to do so, Landlord may, upon
five (5) days written notice, do so at Tenant's cost and Tenant shall
reimburse Landlord for the reasonable, out-of-pocket costs and expenses
therefor within twenty (20) days after demand therefor, which demand
shall be accompanied by evidence reasonably substantiating such costs
and expenses.
D. Upon failure of Tenant to remove any property or
Alterations in accordance with Subsections A and B above, or upon
failure of Tenant to notify Landlord of any property it does not wish to
remove from the Demised Premises in accordance with Subsection A
above, then, as to such property, or upon termination of this Lease
pursuant to Article 15 hereof, Landlord may, at Tenant's expense:
(i) remove all such property and Alterations which Landlord may require
Tenant to remove pursuant to Subsections A and B above, (ii) cause the
same to be placed in storage, and (iii) repair any damage caused by said
removal and restore the Demised Premises to the order and condition
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existing on the Commencement Date, subject to normal wear and tear,
damage from fire or other casualty, condemnation or eminent domain,
and repairs which are not the responsibility of Tenant under the terms of
this Lease,. Tenant shall reimburse Landlord for all of the aforesaid
reasonable expenses as additional rent and within twenty (20) days after
demand therefor which demand shall be accompanied by evidence
reasonably substantiating such costs and expenses.
E. Notwithstanding anything to the contrary contained
in this Section 5.06, any items of property or Alterations not removed by
Tenant may, at the election of Landlord, be deemed to have been
abandoned by Tenant, and Landlord may retain and dispose of said items
without any liability to Tenant and without accounting to Tenant for the
proceeds thereof.
F. The provisions of this Section 5.06 shall survive
the expiration or sooner termination of the Term, whereupon any and all
monetary obligations of Tenant pursuant thereto shall be deemed damages
recoverable by Landlord.
Section 5.07. If Tenant shall fail to comply with any provision of
this Article 5, Landlord in addition to any other remedy herein provided,
may require Tenant to immediately cease all work being performed in the
Building by or on behalf of Tenant upon twenty-four (24) hours written
notice (except in the event of emergency when no notice shall be
necessary), and Landlord may deny access to the Demised Premises to
any person performing work or supplying materials in the Demised
Premises.
Section 5.08. Notwithstanding anything contained in this Article
5 to the contrary, Landlord shall reasonably cooperate with Tenant's
efforts (but shall not be obligated to incur any cost or expense in so
doing) to obtain such permits, authorizations or consents as Tenant may
be required to obtain pursuant to applicable Legal Requirements and/or
the terms of this Lease.
ARTICLE 6
REPAIRS AND MAINTENANCE
Section 6.01. Tenant shall take good care of the Demised
Premises and the fixtures, glass, appurtenances and equipment therein
(including all horizontal portions of the Building Systems that are located
within and which exclusively serve the Demised Premises, and expressly
including any sprinkler loop and distribution pipes and heads, any
ventilation and air-conditioning equipment and any private bathrooms (or
any plumbing lines or horizontal or vertical fixtures therein) in the
Demised Premises), and, at Tenant's sole cost and expense, shall make
all Repairs as and when needed to preserve them in working order and
condition, whether or not such Repairs are ordinary or extraordinary, or
foreseen or unforeseen at this time, and whether or not such Repairs
pertain to improvements in the Demised Premises furnished or installed
by Landlord, but excluding (i) Repairs necessitated by the gross
negligence or willful misconduct of Landlord or Persons Within
Landlord's Control, or (ii) Repairs to the rough floor, the rough ceiling,
exterior windows, exterior walls or load-bearing columns, unless
required under the provisions of following sentence. All damage or
injury to the Demised Premises, or to the Building or the Building
Systems outside of the Demised Premises, caused by or arising from acts
or omissions of Tenant, or of Persons Within Tenant's Control, including
those which are structural, extraordinary and unforeseen, shall be
promptly repaired, restored or replaced by Tenant, at Tenant's own cost
and expense (except if and to the extent that Landlord recovers proceeds
from Landlord's insurer with respect to such damage or injury). All
Repairs shall be in quality and class equal to or better than the original
work or installations, and shall be performed in good and workmanlike
manner, using prime quality materials.
Section 6.02. Landlord, at Landlord's expense, shall make or
cause to be made all Repairs, structural and otherwise, necessary to keep
in good order and repair the exterior (including exterior windows) of the
Building and the public portions of the Building and Building Systems,
other than those required to be made by Tenant as provided in
Section 6.01; provided that, with respect to those Repairs to be made
within the Demised Premises or to the Building Systems which serve the
Demised Premises, Tenant shall have given notice to Landlord of the
need for such Repairs. There shall be no allowance to Tenant for a
diminution of rental value or interruption of business, and no liability on
the part of Landlord, by reason of inconvenience, annoyance or injury to
business arising from Landlord, Tenant or others making any Repairs or
Alterations in or to any portion of the Building or Building Systems or
the Demised Premises, except as otherwise expressly provided herein.
Section 6.03. If any Insurance Boards or Legal Requirements
shall require or recommend installation of fire extinguishers or of a
"sprinkler system" or any other fire protection devices, or any changes,
modifications, alterations or additions thereto for any reason attributable
to Tenant's manner of use of the Demised Premises (as distinguished
from Tenant's mere use of the Demised Premises for the Authorized
Use), or if any such installation or equipment becomes necessary to
prevent the imposition of a penalty or charge against the full allowance
for a sprinkler or fire extinguishing system in the fire insurance rate as
fixed by Insurance Boards, or by any fire insurance company, then
Tenant, at Tenant's expense, shall promptly make such installation within
the Demised Premises and supply such changes, modifications,
alterations, additions or other equipment. In the event that (i) Tenant
shall fail to perform the work required pursuant to the preceding
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sentence, and/or (ii) if due to the nature of such work, Landlord requires
that such work be performed by Landlord, Landlord shall make any such
installation (including sprinklers, stair pressurizers, water towers), or any
such change, modification, alteration or additions outside of the Demised
Premises (such as, without limitation, in the common area) and Tenant
shall reimburse Landlord, as additional rent, an amount equal to Tenant's
Proportionate Share of the cost thereof. Such reimbursement shall be
made by Tenant within twenty (20) days after written notice to Tenant of
such amount, which notice shall be accompanied by evidence reasonably
substantiating such amount.
Section 6.04. In any case where Tenant shall be required to
make Repairs or perform any work pursuant to this Article and such
Repairs or work shall affect the Building Systems or areas outside of the
Demised Premises, Landlord may, in Landlord's discretion, elect to
make such Repairs or to perform such work for and on behalf of Tenant,
but at Tenant's reasonable cost and expense. In such event, Tenant shall
reimburse Landlord as additional rent for the cost of such Repairs and/or
work within twenty (20) days after Landlord shall furnish a statement to
Tenant of the amount thereof, which statement shall be accompanied by
evidence reasonably substantiating such amount.
Section 6.05. Tenant shall maintain the Demised Premises
(including any permitted signs or cameras) in a clean and orderly
condition that is consistent with the use and appearance of the Building.
If Tenant shall fail to so maintain the Demised Premises to the
reasonable satisfaction of Landlord, then Landlord shall have the right,
on notice to Tenant and at Tenant's sole cost and expense, to enter into
the Demised Premises for the express purpose of rectifying the condition
thereof and restoring the Demised Premises to the condition and
appearance required hereunder.
ARTICLE 7
COMPLIANCE WITH LAW
Section 7.01.
A. Tenant shall not do, and shall not permit Persons
Within Tenant's Control to do, any act or thing in or upon the Demised
Premises or the Building which will invalidate or be in conflict with the
certificate of occupancy for the Demised Premises or the Building, or
violate any Legal Requirements. Tenant shall, at Tenant's cost and
expense, comply with all Legal Requirements (including Local Laws
No. 5 of 1973, No. 16 of 1984 and No. 58 of 1988, each as modified
and supplemented from time to time under the Administrative Code as
applicable to the Demised Premises, and all Legal Requirements relating
to asbestos) which shall with respect to the Demised Premises or with
respect to any abatement of nuisance (including the removal,
containment, transportation and disposal of asbestos), impose any
violation, order or duty upon Landlord or Tenant arising from, or in
connection with, the Demised Premises, Tenant's manner of use of the
Demised Premises (as distinguished from Tenant's mere use of the
Demised Premises for the Authorized Use), or any installations therein,
or required by reason of a breach of any of Tenant's covenants or
agreements hereunder, whether or not such Legal Requirements shall
now be in effect or hereafter enacted or issued, and whether or not any
work required shall be ordinary or extraordinary or foreseen or
unforeseen at the date hereof.
B. Notwithstanding anything to the contrary contained
in this Lease, Tenant shall be responsible for the cost of all present and
future compliance with The Americans with Disabilities Act of 1990,
Public Law 101-336, 42 U.S.C. ' 12101 et seq. (herein called the
"Disabilities Act") in respect of the Demised Premises, except that
Tenant shall not hereby be under any obligation to comply with the
Disabilities Act to the extent that the same shall require Tenant to make
any structural alterations within the Demised Premises (i.e., alterations to
the slab, support columns and facade) or to make any modifications to
Building Systems located within the Demised Premises, unless the
necessity for such structural alteration or modification to Building
Systems located within the Demised Premises arises from (i) Tenant's
particular manner of use of the Demised Premises for other than
customary office uses, (ii) the manner of conduct of Tenant's business
(as distinguished from Tenant's mere use of the Demised Premises for
the Authorized Use), (iii) Tenant's installations, equipment or other
property therein or the operation thereof, (iv) any cause or condition
created by or at the instance of Tenant (as distinguished from Tenant's
mere occupancy of the Demised Premises for the Authorized Use), or (v)
the breach of any of Tenant's obligations under this Lease. In addition,
Tenant shall be responsible for the cost of all present and future
compliance with the Disabilities Act with respect to areas of the Land
and Building outside the Demised Premises, but only if and to the extent
that compliance with the requirements for such present and future
compliance arises from (I) Tenant's manner of use of the Demises
Premises (as distinguished from Tenant's mere use of the Demised
Premises for the Authorized Use), (II) the manner of conduct of Tenant's
business (as distinguished from Tenant's mere conduct of business at the
Demised Premises) (III) Tenant's installations, equipment or other
property therein or the operation thereof, (IV) any cause or condition
created by or at the instance of Tenant (as distinguished from Tenant's
mere occupancy of the Demised Premises for the Authorized Use), or
(V) the breach of any of Tenant's obligations under this Lease.
C. Tenant shall not cause or permit any Hazardous
Materials (hereinafter defined) to be used, stored, transported, released,
handled, produced or installed in, on or from the Demised Premises or
the Building; provided, however, that the foregoing prohibition shall not
apply to standard office supplies, materials and equipment in reasonable
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limited quantities, if and to the extent permitted by Applicable Legal
Requirements. The term "Hazardous Materials", as used herein, shall
mean any flammables, explosives, radioactive materials, hazardous
wastes, hazardous and toxic substances or related materials, asbestos or
any material containing asbestos, or any other substance or material
included in the definition of "hazardous substances", "hazardous wastes",
"hazard materials", "toxic substances", "contaminants" or any other
pollutant, or otherwise regulated by any federal, state or local
environmental law, ordinance, rule or regulation, including the
Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended, the Hazardous Materials Transportation Act, as
amended, and the Resource Conservation and Recovery Act, as
amended, and in the regulations adopted and publications promulgated
pursuant to each of the foregoing Acts. In the event of a violation of any
of the foregoing provisions of this Subsection 7.01C, Landlord may,
upon twenty-four (24) hours telephonic notice (except in the event of
emergency when no notice shall be necessary), take all remedial action
deemed necessary by Landlord to correct such condition, and Tenant
shall reimburse Landlord for the actual out-of-pocket costs and expenses
therefor as additional rent within twenty (20) days after demand therefor
which demand shall be accompanied by evidence reasonably
substantiating such costs and expenses.
D. Tenant may contest, at Tenant's sole cost and expense, by appropriate
proceedings prosecuted diligently and in good faith, the validity, or
applicability to the Demised Premises, of any Legal Requirements, provided that:
(i) Landlord shall not be subject to criminal or civil penalty or to
prosecution for a crime nor shall the Demised Premises or any part thereof be
subject to being condemned or vacated, by reason of non-compliance or otherwise
or by reason of such contest or civil penalty;
(ii) Tenant shall defend, indemnify and hold harmless Landlord and the
agents, partners, shareholders, directors, officers and employees of Landlord
against all claims, damage, loss, liability, costs and expense (including
reasonable attorneys' fees) resulting from Tenant's non-compliance or contest;
(iii) such non-compliance or contest shall not constitute or result
in any violation of any Underlying Lease or Mortgage (of which Tenant has
notice), or if such Underlying Lease and/or Mortgage shall permit such non-
compliance or contest on condition of the taking of action or furnishing of
security by Landlord, such action shall be taken and such security shall be
furnished at the sole cost and expense of Tenant;
(iv) such non-compliance or contest shall not result in the
cancellation of, or shall increase the rate of premium for any of, the Building
insurance of which Landlord has given Tenant written notice;
(v) such non-compliance or contest shall not result in any hazardous
or unsafe condition, as reasonably determined by Landlord, at the Demised
Premises or the Building; and
(vi) Tenant shall keep Landlord advised as to the status of such
proceedings.
Without limiting the application of clause (i) above thereto, Landlord
shall be deemed subject to prosecution for a crime within the meaning of
said cause (i), if Landlord, or any agent, partner, shareholder, director,
officer or employee of Landlord individually is charged with a crime of
any kind or degree whatever, whether by service of a summons or
otherwise, unless such charge is withdrawn before Landlord or such
agent, partner, shareholder director, officer or employee, as the case
may be, is required to plead or answer thereto.
Section 7.02. If Tenant shall receive notice of any violation of any Legal
Requirements applicable to the Demised Premises, Tenant shall give prompt
notice thereof to Landlord. Landlord shall, during the term of this Lease,
comply with those Legal Requirements which are of a nature that, if Landlord
did not so comply, such non-compliance would materially impair Tenant's
ability to conduct Tenant's business at the Demised Premises.
Section 7.03. Tenant shall also be obligated to comply with any Legal
Requirements requiring any structural Alteration of the Demised Premises,
but only if such Alteration shall be required by reason of a condition which
has been created by, or at the instance of, Tenant or Persons Within Tenant's
Control, or shall be attributable to the particular use or manner of use to
which Tenant or Persons Within Tenant's Control puts the Demised Premises (as
distinguished from Tenant's mere use of the Demised Premises for the
Authorized Use), or shall be required by reason of a breach of any of Tenant's
covenants and agreements hereunder.
Section 7.04. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to
secure such license or permit would, in any way, affect Landlord or the
Building, then Tenant, at Tenant's expense, shall promptly procure and
thereafter maintain, submit for inspection by Landlord, and at all times
comply with the terms and conditions of, each such license or permit.
Section 7.05. If an excavation shall be made upon the land adjacent to or
under the Building, or shall be authorized or contemplated to be made, Tenant
shall upon prior notice afford to the person causing or authorized to cause
such excavation license to enter upon the Demised Premises for the purpose of
doing such work as said person shall deem necessary or desirable to preserve
the Building from injury or damage and to support the same by proper
foundations without any claim for damages or indemnity against Landlord, or
diminution or abatement of rent. In connection with such excavation, Landlord
shall use commercially reasonable efforts to minimize interference with
Tenant's use and occupancy of the Demised Premises.
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Section 7.06. Tenant shall not clean, or permit, suffer or allow
to be cleaned, any windows in the Demised Premises from the outside in
violation of Section 202 of the Labor Law or any other Legal Requirements.
Section 7.07. Notwithstanding anything contained in this Article
7 to the contrary, Tenant shall not be obligated to cure any violation of
Legal Requirements applicable to the Demised Premises which is of
record as of the Commencement Date.
ARTICLE 8
INSURANCE
Section 8.01. Tenant shall not do or permit to be done any act or
thing in or upon the Demised Premises which will invalidate or be in
conflict with the terms of the New York State standard form of fire
insurance with extended coverage, or with rental, liability, boiler,
sprinkler, water damage, war risk or other insurance policies covering
the Building and the fixtures and property therein (hereinafter referred to
as "Building Insurance"); and Tenant, at Tenant's own expense, shall
comply with all rules, orders, regulations and requirements of all
Insurance Boards, and shall not do or permit anything to be done in or
upon the Demised Premises or bring or keep anything therein or use the
Demised Premises in a manner which increases the rate of premium for
any of the Building Insurance or any property or equipment located
therein over the rate in effect at the commencement of the Term.
Section 8.02.
A. If, by reason of the failure of Tenant to comply
with any provision of this Lease, the rate of premium for Building
Insurance or other insurance on the property and equipment of Landlord
or any other tenant or subtenant in the Building shall be higher than it
otherwise would be, Tenant shall reimburse Landlord and/or such other
tenants or subtenants in the Building for that part of the insurance
premiums thereafter paid by Landlord or by the other tenants or
subtenants in the Building which shall have been charged because of such
failure by Tenant. Tenant shall make said reimbursement within twenty
(20) days following Landlord's submission to Tenant of written demand
therefor, which demand shall be accompanied by evidence reasonably
substantiating such increase. Tenant shall not be responsible for the
payment of any increase in the rate of premium for Building Insurance or
other insurance on the property or equipment of Landlord if such
increase is imposed solely by reason of Tenant's use of the Demised
Premises in accordance with the primary Authorized Use (in
contradistinction to use of the Demised Premises for any incidental or
ancillary use permitted in connection therewith).
B. In any action or proceeding wherein Landlord and
Tenant are parties, a schedule or "make-up" of any insurance rate for the
Building or Demised Premises issued by any Insurance Board
establishing insurance premium rates for the Building shall be prima facie
evidence of the facts therein stated and of the several items and charges
in the insurance premium rates then applicable to the Building.
Section 8.03.
A. Tenant shall, at Tenant's own cost and expense,
obtain, maintain and keep in force during the entire Term, for the benefit
of Landlord, Overlandlord and Tenant, the following insurance
coverages: (i) commercial general liability insurance (including premises
operation, bodily injury, personal injury, death, independent contractors'
liability, owner's protective liability, products and completed operations
liability, broad form contractual liability and broad form property
damage coverages) in a combined single limit amount of not less than
$3,000,000, against all claims, demands or actions with respect to
damage, injury or death made by or on behalf of any person or entity,
arising from or relating to the conduct and operation of Tenant's business
in, on or about the Demised Premises (which shall include Tenant's
signs, if any), or arising from or related to any act or omission of Tenant
or of Persons Within Tenant's Control; (ii) during the course of
construction of any Tenant's Alterations and until completion thereof,
Builder's Risk insurance on an "all risk" basis (including collapse) on a
completed value (non-reporting) form for full replacement value covering
the interests of Landlord and Tenant (and their respective contractors and
subcontractors) in all work incorporated into the Building and all
materials and equipment located in or about the Demised Premises; (iii)
Workers' Compensation Insurance, as required by law; and (iv) if Tenant
shall install or maintain one or more boilers or other pressure vessels to
serve the Demised Premises or Tenant's operations thereat, Tenant shall,
at Tenant's own cost and expense, obtain, maintain and keep in force,
for the benefit of Landlord, Overlandlord and Tenant, appropriate
insurance coverage thereof in an amount not less than $1,000,000 (it
being understood and agreed, however, that the foregoing shall not be
deemed a consent by Landlord to the installation and/or maintenance of
any boilers or other pressure vessels in the Demised Premises, which
installation and/or maintenance shall at all times be subject to the prior
written consent of Landlord). All such insurance shall contain only such
"deductibles" or "retentions" as Landlord shall reasonably approve. In
addition, prior to any entry upon the Demised Premises by Tenant or by
any Person Within Tenant's Control, Tenant shall deliver or cause to be
delivered to Landlord certificates evidencing that all insurance required
hereunder is in full force and effect. Whenever, in Landlord's
reasonable judgment, good business practice and changing conditions
indicate a need for additional or different types of insurance coverage,
taking into account customary insurance coverage and policies for
comparable buildings in Manhattan, Tenant shall, upon Landlord's
request, promptly obtain such insurance coverage, at Tenant's expense.
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B. Tenant, at Tenant's own cost and expense, shall
maintain insurance protecting and indemnifying Landlord, the managing
agent of the Building, Tenant and Overlandlord against any and all
damage to or loss of Tenant's Alterations, equipment, furnishings,
furniture, fixtures and contents in the Demised Premises or the Building
(including all portions of the Building Systems that are located within the
Demised Premises, and expressly including any sprinkler loop and
distribution pipes and heads, any ventilation and air-conditioning
equipment and any private bathrooms in the Demised Premises), and all
claims and liabilities relating thereto.
C. Landlord and Overlandlord shall be named as
insureds in said policies and shall be protected against all liability
occasioned by an occurrence insured against. All said policies of
insurance shall be: (i) written as "occurrence" policies, (ii) written as
primary policy coverage and not contributing with or in excess of any
coverage which Landlord or Overlandlord may carry, (iii) written in
form and substance reasonably satisfactory to Landlord, and (iv) issued
by insurance companies then rated not less than A:XII in Best's
Insurance Reports, and which are licensed to do business in the State of
New York. Tenant shall, prior to the Commencement Date, deliver to
Landlord the policies of insurance or certificates thereof, together with
evidence of payment of premiums thereon, and shall thereafter furnish to
Landlord, at least thirty (30) days' prior to the expiration of any such
policies and any renewal thereof, a new policy or certificate in lieu
thereof, with evidence of the payment of premiums thereon. Each of
said policies shall also contain a provision whereby the insurer agrees not
to cancel, diminish or materially modify said insurance policy(ies)
without having given Landlord and Overlandlord at least thirty (30) days'
prior written notice thereof, by certified mail, return receipt requested.
D. Tenant shall pay all premiums and charges for all
of said policies, and, if Tenant shall fail to make any payment when due
or carry any such policy, Landlord may, but shall not be obligated to,
make such payment or carry such policy upon three (3) Business Days
notice to Tenant, and the amount paid by Landlord, with interest thereon
at the Interest Rate, shall be repaid to Landlord by Tenant within twenty
(20) days after demand therefor, which demand shall be accompanied by
evidence reasonably substantiating such amount, and all such amounts so
repayable, together with such interest, shall be deemed to constitute
additional rent hereunder. Payment by Landlord of any such premium,
or the carrying by Landlord of any such policy, shall not be deemed to
waive or release the default of Tenant with respect thereto.
E. Notwithstanding and without regard to the limits of
insurance specified in this Section 8.03, Tenant agrees to defend, protect,
indemnify and hold harmless Landlord and Overlandlord, and the agents,
partners, shareholders, directors, officers and employees of Landlord and
Overlandlord, from and against all claims, damage, loss, liability, cost
and expense (including reasonable engineer's, architects' and attorneys'
fees and disbursements) resulting from any of the risks referred to in this
Section 8.03. The foregoing obligation of Tenant shall be and remain in
full force and effect whether or not Tenant has placed and maintained the
insurance specified in this Section 8.03, and whether or not proceeds
from such insurance (such insurance having been placed and maintained)
actually are collectible from one or more of the aforesaid insurance
companies; provided, however, that Tenant shall be relieved of its
obligation of indemnity herein pro tanto of the amount actually recovered
by Landlord from one or more of said insurance companies by reason of
injury, damage or loss sustained on the Demised Premises. If any action
or proceeding shall be brought against Landlord or any of the other
indemnified parties in connection with any matter which is the subject of
the foregoing indemnity, Tenant, upon notice from Landlord, shall resist
and defend such action or proceeding at Tenant's expense by counsel
afforded by the insurer providing the insurance required to be maintained
by Tenant pursuant to this Section 8.03 or by other counsel reasonably
satisfactory to Landlord, without any disclaimer of liability in connection
therewith.
Section 8.04.
A. Landlord shall cause each policy carried by
Landlord insuring the Building against loss, damage, or destruction by
fire or other casualty, and Tenant shall cause each insurance policy
carried by Tenant and insuring the Demised Premises and Tenant's
Alterations, leasehold improvements, equipment, furnishings, fixtures
and contents against loss, damage, or destruction by fire or other
casualty, to be written in a manner so as to provide that the insurance
company waives all rights of recovery by way of subrogation against
Landlord or Tenant in connection with any loss or damage covered by
any such policy. Neither party shall be liable to the other for the amount
of such loss or damage which is in excess of the applicable deductible, if
any, caused by fire or any of the risks enumerated in its policies,
provided that such waiver was obtainable at the time of such loss or
damage. However, if such waiver cannot be obtained, or shall be
obtainable only by the payment of an additional premium charge above
that which is charged by companies carrying such insurance without such
waiver of subrogation, then the party undertaking to obtain such waiver
shall notify the other party of such fact, and such other party shall have a
period of ten (10) days after the giving of such notice to agree in writing
to pay such additional premium if such policy is obtainable at additional
cost (in the case of Tenant, pro rata in proportion of Tenant's rentable
area to the total rentable area covered by such insurance); and if such
other party does not so agree or the waiver shall not be obtainable, then
the provisions of this Section 8.04 shall be null and void as to the risks
covered by such policy for so long as either such waiver cannot be
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obtained or the party in whose favor a waiver of subrogation is desired
shall refuse to pay the additional premium. If the release of either
Landlord or Tenant, as set forth in the second sentence of this Section
8.04, shall contravene any law with respect to exculpatory agreements,
the liability of the party in question shall be deemed not released, but no
action or rights shall be sought or enforced against such party unless and
until all rights and remedies against the other's insurer are exhausted and
the other party shall be unable to collect such insurance proceeds.
B. The waiver of subrogation referred to in
Subsection 8.04A above shall extend to the agents and employees of each
party, but only if and to the extent that such waiver can be obtained
without additional charge (unless such party shall pay such charge).
Nothing contained in this Section 8.04 shall be deemed to relieve either
party from any duty imposed elsewhere in this Lease to repair, restore
and rebuild.
Section 8.05. In the event of any permitted or approved sublease
or occupancy (by a person other than Tenant) of all or a portion of the
Demised Premises, all of the covenants and obligations on the part of
Tenant set forth in this Article 8 shall bind and be fully applicable to the
subtenant or occupant (as if such subtenant or occupant were Tenant
hereunder) for the benefit of Landlord.
ARTICLE 9
DAMAGE OR CASUALTY
Section 9.01. If the Demised Premises or any part thereof shall
be damaged by fire or other insured casualty and Tenant shall give
prompt written notice thereof to Landlord, then Landlord shall, subject to
the provisions of Sections 9.02 and 9.03, proceed with reasonable
diligence to repair or cause to be repaired such damage at Landlord's
expense if and to the extent that such repair is fully paid for with the net
proceeds of insurance, if any, recovered with respect to the damage, but
in no event greater than the scope of Landlord's construction of the
Demised Premises on the commencement of the Term. If the Demised
Premises, or any material part thereof, shall be rendered untenantable or
inaccessible by reason of such damage and such damage shall not be the
result of the gross negligence or willful misconduct of Tenant or of
Persons Within Tenant's Control, then the Fixed Rent and Recurring
Additional Rent hereunder, or an amount thereof apportioned according
to the area of the Demised Premises so rendered untenantable (if less
than the entire Demised Premises shall be so rendered untenantable),
shall be abated for the period from the date of such damage to date when
the damage shall have been repaired as aforesaid. If Landlord,
Overlandlord or any Mortgagee shall be unable to collect the rent
insurance proceeds applicable to such damage because of some action or
inaction on the part of Tenant or of Persons Within Tenant's Control,
then there shall be no abatement of Fixed Rent or Recurring Additional
Rent. Tenant covenants and agrees to reasonably cooperate with
Landlord, Overlandlord and any Mortgagee in their efforts to collect
insurance proceeds (including rent insurance proceeds) payable to such
parties. Landlord shall not be liable for any delay which may arise by
reason of adjustment of insurance on the part of Landlord and/or Tenant,
or any cause beyond the control of Landlord or contractors employed by
Landlord.
Section 9.02. Landlord shall not be liable for any inconvenience
or annoyance to Tenant or injury to the business of Tenant resulting in
any way from damage from fire or other casualty or the repair thereof.
Tenant understands that Landlord, in reliance upon the provisions set
forth in Section 8.03, will not carry insurance of any kind on Tenant's
furnishings, furniture, contents, fixtures, equipment, Alterations and
leasehold improvements (other than Landlord's Work) (including
horizontal portions of the Building Systems that are located within and
serving the Demised Premises, and expressly including any ventilation
and air-conditioning equipment and any private bathrooms in the
Demised Premises), and that Landlord shall not be obligated to repair
any damage thereto or replace the same.
Section 9.03. Notwithstanding anything to the contrary contained
in Sections 9.01 and 9.02 above, in the event that:
(i) the Building shall be also damaged by such fire or other
casualty so that substantial alteration or reconstruction of the Building
shall, in Landlord's sole and unfettered opinion, be required (whether or
not the Demised Premises shall have been damaged by such fire or other
casualty and without regard to the structural integrity of the Building), or
(ii) the Demised Premises are totally or substantially damaged
or are rendered wholly or substantially untenantable, or
(iii) there is any damage to the Demised Premises within the last
two (2) years of the Term, and the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then Landlord may, in Landlord's
sole and absolute discretion, terminate this Lease and the term and estate
hereby granted, by notifying Tenant in writing of such termination within
ninety (90) days after the date of such damage. In the event that such a
notice of termination shall be given, then this Lease and the term and estate
hereby granted shall expire as of the date of termination stated in said
notice with the same effect as if that were the date hereinbefore set for the
expiration of the Term, and the Fixed Rent and additional rent hereunder shall
be apportioned as of such date.
Section 9.04. Except as may be provided in Section 8.04,
nothing herein contained shall relieve Tenant from any liability to
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Landlord or to Landlord's insurers in connection with any damage to the
Demised Premises or the Building by fire or other casualty if Tenant
shall be legally liable in such respect.
Section 9.05. Tenant shall throughout the Term provide fire
wardens and searchers as required under NYC Local Law No. 5 of
1973, as heretofore and/or hereafter amended.
Section 9.06. Tenant shall give Landlord notice of the occurrence
of any fire, casualty or other accident in the Demised Premises promptly
after Tenant becomes aware thereof.
Section 9.07. This Lease shall be considered an express
agreement governing any case of damage to or destruction of the
Building or any part thereof by fire or other casualty, and Section 227 of
the Real Property Law of the State of New York (providing for such a
contingency in the absence of express agreement), and any other law of
like import now or hereafter in force, shall have no application in such
case.
Section 9.08. Notwithstanding anything to the contrary contained
in this Article 9:
(i) if the Demised Premises shall be totally or
substantially damaged, shall be rendered wholly or substantially
untenantable or shall be rendered inaccessible as a result of fire or other
casualty during the first six (6) years of the Term hereof, then, within forty-
five (45) days following the date on which Tenant shall have given notice
to Landlord, in accordance with the provisions of this Article 9, of such
damage, untenantability or inaccessibility Landlord shall deliver to
Tenant an estimate prepared by a reputable contractor selected by
Landlord setting forth such contractor's estimate as to the time
reasonably required to repair such damage (the "Contractor's Estimate").
If (A) the period to repair set forth in such Contractor's Estimate shall
exceed two hundred seventy (270) days from the date of such fire or
other casualty or (B) Landlord fails to complete such repairs or restore
access to the Demised Premises within two hundred seventy (270) days
from the date of casualty (the "Casualty Repair Period") and Landlord's
failure to complete such repairs or restore access to the Demised
Premises does not arise from (1) any of the reasons set forth in Section
32.01 hereof, (2) any act or omission on the part of Tenant or Persons
Within Tenant's Control, (3) any of the reasons set forth in Paragraph
H(2) of Exhibit C, or (4) Tenant's failure to comply with the provisions
of Exhibit C, then Tenant may elect to terminate this Lease by notice
(the "Casualty Termination Notice") to Landlord given not later than:
(x) thirty (30) days following delivery to Tenant of the Contractor's
Estimate with respect to clause (A) of this sentence; and (y) five (5) days
following the expiration of the Casualty Repair Period with respect to
clause (B) of this sentence (time being of the essence with respect to such
thirty (30) day and five (5) day periods). If Tenant shall exercise such
election, the Term shall terminate upon the thirtieth (30th) day following
the date upon which such notice of terminate is given by Tenant to
Landlord as if such date was the date hereinabove set forth as the
Expiration Date, and the Fixed Rent and additional rent hereunder shall
be apportioned as of such date. In the event that Landlord shall have
failed to complete such repairs or restore access to the Demised Premises
within the Casualty Repair Period and Tenant shall have elected to
terminate this Lease pursuant to the provisions of clause (B) of this
Section 9.08, then, notwithstanding Tenant's delivery of the Casualty
Termination Notice, if Landlord shall have substantially completed the
repairs or restored access to the Demised Premises or shall have
rendered the Demised Premises to a tenantable condition, and Landlord
shall tender to Tenant possession of the Demised Premises within thirty
(30) days following Landlord's receipt of the Casualty Termination
Notice, then Tenant's Casualty Termination Notice shall be null and void
and of no force and effect, or
(ii) if the Demised Premises are totally or
substantially damaged or are rendered wholly or substantially
untenantable during the last year of the Term, then Tenant may terminate
this Lease and the Term and estate hereby granted, by notifying Landlord
in writing within thirty (30) days after the date of such damage or
untenantability (time being of the essence with respect to such notice).
In the event that Tenant shall give a notice of termination pursuant to this
Section 9.08, then this Lease and the term and estate hereby granted shall
expire as of the date of termination stated in said notice with the same
effect as if that were the Expiration Date of the Term of this Lease, and
the Fixed Rent and additional rent hereunder shall be apportioned as of
such date.
ARTICLE 10
ASSIGNMENT AND SUBLETTING
Section 10.01.
A. As a material inducement to Landlord to enter into
this Lease, Tenant covenants and agrees, for Tenant and Tenant's heirs,
distributees, executors, administrators, legal representatives, successors
and assigns, that neither this Lease nor the term and estate hereby
granted, nor any part hereof or thereof, will be assigned, or advertised
for assignment, mortgaged, pledged, encumbered or otherwise
transferred, by operation of law or otherwise, and that neither the
Demised Premises, nor any part thereof, will be sublet or occupied by
anyone other than Tenant, or for any purpose other than as hereinbefore
set forth, without the prior written consent of Landlord (which consent,
unless expressly provided to the contrary in this Article 10, may be
granted, withheld or conditioned in Landlord's sole and absolute
discretion) in every case.
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B. The direct or indirect transfer of fifty (50%)
percent or more (aggregating all multiple and/or prior transfers) of:
(i) the shares of a corporate tenant, or (ii) the shares of any corporation
of which Tenant is an immediate or remote subsidiary, or (iii) the
beneficial or legal interests of a tenant that is a business entity other than
a corporation, in each case including transfers by operation of law, and
including a related or unrelated series of transactions, shall be deemed an
assignment of this Lease for the purposes of this Article 10. For the
purposes hereof, "shares" of a corporate tenant or other corporation shall
be deemed to include: (x) the issued and outstanding shares of any class
of the voting stock of a corporation, and/or (y) the issued and
outstanding shares of any class of convertible non-voting stock,
debentures or securities of a corporation. Issuance of new corporate
shares of a corporation or partnership interests by a partnership, and/or
the issuance of a new class of voting stock or convertible non-voting
stock or debentures or securities of a corporation which results in a
transfer of control of that corporation, or the execution of an agreement
affecting the power to vote fifty (50%) percent or more of the issued and
outstanding shares of any class of stock or securities of a corporation,
shall each be deemed to be a "transfer" for the purposes hereof. In
implementation of the foregoing provisions (but subject to the provisions
of Subsection 10.02C below), if Tenant shall be a corporation, then,
within ten (10) days following Landlord's written request therefor,
Tenant shall furnish to Landlord a statement verified by an officer of
Tenant setting forth the details of the then present ownership and all
prior transfers of the issued and outstanding stock of the corporation, and
such other information relating to such stock ownership and transfer of
stock or securities as Landlord may request in such notice.
Section 10.02.
A. Tenant may sublet all or part of the Demised
Premises or assign Tenant's interest in this Lease and the leasehold estate
hereby created to a corporation or other business entity which controls, is
controlled by or is under common control with, Tenant (herein referred
to as a "Related Corporation"), provided that: (i) Tenant shall not then
be in default with respect to any of Tenant's obligations under this Lease
(after notice and the expiration of the applicable cure period, if any), (ii)
not less than ten (10) days prior to such subletting or assignment, Tenant
shall furnish Landlord with the name of such Related Corporation,
together with a certification of Tenant, and such other proof as Landlord
may reasonably request, that such subtenant or assignee is a Related
Corporation of Tenant, (iii) in the reasonable judgment of Landlord, the
proposed subtenant or assignee is of a character which is in keeping with
the standards of Landlord for the Building, and (iv) for the entire term of
such sublease or assignment, the subtenant or assignee thereunder shall
continue to be a Related Corporation of Tenant. In connection with the
information to be provided to Landlord pursuant to this Subsection
10.02A, Landlord shall have the right, at any reasonable time and from
time to time, to examine such books and records of Tenant as may be
reasonably necessary to establish that such subtenant or assignee remains
a Related Corporation of Tenant, and that no rent is being paid to Tenant
by such Related Corporation. Notwithstanding the foregoing, however,
if such Related Corporation is a publicly-held corporation, Landlord shall
have no right to examine such books and records; provided, however,
that at any reasonable time and from time to time upon Landlord's
reasonable request, Tenant shall provide a certification, and such other
proof as Landlord may reasonably request, that such subtenant or
assignee continues to be a Related Corporation of Tenant. Such
subletting or assignment shall not be deemed to vest in any such Related
Corporation any right or interest in this Lease or the Demised Premises,
nor shall it relieve, release, impair or discharge any of Tenant's
obligations hereunder. For the purposes of this Article 10, the term
"control" shall be deemed to mean ownership of more than fifty (50%)
percent of all of the voting stock of such corporation, or more than fifty
(50%) percent of all of the legal and equitable interest in any other
business entity.
B. Tenant may assign or transfer Tenant's entire
interest in this Lease and the leasehold estate hereby created to a
"Successor Corporation" of Tenant (as hereinafter defined), provided
that: (i) Tenant shall not then be in default with respect to any of
Tenant's obligations under this Lease (after notice and the expiration of
the applicable cure period, if any), (ii) the proposed occupancy shall not
increase the office cleaning requirements (if any) or impose an extra
burden upon the Building equipment or Building services, and (iii) the
proposed assignee shall not be entitled, directly or indirectly, to
diplomatic or sovereign immunity, and shall be subject to the service of
process in, and the jurisdiction of the courts of, the State of New York.
The term "Successor Corporation" shall mean any of the following: (x)
a corporation into which or with which Tenant shall be merged or
consolidated, in accordance with applicable statutory provisions for the
merger or consolidation of corporations, provided that (whether by
operation of law or by effective provisions contained in the instruments
of merger or consolidation) the liabilities of the corporations participating
in such merger or consolidation are assumed by the corporation surviving
such merger or consolidation; or (y) a corporation acquiring this Lease
and the term hereof and the estate hereby granted, the goodwill and all
or substantially all of the other property and assets of Tenant, and
assuming all or substantially all of the liabilities of Tenant, or acquiring
substantially all of the then outstanding stock of Tenant; or (z) any
corporate successor to a Successor Corporation becoming such by either
of the methods described in clauses (x) and (y) above; provided that, in
each case: (1) such merger or consolidation, such acquisition and
assumption or such stock acquisition, as the case may be, shall be made
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for a good business purpose other than (and not principally for) the
purpose of transferring the leasehold estate created hereby, (2)
immediately after giving effect to any such merger or consolidation, such
acquisition and assumption or such stock acquisition, as the case may be,
the corporation surviving such merger or created by such consolidation
or acquiring such assets and assuming such liabilities or acquiring such
stock, as the case may be, shall have a net worth, as determined in
accordance with generally accepted accounting principles and certified to
Landlord by an independent certified public accountant, at least equal to
the net worth, similarly determined, of Tenant as of the date of this
Lease, and (3) proof reasonably satisfactory to Landlord of such business
purpose, and net worth shall have been delivered to Landlord at least ten
(10) days prior to the effective date of any such transaction. The
acquisition by Tenant of all or substantially all of the assets, together
with the assumption of all or substantially all of the obligations and
liabilities of any corporation or other business entity, shall be deemed to
be a merger for the purposes of this Article 10.
C. Notwithstanding anything to the contrary contained
herein, the transfer of the outstanding capital stock of any corporate
tenant shall not be deemed an assignment of this Lease (and Tenant shall
not be required to furnish Landlord with the information described in the
last sentence of Subsection 10.01B above) if such transfer shall be
effected by the sale of such stock through the "over-the-counter-market"
or through any recognized stock exchange, unless such stock shall be
sold, transferred or otherwise conveyed by persons deemed "insiders"
within the meaning of the Securities Exchange Act of 1934, as amended.
D. Supplementing the provisions of this Section 10.02,
if at any time Tenant shall be a privately-held corporation, Tenant shall
promptly notify Landlord in writing of the names of all owners and/or
holders of the issued and outstanding shares of capital stock of Tenant
(the "Shareholders"). Notwithstanding anything to the contrary contained
in this Article 10, the Shareholders shall have the right, upon notice to
Landlord, but without having to obtain the consent of Landlord, and
without the same constituting an assignment hereunder, to transfer their
stock in the Tenant to any of the following persons or entities (the
Shareholder and each of said persons and entities are hereinafter
collectively referred to as the "Transferees"): the Shareholders' spouse,
siblings, issue or any trust for the benefit of any of such parties, and
each of the Transferees shall have the right, upon notice to Landlord but
without having to obtain Landlord's consent thereto, and without the
same constituting an assignment hereunder, to transfer its stock in the
Tenant to any of the other Transferees.
E. Notwithstanding anything to the contrary contained
in this Article 10, provided that (i) Tenant shall not be in default (after
notice and the expiration of the applicable cure period, if any) with
respect to any obligation of Tenant under this Lease, and (ii) the
proposed occupancy shall not impose an extra burden upon the Building
equipment or Building services, Tenant shall have the right, without
being required to obtain the consent of Landlord, but upon not less than
ten (10) days prior written notice, to permit a portion of the Demised
Premises (not to exceed, in the aggregate, 3,250 rentable square feet) to
be used under a so-called "desk sharing agreement" by a Related
Corporation or a client of, or service provider to, Tenant, but only for
the uses permitted under this Lease, and only for such period as such
Related Corporation or such client of, or service provider to, Tenant,
shall remain a Related Corporation or a client of, or service provider to,
Tenant, as the case may be. Any such desk sharing agreement shall not
give rise to any rights under this Lease to any such occupant, shall be
subject and subordinate to all of the terms, covenants and conditions of
this Lease and, notwithstanding such desk sharing agreement, Tenant
shall remain fully liable for all of Tenant's obligations under this Lease.
Section 10.03.
A. Except with respect to assignments or sublets
described in Section 10.02 above, if Tenant shall desire to assign this
Lease or to sublet all or any portion of the Demised Premises, Tenant
shall submit to Landlord a written request for Landlord's consent to such
assignment or subletting, which request shall contain or be accompanied
by the following information: (i) the name and address of the proposed
assignee or subtenant; (ii) a fully executed binding letter of intent
containing the proposed terms and conditions of such assignment or
sublease (it being agreed that such letter will be delivered by Tenant to
Landlord at or prior to the time that Landlord grants its consent to such
assignment or sublease); (iii) the nature and character of the business of
the proposed assignee or subtenant and its proposed use of the Demised
Premises; and (iv) banking, financial and other credit information with
respect to the proposed assignee or subtenant reasonably sufficient to
enable Landlord to determine the financial responsibility of the proposed
assignee or subtenant. Landlord shall then have the following options
(the "Recapture Options"), which may be exercised by notice (the
"Recapture Notice") given to Tenant within thirty (30) days after
Landlord's receipt of Tenant's request for consent:
(x) Landlord may require Tenant to surrender
the Demised Premises to Landlord and to accept a termination of this
Lease as of a date (the "Recapture Date") to be designated by Landlord
in the Recapture Notice, which date shall not be less than thirty (30) days
nor more than one hundred twenty (120) days following the date of the
Recapture Notice; or
(y) Landlord may require Tenant to assign this
Lease to Landlord (without merger of Landlord's estates) or Landlord's
designee, effective as of a date which shall not be less than thirty (30)
days nor more than one hundred twenty (120) days following the date of
the Recapture Notice.
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B. If Landlord shall elect to require Tenant to
surrender the Demised Premises and accept a termination of this Lease,
then this Lease shall expire on the Recapture Date as if that date had
been originally fixed as the Expiration Date. Regardless of which
Recapture Option Landlord exercises under this Section 10.03 (i.e.,
whether to terminate this Lease or to take an assignment thereof),
Landlord shall be free to, and shall have no liability to Tenant (or to any
broker engaged by Tenant) if Landlord shall, lease the Demised Premises
to Tenant's prospective assignee or subtenant.
Section 10.04. If Landlord shall not exercise either of the
Recapture Options within the time period provided in Section 10.03
above, then Landlord shall not unreasonably withhold or delay consent to
the proposed assignment of this Lease or a proposed subletting of all or a
portion of the Demised Premises, provided that Tenant shall not then be
(i) in default with respect to any of Tenant's obligations under this Lease
after notice and the applicable grace period, if any or (ii) in receipt of
notice of default provided that notice was given prior to Tenant's written
request for Landlord's consent pursuant to Section 10.03A hereof and
provided further that the following additional conditions (which shall be
in addition to, and not in lieu of, the other terms, conditions and
requirements set forth elsewhere in this Article 10) shall be satisfied:
(i) The proposed assignee or subtenant shall not
be: (a) a school of any kind, or an employment or placement agency or
governmental or quasi-governmental agency, or a real estate brokerage
office or medical office or executive recruitment office, or any bank or
retail establishment, or (b) entitled, directly or indirectly, to diplomatic
or sovereign immunity, and the proposed assignee or subtenant shall be
subject to service of process in, and the jurisdiction of the courts of, the
State of New York;
(ii) The subletting or assignment shall be to a
reputable person, whose occupancy will be in keeping with the dignity
and character of the then use and occupancy of the Building, and whose
occupancy will not be more objectionable or more hazardous than that of
Tenant herein or impose any additional burden upon Landlord in the
operation of the Building;
(iii) The proposed assignee or subtenant shall
have, in the reasonable judgment of Landlord, sufficient financial worth
to perform the obligations of Tenant under this Lease; provided,
however, that if the sublease with such subtenant is for less than all of
the Demised Premises, such subtenant shall have sufficient financial
worth to perform the subtenant's obligations under such sublease;
(iv) No space shall be or have been advertised
or promoted to the general public at a lower rental rate than that being
asked by Landlord at the time for similar space in the Building; and
(v) The proposed assignee or subtenant (or any
person who directly or indirectly controls, is controlled by or is under
common control with, either (a) the proposed assignee or subtenant, or
(b) any person who controls the proposed assignee or subtenant) shall not
be a tenant, subtenant, occupant or assignee of any premises in the
Building, or a party who dealt or negotiated with Landlord or Landlord's
agent (directly or through a broker) with respect to the leasing of any
space in the Building during the twelve (12) months immediately
preceding Tenant's request for Landlord's consent.
Section 10.05. In the event of each and every permitted
assignment of Tenant's interest under this Lease, the following provisions
shall apply:
(i) The assignee shall assume and agree, in a
recordable writing delivered to Landlord on or before the effective date
of such assignment, to perform all of the terms, conditions and
agreements of this Lease on the part of Tenant to be kept, performed and
observed, and to become jointly and severally liable with the assignor
(and remote assignors, if any) for the performance thereof.
(ii) The assignor shall assign to the assignee all
of the assignor's right, title and interest and claim to the security
deposited hereunder.
(iii) The terms, covenants and conditions of this
Lease may be changed, altered or modified in any manner whatsoever by
Landlord and the assignee without the consent thereto of any remote or
immediate assignor, and no such change, alteration or modification shall
release the remote or immediate assignor from the performance and
observance by such remote and immediate assignor of any of the terms,
covenants and conditions on Tenant's part to be performed under this
Lease; provided, however, that if a change, alteration or modification
made after the date of an assignment of this Lease shall increase the
obligations of Tenant under this Lease, the assignor shall not be liable
with respect to such increase.
Section 10.06.
A. In the event of each and every permitted subletting
of all or any part of the Demised Premises, the following provisions shall
apply:
(i) No subletting shall be for a term ending
later than one (1) day prior to the Expiration Date.
(ii) The sublease shall provide that it is subject
and subordinate to this Lease and to all matters to which this Lease is or
shall be subordinate.
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(iii) The sublease and all of the subtenant's
rights thereunder shall be expressly made subject to all of the obligations
of Tenant under this Lease, and to the further condition and restriction
that the sublease shall not be assigned, encumbered or otherwise
transferred, or the subleased premises further sublet by the subtenant in
whole or in part, or any part thereof suffered or permitted by the
subtenant to be used or occupied by others, without the prior written
consent of Landlord (which consent may be granted, withheld or
conditioned in Landlord's sole and absolute discretion) in each instance,
except as expressly provided in this Article 10.
B. If Landlord shall consent to a proposed subletting
of all or any portion of the Demised Premises, then the written
instrument of consent, which shall also be executed and acknowledged by
Tenant and the subtenant, shall contain a provision substantially similar
to the following:
"The sublandlord [i.e., Tenant under this Lease] and the subtenant
hereby agree that, if the subtenant shall be in default of any obligation of
the subtenant under the sublease, which default also constitutes a default
by the sublandlord under the overlease [i.e., this Lease], then the
overlandlord [i.e., Landlord under this Lease] shall be permitted to avail
itself of all of the rights and remedies available to the sublandlord in
connection therewith. Without limiting the generality of the foregoing,
the overlandlord shall be permitted (by assignment of a cause of action or
otherwise) to institute an action or proceeding against the subtenant in the
name of the sublandlord in order to enforce the sublandlord's rights
under the sublease, and shall also be permitted to take all ancillary
actions (e.g., serve default notices and demands) in the name of the
sublandlord as the overlandlord shall reasonably determine to be
necessary. The sublandlord agrees to reasonably cooperate with the
overlandlord, and to execute such documents as shall be reasonably
necessary, in connection with the implementation of the foregoing rights
of the overlandlord. The sublandlord and the subtenant expressly
acknowledge and agree that the exercise by the overlandlord of any of
the foregoing rights and remedies: (i) shall not constitute an election of
remedies, (ii) shall not in any way impair the overlandlord's entitlement
to pursue other rights and remedies directly against the sublandlord, and
(iii) shall not establish any privity of relationship between the
overlandlord and the subtenant, or in any way create a landlord/tenant
relationship between the overlandlord and the subtenant."
Section 10.07.
A. If Landlord shall consent to any assignment of this
Lease or to any sublease of all or any part of the Demised Premises,
Tenant shall, in consideration therefor, pay to Landlord, as additional
rent hereunder, the following amounts (hereinafter being referred to as
"Profit"):
(i) in the case of an assignment, fifty (50%)
percent of the excess, if any, of (x) all amounts and other consideration
due or payable to Tenant and/or its designee for or by reason of such
assignment (including all amounts due or payable for the sale or rental of
Tenant's fixtures, leasehold improvements, equipment, furniture,
furnishings or other personal property in excess of the reasonable book
value of the same, as determined on the basis of Tenant's federal income
tax returns), over (y) any reasonable and customary brokerage fees
actually incurred by Tenant in connection with such assignment, the
actual reasonable out-of-pocket expense to Tenant for attorneys' fees, any
Alterations performed to prepare the Demised Premises for occupancy by
the assignee in connection with such assignment and any similar costs
(collectively, "Transfer Costs"); and
(ii) in the case of a sublease, fifty (50%)
percent of the excess, if any, of (x) the sum of (1) all rents, additional
rents and other consideration due or payable under the sublease to Tenant
by the subtenant, and (2) all other amounts and consideration due or
payable to Tenant or its designee for or by reason of such subletting
(including all amounts due or payable for the sale or rental of Tenant's
fixtures, leasehold improvements, equipment, furniture or other personal
property in excess of the reasonable book value of the same, as
determined on the basis of Tenant's federal income tax returns), over (y)
the sum of (1) that part of the Fixed Rent and additional rent hereunder
allocable to the subleased space and accruing for the corresponding
period during the term of the sublease, and (2) any Transfer Costs
actually incurred by Tenant in connection with such sublease.
B. Any amount(s) payable by Tenant pursuant to the
provisions of this Section 10.07 shall be paid by Tenant to Landlord as
and when amounts on account thereof are paid by or on behalf of any
assignee(s) and/or any sublessee(s) to Tenant or Tenant's designee, and
Tenant agrees to promptly advise Landlord thereof and furnish such
information with regard thereto as Landlord may reasonably request from
time to time.
C. Tenant shall furnish to Landlord, in the January
calendar month immediately following each calendar year during any part
of which any such sublease shall be in effect, a reasonably detailed
financial statement certified as being correct by an officer (or, if Tenant
is not a corporation, a principal) of Tenant, setting forth all sums
accruing during the prior calendar year and/or realized by Tenant from
such sublease, and a computation of the Profit accruing and/or realized
by Tenant during such prior calendar year. Tenant shall remit to
Landlord together with such statement any Profit or portion thereof on
account of such calendar year not previously remitted to Landlord.
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Section 10.08.
A. Each permitted assignee or transferee of Tenant's
interest in this Lease (but not a subtenant) shall assume and be deemed to
have assumed this Lease and all of Tenant's obligations under this Lease,
and shall be and remain liable jointly and severally with Tenant for the
payment of all Fixed Rent, additional rent, other charges and payments
due under this Lease, and for the full and timely performance of and
compliance with all the terms, covenants, conditions and agreements
herein contained on Tenant's part to be performed or complied with for
the entire Term. No assignment, sublease or transfer shall be effective
or binding on Landlord unless and until such assignee, subtenant or
transferee of Tenant shall deliver to Landlord a fully executed and
acknowledged duplicate original of the instrument of assignment,
sublease or transfer which contains a covenant of assumption (if not a
sublease) by an assignee or transferee of all of the obligations aforesaid,
and a confirmation (including a sublease) of the covenant under Section
10.01 prior to and preemptive of any similar rights of Tenant or any
subtenant, and shall obtain from Landlord the aforesaid written consent
prior thereto. In the event of any purported assignment, sublease or
transfer in contravention of the provisions of this Lease, Landlord may
elect to treat such purported assignee, subtenant or transferee as having
assumed this Lease jointly and severally with Tenant, without in any way
or to any extent binding Landlord to consent to such purported
assignment, sublease or transfer.
B. In no event shall any assignee, subtenant or other
occupant of the Demised Premises use the Demised Premises for any
purpose other than the Authorized Use.
Section 10.09. The consent by Landlord to an assignment or
subletting shall not relieve Tenant, the assignee or any subtenant from
obtaining the express consent in writing of Landlord (which consent,
unless expressly provided to the contrary in this Article 10, may be
granted, withheld or conditioned in Landlord's sole and absolute
discretion) to any other or further assignment or subletting (except for
assignments or sublettings made pursuant to Section 10.02 hereof).
Section 10.10.
A. If this Lease shall be assigned (whether or not in
violation of the provisions of this Article 10), Landlord may collect from
the assignee, and Tenant hereby authorizes and directs the assignee to
pay to Landlord, all rent (whether denominated as Fixed Rent or
otherwise), additional rent and other charges payable pursuant to the
instrument of assignment, with the net amount so collected by Landlord
to be applied to the Fixed Rent, additional rent and other charges herein
provided, but no such assignment or collection shall be deemed a waiver
of the covenant by Tenant under Section 10.01 above, nor shall the same
be deemed the acceptance by Landlord of the assignee as a tenant, or a
release of Tenant from the further performance of the covenants and
agreements on the part of Tenant to be performed as herein contained.
Each and every instrument of assignment shall contain the substance of
the foregoing provision.
B. If all or any portion of the Demised Premises shall
be sublet or occupied by anyone other than Tenant (whether or not in
violation of the provisions of this Article 10), then, upon demand made
by Landlord at any time following the occurrence of an Event of Default,
Landlord may collect from the subtenant or occupant, and Tenant hereby
authorizes and directs such party to pay to Landlord, all rent (whether
denominated as Fixed Rent or otherwise), additional rent and other
charges payable pursuant to such instrument, with the net amount so
collected by Landlord to be applied to the Fixed Rent, additional rent and
other charges herein provided, but no such subletting, occupancy or
collection shall be deemed a waiver of the covenant by Tenant under
Section 10.01 above, nor shall the same be deemed the acceptance by
Landlord of the subtenant or occupant as a tenant, or a release of Tenant
from the further performance of the covenants and agreements on the
part of Tenant to be performed as herein contained. Each and every
instrument of sublease and/or occupancy agreement shall contain the
substance of the foregoing provision.
C. If Landlord shall for any reason or cause recover
or come into possession of the Demised Premises before the Expiration
Date hereinbefore fixed for the expiration of the Term, or if an Event of
Default shall occur, then Landlord shall have the right (but not the
obligation) to take over any and all subleases or sublettings of the
Demised Premises or any part or parts thereof made or granted by
Tenant and to succeed to all of the rights and privileges of said subleases
and sublettings or such of them as Landlord may elect to take over and
assume, and Tenant hereby expressly assigns and transfers to Landlord
such of the subleases and sublettings as Landlord may elect to take over
and assume at the time of such recovery of possession, (or occurrence of
an Event of Default), and Tenant shall upon request of Landlord execute,
acknowledge and deliver to Landlord such further assignments and
transfers as may be necessary, sufficient and proper to vest in Landlord
the then existing subleases and sublettings. By its entry into a sublease,
each and every subtenant shall be deemed to have thereby agreed that,
upon said recovery of possession (or occurrence of an Event of Default)
and if Landlord shall so elect, Landlord may, in Landlord's sole and
absolute discretion, take over the right, title and interest of Tenant, as
sublandlord, under such sublease, in which case such subtenant shall: (i)
be deemed to have waived any right to surrender possession of the
subleased space or to terminate the sublease, (ii) be bound to Landlord
for the balance of the term of such sublease, and (iii) attorn to Landlord,
as its landlord, under all of the then executory terms, covenants and
conditions of this Lease, except that such subtenant shall be deemed to
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have expressly agreed that Landlord shall not (1) be liable for any
previous act or omission of Tenant under such sublease, (2) be subject to
any counterclaim, offset or defense, not expressly provided in such
sublease, which theretofore accrued to such subtenant against Tenant, or
(3) be bound by any previous modification of such sublease or by any
previous prepayment of more than one (1) monthly installment of rent.
The provisions of this Subsection 10.10C shall be self-operative, and no
further instrument shall be required to give effect thereto. However,
within ten (10) days after Landlord shall have notified any subtenant of
said election, such subtenant shall execute, acknowledge and deliver to
Landlord such instruments as Landlord may reasonably request to
evidence and confirm such attornment and the terms thereof. Each and
every sublease shall contain the substance of this Subsection 10.10C.
Section 10.11. Without limiting the generality of the covenant set
forth in Section 10.01 above, Tenant covenants and agrees that Tenant
shall not assign Tenant's interest under this Lease or sublet the Demised
Premises (or any portion thereof) to any tenant or occupant in the
Building. Tenant covenants and agrees not to accept on assignment of
any lease or sublease from, or become a subtenant of, any tenant or
occupant in the Building.
Section 10.12. Tenant shall reimburse Landlord on demand for
all reasonable costs (including all reasonable legal fees and
disbursements, as well as the costs of making investigations as to the
acceptability of a proposed assignee or subtenant) which may be incurred
by Landlord in connection with a request by Tenant that Landlord
consent to any proposed assignment or sublease.
Section 10.13. If Landlord shall decline to consent to any
proposed assignment or sublease in accordance with the provisions
hereof, or if Landlord shall exercise any of the Recapture Options under
Section 10.03 above, Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all loss, liability, damages, cost and
expense (including reasonable attorneys' fees disbursements), resulting
from any claims that may be made against Landlord by the proposed
assignee or subtenant or by any brokers or other persons claiming a
commission or similar compensation in connection with the proposed
assignment or sublease.
Section 10.14. Except as expressly provided to the contrary in
Section 10.02 hereof, in the event that Tenant shall assign Tenant's
interest in, to or under this Lease, or if Tenant shall sublet the Demised
Premises or any portion thereof, without having obtained Landlord's
prior written consent thereto or in violation of any of the other provisions
contained in this Lease, Landlord shall have the right to terminate this
Lease at any time thereafter without affording Tenant any grace period or
opportunity to cure. The acceptance by Landlord of any Fixed Rent or
additional rent paid, or of the performance of any obligation to be
performed by Tenant, by a purported assignee or subtenant shall not be
deemed (i) a consent by Landlord to the assignment or sublet to such
purported assignee or subtenant, (ii) a release by Landlord of Tenant's
performance of, or compliance with, any of the obligations to be
performed, or covenants or terms to be complied with, by Tenant
pursuant to this Lease, or (iii) a waiver of Landlord's right of
termination as set forth in the immediately preceding sentence.
Section 10.15. The listing of any name other than that of Tenant,
whether on the doors of the Demised Premises, on the Building
directory, elevators or otherwise, shall not operate to vest any right or
interest in this Lease or the Demised Premises, nor shall it be deemed to
be the consent of Landlord to any assignment or transfer of this Lease or
to any sublease of the Demised Premises or to the use or occupancy
thereof by third parties. It is expressly understood that any such listing
is a privilege extended by Landlord that is revocable at will by written
notice to Tenant.
ARTICLE 11
NON-LIABILITY; INDEMNIFICATION
Section 11.01. Neither Landlord nor Landlord's agents shall be
liable for: (i) any damage to property of Tenant or of others entrusted to
employees of Landlord or to Landlord's agents, nor for the loss or
damage to any property of Tenant or of Persons Within Tenant's Control
by theft or otherwise; (ii) any injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity,
water, rain, snow or leaks from any part of the Building or from the
pipes, appliances or plumbing works or from the roof, street or sub-
surface or from any other place or by dampness or by any other cause of
whatsoever nature, unless caused by the negligent act of Landlord or
Persons Within Landlord's Control; (iii) any such damage caused by
other tenants or persons in the Building or caused by operations in
construction of any private, public or quasi-public work; or (iv) any
latent defect in the Demised Premises or in the Building.
Section 11.02. If at any time any windows of the Demised
Premises shall be temporarily or permanently closed, darkened or
covered for any reason whatsoever, excluding the wrongful acts of
Landlord, Landlord shall not be liable for any damage Tenant may
sustain thereby, and Tenant shall not be entitled to any compensation
therefor nor abatement of rent, nor shall the same release Tenant from
Tenant's obligations hereunder or constitute an eviction.
Section 11.03. Tenant agrees, irrespective of whether Tenant
shall have been negligent in connection therewith, to indemnify, protect,
defend and save harmless, Landlord and Landlord's partners, officers,
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directors, contractors, agents and employees from and against any and all
liability (statutory or otherwise), claims, suits, demands, damages
(excluding consequential damages), judgments, costs, fines, penalties,
interest and expenses (including reasonable counsel and other
professional fees and disbursements incurred in any action or
proceeding), to which Landlord and/or any such partner, officer,
director, contractor, agent or employee may be subject or suffer arising
from, or in connection with: (i) any liability or claim for any injury to,
or death of, any person or persons, or damage to property (including any
loss of use thereof), occurring in the Demised Premises, or (ii) the use
and occupancy of the Demised Premises, or from any work, installation
or thing whatsoever done or omitted by Tenant (other than by Landlord
or Persons Within Landlord's Control) in or about the Demised Premises
during the Term and during the period of time, if any, prior to the
Commencement Date that Tenant may have been given access to the
Demised Premises, or (iii) any default by Tenant in the performance of
Tenant's obligations under this Lease, or (iv) any act, omission,
carelessness, negligence or misconduct of Tenant or of Persons Within
Tenant's Control; provided, however, that if such liability, claims, suits,
demands, damages, judgments, costs, fines, penalties, interest and
expenses are caused by the gross negligence or willful misconduct of
Landlord or any other person indemnified pursuant to this Section 11.03,
Tenant shall not be required to indemnify, protect, defend and save
harmless Landlord and Landlord's partners, officers, directors,
contractors, agents and employees as set forth in this Section 11.03.
Section 11.04. Tenant shall reimburse and compensate Landlord,
as additional rent within thirty (30) days after rendition of a statement,
together with back-up documentation, for all reasonable actual out-of-
pocket expenditures, costs, fees, expenses, judgments, penalties, damages
and fines sustained or incurred by Landlord (including reasonable counsel
and other professional fees and disbursements incurred in connection with
any action or proceeding) in connection with any matter set forth in this
Article 11, or non-performance or non-compliance with or breach or
failure by Tenant to observe any term, covenant, agreement, provision or
condition of this Lease, or breach of any warranty or representation by
Tenant made in this Lease. If, in any action or proceeding naming both
Landlord and Tenant, liability arising out of the negligence of Tenant is
established, Tenant shall (i) indemnify Landlord in accordance with the
provisions of this Article 11 and (ii) waive any right of contribution
against Landlord. Reference in this Article 11 to Landlord shall for all
purposes be deemed to include the lessor of any Underlying Lease and
each Mortgagee.
Section 11.05.
A. Tenant agrees that Tenant's sole remedies in any
instances where Tenant disputes Landlord's reasonableness in exercising
judgment or withholding its consent or approval pursuant to a specific
provision of this Lease, shall be those in the nature of an injunction,
declaratory judgment or specific performance, the rights to monetary
damages or other remedies being hereby specifically and irrevocably
waived by Tenant. Without limiting the generality of the foregoing, and
unless expressly provided to the contrary in this Lease, Tenant agrees
that, in any situation in which Landlord's consent or approval is required
pursuant to this Lease, the same may be granted or withheld in
Landlord's sole and absolute discretion, and/or be made subject to such
reasonable conditions as Landlord, in Landlord's sole and absolute
discretion, may deem reasonably appropriate. If Landlord shall withhold
consent in any situation in which Landlord's consent or approval is
required, and such consent or approval may not be unreasonably
withheld, pursuant to this Lease, Landlord shall provide Tenant with a
statement setting forth in reasonable detail Landlord's reasons for
withholding such consent or approval within thirty (30) days of Tenant's
request therefor; provided, however, that Landlord's failure to provide
such statement shall not negate or in any way affect Landlord's previous
withholding of such consent.
B. In any instance where this Lease expressly provides
that, in connection with a proposed Alteration, assignment or subletting,
Landlord's consent or approval is required and may not unreasonably be
withheld, if Tenant shall dispute the reasonableness of Landlord's refusal
to grant such consent or approval, Tenant shall have the right to submit
said dispute to binding arbitration under the Expedited Procedures
provisions (Rules 53 through 57 in the May 1, 1992 edition) of the
Commercial Arbitration Rules of the American Arbitration Association
("AAA"). In cases where Tenant shall elect to utilize such arbitration:
(i) the parties will have no right to object if the arbitrator so appointed
was on the list submitted by the AAA and was not objected to in
accordance with Rule 54, (ii) the first hearing shall be held within seven
(7) Business Days after the appointment of the arbitrator, (iii) if the
arbitrator shall find that Landlord acted unreasonably in withholding a
consent or approval, such consent or approval shall be deemed granted,
and (iv) the losing party in such arbitration shall pay the arbitration costs
charged by AAA and/or the arbitrator as well as the reasonable
attorneys' fees incurred by the successful party.
Section 11.06.
A. Tenant acknowledges receipt of advice from
Landlord to the effect that the Demised Premises and other portions of
the Building contain (or may contain) asbestos. Tenant expressly agrees
that: (i) Landlord shall have no liability whatsoever to Tenant, or to any
person or entity claiming by, through or under Tenant, on account of, or
in connection with, the presence of asbestos in the Demised Premises or
the Building, and (ii) Tenant's obligation to keep, observe and perform
all of the terms, provisions, covenants and conditions on the part of
Tenant to be kept, observed and performed pursuant to this Lease shall
not in any way be diminished or contested on account of the presence of
such asbestos.
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B. Notwithstanding anything to the contrary contained
in the foregoing Subsection 11.06A, Landlord represents that Landlord
has removed all asbestos-containing material, as defined by applicable
Legal Requirements, located in the Demised Premises, except from the
Building core and wet columns, in compliance with all applicable Legal
Requirements. With respect to any asbestos-containing material which
shall remain in the Demised Premises, Landlord represents that the
Demised Premises and such asbestos-containing material shall be in
compliance with all applicable Legal Requirements. If any Legal
Requirements which shall become effective following the date hereof
shall require the removal, containment, treatment or encapsulation of any
asbestos-containing material which may exist in the Demised Premises,
Landlord shall promptly cause the removal, containment, treatment or
encapsulation of any such asbestos-containing material, at Landlord's
own cost and expense, it being understood and agreed that Landlord's
obligation to so treat such asbestos-containing materials is subject to the
removal by Tenant, at Tenant's sole cost and expense, of such
installations of Tenant as are necessary to remove so that Landlord shall
have adequate access for such treatment of asbestos-containing materials.
Landlord shall have no obligation for the restoration or repair of such of
Tenant's installations. Notwithstanding anything to the contrary
contained in this Subsection 11.06B, if the removal, containment,
treatment or encapsulation of such asbestos-containing material shall be
necessitated by (i) any Alterations (other than Landlord's Work)
performed by Tenant in or about the Demised Premises, or (ii) the
negligence or willful misconduct of Tenant or Persons Within Tenant's
Control, Landlord shall cause such asbestos-containing material to be
removed, contained, treated or encapsulated solely at Tenant's cost and
expense; provided, however, that Tenant shall cooperate with any such
removal, containment, treatment or encapsulation undertaken by
Landlord.
ARTICLE 12
CONDEMNATION
Section 12.01. If the whole of the Demised Premises (or a
portion thereof consisting of fifty (50%) percent or more of the rentable
square foot area of the Demised Premises) shall be lawfully condemned
or taken in any manner for any public or quasi-public use, this Lease and
the Term and estate hereby granted shall forthwith cease and terminate as
of the date of vesting of title. If only a part of the Demised Premises
shall be so condemned or taken, then, effective as of the date of vesting
of title, the Fixed Rent and additional rent hereunder shall be abated in
an amount thereof apportioned according to the area of the Demised
Premises so condemned or taken. If only a part of the Building shall be
so condemned or taken (whether or not the Demised Premises be
affected), then (i) Landlord may, at Landlord's option, terminate this
Lease and the term and estate hereby granted as of the date of such
vesting of title by notifying Tenant in writing of such termination within
sixty (60) days following the date on which Landlord shall have received
notice of vesting of title, and (ii) if such condemnation or taking shall
deprive Tenant of access to the Demised Premises and Landlord shall not
have provided or undertaken steps to provide other comparable means of
access thereto, or if such condemnation or taking shall otherwise
materially impair the conduct of Tenant's business at the Demised
Premises. Tenant may, at Tenant's option, by delivery of notice in
writing to Landlord within sixty (60) days following the date on which
Tenant shall have received notice of vesting of title, terminate this Lease
and the term and estate hereby granted as of the date of vesting of title.
If neither Landlord nor Tenant elects to terminate this Lease as aforesaid,
this Lease shall be and remain unaffected by such condemnation or
taking, except that the Fixed Rent and additional rent shall be abated to
the extent, if any, hereinbefore provided in this Article 12. If only a
part of the Demised Premises consisting of less than fifty (50%) percent
of the rentable square foot area of the Demised Premises shall be so
condemned or taken and this Lease and the term and estate hereby
granted are not terminated as hereinbefore provided, Landlord will, with
reasonable diligence and at its expense, restore the remaining portion of
the Demised Premises as nearly as practicable to the same condition as it
was in prior to such condemnation or taking, provided that such
restoration shall not exceed the scope of the work done in originally
constructing the Building and that the cost thereof shall not exceed the
net proceeds of the award received by Landlord for the value of the
portion of the Demised Premises so taken, and Tenant shall be entitled to
receive no part of such award.
Section 12.02. In the event of any condemnation or taking
hereinbefore mentioned of all or a part of the Building or the Demised
Premises, Landlord shall be entitled to receive the entire award in the
condemnation proceeding, including any award made for the value of the
estate vested by this Lease in Tenant, and Tenant hereby expressly
assigns to Landlord any and all right, title and interest of Tenant now or
hereafter arising in or to any such award or any part thereof, and Tenant
shall be entitled to receive no part of such award. In any condemnation
proceeding, Tenant may submit a separate claim against the condemning
authority for moving expenses, the value of Tenant's trade fixtures,
equipment and the cost of removal or relocation, if such separate claims
are allowable as such and do not reduce the award otherwise payable to
Landlord.
Section 12.03. If all or any portion of the Demised Premises
shall be taken by the exercise of the right of eminent domain for
occupancy for a limited period, this Lease shall continue in full force and
effect and Tenant shall continue to pay in full the Fixed Rent, additional
rent and other charges herein reserved, without reduction or abatement,
and Tenant shall be entitled to receive, for itself, so much of any award
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or payment made for such use as is equal to the aforementioned
payments that are actually made by Tenant to Landlord during such
temporary taking, except as hereinafter provided, and Landlord shall
receive the balance thereof. If such award or payment is made in a lump
sum, Landlord shall receive out of such lump sum (and Tenant shall be
credited with) an amount equal to the total of the Fixed Rent, additional
rent and other charges due to Landlord or to be paid by Tenant under the
terms of this Lease for the period of such taking (less any amounts
theretofore paid by Tenant to Landlord attributable to the period of such
taking), and such amount received by Landlord shall be held by Landlord
as a fund which Landlord shall apply from time to time to the payments
due to Landlord from Tenant under the terms of this Lease. Out of the
balance of such sum, if any, Tenant shall be paid in an amount equal to
the amounts, if any, theretofore paid by Tenant to Landlord attributable
to the period of such taking, and Landlord shall be paid the remainder of
such balance. If such taking is for a period not extending beyond the
Term of this Lease, and if such taking results in changes or Alterations
in the Demised Premises which would necessitate an expenditure to
restore the Demised Premises to its former condition, then Tenant at the
termination of such taking shall, at its expense, restore the Demised
Premises to its former condition (subject to reasonable wear and tear,
damage from fire or other casualty, condemnation or eminent domain,
and repairs which are not the responsibility of Tenant under the terms of
this Lease), and such portion of the award or payment payable to
Landlord, if any, in excess of the Fixed Rent, additional rent and other
charges for the period of such taking as is necessary to cover the
expenses of such restoration shall be applied to such restoration, and the
balance necessary, if any, shall be paid by Tenant. Tenant shall also pay
all fees, costs and expenses of every character and kind of Landlord
incurred in connection with such limited taking and obtaining the award
therefor, and in connection with such restoration.
ARTICLE 13
ACCESS; BUILDING NAME
Section 13.01. Landlord reserves the right at any time and from
time to time (without thereby creating an actual or constructive eviction
or incurring any liability to Tenant therefor) to place such structures and
to make such relocations, changes, Alterations, additions, improvements,
Repairs and replacements on the Land and in or to the Building
(including the Demised Premises) and the Building Systems, and the
operation of the Building Systems, as well as in or to the street
entrances, subway entrances, lobbies, halls, plazas, washrooms, tunnels,
elevators, stairways and other parts thereof and to erect, maintain and
use pipes, ducts and conduits in and through the Demised Premises, all
as Landlord may in its sole discretion deem necessary or desirable;
provided, however, that (i) Landlord shall use commercially reasonable
efforts (but shall not be obligated to use overtime or premium pay labor)
to minimize interference with Tenant's use and occupancy of the
Demised Premises arising from the making of such Repairs, Alterations
and improvements, (ii) any pipes, conduits or ducts installed in or
through the Demised Premises shall be concealed behind interior walls,
floors or ceilings, if feasible, or shall be enclosed and "boxed in"
adjacent to such walls, floors or ceilings, (iii) when completed, the
installation of such pipes, ducts or conduits shall not reduce the useable
areas of the Demised Premises more than a de minimis amount, (iv)
Landlord shall promptly repair all damage to the Demised Premises
caused by such work, (v) all work affecting the Demised Premises shall
be subject to the notice requirements set forth in Section 13.03 below,
and (vi) upon completion of such Repairs, Alterations and improvements,
Tenant shall have commercially reasonable access to the Demised
Premises and the Building Systems shall be in working order. Landlord
shall also have the right at Landlord's sole cost and expense to install
solar control window film on, or otherwise alter for energy savings
purpose, any windows of the Demised Premises. Nothing contained in
this Article 13 shall be deemed to relieve Tenant of any duty, obligation
or liability of Tenant with respect to making any repair, replacement or
improvement or complying with any Legal Requirements as in this Lease
provided.
Section 13.02. Neither this Lease nor any use by Tenant shall
give Tenant any right or easement in or to the use of any door or
hallways, or any passage or any tunnel or any concourse or arcade or
plaza or to any connection of the Building with any subway, railroad or
any other building or to any public conveniences, and the use of such
doors, halls, passages, tunnels, concourses, arcades, plazas, connections
and conveniences may upon prior notice to Tenant (which may be given
orally), except in the event of an emergency (in which event entry shall
be permitted at any time without notice) be reasonably regulated or
discontinued at any time and from time to time by Landlord without
Landlord incurring any liability to Tenant therefor and without affecting
the obligations of Tenant under this Lease.
Section 13.03. Landlord, Overlandlord and any Mortgagee, and
their representatives, may enter the Demised Premises at all reasonable
hours upon prior notice to Tenant (which may be given orally), except in
the event of an emergency (in which event entry shall be permitted at any
time without notice) and without Tenant being present, for the purpose of
inspection or of making Repairs, Alterations, additions, restorations,
replacements or improvements in or to the Demised Premises or the
Building or Building Systems or of complying with Legal Requirements
or the requirements of any Insurance Board, or of exercising any right
reserved to Landlord by this Lease (including the right, during the
progress of any Repairs or Alterations or while performing work or
furnishing materials in connection with compliance with all such Legal
Requirements or requirements of any Insurance Board, to keep and store
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within the Demised Premises all necessary materials, tools and
equipment), provided that the foregoing shall not be deemed to impose
any obligation on Landlord or Overlandlord or Mortgagee to make any
Repairs or Alterations. Landlord shall use reasonable efforts to minimize
interference with Tenant's use and occupancy of the Demised Premises
while performing the foregoing Alterations, Repairs, improvements,
changes and replacements; provided, however, that Landlord shall have
no obligation to employ contractors or labor at overtime or premium
rates or to incur any other overtime costs or expenses in connection with
the performance of such Alterations, Repairs, improvements, changes or
replacements.
Section 13.04. Landlord may, at reasonable times upon prior
notice (which notice may be given orally) and without Tenant being
present, show the Demised Premises to any prospective purchaser,
lessee, mortgagee, or assignee of the Building and/or the Land, or of
Landlord's interest therein, and their representatives. During the twelve
(12) month period preceding the Expiration Date, Landlord may similarly
show the Demised Premises or any part thereof to any person
contemplating the leasing of all or a portion of the same.
Section 13.05. Without incurring any liability to Tenant,
Landlord may permit access to the Demised Premises and open the same,
whether or not Tenant shall be present, upon demand of any receiver,
trustee, assignee for the benefit of creditors, sheriff, marshal or court
officer entitled to, or purporting to be entitled to, such access for the
purpose of taking possession of, or removing, Tenant's property or for
any other lawful purpose (but by this provision any action by Landlord
hereunder shall not be deemed a recognition by Landlord that the person
or official permitted to such access has any right to such access or
interest in or to this Lease, or in or to the Demised Premises), or upon
demand of any representative of the fire, police, building, sanitation or
other department of the city, state or federal governments.
Section 13.06. Landlord shall have the absolute right at any time,
and from time to time, to name and change the name of the Building and
to change the designated address of the Building. The Building may be
named after any person, or otherwise, whether or not such name shall
be, or shall resemble, the name of a tenant of space in the Building.
Section 13.07. Any reservation of a right by Landlord to enter
upon the Demised Premises and to make or perform any Repairs,
Alterations or other work in, to or about the Demised Premises which, in
the first instance, is the obligation of Tenant pursuant to this Lease, shall
not be deemed to: (i) impose any obligation on Landlord to do so, (ii)
render Landlord liable (to Tenant or any third party) for the failure to do
so, or (iii) relieve Tenant from any obligation to indemnify Landlord as
otherwise provided elsewhere in this Lease.
Section 13.08. At any time before or during the Term, Landlord
may elect to relocate the Demised Premises to other space of
substantially equal size (the "Relocation Space") on the same or a higher
or lower floor in the Building; provided, however, that (i) the Relocation
Space shall be on or above the fourteenth (14th) floor and (ii) Landlord
shall use reasonable efforts to locate the Relocation Space on the
"Broadway side" of the Building and, in the event that Landlord is
unable to do so, Landlord shall locate the Relocation Space on the
"Nassau Street side" of the Building. Landlord may exercise this
election by giving Tenant at least ninety (90) days prior written notice
thereof. Upon Landlord making such election: (i) the floor plans
annexed hereto as Exhibit A shall be replaced with substitute floor plans
showing the Relocation Space, (ii) appropriate adjustment shall be made
for differences in measurements between the original Demised Premises
and the Relocation Space, and (iii) all references in this Lease to the
Demised Premises shall thereafter be deemed to refer to the Relocation
Space. At the time that Landlord shall exercise said relocation rights,
Landlord shall, in Landlord's discretion: (x) to the extent practicable,
build out the Relocation Space and all appurtenances used by Tenant in
connection therewith (e.g., electric submetering and cabling), or (y)
require Tenant to do so and reimburse Tenant for the reasonable cost
thereof.
ARTICLE 14
BANKRUPTCY
Section 14.01. This Lease and the term and estate hereby granted
shall be subject to the conditional limitation that, if any one or more of
the following events shall occur: (i) Tenant shall (a) have applied for or
consented to the appointment of a receiver, trustee, liquidator, or other
custodian of Tenant or any of its properties or assets, (b) have made a
general assignment for the benefit of creditors, (c) have commenced a
voluntary case for relief as a debtor under the United States Bankruptcy
Code or filed a petition to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debts, dissolution or
liquidation law or statute or an answer admitting the material allegations
of a petition filed against it in any proceeding under any such law, or (d)
be adjudicated a bankrupt or insolvent, or (ii) without the acquiescence
or consent of Tenant, an order, judgment or decree shall have been
entered by any court of competent jurisdiction (a) approving as properly
filed a petition seeking relief under the United States Bankruptcy Code or
any bankruptcy, reorganization, insolvency, readjustment of debts,
dissolution or liquidation law or statute with respect to Tenant or all or
liquidation law or statute with respect to Tenant or all or a substantial
part of its properties or assets, or (b) appointing a receiver, trustee,
liquidator or other custodian or all or a substantial part of its properties
or assets, and such order, judgment or decree shall have continued
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unstayed and in effect for any period of ninety (90) days or more, then
this Lease may be canceled and terminated by Landlord by the sending of
a written notice to Tenant within a reasonable time after Landlord shall
be notified of the happening of any of the aforedescribed events. Neither
Tenant, nor any person claiming through or under Tenant or by reason
of any statute or order of court, shall thereafter be entitled to possession
of the Demised Premises, but shall forthwith quit and surrender the
Demised Premises. If this Lease shall have been theretofore assigned in
accordance with its terms, the provisions of this Article shall be
applicable only to the party then owning Tenant's interest in this Lease.
Section 14.02. Without limiting any of the foregoing provisions
of this Article, if, pursuant to the United States Bankruptcy Code, Tenant
shall be permitted to assign this Lease notwithstanding the restrictions
contained in this Lease, Tenant agrees that adequate assurance of future
performance by an assignee expressly permitted under such Code shall be
deemed to mean (a) the deposit of cash security in an amount equal to
the sum of three (3) monthly installments of the Fixed Rent plus
additional rent under Article 19 of this Lease for the calendar year
preceding the year in which such assignment is intended to become
effective, which deposit shall be held by Landlord for the balance of the
Term, without interest, as security for the full performance of all of the
obligations under this Lease on the part of Tenant to be performed, and
(b) evidence by financial statement prepared and certified by a certified
public accountant that the assignee has a current net worth, after
including the assignment and excluding the value of the leasehold,
sufficient to meet all of the remaining rental obligations under this Lease.
ARTICLE 15
DEFAULTS, REMEDIES, DAMAGES
Section 15.01. This Lease and the term and estate hereby granted
shall be subject to the conditional limitation that, if any one or more of
the following events (collectively, "Events of Default") shall occur:
(a) Tenant shall fail to pay to Landlord the full
amount of any installment of Fixed Rent or Recurring Additional Rent
within ten (10) days after the date upon which the same shall first
become due and any other additional rent, or any other charge payable
hereunder by Tenant to Landlord, within ten (10) days after notice and
demand therefor; or
(b) Tenant shall do anything or permit anything
to be done, whether by action or inaction, in breach of any covenant,
agreement, term, provision or condition of this Lease, or any Exhibit
annexed hereto, on the part of Tenant to be kept, observed or performed
(other than a breach of the character referred to in clause 15.01(a)
above), and such breach shall continue and shall not be fully remedied by
Tenant within fifteen (15) days after Landlord shall have given to Tenant
a notice specifying the same (except in connection with a breach which
cannot be remedied or cured within said fifteen (15) day period, in which
event the time of Tenant within which to cure such breach shall be
extended for such time as shall be necessary to cure the same, but only if
Tenant, within such fifteen (15) day period, shall promptly commence
and thereafter proceed diligently and continuously to cure such breach,
and provided further that such period of time shall not be so extended as
to jeopardize the interest of Landlord in the Land and/or the Building or
so as to subject Landlord to any liability, civil or criminal); or
(c) Any event shall occur or any contingency
shall arise whereby this Lease or the estate hereby granted or the
unexpired balance of the Term of this Lease would, by operation of law
or otherwise, devolve upon or pass to any person, firm, association or
corporation other than Tenant, except as may be expressly authorized
herein, then, upon the occurrence of any of said events, Landlord may at
any time thereafter give to Tenant a notice of termination of this Lease
setting forth a termination date five (5) days from the date of the giving
of such notice, and, upon the giving of such notice, this Lease and the
term and estate hereby granted (whether or not the Term shall theretofore
have commenced) shall expire and terminate upon the expiration of said
five (5) days with the same effect as if that day were the Expiration
Date, but Tenant shall remain liable for damages as provided in Sec-
tion 15.03 below.
Section 15.02.
A. If an Event of Default shall have occurred,
Landlord and/or Landlord's agents and employees, whether or not this
Lease shall have been terminated pursuant to Articles 14 or 15, may,
without notice to Tenant, immediately or at any time thereafter re-enter
into or upon the Demised Premises or any part thereof, either by
summary dispossess proceedings or by any suitable action or proceeding
at law, to the extent legally permitted, without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may
remove any persons or property therefrom, to the end that Landlord may
have, hold and enjoy the Demised Premises again as and of its first
estate and interest therein. The words "reenter" "re-entry" and "re-
entered" as used in this Lease are not restricted to their technical legal
meanings. In the event of any termination of this Lease under the
provisions of Articles 14 or 15, or in the event that Landlord shall re--
enter the Demised Premises under the provisions of this Article 15, or in
the event of the termination of this Lease (or of re-entry) by or under
any summary dispossess or other suitable proceeding or action or any
provision of law, Tenant shall thereupon pay to Landlord the Fixed Rent,
additional rent and any other charges payable hereunder by Tenant to Land-
lord up to the time of such termination of this Lease, or of such recovery
of possession of the Demised Premises by Landlord, as the case may be,
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plus the expenses incurred or paid by Landlord in terminating this Lease
or of re-entering the Demised Premises and securing possession thereof,
including reasonable attorneys' fees and costs of removal and storage of Ten-
ant's property, and Tenant shall also pay to Landlord damages as
provided in Section 15.03 below.
B. In the event of the re-entry into the Demised
Premises by Landlord under the provisions of this Section 15.02, and if
this Lease shall not be terminated, Landlord may (but shall have
absolutely no obligation to do so), not in Landlord's own name, but as
agent for Tenant, relet the whole or any part of the Demised Premises
for any period equal to or greater or less than the remainder of the
original term of this Lease, for any sum which Landlord may deem
suitable, including rent concessions, and for any use and purpose which
Landlord may deem appropriate. Such reletting may include any
improvements, personalty and trade fixtures remaining in the Demised
Premises.
C. In the event of a breach on the part of Tenant with
respect to any of the covenants, agreements, terms, provisions or
conditions on the part of or on behalf of Tenant to be kept, observed or
performed, Landlord shall also have the right to seek injunctive relief.
D. In the event of (i) the termination of this Lease
under the provisions of Articles 14 or 15, or (ii) the re-entry of the De-
mised Premises by Landlord under the provisions of this Section 15.02,
or (iii) the termination of this Lease (or re-entry) by or under any
summary dispossess or other suitable proceeding or action or any
provision of law by reason of an Event of Default hereunder, Landlord
shall be entitled to retain all monies, if any, paid by Tenant to Landlord,
whether as advance rent, security deposit or otherwise, but such monies
shall be credited by Landlord against any Fixed Rent, additional rent or
any other charge due from Tenant at the time of such termination or re-
entry or, at Landlord's option, against any damages payable by Tenant
under Section 15.03 or pursuant to law.
E. The specified remedies to which Landlord may
resort under this Lease are cumulative and concurrent, and are not
intended to be exclusive of each other or of any other remedies or means
of redress to which Landlord may lawfully be entitled at any time, and
Landlord may invoke any remedy allowed under this Lease or at law or
in equity as if specific remedies were not herein provided for, and the
exercise by Landlord of any one or more of the remedies allowed under
this Lease or in law or in equity shall not preclude the simultaneous or
later exercise by the Landlord of any or all other remedies allowed under
this Lease or in law or in equity.
Section 15.03.
A. In the event of any termination of this Lease under
the provisions hereof or under any summary dispossess or other
proceeding or action or any provision of law, or in the event that Land-
lord shall re-enter the Demised Premises under the provisions of this
Lease, Tenant shall pay to Landlord as damages, at the election of Land-
lord, either:
(i) a sum which at the time of such termination
of this Lease or at the time of any such re-entry by Landlord, as the case
may be, represents the then value of the excess, if any, of (a) the
aggregate of the installments of Fixed Rent and the additional rent (if
any) which would have been payable hereunder by Tenant, had this
Lease not so terminated, for the period commencing with such earlier
termination of this Lease or the date of any such re-entry, as the case
may be, and ending with the date hereinbefore set for the expiration of
the full Term hereby granted pursuant to Articles 1 and 2, over (b) the
aggregate rental value of the Demised Premises for the same period (the
amounts of each of clauses (a) and (b) being first discounted to present
value at an annual rate of four (4%) percent); or
(ii) sums equal to the aggregate of the
installments of Fixed Rent and additional rent (if any) which would have
been payable by Tenant had this Lease not so terminated, or had Land-
lord not so re-entered the Demised Premises, payable upon the due dates
therefor specified herein following such termination or such re-entry and
until the date herein before set for the expiration of the full Term hereby
granted; provided, however, that if Landlord shall relet the Demised Pre-
mises during said period, Landlord shall credit Tenant with the net rents
received by Landlord from such reletting, such net rents to be
determined by first deducting from the gross rents as and when received
by Landlord from such reletting the expenses incurred or paid by
Landlord in terminating this Lease and of re-entering the Demised
Premises and of securing possession thereof, including reasonable
attorneys' fees and costs of removal and storage of Tenant's property, as
well as the expenses of reletting, including repairing, restoring and
improving the Demised Premises for new tenants, reasonable brokers'
commissions, reasonable advertising costs, reasonable attorneys' fees and
disbursements, and all other similar or dissimilar expenses chargeable
against the Demised Premises and the rental therefrom in connection with
such reletting, it being understood that such reletting may be for a period
equal to or shorter or longer than the remaining Term of this Lease; and
provided further, that (a) in no event shall Tenant be entitled to receive
any excess of such net rents over the sums payable by Tenant to Land-
lord hereunder, (b) in no event shall Tenant be entitled in any suit for the
collection of damages pursuant to this Subdivision (ii) to a credit in
respect of any net rents from a reletting except to the extent that such net
rents are actually received by Landlord prior to the commencement of
such suit, and (c) if the Demised Premises or any part thereof should be
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relet in combination with other space, then proper apportionment on a
square foot area basis shall be made of the rent received from such
reletting and of the expenses of reletting, or if relet for a period longer
than the remaining Term of this Lease, the expenses of reletting shall be
apportioned based on the respective periods.
B. For the purposes of Subdivision A(i) of this Sec-
tion 15.03, the amount of additional rent which would have been payable
by Tenant under Article 19 for each year, as therein provided, ending
after such termination of this Lease or such re-entry, shall be deemed to
be an amount equal to the amount of such additional rent payable by
Tenant for the calendar year and Tax Year ending immediately preceding
such termination of this Lease or such re-entry. Suit or suits for the
recovery of such damages, or any installments thereof, may be brought
by Landlord from time to time at Landlord's election, and nothing
contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had
not been terminated under the provisions of Articles 14 or 15, or under
any provision of law, or had Landlord not re-entered the Demised Pre-
mises.
Section 15.04. Nothing contained in this Article 15 shall be
construed as limiting or precluding the recovery by Landlord against
Tenant of any payments or damages (excluding consequential damages)
to which, in addition to the damages particularly provided above, Land-
lord may lawfully be entitled by reason of any default hereunder on the
part of Tenant beyond notice and the expiration of the applicable cure
period, if any. The failure or refusal of Landlord to relet the Demised
Premises or any part or parts thereof, or the failure of Landlord to
collect the rent thereof under such reletting, shall not release or affect
Tenant's liability for damages.
Section 15.05. Tenant, for Tenant, and on behalf of any and all
persons claiming through or under Tenant, including creditors of all
kinds, does here by waive and surrender all right and privilege which
they or any of them might have under or by reason of any present or
future law to redeem the Demised Premises, or to have a continuance of
this Lease for the Term hereby demised, after Tenant shall be dis-
possessed or ejected therefrom by process of law or under the terms of
this Lease or after the expiration or termination of this Lease as herein
provided or pursuant to law. Tenant also waives the provisions of any
law relating to notice and/or delay in levy of execution in case of an
eviction or dispossess of a tenant for non-payment of rent, and of any
other law of like import now or hereafter in effect. In the event that
Landlord shall commence any summary proceeding for non-payment of
rent or for holding over after the expiration or sooner termination of this
Lease, Tenant shall not, and hereby expressly waives any right to, inter-
pose any counterclaim of whatever nature or description in any such
proceeding unless the failure of Tenant to interpose such counterclaim
would operate as a forfeiture or Tenant's right to make such a claim
separately.
Section 15.06. The provisions of this Article 15 shall survive
the expiration or sooner termination of this Lease.
ARTICLE 16
CURING TENANT'S DEFAULTS; REIMBURSEMENT
Section 16.01. If Tenant shall default in the observance or
performance of any term, covenant, provision or condition on Tenant's
part to be observed or performed under or by virtue of any of the terms
or provisions in this Lease beyond notice and the expiration of the
applicable cure period, if any, then, unless otherwise provided elsewhere
in this Lease, Landlord may immediately or at any time thereafter and
upon notice perform the obligation of Tenant thereunder, and if
Landlord, in connection therewith or in connection with any default by
Tenant in the covenant to pay Fixed Rent or additional rent hereunder,
shall make any expenditures or incur any obligations for payment of
money, including court costs and reasonable attorneys' fees, in
instituting, prosecuting or defending any action or proceeding, then such
fees, costs and expenses so paid or obligations incurred shall be
additional rent to be paid by Tenant to Landlord, within twenty (20) days
after demand therefor (which demand shall be accompanied by evidence
reasonably substantiating such amount) with interest thereon at an annual
rate (the "Interest Rate") equal to the lesser of: (a) the then prevailing
prime rate (which, for the purposes hereof, includes any equivalent or
successor interest rate, however denominated) of interest for unsecured ninety-
day loans by Citibank, N.A. (or The Chase Manhattan Bank, N.A., if
Citibank, N.A. shall not then have an established prime rate; or
Chemical Bank, if neither Citibank, N.A. nor The Chase Manhattan
Bank, N.A., shall then have an established prime rate; or the prime rate
of any major banking institution doing business in New York City, as
selected by Landlord, if none of the aforementioned banks shall be in
existence or have an established prime rate) plus two (2) percentage
points, or (b) the maximum rate allowed by law. Any interest payable
by Tenant pursuant to this Lease at the Interest Rate shall be calculated
from the day such expenditure is made or obligation is incurred until the
date when such payment is finally and completely paid by Tenant to
Landlord.
Section 16.02. Bills for any property, material, labor or services
provided, furnished or rendered, or caused to be provided, furnished or
rendered, by Landlord to Tenant (other than that provided, furnished or
rendered in connection with Landlord's Work), may be sent by Landlord
to Tenant monthly (or immediately, at Landlord's option), and shall be
due and payable by Tenant as additional rent within twenty (20) days
after the same shall be delivered to Tenant by Landlord. Such bills shall
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be accompanied by evidence reasonably substantiating amounts shown
thereon. If Landlord shall commence a summary proceeding against
Tenant for non-payment of rent, Tenant shall reimburse Landlord as
additional rent for Landlord's reasonable attorneys' fees and expenses,
both if judgment is awarded for Landlord, or if Tenant makes the
payment subsequent to service of process but prior to entry of judgment.
If Tenant or any subtenant of Tenant shall request Landlord's consent to
any matter that requires Landlord's consent under this Lease and if
Landlord (in Landlord's sole discretion) shall refer the matter to
Landlord's independent attorneys or other professionals or consultants,
then, whether or not such consent shall be granted, Tenant shall
reimburse Landlord for the reasonable, out-of-pocket fees and
disbursements incurred by Landlord in connection therewith as additional
rent within twenty (20) days after a bill therefor shall have been
rendered, which bill shall be accompanied by evidence reasonably
substantiating such amount.
Section 16.03. If the Term shall have expired or been terminated
after or on the date that Landlord shall have made any of the
expenditures, or incurred any of the obligations, set forth in this Article
16, then all such amounts and any interest thereon, as set forth in Section
16.01 above, shall be recoverable by Landlord as damages. The
provisions of this Article 16 shall survive the expiration or sooner
termination of this Lease.
ARTICLE 17
QUIET ENJOYMENT
Section 17.01. Landlord covenants that, if and for so long as
Tenant shall pay all of the Fixed Rent and additional rent reserved
hereunder and shall observe and perform all of the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the
Demised Premises, subject nevertheless to the terms and conditions of
this Lease, and provided, however, that no eviction of Tenant by reason
of paramount title, by reason of the foreclosure of any Mortgage now or
hereafter affecting the Demised Premises or by reason of any termination
of any Underlying Lease to which this Lease is subject and subordinate,
whether such termination is effected by operation of law, by agreement
or otherwise, shall be construed as a breach of this covenant nor shall
any action by reason thereof be brought against Landlord. This covenant
shall be construed as a covenant running with the Land, and is not, nor
shall it be construed as, a personal covenant of Landlord, except to the
extent of Landlord's interest in this Lease and only for so long as such
interest shall continue. Accordingly, this covenant shall bind and be
enforceable against Landlord or any successor to Landlord's interest,
subject to the terms hereof, only for so long as Landlord or any
successor to Landlord's interest, respectively, shall be in possession and
shall be collecting rent from Tenant, but not thereafter.
ARTICLE 18
BUILDING SERVICES
Section 18.01.
A. So long as this Lease shall remain in full force and
effect, from and after the date that Tenant shall be ready to occupy the
Demised Premises for the conduct of Tenant's business therein, Landlord
shall provide the following services:
(i) Passenger and (on a first come, first served
basis) freight elevator service on Business Days, during usual business
hours (i.e., 8 A.M. to 6 P.M.), and, subject to the provisions of Section
18.04 below, have one elevator on call at all other times. Tenant agrees
that Landlord may, at Landlord's election, install elevators with or
without operators and may change the same from time to time;
(ii) heat to the Demised Premises when and as
required by law, on Business Days from 8 A.M. to 6 P.M.;
(iii) water for ordinary lavatory and drinking and
office cleaning purposes. If Tenant requires, uses or consumes water for
any other purposes or in unusual quantities (as reasonably determined by
Landlord), then Landlord may (or, at Landlord's direction, Tenant shall)
install a meter or meters or other means to measure Tenant's water
consumption, and Tenant agrees to pay for the cost of the meter or
meters and the installation thereof, and to pay for the maintenance of said
meter equipment and/or to pay Landlord's actual out-of-pocket cost of
other means of measuring such water consumption by Tenant. Tenant
shall reimburse Landlord for the actual cost of all water consumed as
measured by said meter or meters or as otherwise measured, including
sewer rents, as additional rent, within ten (10) days after bills therefor
are rendered. If Landlord shall elect (or otherwise be required) to
furnish hot water to the Demised Premises, Tenant shall reimburse
Landlord for the actual cost of generating such hot water, as additional
rent, within fifteen (15) days after bills therefor are rendered; and
(iv) cleaning of the Demised Premises on
Business Days in accordance with the specifications set forth in
Exhibit "E" annexed hereto and made a part hereof, provided that the
Demised Premises are kept in reasonable order by Tenant (and further
subject to the provisions of Section 18.03 below). Tenant shall
reimburse Landlord for the actual cost of removal from the Demised
Premises and the Building of so much of Tenant's refuse and rubbish (x)
as shall exceed that ordinarily accumulated daily in the routine of
business office occupancy or (y) resulting from any use of the Demised
Premises during hours other than usual business hours (collectively,
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"Extra Rubbish Removal"). The reimbursement for Extra Rubbish
Removal shall be made by Tenant to Landlord, as additional rent, within
twenty (20) days after bills therefor are rendered.
B. Tenant acknowledges receipt of advice from
Landlord to the effect that there is no Building air-conditioning or
ventilation system servicing the Demised Premises, and that all air-
conditioning and ventilation of the Demised Premises shall be procured
by Tenant at Tenant's own cost and expense, except as otherwise set
forth on Exhibit C. Tenant agrees that all air-conditioning equipment
now or hereafter installed by Tenant in the Demised Premises shall be of
the package air-cooled type, window units being expressly prohibited.
Tenant covenants and agrees that, at Tenant's own cost and expense,
Tenant shall maintain said air-conditioning equipment in working order at
all times during the Term, perform all repairs thereto and servicing
thereof, and make replacement of all parts, as the same becomes
necessary. Tenant shall be required to pay in accordance with Article 20
below for all electric energy necessary or used in connection with air-
conditioning and ventilation in the Demised Premises. Said air-
conditioning equipment shall at all times be the exclusive property of
Landlord, and shall be surrendered to Landlord with the Demised
Premises upon the expiration or sooner termination of this Lease.
C. If Tenant shall require freight elevator service at
any time other than the time periods set forth in Subdivision 18.01A(i)
above, Landlord shall furnish the same upon advance written notice from
Tenant, provided that such notice shall be given prior to 2:00 P.M. on
any Business Day on which Tenant requires such after hours freight
elevator service or if Tenant shall desire freight elevator service on a day
other than a Business Day, Landlord shall furnish the same upon advance
written notice from Tenant given prior to 2:00 P.M. on the last Business
Day prior to such non-Business Day. Tenant shall pay to Landlord, as
additional rent and within twenty (20) days after being billed therefor
(which bill shall be accompanied by evidence reasonably substantiating
amounts shown thereon), Landlord's then established hourly rates for
such usage with a four (4) hour minimum. Landlord agrees that said
hourly rate shall not exceed the cost incurred by Landlord to provide
such freight elevator service.
D. If Tenant shall require heating service at any time
other than the time periods set forth in Subdivision 18.01A(ii) above,
Landlord shall furnish the same upon advance written notice from
Tenant, given prior to 2:00 P.M. on any Business Day on which Tenant
requires such after hours heat or if Tenant shall desire heat on a day
other than a Business Day, Landlord shall furnish the same upon advance
written notice from Tenant given prior to 2:00 P.M. on the last Business
Day prior to such non-Business Day, Tenant shall pay to Landlord, as
additional rent and within twenty (20) days after being billed therefor
(which bill shall be accompanied by evidence reasonably substantiating
amounts shown thereon), Landlord's then established rates for such
heating service. Landlord agrees that said rates shall not exceed the
costs incurred by Landlord to provide such heating service. If any other
tenant whose premises are served by the same heating system as the
Demised Premises shall request and receive heat after hours for any of
the same hours as Tenant, the charges for such hours of common use
shall be equitably allocated among all tenants actually requesting such
common heat service from Landlord.
Section 18.02. The term "Business Days" shall be deemed to
mean all days other than Saturdays, Sundays and Holidays. The term
"Holidays" shall be deemed to mean all federal, state, municipal and
bank holidays and Building Service Employees and Operating Engineer's
Union contract holidays now or hereafter in effect.
Section 18.03.
A. If Tenant so elects, Tenant may elect to clean the
Demised Premises, in which case Landlord shall not be obligated to
provide cleaning services, and Tenant shall, at Tenant's own cost and
expense, keep the Demised Premises clean and in order, to the
reasonable satisfaction of Landlord (including cleaning of the inside and
outside of the windows once per month), and for that purpose shall
employ a person, who or which shall be subject to the prior written
approval of Landlord, which approval shall not be unreasonably withheld
or delayed. In order to ensure effective security in the Building, Tenant
acknowledges the reasonableness of Landlord's right at its option to
designate a party to be so employed by Tenant and to act as maintenance
and cleaning contractor for any office cleaning, rubbish removal,
waxing, polishing, lamp replacement, cleaning and maintenance work in
the Demised Premises, so long as such party is a reputable person that
charges no more than the prevailing rates in effect for comparable
services in similar type buildings. Landlord expressly reserves the right
to exclude from the Building any person attempting to perform any such
work or furnish any of such services without Landlord's prior written
approval or not so designated by Landlord.
B. If Landlord so elects, then, notwithstanding
anything to the contrary set forth in Subdivision 18.01A(iv) above,
Tenant shall directly procure the cleaning services and removal of refuse
and rubbish which Landlord would otherwise be obligated to provide
pursuant to said Subdivision 18.01A(iv). Tenant hereby irrevocably
designates Landlord as Tenant's attorney-in-fact to arrange for such
procurement at any time, and from time to time, during the Term. In
the event that Landlord shall make the election described in the first
sentence of this Subsection 18.03B, Landlord shall notify Tenant not less
than twenty (20) days prior to the effective date thereof, and Landlord,
as Tenant's attorney-in-fact, shall then arrange for such procurement at
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no additional cost or expense to Tenant, except for the cost of Extra
Rubbish Removal. Landlord shall have the right, on notice given to
Tenant at any time thereafter, to rescind such election. Tenant's
designation of Landlord as Tenant's attorney-in-fact shall be limited to
the specific purpose set forth in this Subsection 18.03B, and shall in no
way be construed to (x) impose any fiduciary obligation upon Landlord
with respect to said procurement or any other matter arising from or
related to this Lease or Tenant's occupancy of the Demised Premises,
(y) create any agency relationship between Tenant and Landlord, or
(z) otherwise alter the relationship of the parties from that of tenant and
landlord.
Section 18.04. Landlord reserves the right to stop the furnishing
of the Building services and to stop service of the Building Systems,
when necessary, by reason of accident, or emergency, or for Repairs and
Alterations in the reasonable judgment of Landlord desirable or necessary
to be made, until said Repairs and Alterations shall have been completed;
and Landlord shall have no responsibility or liability for failure to supply
heat, elevator, plumbing, electric or other services during said period or
when prevented from so doing by strikes, lockouts, difficulty of
obtaining materials, accidents or by any cause beyond Landlord's
reasonable control, or by Legal Requirements or failure of electricity,
water, steam, coal, oil or other suitable fuel or power supply, or inability
by exercise of reasonable diligence to obtain electricity, water, steam,
coal, oil or other suitable fuel or power. In the event that such services
shall have been stopped, Landlord agrees to use commercially reasonable
efforts to resume such services, but shall not be obligated to use overtime
or premium pay labor except when good business practice indicates a
need for the use of such overtime or premium labor to minimize
interference with Tenant's use and occupancy of the Demised Premises
caused by the interruption of the heat, elevator, plumbing, electric or
other building services. No diminution or abatement of rent or other
compensation shall or will be claimed by Tenant as a result therefrom,
nor shall this Lease or any of the obligations of Tenant be affected or
reduced by reason of such interruption, curtailment or suspension unless
such interruption, curtailment or suspension shall result from the gross
negligence or willful misconduct of Landlord or Persons Within
Landlord's Control, nor shall the same constitute an actual or
constructive eviction.
Section 18.05. Tenant shall, at Tenant's own cost and expense,
reasonably cooperate with Landlord with respect to any rule or
requirement promulgated by Landlord for the proper protection and
functioning of the Building Systems and the furnishing of the Building
services. Tenant also shall, at Tenant's own cost and expense,
reasonably cooperate with Landlord in any conservation effort pursuant
to a program or procedure promulgated or recommended by ASHRAE or
any Legal Requirements.
Section 18.06. Except as may be provided to the contrary in this
Lease, Tenant shall have access to the Building and the Demised
Premises twenty-four (24) hours each day, seven (7) days each week.
ARTICLE 19
TAXES; OPERATING EXPENSES
Section 19.01. In addition to the Fixed Rent and additional rent
hereinbefore reserved, Tenant covenants and agrees to pay Landlord, as
additional rent, all amounts computed in accordance with the provisions
set forth in this Article 19.
Section 19.02. For the purposes of this Lease:
A. The term "Taxes" shall mean (whether represented
by one or more bills) the total amount of all real estate taxes,
assessments and special assessments (provided, however, that if such
assessment shall be payable in installments and Landlord shall actually
pay the same in installments, Taxes shall include only the portion of
assessment installments due during the Term plus any interest payable by
reason of Landlord's election to pay such assessment in installments),
water and sewer rents, governmental levies, county taxes or any other
governmental charge, general or special, ordinary or extraordinary,
unforeseen as well as foreseen, of any and every kind or nature
whatsoever, which are or may be levied, confirmed, charged, assessed or
imposed upon the Land, the Building and/or Landlord's interest therein,
and the sidewalks, plazas, streets and alleys in front of or adjacent
thereto, and any rights or interests appurtenant thereto under the laws of
the United States, the State of New York or any political subdivision
thereof, or by the City of New York or any political subdivision thereof
(including any assessments, levies, impositions, charges or taxes arising
from the location of the Land or Building within a Business Improvement
District or other area or zone which is subject to governmentally
authorized or civic related assessments, levies, impositions, charges or
taxes not generally applicable to other portions of the Borough of
Manhattan or the City of New York). If, due to a future change in the
method of taxation or in the taxing authority, a franchise, income, gross
receipts, transit, profit or other tax or governmental imposition, however
designated (including any tax, excise or fee, measured by or payable with
respect to any rents, licenses or other charges received by Landlord and
levied against Landlord, Land and/or the Building) shall be levied against
Landlord, the Land and/or the Building in substitution (in whole or in
part) for, or as an addition to or in lieu of, any Taxes, then such
franchise, income, gross receipts, transit, profit or other tax or
governmental imposition shall be deemed to be included within the
definition of the term "Taxes" for the purposes hereof, excluding any
general income, corporate franchise, gains, estate, inheritance,
succession, capital stock or transfer tax levied on Landlord.
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B. The term "Tax Year" shall mean every twelve (12)
consecutive month period, all or any part of which shall occur during the
Term, commencing each July 1 or such other date as shall be the first
day of the fiscal tax year of The City of New York or other
governmental agency determined by Landlord to be responsible for the
collection of substantially all Taxes.
C. The term "Operating Year" shall mean each
calendar year, all or any part of which shall occur during the Term,
following the Base Operating Year.
D. The term "Operating Statement" shall mean a
written statement prepared by Landlord or Landlord's agent, setting forth
Landlord's computation of the amount payable by Tenant pursuant to
Section 19.04 for a specified Operating Year.
E. The term "Operating Expenses" shall mean (subject
to the provisions of Subsection 19.02G below) all costs and expenses
paid or incurred by Landlord or on Landlord's behalf in connection with
the ownership, management, repair, maintenance, replacement,
restoration or operation of the Building, the Land and any plazas,
sidewalks, curbs and appurtenances thereto, including the following items
(which items are illustrative of items to be included in Operating
Expenses):
(i) "Labor Costs" (as such term is defined
below) of persons performing services in connection with the operation,
repair and maintenance of the Land or the Building;
(ii) the cost of (including any rental cost of)
materials and supplies used in the operation, cleaning, safety, security,
renovation, replacement, repair and maintenance of the Building and its
plazas (if any), sidewalks, curbs and appurtenances, and any plant,
equipment, facilities and systems designed to supply heat, ventilation,
air-conditioning or any other services or utilities, or comprising any
portion of the electrical, gas, steam, plumbing, sprinkler, mechanical,
communications, alarm, security or fire/life safety systems or equipment,
including any sales and other taxes thereon;
(iii) the depreciation for, or the rental cost or
value (including applicable sales taxes) of, hand tools and other movable
equipment used in the operation, cleaning, safety, security, repair or
maintenance of the Building and its plazas (if any), sidewalks, curbs and
appurtenances;
(iv) reasonable legal, accounting and other
professional fees incurred in connection with the operation or
management of the Land or the Building;
(v) amounts incurred by Landlord for services,
materials and supplies furnished in connection with the operation, repair
and maintenance of any part of the Building and its plazas (if any),
sidewalks, curbs and appurtenances, including the heating,
air-conditioning, ventilating, plumbing, electrical, elevator, safety and
other systems of the Building;
(vi) the cost of all charges for window cleaning
and other cleaning, janitorial, security and other services, in and about
the Building and its plazas (if any), sidewalks, curbs and appurtenances;
(vii) premiums paid by Landlord for rent,
casualty, boiler, sprinkler, plate-glass, liability and fidelity insurance
with respect to the Land or Building and its plazas (if any), sidewalks,
curbs and appurtenances, and any other insurance Landlord maintains or
is required to maintain with regard to the Land or the Building or the
maintenance or operation thereof;
(viii) costs (including all applicable taxes) for
electricity (as measured by the Building's electric meters, and evaluated
under the same rate classification and frequency that Landlord is charged
by the public utility furnishing electricity to the Building), steam,
telephone, and other utilities for the portions of the Land and the
Building not leased and occupied (or available for leasing or occupancy)
by tenants in the Building and for utilities and electricity (so measured
and evaluated) consumed in connection with the operation of the heating,
ventilating and air-conditioning equipment servicing common, public or
service areas of the Building;
(ix) water charges and sewer rents or charges to
the extent not specifically reimbursable by tenants of the Building and not
otherwise included in "Taxes";
(x) telephone and stationery costs;
(xi) the cost of painting and otherwise decorating
any non-tenant areas of the Building, and its plazas (if any) and
sidewalks;
(xii) the cost of installing, maintaining, repairing
and replacing art works (except fine art) as well as holiday decorations,
for the lobby and other public portions of the Building, and its plazas (if
any) and sidewalks;
(xiii) the cost of exterior and interior landscaping
of non-tenant areas of the Land, the Building and its plazas (if any) and
sidewalks;
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(xiv) dues and fees paid to civic organizations and
associations representing Landlord, or of which Landlord is a member,
in the City of New York;
(xv) franchise, license and similar fees and
charges paid by Landlord to any governmental agency for the privilege
of owning, leasing, operating, maintaining or servicing the Building or
any of its equipment, property or appurtenances;
(xvi) management fees, or, if no managing agent
is then employed by Landlord, an amount in lieu thereof which is not in
excess of the then prevailing rates for management fees of first-class
office buildings in Manhattan;
(xvii) the cost of the rental, together with the cost
of installation, of any Building security or other system used in
connection with life or property protection installed after the Base
Operating Year (including the cost, or the cost of the rental, of all
machinery, electronic systems and other equipment comprising any part
thereof), as well as the cost of the operation and repair of any such
system in operation during the Base Operating Year;
(xviii) whether or not capitalized under generally
accepted accounting principles, costs for Alterations to the Building made
after the Base Operating Year by reason of any Legal Requirements or
the requirements of any Insurance Boards or Landlord's insurer enacted
after the date hereof, provided, however, (i) that if and to the extent such
costs are capitalized under generally accepted accounting principles, such
costs shall be amortized over the useful life of such improvement,
equipment or machinery (determined in accordance with generally
accepted accounting principles) with an interest factor calculated using
the Interest Rate in effect at the time that any such cost is incurred, and
(ii) that the costs of curing violations existing of record against the
Building on the Commencement Date or of complying with Legal
Requirements in effect on the Commencement Date shall not be included
in Operating Expenses;
(xix) whether or not capitalized under generally
accepted accounting principles, the cost of improvements, equipment or
machinery installed for the purpose of reducing energy consumption or
reducing other Operating Expenses, provided, however, that if and to the
extent such costs are capitalized under generally accepted accounting
principles, such costs shall be amortized over the useful life of such
improvement, equipment or machinery (determined in accordance with
generally accepted accounting principles) with an interest factor
calculated using the Interest Rate in effect at the time that any such cost
is incurred; and
(xx) all other charges allocable to the repair,
ownership, management, maintenance, replacement, restoration or
operation of the Building in accordance with real estate accounting
practices customarily used in Manhattan.
F. The term "Labor Costs" shall mean any and all
expenses incurred by Landlord or on Landlord's behalf which shall be
related to employment of personnel, including amounts incurred for
wages, salaries and other compensation for services, payroll, social
security, unemployment and other similar taxes, Workers' Compensation
insurance, liability benefits, pensions, hospitalization, retirement plans
and insurance (including group life and disability), uniforms and working
clothes and the cleaning thereof, and expenses imposed on or on behalf
of Landlord pursuant to any collective bargaining agreement relating to
such employees. With respect to employees who are not employed on a
full-time basis with respect to the Building, a pro rata portion of
expenses allocable to the time any such employee is employed with
respect to the Building shall be included in Labor Costs.
G. The term "Operating Expenses" shall not include
the following items:
(i) Labor Costs in respect of officers and
executives of Landlord, unless for work actually performed in or about
the Building ordinarily done by a third person, and then only at
compensation no higher than that which would have been paid to such
third person;
(ii) legal fees, leasing commissions, advertising
expenses and promotional expenses incurred in leasing or attempting to
lease any portion of the Building;
(iii) insurance premiums, but only if and to the
extent that Landlord is specifically entitled to be reimbursed therefor by
Tenant pursuant to this Lease (other than pursuant to this Article) or by
any other tenant or other occupant of the Building pursuant to its lease
(other than pursuant to an operating expenses escalation clause contained
therein);
(iv) the cost of any item for which and to the
extent that Landlord is reimbursed by insurance or otherwise
compensated including reimbursement by any tenant, and any net
proceeds of refund or recovery from other sources;
(v) the cost of any alterations, additions,
changes, replacements and improvements that are made solely in order to
prepare space for occupancy by a new tenant;
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(vi) the cost of capital improvements, other than
those (a) which under generally applied real estate practice are deemed
expenses or deferred expenses, or (b) described in clauses (xviii) and
(xix) of Subsection 19.02E above;
(vii) the cost of electricity furnished to the
Demised Premises or any other space in the Building leased to tenants,
and for which tenants are specifically billed in accordance with the terms
of their leases;
(viii) such portion of Taxes attributable, in
Landlord's judgment, to space in the Building leased to tenants, and for
which tenants are specifically billed in accordance with the terms of their
leases;
(ix) refinancing costs, depreciation and
amortization, and payments of mortgage interest and principal;
(x) costs to perform work or to provide services
for any tenant of the Building, but only if and to the extent that the same
is in excess of that which Landlord furnishes generally (with no
additional expense) to the tenants of the Building;
(xi) any costs incurred for the purpose of effecting
a sale of the Building, Land or any Underlying Lease, including any
transfer, deed or gains taxes payable by Landlord;
(xii) bad debt losses, rent losses or reserves for either;
(xiii) ground rent, if any, on any Underlying Lease;
(xiv) depreciation of the Building;
(xv) any amounts paid by Landlord to any affiliate of
Landlord, to the extent such amount is in excess of the amount which would
have been paid by Landlord in the absence of such relationship;
(xvi) payments of any amounts to any person
seeking recovery for negligence or other torts committed by Landlord;
(xvii) fines, penalties or interest incurred by
Landlord, if due to Landlord's late payment of any of Landlord's
financial obligations to third parties or due to violations of any Legal
Requirements (unless cure or compliance is the obligation of Tenant or
any other tenant under its lease);
(xviii) costs of repairs or replacements incurred
by reason of fire or other casualty or by eminent domain or
condemnation to the extent Landlord is compensated therefor;
(xix) legal fees and auditing fees incurred in the
enforcement of any leases in the Building or in defending any suits
brought by tenants in the Building and other legal and auditing fees
(other than legal and auditing fees incurred in connection with (x) the
maintenance or operation of the Building or Land, and (y) the
preparation of any of Landlord's statements pursuant to this Article 19,
both of which shall be included within the definition of Operating
Expenses); and
(xx) the cost of correcting defects or inadequacies
of the original design of the structure of the Building or in the
construction of the Building or the Building Systems, except that
conditions resulting from ordinary wear and tear shall not be deemed
defects for the purpose hereof.
H. If, during all or part of any Operating Year
(including the Base Operating Year), Landlord shall not furnish any
particular item(s) of work or service (which would otherwise constitute
an Operating Expense hereunder) to portions of the Building due to the
fact that (i) such portions are not occupied or leased, (ii) such item of
work or service is not required or desired by the tenant of such portion,
(iii) such tenant is itself obtaining and providing such item of work or
service, or (iv) for any other reason, then, for the purposes of computing
Operating Expenses, the amount for such item and for such period shall
be deemed to be increased by an amount equal to the additional costs and
expenses of furnishing such item of work or services to such portion of
the Building or to such tenant.
Section 19.03.
A. (i) If, for any reason whatsoever (whether
foreseen or unforseen), the Taxes payable for any Tax Year shall be
greater than the Taxes, as finally determined, payable for the Base Tax
Amount then Tenant shall pay to Landlord as additional rent for each
such Tax Year an amount (the "Tax Payment") equal to Tenant's
Proportionate Share (as defined in Section 1.01 above) of the amount by
which the Taxes payable for such Tax Year exceeds the Taxes payable
for the Base Tax Amount.
(ii) Within a reasonable time period after the
issuance by the governmental authority having jurisdiction thereover of
tax bills for Taxes payable for any Tax Year, Landlord shall submit to
Tenant a statement (the "Tax Statement") which shall indicate the
amount, if any, required to be paid by Tenant as additional rent as in this
Section provided together with a copy of such tax bills.
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(iii) Within twenty (20) days after delivery of the
Tax Statement, Tenant shall pay to Landlord the additional rent as set
forth on such Tax Statement.
B. If, following the delivery of any Tax Statement,
Landlord shall receive a refund of Taxes with respect to a Tax Year for
which Tenant has paid any additional rent under the provisions of this
Section, then Tenant's Proportionate Share of the net proceeds of such
refund, after deduction of reasonable legal fees, appraiser's fees and
other reasonable expenses incurred in obtaining reductions and refunds
and collecting the same (and after deduction of such expenses for
previous Tax Years which were not offset by tax refunds for such Tax
Years) shall be applied and allocated to the periods for which the refund
was obtained and, if Tenant shall not be in default of any of Tenant's
obligations under this Lease beyond notice and the expiration of the
applicable cure period, if any. Landlord shall refund or credit to Tenant
an amount equal to Tenant's Proportionate Share of the net proceeds of
such refund. In no event shall any refund or credit due to Tenant here-
under exceed the sum paid by Tenant for such particular Tax Year.
Only Landlord shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation of the Landlord or the
Building. In no event shall Tenant have the right to seek from the taxing
authority any refund or reduction of Taxes. If, prior to the delivery of a
Tax Statement to Tenant with respect to a particular Tax Year, Landlord
shall obtain a reduction in Taxes for that Tax Year, then Tenant shall pay
to Landlord, within twenty (20) days following the issuance to Tenant of
a bill therefor, an amount equal to Tenant's Proportionate Share of all
reasonable costs and expenses (including reasonable legal, appraisal and
other expert fees) incurred by Landlord in obtaining such reduction.
C. If there shall be a reduction or refund of Taxes for
either of the Tax Years utilized in computing the Base Tax Amount,
Landlord shall furnish to Tenant a statement indicating the amount
thereof, and all prior and future additional rent payments provided for in
this Section 19.03 shall be recalculated accordingly. Any additional
payment due for any Tax Year shall be made by Tenant within fifteen
(15) days after the furnishing to Tenant of the revised statement.
D. If there shall be a reduction of the area of the De-
mised Premises either due to a partial taking thereof by eminent domain
or due to subsequent agreement of the parties or if the area of the De-
mised Premises shall be increased, Tenant's Proportionate Share of
increases of Taxes thereafter payable by Tenant under Subsection 19.03A
shall, except as may otherwise be expressly agreed in writing by the
parties, be increased or decreased on the basis of the ratio between the
square feet of rentable area in the Demised Premises before and after
said increase or decrease in area.
E. Tenant shall pay, before delinquency, all rent and
occupancy taxes and all property taxes and assessments on the furniture,
fixtures, equipment and other property of Tenant at any time situated on
or installed in the Demised Premises, and on additions and improvements
in the Demised Premises made or installed by Tenant subsequent to the
Commencement Date, if any. If at any time during the Term any of the
foregoing are assessed as a part of the real property of which the De-
mised Premises are a part, Tenant shall pay to Landlord within twenty
(20) days after demand therefor the amount of such additional taxes as
may be levied against said real property by reason thereof, which
demand shall be accompanied by evidence reasonably substantiating such
amount.
Section 19.04.
A. For each Operating Year, any part of which shall
occur during the Term, Tenant shall pay an amount (the "Operating
Expense Payment") equal to Tenant's Proportionate Share of the amount,
if any, by which Operating Expenses for such Operating Year shall
exceed the Operating Expenses for the Base Operating Year; provided,
however, that if the Commencement Date shall occur other than on the
first day of an Operating Year or if the Term shall expire or be sooner
terminated on other than the last day of an Operating Year, then the
Operating Expense Payment in respect thereof shall be prorated to
correspond to that portion of such Operating Year occurring within the
Term.
B. At any time during each Operating Year, Landlord
may furnish to Tenant a written statement (an "Estimate Statement")
setting forth Landlord's estimate of the Operating Expense Payment for
such Operating Year (the "Estimated Payment"). Tenant shall pay to
Landlord on the first day of each month during each Operating Year an
amount equal to one twelfth (1/12th) of the Estimated Payment. If
Landlord furnishes an Estimate Statement for an Operating Year
subsequent to the commencement thereof, then: (i) until the first day of
the month following the month in which the Estimate Statement shall be
furnished to Tenant, Tenant shall continue to pay to Landlord on the first
day of each month an amount equal to the monthly sum payable by
Tenant to Landlord with respect to the most recent Operating Year; (ii)
promptly after the Estimate Statement shall be furnished to Tenant,
Landlord shall give notice to Tenant stating whether the amount
previously paid by Tenant to Landlord for the current Operating Year
was greater or less than the installment of the Estimated Payment to be
paid for the current Operating Year, and (x) if there shall be a
deficiency, Tenant shall pay the amount thereof to Landlord within
twenty (20) days after demand therefor, or (y) if there shall have been an
overpayment, Landlord shall credit the amount thereof against the next
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monthly installment of the Fixed Rent and/or additional rent payable
under this Lease; and (iii) on the first day of the month following the
month in which the Estimate Statement shall be furnished to Tenant, and
monthly thereafter throughout the remainder of the Operating Year,
Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of
the Estimated Payment shown on the Estimate Statement. Landlord may
during an Operating Year (but not more often than once in any three (3)
consecutive month period), furnish to Tenant a revised Estimate
Statement, and, if a revised Estimate Statement shall be furnished to
Tenant, the Estimated Payment for such Operating Year shall be adjusted
in the same manner as provided in the preceding sentence.
C. At any time during or after each Operating Year,
Landlord shall furnish to Tenant an annual Operating Statement (the
"Annual Statement") for such Operating Year. If the Annual Statement
shows that the Estimated Payment (or other payments) for such
Operating Year exceeds the Operating Expense Payment which should
have been paid for such Operating Year, then Landlord shall credit the
amount of such excess against the next monthly installment of Fixed Rent
and/or additional rent payable under this Lease; if the Annual Statement
for such Operating Year shows that the Estimated Payment for such
Operating Year was less than the Operating Expense Payment (or other
payments) which should have been paid for such Operating Year, Tenant
shall pay the amount of such deficiency to Landlord within twenty (20)
days after receipt of the Annual Statement.
D. Each Annual Statement shall be conclusive and
binding upon Tenant unless, within forty-five (45) days after receipt
thereof, Tenant shall give Landlord notice (the "Audit Notice") that
Tenant disputes the correctness of the Annual Statement and that Tenant
requests the right to audit Landlord's books and records. If such Audit
Notice shall be timely delivered by Tenant to Landlord, then, provided
that Tenant shall pay or have paid to Landlord the amount shown to be
due to Landlord on the disputed Annual Statement (without prejudice to
Tenant's rights hereunder to contest the same), Tenant and its
representatives shall have the right, not later than twenty (20) days after
Landlord's receipt of Tenant's Audit Notice, and not earlier than five (5)
Business Days after Landlord's receipt of a written request therefor, to
examine and, if reasonably required, to photocopy, during regular
business hours at a location in Manhattan designated by Landlord,
Landlord's relevant books and records with respect to Operating
Expenses relating to the Building for the period in question (the
"Relevant Records") in order to verify the accuracy of the relevant
Annual Statement; provided, however that Tenant and its authorized
representatives shall minimize interference to Landlord's business
operations during the course of such examination and that only reputable
accounting firms hired on a non-contingency fee basis using full time and
permanent employees may be used by Tenant to conduct such
examinations. Tenant shall not disclose (and shall require all of Tenant's
representatives not to disclose) to any third party any information
obtained in the course of such examination, except if and to the extent
the same shall be required by a court of competent jurisdiction. Tenant
recognizes and agrees that Landlord's books and records (and those of
Landlord's agents) with respect to the operation of the Land and the
Building are confidential, and that, except as provided herein, Tenant
shall have no right to inspect the same. If Tenant shall have timely
delivered the Audit Notice to Landlord, and the parties shall not be able
to resolve such dispute within thirty (30) days after Tenant or its
authorized representatives have examined the Relevant Records or the
Relevant Records have been made available for examination, as the case
may be, then, either party may refer the decision of the issue raised to a
reputable independent firm of certified public accountants mutually
agreeable to the parties and the decision of such accountants shall be
conclusive and binding upon the parties. The fees and expenses involved
in such decision shall be borne by the unsuccessful party (and if both
parties are partially unsuccessful, the accountants shall apportion the fees
and expenses between the parties based on the degree of success of each
party). Tenant agrees that, notwithstanding any such dispute (and
pending resolution thereof), Tenant shall timely pay to Landlord in full
the amount shown to be due to Landlord on the disputed Annual
Statement (but without prejudice). If such dispute is resolved in Tenant's
favor, Landlord shall either promptly reimburse Tenant for any
overpayment or at Tenant's option credit the amount of such
overpayment against the next monthly installment of Fixed Rent and
Recurring Additional Rent payable under this Lease.
Section 19.05. Nothing contained in this Article 19 or any other
provision of this Lease concerning the payment of additional rents shall
be construed so as to reduce the Fixed Rent below the amount set forth
in Section 1.01, plus any increases therein pursuant to any provision of
this Lease.
Section 19.06. Any payments due hereunder for any period of
less than a full Tax Year or Operating Year at the commencement or end
of the Term shall be equitably prorated. In the event of any change in
the fiscal period constituting a Tax Year, Taxes levied during any period
shall be added to the first subsequent Tax Year for purposes of Section
19.03. Any delay or failure by Landlord to render any statement under
the provisions of this Article 19 shall not prejudice Landlord's right here-
under to render such statement for prior or subsequent periods. Any
delay or failure by Landlord in making any request or demand for any
amount payable by Tenant pursuant to the provisions of this Article 19
shall not constitute a waiver of, or in any way diminish, the continuing
obligation of Tenant to make such payment. Except as otherwise
provided in Subsection 19.04D above, all statements rendered by
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Landlord pursuant to the provisions of this Article 19 shall be deemed
final and conclusive as to Tenant, unless, within forty-five (45) days
following rendition of any such statement, Tenant shall, in good faith and
with specificity, notify Landlord that such statement contains one or more
errors. Tenant agrees that, notwithstanding any dispute as to the
correctness of a statement (and pending resolution of such dispute),
Tenant shall timely pay to Landlord in full the amount shown to be due
to Landlord on the disputed statement; provided, however, that such
payment shall be made by Tenant without prejudice. If such dispute is
resolved in Tenant's favor, Landlord shall, at Tenant's option, either
promptly reimburse Tenant for any overpayment or credit the amount of
such overpayment against the next monthly installment of Fixed Rent
and/or additional rent payable under this Lease. The obligations of
Tenant, with respect to any payment required pursuant to the provisions
of this Article 19, and of Landlord, with respect to any adjustments
pursuant to the provisions of this Article 19 (if any), shall survive the
expiration or sooner termination of the Term for a period of three (3)
years from the Expiration Date.
ARTICLE 20
ELECTRICITY
Section 20.01. Subject to the provisions of this Article 20 and
other provisions of this Lease, Landlord shall furnish the electricity that
Tenant shall reasonably require in the Demised Premises for normal
business office purposes, making available to the Demised Premises a
capacity (the "Existing Capacity") equal to twelve (12) watts per rentable
square foot in the Demised Premises, inclusive of electricity used by the
machinery and equipment of Tenant's air-conditioning unit(s) servicing
the Demised Premises. Landlord shall not be liable to Tenant for any
loss or damage or expense which Tenant may sustain or incur if either
the quantity or character of electric service shall be changed or shall no
longer be available or suitable for Tenant's requirements provided the
same shall not have been caused solely by Landlord's willful misconduct.
At Landlord's election, Landlord shall furnish and install all replacement
lighting tubes, lamps, bulbs and ballasts required in the Demised
Premises, and Tenant shall pay to Landlord or Landlord's designated
contractor within twenty (20) days after demand therefor the then
established charges of Landlord or said contractor, as the case may be,
which demand shall be accompanied by evidence reasonably
substantiating such charges.
Section 20.02.
A. Subject to the provisions of Section 20.03 below,
Tenant's consumption and demand of all electricity made available to the
Demised Premises (including the machinery and equipment of Tenant's
air-conditioning unit(s) servicing the Demised Premises) or to Tenant
elsewhere in the Building (collectively, "Tenant Electricity") shall be
measured by one or more submeters (collectively, the "Submeter") to be
furnished and installed by Landlord in a location designated by Landlord
and approved by Tenant. Landlord shall also, at Tenant's cost and
expense, install connections from the risers and/or circuits servicing the
Demised Premises to the Submeter, and perform all other work
necessary for the furnishing of Tenant Electricity by Landlord in the
manner provided for in this Section 20.02. Tenant shall pay all such
costs and expenses to Landlord, as additional rent, within ten (10) days
after being billed therefor.
B. Tenant agrees to purchase Tenant Electricity from
Landlord or Landlord's designated agent at terms and rates equal to
"Landlord's Electricity Cost" (as such term is defined below), plus five
(5%) percent thereof to reimburse Landlord for administrative services in
connection with supplying, measuring and billing Tenant Electricity and
for transmission and transformer losses. If more than one submeter shall
measure Tenant Electricity, then the service rendered through each such
submeter shall be aggregated and billed in accordance with the foregoing
rate. Landlord may at any time render bills for Tenant Electricity in
accordance with the foregoing provisions and Tenant shall pay all
amounts shown on said bills to Landlord, as additional rent, within
twenty (20) days following the date that such bills shall have been
rendered, which bills shall be accompanied by evidence reasonably
substantiating such amounts.
C. For purposes of this Article 20 and the other
provisions of this Lease:
(i) The term "Landlord's Electricity Cost",
shall mean the cost per kilowatt hour consumption and cost per kilowatt
demand, by time of day, if applicable, or other applicable billing
method, to Landlord of purchasing electricity for the Building, including
fuel adjustment charges (as determined for each month of the relevant
period), rate adjustment charges, sales tax, and/or any other factors used
by the public utility furnishing electric service to the Building (the
"Public Utility") in computing its charges to Landlord, applied to the
kilowatt hours of electricity and kilowatts of demand purchased by
Landlord during a given period giving effect to any increases or
decreases pursuant to Subsection 20.02E below and to any discounts
actually received by Landlord during the Term of this Lease attributable
to the Demised Premises in connection with the Electricity Abatement
Program or any other utility discount plans.
(ii) The term "Electricity Additional Rent" shall
mean all amounts computed in accordance with Subsection 20.02B
above.
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D. If the Submeter should fail to properly register or
operate at any time during the Term for any reason whatsoever, then,
unless Landlord shall otherwise elect in accordance with the provisions of
Section 20.03 below, Landlord may estimate the Electricity Additional
Rent, and when the Submeter shall again become properly operative, an
appropriate reconciliation shall be made, by Tenant paying any deficiency
to Landlord within twenty (20) days after demand therefor, or by
Landlord crediting Tenant with the amount of any overpayment against
the next monthly installment of Fixed Rent and/or additional rent, as the
case may be. The estimate referred to in the immediately preceding
sentence shall be calculated on the basis that Tenant shall be deemed to
have used the same amount of electricity per day as Tenant had been
using, on the average (i) during the comparable period in the preceding
lease year, or (ii) if Tenant shall not have occupied the Demised Premiss
for the normal conduct of its business operations during such comparable
period in the preceding year, then during the most recent three (3)
months for which submeter readings are available.
E. If at any time during the Term the electric rate
charged by the Public Utility (the "Electric Rate") shall be increased by
the Public Utility, or Landlord's Electricity Cost shall be increased for
any other reason (other than the gross negligence or willful misconduct
of Landlord or Persons Within Landlord's Control), then, effective as of
the date of each such increase in the Electric Rate or Landlord's
Electricity Cost (as the case may be), the Electricity Additional Rent
shall be increased in proportion to such change in the Electric Rate or
Landlord's Electricity Cost, as determined by Landlord's electrical
consultant ("Landlord's Consultant"), whose determination shall be
binding and conclusive upon the parties, subject to the provisions of
Subsection 20.03E below. Tenant acknowledges that it is anticipated that
electric rates, charges, fees and/or other costs, as well as methods of or
rules on billing, may be changed by virtue of time-of-day rates or other
methods of billing, and that the references in this Article 20 to changes
in the Electric Rate are intended to include any and all such changes.
F. Landlord and Tenant agree that the Submeter might
be installed or become operational subsequent to the date (the "Initial
Occupancy Date") that Tenant or any Person Within Tenant's Control
first enters the Demised Premises. In such event, Landlord, in
Landlord's sole discretion, may: (i) furnish Tenant Electricity on a "rent
inclusion" basis in accordance with the provisions of Section 20.03 below
for the period between the Commencement Date and such time as the
Submeter shall be installed and operating; or (ii) estimate the Electricity
Additional Rent payable by Tenant for the period commencing on the
Initial Occupancy Date and ending on the "Occupancy Reading Date"
(hereinafter defined), and Tenant shall pay to Landlord, within twenty
(20) days after demand therefor, the amount set forth on Landlord's
estimate and, after rendition of a subsequent statement, an appropriate
reconciliation shall be made for any deficiency owed by Tenant, or any
overage paid by Tenant; or (iii) render a statement to Tenant after the
first reading of the Submeter shall be made (the date upon which the
Submeter shall be first read being herein called the "Occupancy Reading
Date"), which shall be on or about the date upon which Tenant shall
have commenced the conduct of Tenant's business operations in the
Demised Premises, and the amount calculated based on the Submeter
reading on the Occupancy Reading Date shall be determined on a per
diem basis and then multiplied by the number of days from the Initial
Occupancy Date through the Occupancy Reading Date to arrive at the
amount due for said period, and Tenant shall pay the Electricity
Additional Rent to Landlord on the basis of such Submeter reading
within twenty (20) days after rendition of Landlord's statement setting
forth such computation.
Section 20.03.
A. Notwithstanding in the provisions of Section 20.03
above, if at any time during the Term said submeter(s) shall not then be
installed or operating, or if Landlord shall be required by any Legal
Requirements or by the Public Utility to discontinue furnishing electricity
to Tenant on a submetered basis, or if Landlord elects to discontinue
furnishing electricity to substantially all of the office tenants of the
Building on a submetered basis, then (subject to the provisions of Section
20.05 below) Landlord shall furnish electricity to the Demised Premises
in quantity equal to the Existing Capacity on a "rent inclusion" basis, and
there shall be no separate charge to Tenant for such electricity.
B. For the purposes of this Article 20, and other
provisions of this Lease:
(i) The term "Base Electric Charge" shall
initially mean the amount of $37,058.55 (except during the period which
shall begin on the Commencement Date and end on the day immediately
preceding the date on which Tenant shall first occupy the Demised
Premises for the purpose of conducting Tenant's business operations
therein, during which period the term "Base Electric Charge" shall mean
the amount of $13,003.00).
(ii) The term "Electric Inclusion Factor" shall
mean an amount, to be included as a component of Fixed Rent, equal to
the sum of the Base Electric Charge plus all increases thereto pursuant to
the provisions of this Article 20; it being understood and agreed that at
all times the Electric Factor shall not be less than the amount computed
by multiplying Landlord's Electricity Cost by Tenant's kilowatt hour
consumption and kilowatt demand usage as reasonably determined by the
estimate of Landlord's Consultant, plus five (5%) percent of the resulting
total.
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C. Landlord and Tenant agree that, during any period
in which electricity shall be furnished to the Demised Premises on a
"rent inclusion" basis, the annual Fixed Rent set forth in Section 1.01
above shall be increased by an amount equal to the Base Electric Charge,
as the same may be adjusted pursuant to the provisions of this Article 20.
Tenant acknowledges and agrees that the Base Electric Charge currently
represents the amount initially included in the Electric Inclusion Factor to
compensate Landlord for the electrical wiring and other installations
necessary for, and for Landlord's obtaining and making available to
Tenant, the redistribution of electric energy to the Demised Premises as
an additional service, and that such Base Electric Charge component of
the Electric Inclusion Factor is subject to adjustment as provided herein
based on Tenant's consumption and/or demand of electricity.
D. At any time, and from time to time, after Tenant
shall have entered into possession of the Demised Premises or any
portion thereof, and electricity shall be furnished to the Demised
Premises on a "rent inclusion" basis, Landlord and Landlord's agents and
consultants upon notice (which notice may be given orally) may survey
the electrical fixtures, appliances and equipment located in or servicing
the Demised Premises and Tenant's consumption and demand of
electricity therein to (i) ascertain whether Tenant is complying with
Tenant's obligations under this Article 20, and (ii) determine whether the
then Electric Inclusion Factor included in Fixed Rent is less than the
Electric Inclusion Factor computed as a result of said survey, and to
adjust the Electric Inclusion Factor component of Fixed Rent in
accordance with the following computations:
(x) In the case of the first electric
survey, if the cost or value of Tenant's electric consumption and/or
demand shown by the survey shall exceed the initial Electric Inclusion
Factor, then the Electric Inclusion Factor component of the Fixed Rent
shall be increased by the amount of such excess retroactive to the
beginning of the period when electricity shall be furnished to the Demised
Premises on a "rent inclusion" basis; and
(y) In the event of the second and subsequent
surveys, if the cost or value of Tenant's electric consumption and/or
demand shown by such survey shall exceed the then Electric Inclusion
Factor, then such Electric Inclusion Factor component of Fixed Rent
shall be increased by the amount of such excess, effective as of the
earlier of (a) the date of such survey or (b) the date on which increases
in the connected power load or changes in electric consumption occurred
(as determined by Landlord's Consultant).
E. The initial amount of each such increase shall be
paid by Tenant to Landlord within ten (10) days after Landlord furnishes
Tenant with a statement thereof, and thereafter, such increase shall be
added to each of the monthly installments of Fixed Rent. The cost of
each survey made pursuant to Subsection 20.03D above shall be borne
equally by Landlord and Tenant. The determination of Landlord's
Consultant as to any increase in the Fixed Rent based on such average
monthly electric energy consumption and/or demand shall be conclusive
and binding upon the parties from and after the delivery of a copy of
such determination to Landlord and Tenant, unless, within thirty (30)
days thereafter, Tenant shall dispute such determination by having an
independent reputable electrical consultant, selected and paid for by
Tenant ("Tenant's Consultant"), consult with Landlord or Landlord's
Consultant as to said determination. If the parties or their respective
consultants shall agree as to a resolution of said dispute, then such
agreement shall be binding upon the parties or if the difference between
them shall be five (5%) percent or less of the determination made by
Landlord's Consultant, then the determination made by Landlord's
Consultant shall be binding upon the parties. If Landlord's Consultant
and Tenant's Consultant shall not agree within the said five (5%) percent
of each other, then Landlord's Consultant and Tenant's Consultant shall
jointly select a third duly qualified independent, reputable electrical
consultant who shall determine the matter and whose decision shall be
binding upon both parties with the same force and effect as if a
non-appealable judgment had been entered by a court of competent
jurisdiction. If Landlord's Consultant and Tenant's Consultant shall not
agree upon such a third electrical consultant, the matter shall be
submitted to the American Arbitration Association in New York City to
be determined in accordance with its rules and regulations, and the
decision of the arbitrators shall be binding upon the parties with the same
force and effect as if a non-appealable judgment had been entered by a
court of competent jurisdiction. Any charges of such third consultant or
of the American Arbitration Association, and all costs and expenses of
either, shall be borne equally by both parties. Notwithstanding the
foregoing, until such final determination, Tenant shall pay Fixed Rent to
Landlord in accordance with the determination made by Landlord's
Consultant; provided, however, that such payments shall be made by
Tenant without prejudice. After such final determination, the parties
shall promptly make adjustment for any deficiency owed by Tenant or
any overage paid by Tenant.
F. If at any time during the Term the Electric Rate
shall be increased by the Public Utility, then, effective as of the date of
each such increase in the Electric Rate, the Electric Inclusion Factor
included in the Fixed Rent shall be increased in proportion to such
change in the Electric Rate (as determined by Landlord's Consultant,
whose determination shall be binding and conclusive upon the parties,
subject to the provisions of Subsection 20.03E above).
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G. At Landlord's request, the parties shall execute,
acknowledge and deliver to each other a supplemental agreement in such
form as Landlord shall reasonably require to reflect each change in the
Fixed Rent under this Article 20, but each and every such change shall
be effective as of the effective date described in the provision under
which such change is provided for, even if such agreement shall not be
executed and delivered.
Section 20.04.
A. Tenant's use of electricity in the Demised Premises
shall not at any time exceed the Existing Capacity. In order to ensure
that the Existing Capacity is not exceeded and to avert possible adverse
effect upon the Building's distribution of electricity via the Building's
electric system, if at any time the total connected load of Tenant's
fixtures, appliances and equipment in the Demised Premises shall equal
or exceed the Existing Capacity, then Tenant shall not, without
Landlord's prior consent in each instance, connect any additional
fixtures, appliances or equipment to the Building's electric system, or
make any alterations or additions to the electric system of the Demised
Premises existing on the Commencement Date.
B. In the event that Tenant shall request electric
energy in addition to the Existing Capacity, and if and to the extent that
Landlord shall reasonably determine that such additional electric energy
is available for use by Tenant without (x) resulting in allocation to
Tenant of a disproportionate amount of available electric energy and
(y) otherwise adversely affecting the Building or any of the other
tenancies therein, then Landlord shall connect such additional electric
energy to the Demised Premises, and Tenant shall pay to Landlord a
charge equal to Landlord's then established connection charge for each
additional amp of electric energy or portion thereof so supplied to the
Demised Premises, in addition to the actual cost of installing additional
risers, switches and related equipment necessary in providing such
additional electric energy.
Section 20.05.
A. Landlord reserves the right to discontinue
furnishing electricity to Tenant in the Demised Premises at any time upon
not less than forty-five (45) days notice to Tenant if compelled or
required by the Public Utility or any Legal Requirements (it being agreed
that such compulsion shall include Landlord's inability to legally collect
from Tenant all of the costs incurred by Landlord for Tenant Electricity)
or if Landlord shall elect to discontinue furnishing electricity to
substantially all other tenants in the Building, except that, if Tenant shall
promptly commence and diligently pursue to completion arrangements to
obtain electricity from the Public Utility upon receipt of Landlord's
notice that Landlord intends to discontinue furnishing electricity to the
Demised Premises, then Landlord shall postpone such discontinuance for
a sufficient amount of time so as to allow Tenant to obtain electricity
directly from the Public Utility. If Landlord exercises such right, this
Lease shall continue in full force and effect and shall be unaffected
thereby, except that, from and after the effective date of such
discontinuance, Landlord shall not be obligated to furnish electricity to
Tenant (and, if electricity shall, immediately prior to such
discontinuance, have been furnished to the Demised Premises on a "rent
inclusion" basis, the Fixed Rent payable under this Lease shall be
reduced by an amount equal to the Electric Inclusion Factor component
of such Fixed Rent).
B. If Landlord so discontinues furnishing electricity to
Tenant, then Tenant shall, at Tenant's own cost and expense, promptly
arrange to obtain electricity directly from the Public Utility. Such
electricity may be furnished to Tenant by means of the then existing
Building System feeders, risers and wiring, but only if and to the extent
that Landlord determines the same to be available, suitable and safe for
such purpose. All meters and additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to
obtain electricity directly from such Public Utility shall be: (x) if located
entirely within the Demised Premises, installed and connected by Tenant,
at Tenant's own cost and expense, but only after having received
Landlord's prior written consent thereto,, which consent shall not be
unreasonably withheld or delayed and Tenant shall thereafter maintain,
repair and replace the same, as necessary, at Tenant's own cost and
expense; and (y) if located wholly or in part outside of the Demised
Premises, installed, connected and thereafter maintained, repaired and
replaced, as necessary, by Landlord, at Tenant's cost and expense. Only
rigid conduit will be allowed in connection with any such installation.
Section 20.06. If, pursuant to any Legal Requirement (other than
the Electricity Abatement Program), the amount which Landlord shall be
permitted to charge Tenant for the purchase of electricity pursuant to this
Article 20 shall be reduced below that which Landlord would otherwise
be entitled to charge Tenant hereunder, then Tenant shall pay the
difference between such amounts to Landlord as additional rent within
thirty (30) days after being billed therefor by Landlord, as compensation
for the use of the Building's electrical distribution system. If any tax
shall be imposed on Landlord by any federal, state or municipal authority
with respect to electricity furnished to Tenant, then Tenant's applicable
share of such taxes shall be reimbursed by Tenant to Landlord as
additional rent within thirty (30) days after being billed therefor.
Section 20.07. If the Public Utility or any Legal Requirement
shall institute or require a change in the manner in which electricity is to
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be furnished or paid for, and such change reasonably necessitates an
appropriate modification of this Article 20, Tenant shall execute and
deliver to Landlord an instrument which sets forth such modification;
provided, however, that in no event shall the Fixed Rent be reduced to
an amount below the amount thereof stated in Section 1.01 above.
Tenant agrees to fully and timely comply with all rules and regulations of
the Public Utility applicable to Tenant or the Demised Premises.
Section 20.08. In the event that, pursuant to any of the
provisions of this Article 20, any initial determinations, statements or
estimates are made by or on behalf of Landlord (whether such initial
determinations, statements or estimates are subject to dispute or not
pursuant to the provisions of this Article 20), Tenant shall pay to
Landlord the amount(s) set forth on such initial determinations,
statements or estimates, as the case may be, (provided that such payment
shall be made by Tenant without prejudice) until subsequent
determinations, statements or estimates are rendered, at which time the
parties shall promptly make adjustment for any deficiency owed by
Tenant, or any overage paid by Tenant.
Section 20.09. Notwithstanding any provisions of this Article 20
and regardless of the manner of service of electricity to the Demised
Premises (whether by rent inclusion or submetering, but excluding a
situation in which Tenant shall be obtaining electricity directly from the
Public Utility pursuant to the provisions of Section 20.05 above), in no
event shall the cost to Tenant for electricity to the Demised Premises be
less than one hundred five (105%) percent of Landlord's Electricity Cost.
Section 20.10. Any payments due hereunder for less than a
calendar year at the commencement or end of the Term shall be equitably
prorated. Any delay or failure by Landlord to render any bills or
statements under the provisions of this Article 20 shall not prejudice
Landlord's right thereunder to render such bills or statements for prior or
subsequent periods. Any delay or failure by Landlord in making any
request or demand for any amount payable by Tenant pursuant to the
provisions of this Article 20 shall not constitute a waiver of, or in any
way diminish, the continuing obligation of Tenant to make such payment.
The obligations of Tenant, with respect to any payment or increase
pursuant to the provisions of this Article 20, and Landlord, with respect
to any adjustments pursuant to the provisions of this Article 20, if any,
shall survive the expiration or sooner termination of the Term for a
period of three (3) years from the Expiration Date.
ARTICLE 21
BROKER
Section 21.01. Each party represents and warrants to the other
that such party has not employed, dealt with or negotiated with any
broker in connection with this Lease, and each party shall indemnify,
protect, defend and hold the other harmless from and against any and all
liability, damage, cost and expense (including reasonable attorneys' fees
and disbursements) arising out of a breach of the foregoing representation
and warranty. The provisions of this Section 21.01 shall not apply to the
Designated Broker, if a Designated Broker is specified in Section 1.01.
ARTICLE 22
SUBORDINATION
Section 22.01.
A. This Lease and all of Tenant's rights hereunder,
including Tenant's rights under Section 27.01, are and shall be subject
and subordinate to (i) every Underlying Lease, the rights of the
Overlandlord or Overlandlords under each Underlying Lease, all
mortgages heretofore or hereafter placed on or affecting any Underlying
Lease, alone or with other property, and to all advances heretofore or
hereafter made under any such leasehold mortgage, and to all renewals,
modifications, consolidations, replacements, substitutions, spreaders,
additions and extensions of any such leasehold mortgage, and (ii) any
condominium plan or declaration now or hereafter affecting the Building,
and any other instruments or rules and regulations promulgated in
connection therewith, and (iii) any Mortgage now or hereafter affecting
the real property of which the Demised Premises form a part or any part
or parts of such real property, or such real property and other property,
and to each advance made or hereafter to be made under any such
Mortgage and to all renewals, modifications, consolidations,
replacements, substitutions, spreaders, additions and extensions of any
such Underlying Lease or Leases and/or Mortgages. The subordination
provisions herein contained shall be self-operative and no further
instrument of subordination shall be required. Landlord reserves the
right, by written notice to Tenant from Landlord, to provide that the
foregoing provisions shall not apply to any or all Mortgages then being
and/or thereafter to be made. In confirmation of such subordination,
Tenant shall execute and deliver promptly any certificate that Landlord or
its successors in interest may request. If Tenant shall not execute and
deliver such subordination certificate within ten (10) days after the
request of Landlord or Landlord's successors-in-interest, then Tenant
shall be deemed to constitute and appoint Landlord or Landlord's successor-in-
interest as Tenant's attorney-in-fact to execute and deliver any such
certificate or certificates for and on behalf of Tenant. Notwithstanding
any provision in this Lease or any separate agreement with Tenant,
Tenant covenants and agrees that Tenant shall not do any act, or refrain
from doing any act, if doing such act, or refraining from doing such act,
would constitute a default or breach of any Underlying Lease or
Mortgage to which this Lease is subordinate, and of which Tenant has
knowledge or has been given notice.
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B. Without limiting the generality of the provisions of
the foregoing Subsection 22.01A, Tenant acknowledges receipt of advice
from Landlord to the effect that this Lease, and all rights of Tenant
hereunder, are and shall be subject and subordinate in all respects to the
lease dated as of July 15, 1955, between Webb & Knapp, Inc., as
landlord, and 13039 Corporation, as tenant, as such lease has been
amended, and as assigned by mesne assignments to Landlord with respect
to the interest of the tenant thereunder, and to 405 Company, S.K.
Realty Company and 715 Realty Company, collectively, with respect to
the interest of the landlord thereunder.
Section 22.02. This Lease may be conditionally assigned as
collateral security by Landlord to a Mortgagee, which collateral
assignment may provide that, without Mortgagee's prior written consent,
the parties shall not (i) pay or accept the rent or additional rent under the
terms of this Lease for more than one (1) month in advance of its due
date, or (ii) enter into an agreement to amend or modify this Lease if
there is an unexpired Term of more than one (1) year thereunder, or (iii)
voluntarily surrender the Demised Premises, terminate this Lease, or
accelerate the Term without cause, or (iv) authorize Tenant to assign this
Lease or sublet the Demised Premises or any part thereof except in the
manner as provided under the terms of this Lease. Any agreement by
Landlord to make, perform or furnish any capital improvements or
services not related to the possession or use of the Demised Premises by
Tenant, shall not be binding on any Mortgagee in the event of
foreclosure or in the event that a Mortgagee enters upon the Demised
Premises pursuant to any security instrument in connection with the
mortgage loan. Any Mortgagee and its successor shall not be responsible
for any improvements, covenants, contractual obligations or services
which Landlord has agreed to make, furnish or perform for Tenant under
the terms of this Lease which do not run with the Land, or for the
control, care or management of the Building or any waste committed on
the Building by any tenant, or for any dangerous or defective condition
of the Building resulting in loss or injury or death to any tenant, licensee
or stranger. No security deposited by Tenant has been transferred to any
Mortgagee, who will assume no liability for any security so deposited
unless it demands the transfer of said security and assumes responsibility
therefor.
Section 22.03. Tenant agrees that, unless a Mortgagee shall elect
otherwise in the case of a foreclosure of such Mortgage, or unless the
Overlandlord of an Underlying Lease to which this Lease is subordinate
shall elect otherwise in the case of a cancellation or a termination of such
Underlying Lease, neither the cancellation nor termination of any
Underlying Lease, nor any foreclosure of a Mortgage affecting the Land,
Building, an Underlying Lease or the Demised Premises, nor the
institution of any suit, action, summary or other proceeding against
Landlord herein or any successor landlord, shall by operation of law or
otherwise result in cancellation or termination of this Lease or the
obligations of Tenant hereunder, and upon the request of the
Overlandlord of such Underlying Lease, or the holder of such Mortgage,
or the purchaser at a sale in foreclosure of such Mortgage, or other
person who shall succeed to the interests of Landlord (which such
Overlandlord, holder, purchaser or other person is hereafter in this
paragraph referred to as "such successor-in-interest"), Tenant covenants
and agrees to attorn to such successor-in-interest and recognize such
successor-in-interest as its landlord under this Lease. Tenant agrees to
execute an instrument in writing reasonably required by such successor-
in-interest whereby Tenant attorns to such successor-in-interest, and
hereby appoints such successor-in-interest, irrevocably, as attorney-in-
fact of Tenant to execute such instrument for and on behalf of Tenant, if
Tenant shall not execute and deliver such instrument within ten (10) days
after request therefor by such successor-in-interest. Tenant further
waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give Tenant any right of election to
terminate this Lease or to surrender possession of the Demised Premises
in the event any Underlying Lease terminates or any such mortgage is
foreclosed or any such proceeding is brought by any Overlandlord or the
holder of any such mortgage.
Section 22.04. In the event of the occurrence of any act or
omission by Landlord which would give Tenant the right to terminate
this Lease or claim a partial or total eviction, or make any claim against
Landlord for the payment of money, Tenant will not exercise such right
until Tenant has given written notice of such occurrence to (i) Landlord
and (ii) each Mortgagee and the Overlandlord of any Underlying Lease,
as to whom, and to the last address to which Tenant has been instructed
to give such notice, and a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notices, during
which such parties or any of them with reasonable diligence following
the giving of such notice, have not commenced and continued to remedy
such act or omission or to cause the same to be remedied. Nothing
herein contained shall be deemed to create any rights in Tenant not
specifically granted in this Lease or under any applicable provision of
law, nor to obligate any such Mortgagee or Overlandlord to remedy any
such act or omission.
Section 22.05. If a Mortgagee or prospective mortgagee shall
request modifications to this Lease, Tenant shall not unreasonably
withhold, delay or defer Tenant's consent thereto, provided that such
modifications shall not materially increase the obligations or materially
decrease the rights of Tenant hereunder, or to more than a de minimis
degree, decrease the obligations or increase the rights of Landlord
hereunder, or materially adversely affect the leasehold interest hereby
created. In no event shall a requirement that the consent of any such
Mortgagee or prospective mortgagee be given for any modification of
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this Lease or for any assignment or sublease, be deemed to materially
adversely affect the leasehold interest hereby created; provided, however,
that the standards for withholding such consent are not more onerous to
Tenant than those contained in this Lease.
ARTICLE 23
ESTOPPEL CERTIFICATE
Section 23.01. Tenant agrees, at any time, and from time to
time, within ten (10) days after request by Landlord, to execute,
acknowledge and deliver to Landlord, a statement in writing addressed to
Landlord and/or to such other party(ies) as Landlord may designate: (i)
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (ii) stating the dates to which the
Fixed Rent, additional rent and other charges have been paid, (iii) stating
whether or not, to the best knowledge of the signer of such certificate,
there exists any default by either party in the performance of any
covenant, agreement, term, provision or condition contained in this
Lease, and, if so, specifying each such default of which the signer may
have knowledge, (iv) setting forth the names and addresses of the
shareholders of Tenant (if Tenant shall be a corporate entity) and their
holdings, and (v) setting forth such other information as Landlord may
reasonably request concerning this Lease, it being intended that any such
statement delivered pursuant hereto may be relied upon by Landlord or a
purchaser of Landlord's interest and by any Mortgagee, or prospective
mortgagee, of any mortgage affecting the Building or the Land, or both,
and by any Overlandlord or prospective Overlandlord under any
Underlying Lease affecting the Land or Building, or both, and by any
Mortgagee or prospective mortgagee of any Underlying Lease. Failure
by Tenant to comply with the provisions of this Article 23 shall
constitute a waiver by Tenant of any defaults on Landlord's part under
this Lease and a waiver of enforceability by Tenant of any modification
of this Lease, as against any person above described entitled to rely upon
such statement, but without however limiting any rights and remedies
available to Landlord by reason of such failure.
Section 23.02. Landlord agrees, in connection with any proposed
assignment of this Lease or subletting of the Demised Premises by
Tenant, upon not less than twenty (20) days prior notice by Tenant, to
execute, acknowledge and deliver to Tenant a statement in writing
addressed to Tenant: (i) stating that this Lease is then in full force and
effect and has not been modified (or if modified, setting forth all
modifications), (ii) setting forth, to the best knowledge of Landlord (but
without having made any independent investigation), the date to which
the Fixed Rent and Recurring Additional Rent have been paid, and (iii)
stating whether or not, to the best knowledge of Landlord (but without
having made any independent investigation), Tenant is in default under
the Lease, and, if Tenant is in default, identifying such defaults.
Notwithstanding the foregoing, Landlord shall not be obligated to furnish
Tenant with more than one (1) such statement during any twelve (12)
month period.
ARTICLE 24
LEGAL PROCEEDINGS
Section 24.01. If Tenant or Landlord shall bring any action or
suit for any relief against the other, declaratory or otherwise, arising out
of this Lease or Tenant's occupancy of the Demised Premises, the parties
hereto agree to and hereby waive any right to a trial by jury.
Section 24.02. This Lease shall be governed in all respects by
the laws of the State of New York. Tenant hereby specifically consents
to jurisdiction in the State of New York in any action or proceeding
arising out of this Lease and/or the use and occupation of the Demised
Premises. If Tenant at any time during the Term shall not be a New
York partnership or a New York corporation or a foreign corporation
qualified to do business in New York State, Tenant shall designate, in
writing, an agent located in New York County (together with such
agent's address) for service under the laws of the State of New York for
the entry of a personal judgment against Tenant. Tenant, by notice to
Landlord, shall have the right to change Tenant's designation of such
agent, provided that at all times there shall be an agent in New York
County for such service. In the event of any revocation by Tenant of
such agency, such revocation shall be void and have no force or effect
unless and until a new agent shall have been designated for service and
Tenant shall have notified Landlord thereof (together with such new
agent's address). If any such agency designation shall require a filing in
the office of the Clerk of the County of New York, the same shall be
promptly accomplished by Tenant, at Tenant's expense, and a certified
copy thereof shall thereupon be transmitted by Tenant to Landlord.
ARTICLE 25
SURRENDER
Section 25.01. Tenant shall, at the expiration or sooner
termination of the Term (either, as applicable, being referred to herein as
the "Surrender Date"), quit and surrender to Landlord the Demised
Premises, broom clean and in the condition required under this Lease,
reasonable wear and tear, damage from fire or other casualty,
condemnation or eminent domain and repairs which are not the
responsibility of Tenant under the terms of this Lease excepted, and shall
surrender all keys for the Demised Premises to Landlord at the place
then fixed for the payment of rent, and shall inform Landlord of all
combinations of locks, safes and vaults, if any, located (and permitted by
Landlord to remain) in the Demised Premises. Except as otherwise
expressly provided elsewhere in this Lease, Tenant shall, on the
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Surrender Date, remove all of Tenant's property from the Demised
Premises and shall immediately repair any damage to the Demised
Premises caused by the installation and/or removal of such property.
Any or all of such property not so removed shall, at Landlord's option,
become the exclusive property of Landlord or be disposed of by
Landlord, at Tenant's cost and expense, without further notice to or
demand upon Tenant, and without any liability to Tenant, in connection
therewith, except as may be otherwise provided herein.
Section 25.02.
A. If the Demised Premises shall not be surrendered as
and when aforesaid, Tenant shall pay to Landlord as use and occupancy
for each month or fraction thereof during which Tenant continues to
occupy the Demised Premises from and after the Surrender Date (the
"Continued Occupancy Period") an amount of money (the "Occupancy
Payment") equal to one hundred fifty (150%) percent of one twelfth
(1/12) of the Fixed Rent and one twelfth (1/12) of Recurring Additional
Rent payable by Tenant during the immediately preceding twelve (12)
months. Tenant shall make the Occupancy Payment, without notice or
previous demand therefor, on the first day of each and every month
during the Continued Occupancy Period.
B. In addition to making all required Occupancy
Payments, Tenant shall, in the event of Tenant's failure to surrender the
Demised Premises on the Surrender Date as and in the manner aforesaid,
also indemnify and hold Landlord harmless from and against any and all
cost, expense, damage, claim, loss or liability resulting from any delay
or failure by Tenant in so surrendering the Demised Premises, including
any consequential damages suffered by Landlord and any claims made by
any succeeding occupant founded on such delay or failure of whose
existence Tenant has knowledge or has been given notice, and any and
all reasonable attorneys' fees, disbursements and court costs incurred by
Landlord in connection with any of the foregoing.
C. The receipt and acceptance by Landlord of all or
any portion of the Occupancy Payment shall not be deemed a waiver or
acceptance by Landlord of Tenant's breach of Tenant's covenants and
agreements under this Article 25, or a waiver by Landlord of Landlord's
right to institute any summary holdover proceedings against Tenant, or a
waiver by Landlord of Landlord's rights to enforce any of Landlord's
rights, or pursue any of Landlord's remedies against Tenant in such
event as provided for in this Lease or under law.
Section 25.03. It is expressly understood and agreed that there
can be no extension of the Term unless said extension is reduced to
writing and agreed to by Landlord. No verbal statement or unsigned
writing shall be deemed to extend the Term, and Tenant hereby agrees
that any improvements Tenant shall make to the Demised Premises in
reliance upon any extension of the Term given verbally or by an
unsigned writing shall be at Tenant's peril.
Section 25.04. If the last day of the Term shall fall on a
Saturday, Sunday or legal holiday, the Term of this Lease shall expire on
the Business Day immediately preceding such date.
Section 25.05. Tenant expressly waives, for itself and for any
person claiming by, through or under Tenant, any rights which Tenant or
any such persons may have under the provisions of Section 2201 of the
New York Civil Practice Law and Rules, and of any successor law of
like import then in force, in connection with any summary holdover
proceedings which Landlord may institute to enforce the provisions of
this Article 25.
Section 25.06. Each and every one of Tenant's obligations set
forth in this Article 25 (including the indemnity) shall survive the
expiration or other termination of the Term.
ARTICLE 26
RULES AND REGULATIONS
Section 26.01. Tenant and all Persons Within Tenant's Control
shall faithfully observe and comply with: (i) all of the rules and
regulations set forth in Exhibit "F" annexed hereto and made a part
hereof, and (ii) such additional rules and regulations as Landlord
hereafter at any time or from time to time may reasonably make and
communicate in writing to Tenant, which, in the reasonable judgment of
Landlord, shall be necessary or desirable for the reputation, safety, care
or appearance of the Building and the Building Systems, or the
preservation of good order therein, or the operation or maintenance of
the Building and Building Systems, or the comfort of tenants or others in
the Building; provided, however, that in the case of any conflict between
the provisions of this Lease and any such rules or regulations, the
provisions of this Lease shall control, and provided further that nothing
contained in this Lease shall be construed to impose upon Landlord any
duty or obligation to enforce the rules and regulations or the terms,
covenants or conditions in any other lease as against any other tenant,
and provided further that Landlord shall not be liable to Tenant for
violation of the same by any other tenant, its servants, employees,
agents, visitors, invitees, subtenants or licensees. Notwithstanding
anything contained herein to the contrary, Landlord shall not enforce the
rules and regulations against Tenant in a discriminatory manner. In the
event that Tenant shall dispute the reasonableness of any additional rule
or regulation hereafter made or adopted by Landlord or Landlord's
agents, the parties hereto agree to submit the question of the
reasonableness of such rule or regulation for decision to the Chairman of
the Board of Directors of the Management Division of The Real Estate
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Board of New York, Inc., or to such impartial person or persons as he
may designate, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any
additional rule or regulation upon Tenant's part shall be deemed waived
unless the same shall be asserted by service of a notice in writing upon
Landlord within fifteen (15) days after the giving of notice of the making
of the rule or regulation to Tenant.
ARTICLE 27
PERSONS BOUND
Section 27.01. The covenants, agreements, terms, provisions and
conditions of this Lease shall bind and inure to the benefit of the
respective heirs, distributees, executors, administrators, successors,
assigns and legal representatives of the parties hereto with the same
effect as if mentioned in each instance where a party hereto is named or
referred to, except that no violation of the provisions of Article 10 shall
operate to vest any rights in any successor, assignee or legal
representative of Tenant, and that the provisions of this Article 27 shall
not be construed as modifying the conditions of limitation contained in
Articles 14 and 15. The term "Landlord" as used in this Lease shall
mean the Landlord at the particular time in question, and it is agreed that
the covenants and obligations of Landlord under this Lease shall not be
binding upon Landlord herein named or any subsequent landlord with
respect to any period subsequent to the transfer of its interest under this
Lease by operation of law or otherwise. In the event of any such
transfer, the transferee shall be deemed to have assumed (subject to this
Article 27) the covenants and obligations of Landlord under this Lease,
and Tenant agrees to look solely to the transferee for the performance of
the obligations of Landlord hereunder, but only with respect to the period
beginning with such transfer and ending with a subsequent transfer of
such interest. A lease of Landlord's interest shall be deemed a transfer
within the meaning of this Article 27.
Section 27.02. Notwithstanding anything to the contrary provided
in this Lease, Tenant agrees that there shall be no personal liability on
the part of Landlord arising out of any default by Landlord under this
Lease, and that Tenant (and any person claiming by, through or under
Tenant) shall look solely to the equity interest of Landlord in and to the
Land and/or Building or the leasehold estate of Landlord for the
enforcement and satisfaction of any defaults by Landlord hereunder, and
that Tenant shall not enforce any judgment or other judicial decree
requiring the payment of money by Landlord, against any other property
or assets of Landlord, and at no time shall any other property or assets
of Landlord, or Landlord's principals, partners, members, shareholders,
directors or officers, be subject to levy, execution, attachment or other
enforcement procedure for the satisfaction of Tenant's (or such person's)
remedies under or with respect to this Lease, the relationship of Landlord
and Tenant hereunder or Tenant's use or occupancy of the Demised
Premises; such exculpation of personal liability to be absolute and
without any exception.
ARTICLE 28
NOTICES
Section 28.01. In order for the same to be effective, each and
every notice, request or demand permitted or required to be given by the
terms and provisions of this Lease, or by any Legal Requirement, either
by Landlord to Tenant or by Tenant to Landlord (any of the foregoing
being referred to in this Article 28 as a "Notice"), shall be given in
writing, in the manner provided in this Section 28.01, unless expressly
provided otherwise elsewhere in this Lease. In the case of Notices given
by Landlord to Tenant, any such Notice shall be deemed to have been
served and given by Landlord and received by Tenant on the third
Business Day following the date on which Landlord shall have deposited
such Notice by registered or certified mail, return receipt requested,
addressed to Tenant at the Demised Premises (or before Tenant has
moved its offices to the Demised Premises, addressed to Tenant at its
address as stated on the first page of this Lease), with a copy to Tenant
at 360 Second Avenue, Waltham, Massachusetts 02154, Attention: Mr.
John D. Pittenger, Chief Financial Officer, and a copy to Cole, Schotz,
Meisel, Forman & Leonard, P.A., Court Plaza North, 25 Main Street,
P.O. Box 800, Hackensack, New Jersey 07602-0800, Attention: Leonard
R. Glass, Esq. In the case of Notices given by Tenant to Landlord, any
such Notice shall be deemed to have been served and given by Tenant
and received by Landlord on the third Business Day following the date
on which Tenant shall have deposited such Notice (and any required
copies thereof) by registered or certified mail, return receipt requested,
enclosed in securely closed postpaid wrapper in a Post Office addressed
to Landlord as follows: Broadpine Realty Holding Company, Inc., c/o
J.P. Morgan Investment Management Inc., 522 Fifth Avenue, New
York, New York 10036, Attention: Ms. Anne S. Pfeiffer, with a copy to
Silverstein Properties, Inc., 120 Broadway, New York, New York
10271, attention: Mr. Edward J. Kulik, Jr., and with an additional copy
to: Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004, Attention: Brian Diamond, Esq., and with copies thereof
mailed as aforesaid to parties designated in accordance with
Section 22.04. Notices may also be given by telegram or telecopy or by
overnight courier with receipted delivery, each effective upon receipt, or
by hand delivery served in the same manner as a summons in a Supreme
Court action is then provided to be made under New York law. Either
party may, by notice as aforesaid, designate a different person or persons
and/or address or addresses for Notices.
Section 28.02. Notices may be given on behalf of Landlord by
the managing agent for the Building the name of which shall be supplied
to Tenant from time to time, and which currently is Silverstein
Properties, Inc.
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ARTICLE 29
PARTNERSHIP TENANT
Section 29.01. If Tenant is a partnership (or is comprised of two
(2) or more persons, individually and as co-partners of a partnership) or
if Tenant's interest in this Lease shall be assigned to a partnership (or to
two (2) or more persons, individually and as co-partners of a partnership)
pursuant to Article 10 (any such partnership and such persons being
referred to in this Article as "Partnership Tenant"), the following
provisions of this Section 29.01 shall apply to such Partnership Tenant:
(i) the liability of each of the parties comprising Partnership Tenant shall
be joint and several, (ii) each of the parties comprising Partnership
Tenant hereby consents in advance to, and agrees to be bound by, any
written instrument which may hereafter be executed changing, modifying
or discharging this Lease, in whole or in part, or surrendering all or any
part of the Demised Premises to Landlord, and by any notices, demands,
requests or other communications which may hereafter be given by
Partnership Tenant or by any of the parties comprising Partnership
Tenant, (iii) any bills, statements, notices, demands, requests or other
communications given or rendered to Partnership Tenant or to any of the
parties comprising Partnership Tenant shall be binding upon Partnership
Tenant and all such parties, (iv) if Partnership Tenant shall admit new
partners, all of such new partners shall, by their admission to Partnership
Tenant, be deemed to have assumed performance of all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed
and performed, (v) Partnership Tenant shall give prompt notice to
Landlord of the admission of any such new partners, and, upon demand
of Landlord, shall cause each such new partner to execute and deliver to
Landlord an agreement in form reasonably satisfactory to Landlord,
wherein each such new partner shall assume performance of all of the
terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed (but neither Landlord's failure to request any
such agreement nor the failure of any such new partner to execute or
deliver any such agreement to Landlord shall vitiate the provisions of
clause (iv) of this Section 29.01), and (vi) on each anniversary of the
Commencement Date, Partnership Tenant shall deliver to Landlord a list
of the names of all partners and their current residential addresses.
Section 29.02. If any partner in Tenant is or shall be a
professional corporation, Tenant agrees to cause such professional
corporation and each individual shareholder thereof to execute such
guaranties and other instruments, agreements or documents as Landlord
may reasonably request confirming that such individual shareholder shall
have the same obligations and liability under this Lease as such
shareholder would have had if he, and not such professional corporation,
were a partner in Tenant.
Section 29.03. If Tenant is a professional corporation or a
partnership, Tenant and each of the partners/shareholders of Tenant
hereby waive any requirements of law that may require that Landlord
first look to the assets of Tenant for recovery of any monies due
hereunder, it being the intention of the parties hereto that Landlord may,
at Landlord's election, proceed against the assets of Tenant and/or the
assets of the individual partners/shareholders of Tenant, whether
simultaneously, or in such order of priority as Landlord may determine
in Landlord's sole discretion. The provisions of this Section 29.03 are
not intended to mean that Landlord shall have limited or waived its rights
to any other available remedies hereunder or under applicable law as to
Tenant, including the right to look to the assets of Tenant for recovery of
any monies due hereunder.
Section 29.04. If Tenant is a professional corporation or a
partnership, the partners/shareholders of Tenant hereby consent and
submit to the jurisdiction of any court of record of New York State
located in New York County, or of the United States District Court for
the Southern District of New York, and agree that service of process in
any action or proceeding brought by Landlord may be made upon any or
all of the partners/shareholders of Tenant by mailing a copy of the
summons to such partner(s)/shareholder(s) either at their respective
addresses or at the Demised Premises, by registered or certified mail,
return receipt requested. Notwithstanding the foregoing, the residence of
any partner/shareholder of Tenant shall not be a basis for a choice of
venue or for a motion by a partner/shareholder of Tenant for transfer of
venue or forum non conveniens pursuant to any rule of common law
and/or any applicable state of federal provision or statute, and each
partner/shareholder of Tenant and Tenant hereby waives the right to
choose venue or to move for transfer of venue or forum non conveniens
on the grounds that an individual partner/shareholder of the Tenant
resides in a particular jurisdiction.
ARTICLE 30
NO WAIVER; ENTIRE AGREEMENT
Section 30.01. The failure of the Landlord or Tenant to seek
redress for violation of, or to insist upon the strict performance of any
covenant, agreement, term, provision or condition of this Lease, or any
of the rules and regulations, shall not constitute a waiver thereof, and
Landlord or (except as otherwise provided in this Lease) Tenant, as the
case may be, shall have all remedies provided herein and by applicable
law with respect to any subsequent act which would have originally
constituted a violation. The receipt by Landlord of Fixed Rent and/or
additional rent with knowledge of the breach of any covenant, agreement,
term, provision or condition of this Lease shall not be deemed a waiver
of such breach. No provision of this Lease shall be deemed to have been
waived by Landlord or Tenant, unless such waiver be in writing signed
by Landlord or Tenant, as the case may be. Landlord and Tenant each
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hereby expressly waive any right that Landlord or Tenant might
otherwise have to raise or assert either the aforesaid failure of the other
party to enforce rights, seek redress or insist upon strict performance, or
the aforesaid receipt by Landlord or Tenant of Fixed Rent and/or
additional rent, as a basis for any defense or counterclaim in any legal,
equitable or other proceeding in which Landlord or Tenant shall seek to
enforce any rights, covenants or conditions under this Lease. The
remedies provided in this Lease shall be cumulative and shall not in any
way abridge, modify or preclude any other rights or remedies to which
Landlord or (except as otherwise provided in this Lease) Tenant may be
entitled under this Lease, at law or in equity. Without limiting the
generality of the foregoing, Tenant expressly agrees that, upon the
occurrence of an Event of Default, Landlord shall be entitled to exercise
all of the rights set forth in Article 15 above (including the right to
terminate this Lease), notwithstanding that this Lease provides that
Landlord may cure the default or otherwise perform the obligation of
Tenant which gave rise to such Event of Default, and regardless of
whether Landlord shall have effected such cure or performed such
obligation. The receipt and retention by Landlord of Fixed Rent or
additional rent from any person other than Tenant shall not be deemed a
waiver by Landlord of any breach by Tenant or any covenant,
agreement, term, provision or condition herein contained, or the
acceptance of such other person as a tenant, or a release of Tenant from
the further performance of the covenants, agreements, terms, provisions
and conditions herein contained.
Section 30.02. This Lease, with the schedules, riders and
exhibits, if any, annexed hereto, contains the entire agreement between
Landlord and Tenant, and any agreement heretofore made shall be
deemed merged herein. Any agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive,
release, discharge, terminate or effect a surrender or abandonment of this
Lease, in whole or in part, unless such agreement is in writing and
signed by the party against whom enforcement is sought. All of the
schedules, riders and exhibits, if any, annexed hereto are incorporated
herein and made a part hereof as though fully set forth herein. If Tenant
shall have any right to an extension or renewal of the Term, or any right
to lease other space from Landlord, Landlord's exercise of Landlord's
right to terminate this Lease shall operate, ipso facto, to terminate such
renewal, extension or other right, whether or not theretofore exercised by
Tenant. Any option on the part of Tenant herein contained for an
extension or renewal hereof shall not be deemed to give Tenant any
option for a further extension beyond the renewal or extended term. No
option or right granted to Tenant under this Lease to terminate, extend,
or make any other election, shall be exercisable or valid during such time
as Tenant is in default under this Lease beyond the expiration of any
applicable notice and cure period.
Section 30.03. No act or thing done by Landlord or Landlord's
agents during the Term shall be deemed to constitute an eviction by
Landlord, or be deemed an acceptance of a surrender of the Demised
Premises, and no agreement to accept such surrender shall be valid,
unless in writing signed by Landlord. No employee of Landlord or of
Landlord's agents shall have any power to accept the keys of the
Demised Premises prior to the termination of this Lease. The delivery of
keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Demised
Premises. In the event that Tenant at any time shall desire to have
Landlord sublet the Demised Premises for Tenant's account, Landlord or
Landlord's agents are authorized to receive said keys for such purposes
without releasing Tenant from any of Tenant's obligations under this
Lease, and Tenant hereby relieves Landlord of any liability for loss of or
damage to any of Tenant's property in connection with such subletting.
ARTICLE 31
MISCELLANEOUS
Section 31.01. Tenant represents that Tenant has inspected the
Demised Premises, and (except as may be otherwise expressly set forth
elsewhere in this Lease) agrees to take same in its existing condition "as
is" and "where is" at the Commencement Date. The taking of possession
of the Demised Premises by Tenant shall be deemed presumptive
evidence that Tenant accepts the same "as is" and "where is", and that
the Demised Premises and the Building are in good and satisfactory
condition (subject to latent defects in the Demised Premises) and except
for (i) items noted on a punch list delivered to Landlord within thirty
(30) days of the Commencement Date, and (ii) Landlord's Work which is
to be performed before or contemporaneously with the Commencement
Date which shall be warranted for the period commencing the
Commencement Date and terminating on the first anniversary of the
Commencement Date. Tenant agrees that neither Landlord, nor any
broker, agent, employee or representative of Landlord nor any other
party, has made, and Tenant does not rely on, any representations,
warranties or promises with respect to the Building, the Land, the
Demised Premises or this Lease, except as herein expressly set forth, and
no rights, easements or licenses are acquired by Tenant by implication or
otherwise, except as expressly set forth in the provisions of this Lease.
Landlord makes no representation as to the design, construction,
development or use of the Land or Building, except as may be expressly
set forth in this Lease.
Section 31.02. The Table of Contents and Article headings of
this Lease are included for convenience only, and shall not limit or
define the meaning or content hereof. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identity of the person or persons may require.
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The terms "herein," "hereof" and "hereunder," and words of similar
import, shall be construed to refer to this Lease as a whole, and not to
any particular Article or Section, unless expressly so stated. The term
"and/or," when applied to two or more matters or things, shall be
construed to apply to any one or more or all thereof as the circumstances
warrant at the time in question. The term "person" shall mean any
natural person or persons, a partnership, a corporation, and any other
form of business or legal association or entity, unless expressly otherwise
stated. An "affiliate" of Tenant shall mean any person which controls or
is controlled by, or is under common control with, Tenant, with the
word "control" (and, correspondingly, "controlled by" and "under
common control with"), as used with respect to any person, meaning the
possession of the power to direct or cause the direction of the
management and policies of such person. The rule of "ejusdem generis"
shall not apply in or to the construction of any term of this Lease.
Section 31.03. If the term "Tenant", as used in this Lease, refers
or shall refer to more than one person, then, as used in this Lease, said
term shall be deemed to include all of such persons or any one of them.
If any of the obligations of Tenant under this Lease is or shall be
guaranteed, the term "Tenant" as used in Article 14 shall be deemed to
mean the Tenant and the guarantor, or either of them. If this Lease shall
have been assigned, then for purposes of Article 14, the term "Tenant"
shall be deemed to mean either assignor or assignee. The term "Tenant"
shall mean the Tenant herein named or any assignee or other successor in
interest (immediate or remote) of the Tenant herein named, which at the
time in question is the owner of the Tenant's estate and interest granted
by this Lease; but the foregoing provisions of this Section 31.03 shall not
be construed to permit any assignment of this Lease or to relieve the
Tenant herein named or any assignee or other successor in interest
(whether immediate or remote) of the Tenant herein named from the full
and prompt payment, performance and observance of each and every one
of the covenants, obligations and conditions to be paid, performed and
observed by Tenant under this Lease.
Section 31.04. If any portion of the Building shall be sold or
transferred by Landlord in a transaction in the nature of a condominium,
Landlord may, by notice to Tenant, elect to increase Tenant's
Proportionate Share under this Lease by dividing the prior Tenant's
Proportionate Share by the percentage that the assessed valuation of the
tax lot which includes the Demised Premises for the first year of changed
ownership bears to the total of the assessed valuations of all new tax lots
which comprised the single tax lot which included the Demised Premises
during the preceding Year, and base period amounts shall be reduced by
multiplying the amount thereof theretofore in effect by the same
percentage, and affected computations under Subsection 19.03A shall be
apportioned, but in no event shall Tenant's Tax Payment following such
sale or transfer exceed the amount that such Tax Payment would have
been had the Building remained as a single unit and Tenant's Tax Share
not been recalculated.
Section 31.05. Landlord and Tenant, any subtenant, and any
guarantor of Tenant's obligations under this Lease, hereby expressly
consent to the jurisdiction of the Civil Court of the City of New York,
the Supreme Court of the State of New York and, provided the requisite
jurisdictional requirements are met, United States District Court for the
Southern District of New York with respect to any action or proceeding
between Landlord and Tenant or such party with respect to this Lease or
any rights or obligations of either party pursuant to this Lease, and each
of such subtenant, guarantor, Landlord and Tenant agrees that venue
shall lie in New York County. Tenant and any subtenant further waive
any and all rights to commence any such action or proceeding against
Landlord before any other court.
Section 31.06. The submission of this Lease to Tenant shall not
be construed as an offer, nor shall Tenant have any rights with respect
thereto or the Demised Premises, unless and until Landlord and Tenant
shall each have executed a counterpart of this Lease and delivered the
same to the other. Until such execution and delivery, any action taken or
expense incurred by Tenant in connection with this Lease or the Demised
Premises shall be solely at Tenant's own risk and account.
Section 31.07. Neither this Lease nor any memorandum thereof
shall be recorded.
Section 31.08. This Lease shall be governed exclusively by (i)
the provisions hereof, without the aid of any canon, custom or rule of
law requiring or suggesting construction against the party drafting or
causing the drafting of the provision in question, and (ii) the internal
laws of the State of New York as the same may from time to time exist,
without giving effect to the principles of conflicts of laws.
Section 31.09. There shall be no merger of this Lease, or the
leasehold estate created by this Lease, with any other estate or interest in
the Demised Premises, or any part thereof, by reason of the fact that the
same person may acquire or own or hold, directly or indirectly, (i) this
Lease or the leasehold estate created by this Lease, or any interest in this
Lease or in any such leasehold estate, and (ii) any such other estate or
interest in the Demised Premises or any part thereof; and no such merger
shall occur unless and until all persons having an interest (including a
security interest) in (a) this Lease or the leasehold estate created by this
Lease and (b) any such other estate or interest in the Demised Premises,
or any part thereof, shall join in a written instrument effecting such
merger and shall duly record the same.
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Section 31.10. If Tenant is a corporation, each person executing
this Lease on behalf of Tenant hereby covenants, represents and warrants
that Tenant is a duly incorporated or duly qualified (if foreign)
corporation and is authorized to do business in the State of New York (a
copy of evidence thereof to be supplied to Landlord upon request); and
that each person executing this Lease on behalf of Tenant is an officer of
Tenant, and that he is duly authorized to execute, acknowledge and
deliver this Lease to Landlord (a copy of a resolution to that effect to be
supplied to Landlord upon request). Each person executing this Lease on
behalf of Landlord hereby covenants, represents and warrants that
Landlord is a duly incorporated corporation and is authorized to do
business in the State of New York; and that each person executing this
Lease on behalf of Landlord is an officer of Landlord, and that such
person is duly authorized to execute, acknowledge and deliver this Lease
to Tenant.
Section 31.11. Except as otherwise expressly provided herein,
the terms "Landlord shall have no liability to Tenant," or "the same shall
be without liability to Landlord," or "without incurring any liability to
Tenant therefor," or words of similar import, shall mean that Tenant
shall not be entitled to terminate this Lease, or to claim actual or
constructive eviction (partial or total), or to receive any abatement or
diminution of rent, or to be relieved in any manner of any of Tenant's
other obligations hereunder, or to be compensated for loss or injury
suffered, or to enforce any other right or kind of liability whatsoever
against Landlord under or with respect to this Lease or with respect to
Tenant's use or occupancy of the Demised Premises.
Section 31.12. If, under the terms of this Lease, Tenant shall be
obligated to pay to Landlord any amount (other than Fixed Rent), and no
payment period therefor is specified, Tenant shall pay to Landlord the
amount due within twenty (20) days after being billed therefor, which bill
shall be accompanied by evidence reasonably substantiating such amount.
Section 31.13. Except as otherwise expressly provided herein, all
bills, invoices or statements rendered to Tenant pursuant to the terms of
this Lease shall be deemed binding and conclusive if, within forty-five
(45) days of receipt of the same, Tenant fails to notify Landlord, in
writing, of Tenant's intention to dispute such bill, invoice or statement.
Section 31.14. Time shall be of the essence with respect to the
exercise of any option granted to Tenant pursuant to this Lease.
Section 31.15. Notwithstanding anything to the contrary
contained in this Lease, during the continuance of any default by Tenant
with respect to any of Tenant's obligations under this Lease beyond
notice and the expiration of the applicable cure period, if any. Tenant
shall not be entitled to exercise any rights or options or to receive any
funds or proceeds being held by Landlord under or pursuant to this
Lease.
Section 31.16. If any sales or other tax shall be due or payable
with respect to any cleaning or other service which Tenant obtains or
contracts for directly from any third party or parties, Tenant shall file
any required tax returns and shall pay any such tax, and Tenant shall
indemnify and hold Landlord harmless from and against any loss,
damage or liability suffered or incurred by Landlord by reason thereof.
Section 31.17. Tenant acknowledges that Tenant has no rights to
any development rights, "air rights" or comparable rights appurtenant to
the Land and the Building, and consents, without further consideration,
to any utilization of such rights by Landlord (provided that Tenant's
rights under this Lease and Tenant's use of the Demised Premises are not
materially adversely affected thereby), and agrees to promptly execute
and deliver any instruments which may be reasonably requested by
Landlord, including instruments merging zoning lots, evidencing such
acknowledgment and consent. The provisions of this Section 31.17 shall
be deemed to be and shall be construed as an express waiver by Tenant
of any interest Tenant may have as a "party in interest" (as such quoted
term is defined under the definition of "Zoning Lot" in Section 12-10 of
the Zoning Resolution of the City of New York) in the Land and/or the
Building.
Section 31.18. This Lease shall not be deemed or construed to
create or establish any relationship of partnership or joint venture or
similar relationship or arrangement between Landlord or Tenant.
ARTICLE 32
INABILITY TO PERFORM; SEVERABILITY
Section 32.01. Except as otherwise expressly provided herein, if
for reasons beyond the reasonable control of the Landlord or the Tenant,
as the case may be, including, without limiting the generality of the
foregoing, strikes, lockouts, labor problems, governmental preemption,
or by reason of any Legal Requirements, or by reason of the conditions
of supply and demand which have been or shall be affected by war or
other emergency (each an "Excusable Delay@ and, collectively,
"Excusable Delays@), either the Landlord or the Tenant shall be unable
to perform any obligation that such party is obligated to perform, then
such party's obligation to perform shall be excused for the duration of
such Excusable Delays, and, except as otherwise set forth in this Lease,
this Lease and the other party's rights and obligations hereunder shall not
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be affected, impaired or excused. Notwithstanding anything to the
contrary contained in this Section 32.01, a party's failure to timely fulfill
an obligation required to be fulfilled by such party under this Lease shall
not be excused by reason of what would otherwise be an Excusable
Delay if (i) said obligation is an obligation to pay or reimburse money or
(ii) said failure shall be the result of such party's lack of funds.
Landlord shall use commercially reasonable efforts (but shall not be
obligated to use overtime or premium pay labor) to minimize interference
with Tenant's use and occupancy of the Demised Premises in connection
with any of the foregoing conditions and shall use due diligence to
promptly restore Building Services and facilities interrupted as a result of
the conditions set forth in this Section 32.01.
Section 32.02. If any provision of this Lease or the application
thereof to any person or circumstance shall be determined by a court of
competent jurisdiction to be invalid or unenforceable, the remaining
provisions of this Lease or the application of such provision to persons or
circumstances other than those to which it is held invalid or
unenforceable shall not be affected thereby, and shall be valid and
enforceable to the fullest extent permitted by law.
Section 32.03. Each covenant, agreement, obligation and/or other
provision of this Lease on Tenant's part to be performed shall be deemed
and construed as a separate and independent covenant of Tenant, and not
dependent on any other provision of this Lease.
ARTICLE 33
SECURITY
Section 33.01. Upon the execution of this Lease, Tenant shall
deposit with Landlord the Security Deposit Amount, as security for the
faithful performance and observance by Tenant of all of the covenants,
agreements, terms, provisions and conditions of this Lease. Tenant
agrees that, if Tenant shall default in respect of any of the covenants,
agreements, terms, provisions and conditions of this Lease (beyond
notice and the expiration of the applicable cure period, if any) including
the payment of the Fixed Rent and additional rent, Landlord may use,
apply or retain the whole or any part of the security being held by
Landlord (the "Security") to the extent required for the payment of any
Fixed Rent and additional rent, or any other payments as to which
Tenant shall be in default or for any monies which Landlord may expend
or may be required to expend by reason of Tenant's default in respect of
any of the covenants, agreements, terms, provisions and conditions of
this Lease, including any damages or deficiency in the reletting of the
Demised Premises, whether such damages or deficiency accrued before
or after summary proceedings or other re-entry by Landlord.
Notwithstanding the foregoing sentence, however, Landlord shall not
use, apply or retain the whole or any part of the Security if Tenant's
default (i) is non-monetary and (ii) arises from strikes, lock-outs or
labor problems, governmental preemption, or by reason of any Legal
Requirements, or by reason of the conditions of supply and demand
which have been or shall be affected by war or other emergency or
general market conditions or otherwise; provided, however, that Tenant
shall use its best efforts and diligently pursue to completion the curing of
such default. Landlord shall not be required to so use, apply or retain
the whole or any part of the Security so deposited, but if the whole or
any part thereof shall be so used, applied or retained, then Tenant shall,
within ten (10) days after demand therefor deposit with Landlord an
amount in cash equal to the amount so used, applied or retained, so that
Landlord shall have the entire Security on hand at all times during the
Term. In the event that Tenant shall fully and faithfully comply with all
of the terms, provisions, covenants, agreements and conditions of this
Lease, the Security shall be returned to Tenant within thirty (30) days
after the Expiration Date or earlier termination of this Lease as provided
herein and delivery of exclusive possession of the Demised Premises to
Landlord. In the event of any making or assignment of any Underlying
Lease or upon a conveyance of the Building: (i) Landlord shall have the
right to transfer the Security to the assignee or lessee or transferee,
(ii) Landlord shall thereupon be released by Tenant from all liability for
the return of such Security, and (iii) Tenant agrees to look solely to
Landlord's successor for the return of said Security provided that Tenant
has received notice thereof, it being agreed that the provisions hereof
shall apply to every transfer or assignment made of the Security to a new
Landlord. Tenant further covenants that Tenant will not assign or
encumber or attempt to assign or encumber the monies deposited herein
as Security, and that neither Landlord nor Landlord's successors or
assigns shall be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance.
Section 33.02. Landlord agrees to place the Security in an interest-
bearing account, and, unless disbursed or applied by Landlord as
provided in Section 33.01 above, the interest earned thereon (less an
amount equal to one (1%) percent of the Security, which may be retained
by Landlord each year as compensation for management and
administration of said account) shall be disbursed annually to Tenant
when Landlord shall generally make such distributions to tenants in the
Building, but only if Tenant shall not be in default with respect to any of
Tenant's obligations under this Lease beyond notice and the expiration of
the applicable cure period, if any.
Section 33.03.
A. Notwithstanding anything to the contrary contained
in Section 33.01 above, in lieu of a cash security deposit, Tenant may
deliver to Landlord a clean, irrevocable, transferable and unconditional
letter of credit (the "Letter of Credit") issued by and drawn upon a
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commercial bank (hereinafter referred to as the "Issuing Bank") which
shall be a member bank of the New York Clearinghouse Association (or,
in the alternative, which shall have offices for banking purposes in the
Borough of Manhattan and shall have a net worth of not less than
$100,000,000, with reasonably appropriate evidence thereof to be
submitted by Tenant), which Letter of Credit shall: (i) have a term of not
less than one (1) year, (ii) contain the same substance and be in
materially the same form annexed hereto as Exhibit "G," (iii) be for the
account of Landlord, (iv) be in the amount of $70,950.00, (v) except as
otherwise provided in this Section 33.03, conform and be subject to
Uniform Customs and Practice for Documentary Credits, 1993 Revision,
ICC Publication No. 500 (or any revision thereof or successor thereto),
(vi) be fully transferable by Landlord without any fees or charges
therefor (or, if the Letter of Credit shall provide for the payment of any
transfer fees or charges, the same shall be paid by Tenant as and when
such payment shall be requested by the Issuing Bank), (vii) provide that
Landlord shall be entitled to draw upon the Letter of Credit upon
presentation to the Issuing Bank of a sight draft accompanied by
Landlord's statement that Landlord is then entitled to draw upon the
Letter of Credit pursuant to the terms of this Lease, and (viii) provide
that the Letter of Credit shall be deemed automatically renewed, without
amendment, for consecutive periods of one (1) year each year thereafter
during the entire Term of this Lease and for a period of thirty (30) days
thereafter, unless the Issuing Bank shall send notice (the "Non-Renewal
Notice") to Landlord by certified or registered mail, return receipt
requested, not less than forty-five (45) days next preceding the then
expiration date of the Letter of Credit that the Issuing Bank elects not to
renew such Letter of Credit, in which case Landlord shall have the right,
by sight draft on the Issuing Bank, to receive the monies represented by
the then existing Letter of Credit, and to hold and/or disburse such
proceeds pursuant to the terms of Section 33.01 above as cash security.
If Landlord shall fail, for any reason whatsoever, to draw upon the
Letter of Credit within said forty-five (45) day period, and the Letter of
Credit shall expire prior to the thirtieth (30th) day following the
Expiration Date of the Term of this Lease, then Tenant shall within five
(5) days after demand therefor deposit with Landlord the Security
Deposit Amount in cash or furnish Landlord with a replacement Letter of
Credit (which shall comply with all of the conditions set forth in the
immediately preceding sentence), so that Landlord shall have the entire
Security on hand at all times during the Term and for a period of thirty
(30) days thereafter. Tenant acknowledges and agrees that the Letter of
Credit shall be delivered to Landlord as security for the faithful
performance and observance by Tenant of all of the covenants,
agreements, terms, provisions and conditions of this Lease, and that
Landlord shall have the right to draw upon the entire Letter of Credit in
any instance in which Landlord would have the right to use, apply or
retain the whole or any part of any cash security deposited with Landlord
pursuant to Section 33.01 above. If Landlord shall draw upon the entire
Letter of Credit and such amount shall be greater than that required for
the payments referred to in the first sentence of Section 33.01 hereof, the
balance of any amounts received by Landlord pursuant to drawing upon
such Letter of Credit shall be held by Landlord as a cash security deposit
in accordance with the provisions of this Section 33.
B. In the event that Tenant shall elect to furnish the
Letter of Credit in lieu of cash security: (i) all references to "Security"
in Section 33.01 above shall be deemed to refer to the Letter of Credit,
or any proceeds thereof as may be drawn upon by Landlord, and (ii) the
provisions of Section 33.02 above shall apply only to such Letter of
Credit proceeds (if any) as may be drawn and held by Landlord.
C. Landlord agrees that, provided that the conditions
set forth below shall be satisfied, Tenant shall be permitted to (i) reduce
the amount of said Letter of Credit on the third (3rd) anniversary of the
Commencement Date to $47,300 (with such anniversary date being
referred to as the "Reduction Date", and such reduction being referred to
as the "Permitted Reduction"), or (ii) in the event that Landlord shall
then be holding cash security in lieu of a Letter of Credit, to receive a
refund on or after the third (3rd) anniversary of the Commencement
Date, in an amount equal to the difference between the amount of cash
security then being held by Landlord and $47,300, if any. Landlord
shall have no obligation to refund any portion of the cash security until
thirty (30) days following Landlord's receipt of a written notice
requesting such refund (the "Security Refund Notice"). Landlord agrees
that, if and to the extent Landlord's cooperation shall be required in
order to facilitate a Permitted Reduction, Landlord will, at Tenant's
request, but at no cost or expense to Landlord, cooperate with Tenant in
all reasonable respects to cause such Permitted Reduction to occur.
Tenant shall only have the right to reduce the Letter of Credit or to
receive such refund as aforesaid provided that on the Reduction Date or
the date upon which Landlord shall receive the Security Refund Notice
(x) Tenant shall not then be in default (after notice and the expiration of
the applicable cure period) with respect to any of Tenant's non-monetary
obligations under this Lease (a "Non-Monetary Default") and (y) Tenant
shall not be in default with respect to any of Tenant's monetary
obligations under this Lease after notice and the expiration of the
applicable cure period, if any (a "Monetary Default"); it being agreed,
however, that following Tenant's cure of such Non-Monetary Default or
Monetary Default, as the case may be, Tenant shall be permitted to
reduce the Letter of Credit or receive such refund as aforesaid.
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ARTICLE 34
RENEWAL OPTION
Section 34.01. The initially named Tenant under this Lease, i.e.,
Computer Telephone Corp., as well as any Related Corporation or
Successor Corporation thereof (but no assignee of any such party)
(collectively, "CTC") shall have an option (the "Renewal Option") to
extend the term of this Lease for a single renewal term of five (5) years
(the "Renewal Term"), which shall commence at noon on the Expiration
Date and shall expire at noon on the fifth (5th) anniversary of the
Expiration Date or such earlier date upon which this Lease may be
terminated as herein provided. The Renewal Option may be exercised
only by CTC giving Landlord written notice (the "Renewal Notice") of
CTC's intention to renew this Lease pursuant to this Article 34 not later
than one (1) year prior to the Expiration Date, and not earlier than
fifteen (15) months prior to the Expiration Date, and such Renewal
Notice shall be deemed properly given only if, on the date that CTC
shall exercise the Renewal Option (the "Exercise Date"): (i) this Lease
shall not have been previously terminated or cancelled, (ii) CTC shall be
in occupancy of at least eighty percent (80%) of the Demised Premises,
and (iii) CTC shall not be in breach or default of any of the obligations
of Tenant under this Lease after notice and the expiration of the
applicable cure period, if any;. Time shall be strictly of the essence with
respect to the giving of the Renewal Notice by CTC to Landlord.
Notwithstanding anything to the contrary contained in this Section 34.01,
if, subsequent to the Exercise Date but prior to the commencement of the
Renewal Term: (x) CTC shall not be in occupancy of at least eighty
percent (80%) of the Demised Premises, or (y) an Event of Default shall
have occurred, then Landlord, in Landlord's sole and absolute discretion,
may elect, by written notice to CTC, to void CTC's exercise of the
Renewal Option, in which case CTC's exercise of the Renewal Option
shall be of no force or effect, and the Term shall end on the Expiration
Date of the initial term of this Lease, unless sooner cancelled or
terminated pursuant to the provisions of this Lease or by law.
Section 34.02. If Tenant shall exercise the Renewal Option in
accordance with the provisions of this Article 34, then this Lease shall be
extended for the Renewal Term upon all of the terms, covenants and
conditions contained in this Lease, except that: (i) during the Renewal
Term, the Fixed Rent shall be the fair annual market rental value (the
"Market Value Rent") of the Demised Premises on the Expiration Date,
determined as provided in Section 34.03 below, but in no event less than
the Fixed Rent in effect on the Expiration Date, and with the Base Tax
Year and the Base Operating Year equal to the year in which the
Renewal Term commences, (ii) from and after the Exercise Date (but
subject to the provisions of the last sentence of Section 34.01 above), all
references to "Expiration Date" shall be deemed to refer to the last day
of the Renewal Term, and all references to "Term" shall be deemed to
include the Renewal Term, (iii) Tenant shall have no further right or
option to renew this Lease or the term hereof, and (iv) all provisions of
this Lease concerning the performance by Landlord of any work, and the
grant by Landlord of any monetary contribution, rent abatement or rent
credit, in connection with Tenant's initial occupancy of the Demised
Premises shall be deemed deleted.
Section 34.03.
A. The term "Market Value Rent" shall mean the
annual fair market rental value of the Demised Premises as of the
Determination Date (as hereinafter defined), but in no event less than the
Fixed Rent and all additional rent payable pursuant to Article 19 of this
Lease ("Recurring Additional Rent") payable by Tenant in the twelve-
month period immediately prior to the Expiration Date of the initial term
of this Lease. For purposes hereof, the "Determination Date" shall mean
the date which shall occur one (1) year prior to the Expiration Date.
B. The initial determination of Market Value Rent
shall be made by Landlord. Provided that the Renewal Notice shall so
request, Landlord shall give notice (the "MVR Notice") to Tenant of
Landlord's initial determination of the Market Value Rent within sixty
(60) days following the Determination Date. If the Renewal Notice shall
not contain a request that Landlord furnish the MVR Notice within sixty
(60) days following the Determination Date, Landlord may give Tenant
the MVR Notice at any time after the Determination Date. Such initial
determination of Market Value Rent shall be final and binding in fixing
the Market Value Rent, unless, within thirty (30) days after Landlord
shall have given MVR Notice to Tenant, Landlord shall receive a notice
from Tenant (the "MVR Objection Notice"): (i) advising Landlord that
Tenant disagrees with the initial determination of Market Value Rent set
forth in the MVR Notice, and (ii) proposing a specific alternative Market
Value Rent, which shall have been determined in good faith by Tenant.
If Landlord and Tenant shall fail to agree upon the Market Value Rent
within thirty (30) days after Landlord shall have received the MVR
Objection Notice, then Landlord and Tenant each shall give notice to the
other setting forth the name and address of an arbitrator designated by
the party giving such notice. If either party shall fail to give notice of
such designation within ten (10) days, then the first arbitrator chosen
shall make the determination alone. If two arbitrators shall have been
designated, such two arbitrators shall, within thirty (30) days following
the designation of the second arbitrator, make their determinations of
Market Value Rent in writing and give notice thereof to each other and
to Landlord and Tenant. Such two arbitrators shall have twenty (20)
days after the receipt of notice of each other's determinations to confer
with each other and to attempt to reach agreement as to the determination
of Market Value Rent. The arbitrators shall take into account in any
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such determination the base years set forth in this Lease, which shall
continue throughout the remainder of the Renewal Term. If such two
arbitrators shall concur as to the determination of the Market Value Rent,
such concurrence shall be final and binding upon Landlord and Tenant.
If such two arbitrators shall fail to concur by the end of said twenty (20)
day period, then such two arbitrators shall forthwith designate a third
arbitrator. If the two arbitrators shall fail to agree upon the designation
of such third arbitrator within ten (10) days, then either party may apply
to the American Arbitration Association or any successor thereto having
jurisdiction for the designation of such arbitrator. All arbitrators shall be
real estate appraisers or consultants who shall have had at least fifteen
(15) years continuous experience in the business of appraising or
managing real estate or acting as real estate agents or brokers in the
Borough of Manhattan, City of New York. The third arbitrator shall
conduct such hearings and investigations as he may deem appropriate and
shall, within thirty (30) days after his designation, choose one of the
determinations of the two arbitrators originally selected by the parties,
and that choice by the third arbitrator shall be binding upon Landlord and
Tenant. Each party shall pay its own counsel fees and expenses, if any,
in connection with any arbitration under this Article 34, including the
expenses and fees of any arbitrator selected by it in accordance with the
provisions of this Article, and the parties shall share equally all other
expenses and fees of any such arbitration. The determination rendered in
accordance with the provisions of this Section 34.03 shall be final and
binding in fixing the Market Value Rent. The arbitrators shall not have
the power to add to, modify or change any of the provisions of this
Lease.
C. If for any reason the Market Value Rent shall not
have been determined prior to the commencement of the Renewal Term,
then, until the Market Value Rent and, accordingly, the Fixed Rent, shall
have been finally determined, the Fixed Rent and all Recurring
Additional Rent payable for and during the Renewal Term shall be equal
to the Market Value Rent and Recurring Additional Rent proposed by
Landlord. Upon final determination of the Market Value Rent, an
appropriate adjustment to the Fixed Rent shall be made reflecting such
final determination, and Landlord or Tenant, as the case may be, shall
refund or pay to the other any overpayment or deficiency, as the case
may be, in the payment of Fixed Rent from the commencement of the
Renewal Term to the date of such final determination.
Section 34.04. The right of renewal granted pursuant to this
Article 34 shall be deemed a personal right limited to CTC, and all
references in this Article 34 to "Tenant" shall be deemed to refer only to
CTC.
ARTICLE 35
TENANT'S COMMUNICATION EQUIPMENT
Section 35.01. Landlord shall provide to Tenant, upon Tenant's
request and if then available, space on the roof of the Building not
exceeding one hundred (100) square feet, so as to permit Tenant to
install in a location designated by Landlord (the "Communications
Area"), and once installed, to maintain and operate, at its sole cost and
expense, satellite dish(es), antenna(s) and related telecommunications
equipment (hereinafter collectively referred to as the "Communications
Equipment"), subject to all of the applicable terms, covenants and
provisions of this Lease, and subject to Landlord's prior written approval
including, without limitation, approval as to size, weight, location,
aesthetics, interference with Building Systems, manner of installation and
method of attachment, which approval shall also be required for
modifications and additions to the Communications Equipment, and to
the removal of same. Notwithstanding the foregoing, Tenant expressly
acknowledges and agrees that in no event shall Tenant's Communications
Equipment utilize more than Tenant's pro rata share of the number or
amount of antennas, satellites, other telecommunications equipment and
related equipment permitted to be utilized in or at the Building pursuant
to any Legal Requirement ("Tenant's Communications Share"), based on
the square footage of the Demised Premises (excluding the square
footage of the Communications Area). If, at any time during the Term
of this Lease, Tenant's Communications Equipment then installed and
maintained in the Communications Area shall exceed Tenant's
Communications Share, Tenant shall, within thirty (30) days following
receipt of written notice from Landlord, remove such Communications
Equipment as shall be in excess of Tenant's Communications Share,
solely at Tenant's cost and expense, and repair any damage to the
Building caused by such removal.
Section 35.02. Throughout the Term of this Lease, Tenant shall,
at Tenant's sole cost and expense, maintain the Communications
Equipment. Any installation, maintenance, replacement or repair of the
Communications Equipment which Landlord shall reasonably determine
affects the physical integrity of the Building shall be performed by
Landlord at Tenant's sole cost and expense. In connection with the
installation, maintenance and operation of the Communications
Equipment, Tenant shall comply with all Legal Requirements (including,
without limitation, zoning ordinances) and shall procure, maintain and
pay for all permits and licenses required therefor, including all renewals
thereof. The installation, maintenance, and operation of the
Communications Equipment shall be subject to all of the terms,
covenants and conditions of Articles 5, 6, 7 and 8 hereof, and to all
other applicable provisions of this Lease, as if such installation,
maintenance and operation were an Alteration. In addition to the terms,
covenants and conditions of Article 8, Tenant shall procure, maintain and
pay for such liability and property damage insurance as Landlord shall
-55-<PAGE>
<PAGE>
reasonably require in connection with such installation, maintenance and
operation, in form, substance and with limits of liability reasonably
designated or reasonably approved, in writing, by Landlord. The parties
agree that Tenant's use of the Communications Area shall be on a non-
exclusive basis, and that Landlord may permit the use of any other
portion of the roof of the Building by any other person, firm or
corporation for any use, including the installation of other satellite
dishes, antennas, generators and/or communications systems. Landlord
shall use its reasonable efforts to ensure that such use does not impair
Tenant's data transmission and reception via Tenant's Communications
Equipment, and Tenant shall use its reasonable efforts to ensure that its
use of the Communications Area does not impair such other person's,
firm's or corporation's data transmission and reception via their
respective satellite dishes, antennas and support equipment, if any.
Landlord makes no representation that the Communications Equipment
will be able to receive or transmit communication signals without
interference or disturbance, and Tenant agrees that Landlord shall not be
liable therefor.
Section 35.03. For purposes of this Article 35:
A. The term "CPI Index" shall mean the "The
Consumer Price Index (All Urban Consumers, New York--Northern New
Jersey--Long Island)," issued by the Bureau of Labor Statistics of the
United States Department of Labor. In the event that the CPI Index
ceases to use the 1982-84=100 as the basis of calculation, or if a
substantial change is made in the term or number or items contained in
the CPI Index, then the CPI Index shall be adjusted to the figure that
would have been arrived at if the change in the manner of computing the
CPI Index in effect at the date of this Lease had not been altered. In the
event that such CPI Index (or a successor or substitute index) is not
available, a reliable governmental or other non-partisan publication
evaluating the information theretofore used in determining the CPI Index
shall be used;
B. The term "Base CPI Index" shall mean the CPI
Index as it exists on the last day of the calendar month preceding the
month in which occurs the date the Communications Area is made
available to Tenant by Landlord (the "Communications Area Availability
Date");
C. The term "Communications Lease Year" shall
mean the period commencing on the Communications Area Availability
Date and ending on the last day of the calendar month preceding the
month in which occurs the first anniversary of the Communications Area
Availability Date and each period of twelve (12) consecutive calendar
months thereafter; and
D. The term "Percentage of CPI Increase" shall mean
the percentage, if any, by which the CPI Index existing as of the last day
of a Communications Lease Year exceeds the Base CPI Index.
Section 35.04. A. Tenant shall pay for all electrical service
required for Tenant's use of the Communications Equipment in
accordance with Article 20 of this Lease. At Landlord's election,
Tenant, at Tenant's sole cost and expense, or Landlord, on Tenant's
behalf and at Tenant's sole cost and expense, shall connect all of the
Communications Equipment to a submeter measuring Tenant's electric
usage in connection therewith. Tenant shall pay to Landlord, as
additional rent hereunder, all of the actual costs and expenses incurred by
Landlord in connection with the Communications Equipment (including,
without limitation, any expert and/or consultant fees).
B. At all times during the Term of this Lease that any
Communications Equipment shall be located in the Communications Area
and/or any installations in connection with the Communications
Equipment shall be located in the shaftways, conduits and/or risers of the
Building, Tenant shall pay to Landlord, as additional rent hereunder (the
"Communications Equipment Rent"), the sum of Three Thousand Six
Hundred and 00/100 ($3,600.00) Dollars per annum, payable in equal
monthly installments of $300.00; and (y) for each Communications Lease
Year thereafter, the sum of the Communications Equipment Rent for the
immediately preceding Communications Lease Year, plus an amount
equal to the product of (1) $3,600.00, multiplied by (2) the Percentage of
CPI Increase, which sum shall be payable in equal monthly installments,
in the time and manner provided for the payment of Fixed Rent with
respect to the Demised Premises.
Section 35.05. Tenant, at Tenant's sole cost and expense, shall
promptly repair any and all damage to the Communications Area and to
any part of the Building caused by or resulting from the installation,
maintenance and repair, operation or removal of the Communications
Equipment erected or installed by Tenant pursuant to the provisions of
this Article 35. Any and all structural alterations, repairs,
reinforcements and/or additional structural support which Landlord shall
determine to be necessary in connection with the Communications
Equipment shall be performed by Landlord at Tenant's sole cost and
expense. The creation of any new roof penetrations shall be subject to
the prior written approval of Landlord, which approval may be withheld
for any reason whatsoever. Tenant covenants and agrees that the
installation of the Communications Equipment pursuant to the provisions
of this Article 35 shall be at the sole risk of Tenant. Neither Landlord,
nor any agent, employee, partner, officer, shareholder or contractor of
Landlord, shall be responsible or liable for any injury or damage to, or
loss of, the Communications Equipment. Tenant shall indemnify and
-56-<PAGE>
<PAGE>
hold Landlord harmless from and against any and all actions,
proceedings, liabilities, obligations, claims, damages, deficiencies,
losses, judgments, suits, expenses and costs (including, without
limitation, reasonable legal fees and disbursements) arising under or out
of, or in connection with or resulting from the installation, maintenance,
operation or presence of the Communications Equipment. Tenant further
covenants and agrees that the Communications Equipment erected or
installed by Tenant pursuant to the provisions of this Article 35 shall be
erected, installed, repaired, maintained and operated by Tenant at the
sole cost and expense of Tenant and without charge, cost or expense to
Landlord.
Section 35.06. The Communications Equipment (other than
interior wiring) installed by Tenant pursuant to the provisions of this
Article 35 shall be Tenant's property. Notwithstanding anything to the
contrary contained in this Lease, upon the expiration or sooner
termination of this Lease, the Communications Equipment shall be
removed by Tenant, at Tenant's sole cost and expense, and Tenant shall
repair any damage to the rooftop of the Building or any other portion or
portions of the Building caused by or resulting from said removal.
Section 35.07. If so required by any Legal Requirements, or if
Landlord requires the use of the Communications Area, Landlord
reserves the right, at any time and from time to time throughout the
Term of this Lease, at its sole cost and expense and upon reasonable
prior written notice (or such shorter notice period as may be required by
law or public authorities) to Tenant, to remove and/or relocate the
Communications Equipment to any other location at the Building
designated by Landlord (the "Relocated Area"); provided, however, if
any removal or relocation of the Communications Equipment is required
by any Legal Requirement, then the cost and expense of such removal
and/or relocation shall be paid by Tenant. Tenant covenants and agrees,
upon demand by Landlord, to discontinue or abate as necessary the use
of the Communications Equipment or any portion thereof if such use is
determined to adversely affect the physical health of any individual(s) in
or about the Building.
Section 35.08. All actual costs and expenses incurred by
Landlord in connection with the Communications Equipment and the
Communications Area, including, without limitation, the installation,
maintenance and operation thereof, shall be paid by Tenant to Landlord,
as additional rent, within twenty (20) days after demand therefor, which
demand shall be accompanied by evidence reasonably substantiating such
costs and expenses.
Section 35.09. For the purpose of installing, servicing, repairing
or removing the Communications Equipment, Tenant shall have access to
the Communications Area or the rooftop of the Building, as the case may
be, at reasonable times, upon prior reasonable request of Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have duly
executed this Lease as of the day and year first above written.
BROADPINE REALTY HOLDING COMPANY, INC.,
Landlord
By: /s/ [authorized officer]
COMPUTER TELEPHONE CORP., Tenant
By: /s/ [authorized officer]
Tenant's Federal ID# 04-2731202
-57-<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of February, 1996, before me
personally came , to
me known, who being by me duly sworn, did depose and say that he is
the of COMPUTER TELEPHONE CORP., the
corporation described in and which executed the foregoing instrument;
and that he signed his name thereto by order of the Board of Directors of
said corporation.
________________________
Notary Public
-58-
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<PAGE>
EXHIBIT "A"
FLOOR PLANS
The location and dimensions of walls, partitions, columns, stairs
and openings are approximate and subject to revisions due to mechanical
work, job conditions and requirements of governmental departments and
authorities. If the space as actually partitioned shall differ in any respect
from this sketch, the actual area as partitioned shall in all events control.
No resulting deviation or discrepancy shall affect the rent or Tenant's
obligations under this Lease.
[drawing of floor plan]
A-1<PAGE>
<PAGE>
EXHIBIT "B"
COMMENCEMENT DATE AGREEMENT
AGREEMENT made this day of _______________, 1996,
between Broadpine Realty Holding Company, Inc., hereinafter referred
to as "Landlord", and Computer Telephone Corp., hereinafter referred to
as "Tenant."
WITNESSETH:
1. Landlord and Tenant have heretofore entered into a written
indenture of Lease dated as of January __, 1996 (hereinafter referred to
as the "Lease"), for the leasing by Landlord to Tenant of certain space in
the building known as 120 Broadway, New York, NY, all as in said
Lease more particularly described.
2. Pursuant to Article 2 of the Lease, Landlord and Tenant
agree that the Commencement Date of the term of said Lease is [was]
[shall be] ; and that the term thereof shall
expire, unless sooner terminated pursuant to the Lease, on
________________________ (the "Expiration Date").
IN WITNESS WHEREOF, Landlord and Tenant have duly
executed this Commencement Date Agreement as of the day and year
first above written.
BROADPINE REALTY HOLDING COMPANY, INC.,
Landlord
By:___________________________
COMPUTER TELEPHONE CORP., Tenant
By:____________________________
B-1<PAGE>
<PAGE>
EXHIBIT "C"
LANDLORD'S WORK
A. Landlord, except as otherwise expressly specified in the
Lease, will cause its designated contractor to make and complete in and
to the Demised Premises the work and installations (the "Landlord's
Work") specified in Schedule 1 annexed hereto and made a part hereof.
B. Except as provided in this Exhibit C, Landlord shall not be
required to spend any money or to do any work to prepare the Demised
Premises for Tenant's occupancy. The specification of Landlord's Work
represents the limit of Landlord's responsibilities in connection with the
preparation of the Demised Premises and, except as so provided, Tenant
shall take the Demised Premises "as-is," except as otherwise expressly
provided in this Lease. Any other improvements, alterations or additions
shall be performed by Tenant, but subject to all of the terms, conditions
and covenants of the Lease.
C. Landlord has made and makes no representation of the
date on which Landlord will complete Landlord's Work, and Landlord
shall be under no penalty or liability to Tenant whatsoever by reason of
any delay in such performance, except as specifically provided in the
Lease, and the provisions of the Lease shall not be affected thereby.
D. Landlord shall obtain all permits, licenses and approvals
required for the performance of Landlord's Work. Landlord shall
perform Landlord's Work in a workmanlike manner and in accordance
with all applicable Legal Requirements. Upon final completion of
Landlord's Work, Landlord shall assign to Tenant any warranty or
guaranty covering materials and/or equipment incorporated into the
Demised Premises as part of Landlord's Work (provided that such
warranty or guaranty is assignable).
E. Notwithstanding anything contained herein to the contrary,
Landlord shall perform all Repairs to Landlord's Work which are
necessary due to defects in workmanship for a period of one year from
the Commencement Date; provided, however that such defects do not
arise from the acts or omissions of Tenant or Persons Within Tenant's
Control.
F. Performance of Landlord's Work or any statement made in
this Exhibit C or elsewhere in this Lease shall not constitute an express
or implied representation by Landlord that any or all of Landlord's Work
is suitable for the particular requirements of Tenant or any specific or
general use or purpose of Tenant.
G. Subject to the provisions of Article 2 of the Lease, Tenant
acknowledges that after the Commencement Date Landlord may perform
any remaining components of Landlord's Work, including any items
noted on a punch list delivered to Landlord pursuant to Section 31.01 of
this Lease, during Tenant's ordinary business hours, and the Lease, and
Tenant's obligations thereunder, shall not be affected thereby (except as
specifically provided in the Lease), and Tenant shall make no claim
against Landlord for any loss, cost or expense incurred by Tenant in
connection with the performance of such Landlord's Work.
H. In all instances where Tenant is required to supply
information or authorization with regard to Landlord's Work, Tenant
shall supply the same within three (3) Business Days after written request
therefor by Landlord.
I. (1) For the purposes of this Exhibit C, Landlord's
Work shall be deemed to be substantially completed when all major
construction is completed (or when all major construction would have
been completed but for Tenant Delays (as hereinafter defined) or
otherwise), although "minor items" is not substantially completed.
"Minor items" shall mean any uncompleted construction or improvements
which do not materially interfere with Tenant's use and occupancy of the
Demised Premises. Tenant shall promptly submit to Landlord a
"punch-list" of such "minor items," which punch-list items, after
approval by Landlord, shall be diligently completed. Tenant shall
periodically inspect Landlord's Work and make any objections thereto, if
called for, without delay, so as to mitigate changes, delays and costs.
(2) Tenant specifically acknowledges and agrees that
the cost to Landlord of furnishing and installing Landlord's Work will
increase and that there will be delay in completion of Landlord's Work
by reason of (i) Tenant's failure or unreasonable delay to consult with
Landlord to enable Landlord to review plans or specifications; (ii)
unreasonable delay or failure by Tenant in supplying information,
approving estimates or giving authorizations; (iii) Tenant's making
changes or additions in the plans or specifications or materials originally
approved; (iv) interference by Tenant or Tenant's contractors with the
performance of Landlord's Work; (v) delay or failure of any special or
additional new materials selected by Tenant; or (vi) work, materials,
components and other items specified by Tenant which are not "Building
standard," and/or are not readily available to Landlord or Landlord's
designated contractor, or require special manufacturing, fabrication or
C-1<PAGE>
<PAGE>
installation, or require additional time to obtain or install thereby
delaying the date that Landlord's Work would otherwise be substantially
completed, including special wallcoverings, light fixtures, entrance
doors, woodwork, glass, stairways, door hardware, floor coverings and
security and communications devices (clauses (i)-(vi) are hereby
collectively referred to herein as "Tenant Delays"). Landlord shall not
be responsible for any Tenant Delays and, in addition, Tenant shall
reimburse Landlord, within twenty (20) days of demand therefor (which
demand shall be accompanied by evidence reasonably substantiating the
amount of such losses, costs and damages) and as additional rent, for any
and all losses, costs and damages suffered or incurred by Landlord in
connection with or resulting from any such Tenant Delays, including,
without limitation, any increase to Landlord in the cost of furnishing and
installing Landlord's Work.
J. If Tenant shall fail to make timely payment of any sums
payable to Landlord pursuant to the terms of this Exhibit C or the Lease,
then, in addition to all other rights and remedies afforded Landlord in the
event of such non-payment, Landlord may, without notice to Tenant,
discontinue the performance of Landlord's Work (or any items thereof)
until such time as Tenant makes payment to Landlord of all such past
due sums and provides Landlord with adequate assurance of the timely
payment of all additional sums which may or shall be payable by Tenant
pursuant to the terms of this Exhibit C or the Lease.
C-2<PAGE>
<PAGE>
SCHEDULE 1
[drawing and description of floor layout and installation work to be done]
<PAGE>
<PAGE>
EXHIBIT "D"
LAND DESCRIPTION
ALL that certain plot, piece or parcel of land, situate, lying and being in
the Borough of Manhattan, County of New York, City and State of New
York, bounded and described as follows:
BEGINNING at a point formed by the intersection of the northerly side
of Pine Street and the westerly side of Nassau Street;
RUNNING THENCE northerly along the westerly side of Nassau Street,
152 feet 3 inches to the southerly side of Cedar Street;
THENCE westerly along the southerly side of Cedar Street, 312 feet 7
inches to the easterly side of Broadway;
THENCE southerly along the easterly side of Broadway, 167 feet 1 inch
to the northerly side of Pine Street;
THENCE easterly along the northerly side of Pine Street, 304 feet 2
inches to the point or place of BEGINNING.
D-1<PAGE>
<PAGE>
EXHIBIT "E"
CLEANING SPECIFICATIONS
General Cleaning
Nightly:
General Offices including conference rooms:
1. All hardsurfaced flooring to be swept.
2. Carpet sweep all carpets, moving only light furniture
(desks, file cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and
window sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste receptacles and remove
wastepaper.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
8. Sweep all private stairways.
Building Standard Toilets:
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and
enameled surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers
and receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill toilet tissue holders. Multi-tenanted floors only.
8. Empty and clean disposal receptacles.
Periodic-as reasonably required
1. Vacuum clean all carpeting and rugs.
2. Dust all doors louvres and other ventilating louvres within
a person's reach.
3. Dust all baseboards.
4. Remove all finger marks from vinyl or painted surfaces
near light switches, entrance doors, etc.
5. Wash all windows.
6. High dust premises complete including the following:
a. Dust all pictures, frames, charts, graphs and similar
wall hangings not reached in nightly cleaning.
b. Dust clean all vertical surfaces, such as walls,
partitions, doors, bucks and other surfaces not
reached in nightly cleaning.
c. Dust all venetian blinds.
E-1<PAGE>
<PAGE>
EXHIBIT "F"
RULES AND REGULATIONS
1. The rights of tenants with respect to the entrances, corridors,
elevators and escalators of the Building are limited to ingress to and
egress from the tenants' premises for the tenants and their employees,
contractors, licensees and invitees, and no tenant shall use, or permit the
use of, the entrances, corridors, escalators or elevators for any other
purpose. All deliveries and shipments of goods and packages shall be
through the freight elevators, and not the passenger elevators. No tenant
shall invite to the tenant's premises, or permit the visit of, persons in
such numbers or under such conditions as to interfere with the use and
enjoyment of any of the plazas, entrances, corridors, escalators, elevators
and other facilities of the Building by other tenants. Fire exits and
stairways are for emergency use only, and they shall not be used for any
other purpose by the tenants, their employees, licensees or invitees. No
tenant shall encumber or obstruct, or permit the encumbrance or
obstruction of any of the lobbies, sidewalks, plazas, entrances, corridors,
escalators, elevators, fire exits, stairways or other public portions of the
Building. No door mat of any kind whatsoever shall be placed or left in
any public hall or outside any entry door of any tenant's premises.
Landlord reserves the right to control and operate the public portions of
the Building and the public facilities, as well as facilities furnished for
the common use of the tenants, in such manner as it deems best for the
benefit of the tenants generally.
2. Landlord may refuse admission to the Building outside of
ordinary business hours to any person not known to the watchman in
charge or not having a pass issued by Landlord or not properly
identified, and may require all persons admitted to or leaving the
Building outside of ordinary business hours to register. Tenant's
employees, agents and visitors shall be permitted to enter and leave the
Building whenever appropriate arrangements have been previously made
between Landlord and Tenant with respect thereto. Each tenant shall be
responsible for all persons for whom the tenant requests such permission,
and shall be liable to Landlord for all acts of such persons. Any person
whose presence in the Building at any time shall, in the reasonable
judgment of Landlord, be prejudicial to the safety, character, reputation
or interests of the Building or its tenants may be denied access to the
Building or may be ejected therefrom. In case of invasion, riot, public
excitement or other commotion, Landlord may prevent all access to the
Building during the continuance of the same, by closing the doors or
otherwise, for the safety of the tenants and protection of property in the
Building. All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place during such hours and in such elevators as
Landlord may reasonably determine from time to time. Landlord
reserves the right to inspect all objects and matter to be brought into the
Building, and to exclude from the Building all objects and matter which
violate any of these Rules and Regulations or the lease of which these
Rules and Regulations are a part. Landlord may require any person
leaving the Building with any package or other object to exhibit a pass
from the tenant from whose premises the package or object is being
removed, but the establishment and enforcement of such requirement
shall not impose any responsibility on Landlord for the protection of any
tenant against the removal of property from the premises of the tenant.
Landlord shall in no way be liable to any tenant for damages or loss
arising from the admission, exclusion or ejection of any person to or
from the tenant's premises or the Building under or despite the
provisions of this rule. On days and hours other than those during which
full elevator service is required to be provided, Landlord may lock all
outside Building doors and require use of a night bell to summon a
watchman from his other duties in order to gain access.
3. No tenant shall obtain or accept for use in its premises ice,
towel, barbering, boot blacking, floor polishing, lighting maintenance,
cleaning, messenger service or other similar services from any persons
not authorized by Landlord in writing to furnish such services, provided
always that the charges for such services by persons authorized by
Landlord are competitive. Such services shall be furnished only at such
hours, in such places within the tenant's premises and under such
regulations as may be reasonably fixed by Landlord.
4. No awnings or other projections over or around the windows
shall be installed by any tenant, and only such window blinds or drapes
as are supplied or permitted by Landlord shall be used in a tenant's
premises. No curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of a tenant's
premises, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed. Such curtains, blinds,
shades or screens must be of a quality, type, design and color, and
attached in the manner, approved by Landlord, which approval shall not
be unreasonably withheld or delayed. No tenant shall darken, cover or
permanently close any windows in the tenant's premises.
5. There shall not be used in any space, or in the public halls of
the Building, either by a tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with
rubber tires, side guards and such other safeguards as Landlord shall
require.
F-1<PAGE>
<PAGE>
6. All entrance doors in each tenant's premises shall be left
locked when the tenant's premises are not in use. Entrance doors shall
not be left open at any time unless the tenant, at its expense, has
connected a special smoke detector system in compliance with all Legal
Requirements and approved by Landlord. Each tenant, before closing
and leaving its premises at any time, shall use best efforts to ensure that
all lights are turned out. All windows in each tenant's premises shall be
kept closed at all times, and all blinds and/or drapes therein above the
ground floor shall be lowered and kept drawn when and as reasonably
required (because of the position of the sun) during the operation of the
Building air-conditioning system to cool or ventilate the tenants'
premises. The sashes, sash doors, skylights, windows and doors that
reflect or admit light and air into the halls, passageways or other public
places in the Building shall not be covered or obstructed by any tenant,
nor shall any bottles, parcels, or other articles be placed on the
windowsills.
7. No noise, including the playing of any musical instruments,
radio or television, which, in the judgment of Landlord, might disturb
other tenants in the Building shall be made or permitted by any tenant.
No tenant shall throw anything out of the doors, windows or skylights or
down the passageways. Nothing shall be done or permitted in any
tenant's premises, and nothing shall be brought into or kept in any
tenant's premises, which would impair or interfere with any of the
Building services or the proper and economic heating, cleaning or other
servicing of the Building or the premises, or the use or enjoyment by any
other tenant of any other premises, nor shall there be installed by any
tenant any ventilating, air-conditioning, electrical or other equipment of
any kind which, in the reasonable judgment of Landlord, might cause
any such impairment or interference. No dangerous, inflammable,
combustible or explosive object or material shall be brought into the
Building by any tenant or with the permission of any tenant; provided,
however, that the foregoing prohibition shall not apply to standard office
cleaning supplies or standard office products, in limited quantities, if and
to the extent permitted by applicable Legal Requirements.
8. Tenants shall not permit any cooking within their premises
(unless consented to in writing by Landlord), and shall not permit any
food odors emanating within their premises to seep into other portions of
the Building. In the event that Landlord shall consent to any cooking or
installation of kitchen equipment in a tenant's premises, such tenant shall
operate its dining room and kitchen equipment, if any, in a manner that
will prevent odors and smoke from escaping into areas of the Building
outside the premises, and shall, at its expense, (i) install and maintain
appropriate filters and grease traps to prevent accumulation of grease in
any duct, stack or flue used to exhaust fumes and vapors resulting from
such food preparation and to prevent stopping up of the sewerage
ejecting system of the Building if any of same are necessary or are
required by any governmental authority, (ii) keep all range hoods and
ducts therefrom, if any, clean and free of grease at all times so as to
avoid fire hazard, and (iii) clean out the vertical exhaust flue and duct, if
any, at least once a year, or more frequently as conditions require. The
discharge of any fumes, vapors and odors, which, by any Legal
Requirement, must be discharged into a separate stack or flue, will not
be permitted unless such tenant, at its expense, shall provide for such
discharge in a proper manner. Notwithstanding the foregoing, Tenant
may install vending machines, microwave ovens, coffee makers and
similar small electric appliances.
9. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the
Building which may damage them. The water and wash closets and
other plumbing fixtures in or serving any tenant's premises shall not be
used for any purpose other than the purpose for which they were
designed or constructed, and no sweepings, rubbish, rags, acids or other
foreign substances shall be deposited therein. All damages resulting
from any misuse of the fixtures shall be borne by the tenant who or
whose servants, employees, agents, visitors or licensees, shall have
caused the same.
10. No lettering shall be exhibited, inscribed, painted or affixed
by a tenant on any part of the outside or inside of its premises or the
Building without the prior written consent of Landlord if such lettering
shall be visible from outside of its premises or the Building. In the event
of the violation of the foregoing by a tenant, Landlord may remove the
same without any liability, and may charge the expense incurred by such
removal to the tenant or tenants violating this rule. Lettering on doors
shall be inscribed, painted or affixed for each tenant by Landlord at the
expense of such tenant, and shall be of a size, color and style reasonably
acceptable to Landlord. Landlord shall have the right to prohibit any
advertising by any tenant which impairs the reputation of the Building or
its desirability as a building for offices, and, upon written notice from
Landlord, such tenant shall refrain from or discontinue such advertising.
11. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows in any tenant's premises, and no lock on
any door therein shall be changed or altered in any respect, unless, in
each such case, Landlord shall have been furnished with a key thereto (or
the same shall be operable by Landlord's master key for the Building).
Duplicate keys for a tenant's premises and toilet rooms shall be procured
only from the Landlord, which may make a reasonable charge therefor.
Upon the termination of a tenant's lease, all keys to the tenant's premises
and toilet rooms shall be delivered to the Landlord, and, in the event of
the loss of any keys furnished by Landlord, such tenant shall pay to
Landlord the actual, out-of-pocket cost thereof.
F-2<PAGE>
<PAGE>
12. No tenant shall make, paint, drill into, or in any way deface
any part of the Building or the premises demised to such tenant, except
as may otherwise be expressly provided herein. Nor boring, cutting or
stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as Landlord may reasonably direct. No tenant
shall install any resilient tile or similar floor covering in the premises
demised to such tenant, except in a manner approved by Landlord, which
approval shall not be unreasonably withheld or delayed. Unless and until
Landlord may otherwise direct, no tenant shall lay linoleum, or other
similar floor covering, so that the same shall come in direct contact with
the floor of its premises, and, if linoleum or other similar floor covering
is desired to be used, an interlining of builder's deadening felt shall be
first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly
prohibited.
13. No tenant shall use or occupy, or permit any portion of the
premises demised to such tenant to be used or occupied, as an office for
a public stenographer or typist, or as a barber or manicure shop or as an
employment bureau or for any mail order business. No tenant or
occupant shall engage or pay any employees in the Building, except those
actually working for such tenant or occupant in the Building, nor
advertise for laborers giving an address at the Building. No premises
shall be used, or permitted to be used, at any time, as a store for the sale
or display of goods, wares or merchandise of any kind, or as a
restaurant, shop, booth, bootblack or other stand, or for the conduct of
any business or occupation which predominantly involves direct
patronage of the general public in the premises demised to such tenant,
or for manufacturing or for other similar purposes.
14. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall
not perform any work or do anything outside of their regular duties,
unless under special instructions from the office of the Landlord.
15. Unless Landlord shall be furnishing electricity to the
tenant's premises, each tenant shall, at its expense, provide artificial light
and electricity in the premises demised to such tenant for Landlord's
agents, contractors and employees while performing janitorial or other
cleaning services and making repairs or alterations in said premises.
16. Tenants' employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof. No tenant shall allow its premises to
be used for lodging or sleeping, or for any immoral or illegal purposes.
No bicycles, vehicles, animals, fish or birds of any kind shall be brought
into or kept in or about any tenant's premises. Canvassing, soliciting
and peddling in the Building are prohibited, and each tenant shall
cooperate to prevent the same.
17. If the premises demised to any tenant become infested with
vermin, such tenant, at its own cost and expense, shall cause its premises
to be exterminated, from time to time, to the reasonable satisfaction of
Landlord, and shall employ such exterminators therefor as shall be
reasonably approved by Landlord. Landlord reserves the right to require
that the exterminators generally employed in the Building be employed,
so long as their charges are competitive.
18. Any cuspidors or similar containers or receptacles used in
any tenant's premises shall be cared for and cleaned by and at the
expense of the tenant. No showcases or other articles shall be put in
front of or affixed to any part of the exterior of the Building, nor placed
in the halls, corridors or vestibules. If a tenant's premises shall be an
entire floor, the elevator lobby in the premises shall be kept neat, orderly
and fresh in appearance to Landlord's reasonable satisfaction.
19. No tenant shall not place a load upon any floor of its
premises which exceeds the load per square foot which such floor was
designed to carry and which is allowed by law.
20. Business machines and mechanical equipment of any tenant
which cause noise, vibration or any other nuisance that may be
transmitted to the structure or other portions of the Building or to
premises, to such a degree as to be objectionable to Landlord or which
interfere with the use or enjoyment by other tenants of their premises or
the public portions of the Building, shall be placed and maintained by
such tenant at such tenant's own cost and expense, in settings of cork,
rubber or spring type vibration eliminators sufficient to eliminate noise or
vibration to the reasonable satisfaction of Landlord.
21. Landlord will, at the request of a tenant, maintain up to three
(3) listings on the floor directory and up to a proportionate share (based
on Tenant's Proportionate Share) of the listings on the Building directory
of the name of such tenant (plus permitted or approved subtenants or
occupants) and any other person, firm, association or corporation
lawfully in possession of the premises or any part thereof. The listing of
any name other than that of a tenant, whether on the doors of the
premises, on the Building directory, or otherwise, shall not operate to
vest any right or interest in such tenant's lease or in the premises or be
deemed to be the written consent of Landlord required pursuant to such
tenant's lease, it being expressly understood that any such listing is a
privilege extended by Landlord revocable at will by written notice to
such tenant.
F-3<PAGE>
<PAGE>
22. No tenant shall move any safe, heavy equipment or bulky
matter in or out of the Building without Landlord's written consent,
which consent shall not be unreasonably withheld or delayed. If the
movement of such items requires special handling, the tenant shall
employ only persons holding a Master Rigger's License to do said work,
and all such work shall be done in full compliance with the Administra-
tive Code of the City of New York and other municipal requirements.
All such movements shall be made during hours which will least interfere
with the normal operations of the Building, and all damage caused by
such movement shall be promptly repaired by such tenant at such tenant's
expense.
23. All moving, shipping and receiving of a tenant's property
shall be through the freight elevator only, and at such times and in such a
manner as Landlord shall designate for the proper operation of the
Building. If a tenant's use of such elevator is after regular business
hours, or in such a manner that requires the supervision of Landlord's
employees (of which fact Landlord shall be the sole judge), such tenant
shall pay to Landlord the actual cost of furnishing such after hour service
and/or supervision. All bulk deliveries shall be made during non-
business hours, at the tenant's cost.
24. Any entrance door or doors leading from a tenant's premises
into the public corridor shall be repaired and/or maintained by such
tenant, at such tenant's own cost and expense, including, without
limitation, repair and maintenance of the enframement and mechanisms
of said door(s), whether such repair or maintenance is caused by any
damage by such tenant, its employees, workmen or contractors, by
ordinary wear and tear or otherwise (except that if such damage is caused
by Landlord or by Landlord's agents or contractors, Landlord shall
repair such damage).
25. Landlord reserves the right to rescind, alter or waive any
rule or regulation at any time prescribed for the Building when Landlord
deems it necessary or desirable for the reputation, safety, care of
appearance of the Building, or the preservation of good order therein, or
the operation or maintenance of the Building or the equipment thereof, or
the comfort of tenants or others in the Building. No rescission, alteration
or waiver of any rule or regulation in favor of one tenant shall operate as
a rescission, alteration or waiver in favor of any other tenant.
F-4
<PAGE>
<PAGE>
EXHIBIT "G"
LETTER OF CREDIT
NO.___________ Date ____________ Irrevocable Letter of Credit
BENEFICIARY
Broadpine Realty Holding Company, Inc.
c/o J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Dear Sir(s),
We hereby authorize you to value on ___________________________
New York, NY
For account of Broadpine Realty Holding Company, Inc. up to the
aggregate amount of $___________________________________.
Available by your drafts at sight, accompanied by:
Your statement, purportedly signed by one of your authorized officers,
partners or agents, that the amount of your drawing represents funds due
and payable under a certain lease dated as of ____________________,
executed by and between Broadpine Realty Holding Company, Inc., as
Landlord and __________________,
______________________________________________, as Tenant.
This Letter of Credit may be transferred to any transferee of the interest
of the landlord under the lease dated as of ___________________
between Broadpine Realty Holding Company, Inc., as landlord, and
_____________________________________________, as tenant.
It is a condition of this Letter of Credit that it shall be deemed to be
automatically extended for a period of one year from the present or any
future expiration date, unless we shall notify you by written notice given
by certified mail, return receipt requested at least 45 days prior to such
expiration date that we elect not to renew it for such additional period, in
which case you shall have the right to draw on us the full amount of this
Letter of Credit by your sight draft, accompanied by your signed written
statement that you are drawing under Letter of Credit #_______________
because you have received notice of non-renewal from us, and the
accountee is still obligated to you under the above-referenced lease.
All drafts drawn under this Credit must bear on their face the clause
"Drawn under Letter of Credit No. _________________."
Except so far as otherwise expressly stated, this credit is subject to the
Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce, Publication No. 500.
G-1<PAGE>
<PAGE>
EXHIBIT "H"
CERTIFICATE OF OCCUPANCY
H-1<PAGE>
<PAGE>
EXHIBIT "I"
TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
I-1
EXHIBIT 10.6
AGREEMENT FOR SALE OF SERVICES & ACCOUNT MANAGEMENT
EFFECTIVE AS OF FEBRUARY 1, 1996
BETWEEN
NYNEX
AND
COMPUTER TELEPHONE CORP.
(Agent Name)<PAGE>
<PAGE>
TABLE OF CONTENTS
A. Definitions
1. Account Management
2. Affiliate
3. Business Customers
4. Certification
5. Designated Sales Area
6. Incidental Sales Area
7. Installation
8. NASA Channel Plan
9. Order Issuance Date
10. Quota
11. Registration
12. Services
13. Strategic Business Accounts
14. Subcontract
15. Telemarket
16. Unhook
B. Relationship of the Parties
C. Contract Term
D. Representative's Responsibilities
1. General
2. Account Management Plan
E. NYNEX's Responsibilities
F. Compensation
1. Commissions
2. Account Management Plan
3. Promotional Compensation
4. Set Off
5. Separation Payment
G. Service Ordering Procedures, Credit
H. Authorized use of NYNEX Name and Marks
I. Confidential Information
J. Indemnification
K. Non-Discrimination/Conflict of Interest
L. Arbitration
M. General Provisions
1. Non-Assignability
2. Amendment
3. Waiver
4. Force Majeure
5. Surviving Obligations
6. Choice of Law
7. Successors Bound
8. Agency Orders
9. Severability
10. Headings
11. Notice
12. Entire Agreement
APPENDICES
A. Commissioned Services
B. Commission Schedules
C. Non-Discrimination Compliance Agreement
D. Conflict of Interest
E. Sales Quota
<PAGE>
<PAGE>
PREAMBLE
NYNEX and Representative enter this Agreement in mutual recognition of the
individual value added competencies that each contribute and the understanding
that these collective competencies are valued by customers and essential to
marketplace success. The parties agree to share plans and capabilities on an
ongoing basis, to jointly explore creative market solutions and to work
together toward the profitable growth of both firms.
NYNEX and Representative acknowledge and recognize that there will be
significant changes in the marketplace and in the competitive environment over
the duration of this Agreement, and agree to work together in addressing this
dynamic and changing environment in a manner that is supportive of their
individual and collective interests. If, during the term of this Agreement,
events occur that could compromise either party's interests, financial
objectives and/or fiduciary responsibilities, the parties agree to work
together in good faith to address and resolve such events or issues to the
reasonable satisfaction of the parties.
NYNEX and Representative recognize that unilateral action on either of their
parts in a number of areas, such as compensation, account management and
program implementation could compromise the spirit, goals and financial
viability of this Agreement. The parties commit to the ongoing review and
sharing of individual direction and plans to ensure positive mutual benefits.
The parties further agree that any material changes identified will be
negotiated equitably and in good faith, to the reasonable satisfaction of the
parties.
<PAGE>
<PAGE>
AGREEMENT FOR SALE OF NYNEX SERVICES
This Agreement is made and entered into this 1st day of February, 1996,
by and among NEW YORK TELEPHONE COMPANY, NEW ENGlAND TELEPHONE AND TELEGRAPH
COMPANY (each referred to herein as "NYNEX") and Computer Telephone Corp.
("Representative"), a corporation with its principal place of business at 360
Second Avenue, Waltham, MA 02154:
Each NYNEX party is solely responsible for NYNEX obligations hereunder with
respect to its own service territory.
For and in consideration of the mutual promises and covenants set forth
hereinafter. The parties do mutually agree as follows:
A. Definitions
1. Account Management - means the provision of account management
functions as specified by NYNEX in the NASA Channel Plan.
2. Affiliate - means any corporation or other business entity which
owns or contracts, in whole or in significant part, is under common ownership
or control with, or is owned or controlled, in whole or in significant part,
by another corporation or business entity.
3. Business Customer - means any customer with a class of service
designated as a business service by NYNEX.
4. Certification - means the successful completion by
Representative's salesperson of a series of training courses prescribed by
NYNEX in the NASA Channel Plan.
5. Designated Sales Area - means the geographic area within which
Representative is authorized to sell NYNEX Services, described in Appendix E.
6. Incidental Sales Area - means the geographic area outside
Representative's Designated Sales Area within which Representative may make up
to 10% of its total sales under this Agreement, described in Appendix E.
7. Installation - means the completion of the placement of equipment
and facilities in service as requested and agreed to by the customer and
approved by the Public Service Commission or, where the placement of equipment
and facilities is not necessary, the completion of the NYNEX service order
work necessary to effectuate such Service to the customer.
8. NASA Channel Plan - means the set of policies and procedures
governing the NYNEX authorized sales agent program developed and issued by
NYNEX annually.
9. Order Issuance Date - means the date on which a customer service
order is issued by NYNEX subsequent to Representative placing an accurate and
fully negotiated order for service in accordance with the Service Ordering
Procedures described in Paragraph G. of this Agreement.
10. Quota - means the revenue, service and sales measurements and/or
product units agreed upon by NYNEX and Representative for Representative to
meet during the term hereof. Each year, NYNEX and Representative shall agree
upon new annual and minimum quotas for Representative.
11. Registration - means that Representative has notified NYNEX, in
NYNEX's prescribed format, of-the name of its sales person(s) promoting and/or
selling Services.
12. Services - when capitalized, means those NYNEX services which are
listed on Appendix A. hereto.
13. Strategic Business Accounts - means those accounts, and their
affiliates, subsidiaries and divisions, designated by NYNEX to be exclusively
managed by NYNEX Systems Marketing.<PAGE>
<PAGE>
14. Subcontract - means the use of third party firms, partnerships, or
organizations for the purpose of selling Services.
15. Telemarket - means the outbound selling of Services over the
telephone, to new prospective customers, by conducting such activities as
quoting charges, advising of cost savings benefits, detailing service features
and/or any other similar activities, which provides the prospective customer
with sufficient information as to Influence their buying decision either
immediately or at a future time.
16. Unhook - means the cancellation of a representative's accurate.
fully negotiated order and the subsequent placement of a similar order by
another representative. Under the condition of unhooking the initial
representative of record retains compensation payment rights.
B. Relationship of the Parties
1. NYNEX appoints Representative as a nonexclusive authorized sates
agent for the primary purpose of face to face selling of NYNEX Services to
Business Customers within the Designated Sales Area. Representatives may also
sell NYNEX Services within the Incidental Sales Area, provided that such sales
do not exceed 10% of Representatives total sales under this Agreement.
Representative is not otherwise authorized to act or represent itself as a
NYNEX sales agent without prior written concurrence from NYNEX.
2. The Representative's use of the term "NYNEX Authorized Sales Agent
will be as specified in the "Authorized Use of NYNEX Name" section of this
Agreement.
3. Neither party hereto is an employee of the other and neither has
any right nor any authority to act on behalf of the other beyond that
expressly granted herein. Representative shall conduct its business at its
own initiative, responsibility and expense.
4. During the term of this Agreement or thereafter, NYNEX reserves
the right, without obligation or liability to Representative for payment of
compensation or otherwise, to market the Services, whether through NYNEX's own
representatives, through other independent representative(s), or otherwise.
C. Contract Term
1. This Agreement shall become effective as of February 1, 1996 and
shall continue in effect, unless terminated, through December 31, 1998.
Notwithstanding the above, the Agreement can be terminated at any time by
either party for cause, with thirty (30) days advance written notice to the
other party.
2. NYNEX reserves the right to discontinue, supersede, alter or
diminish any of the Services subject to this Agreement. Furthermore NYNEX
also reserves the right to add Services to, or delete services from, this
Agreement, or to modify the Commission schedules contained therein. Such
rights may be exercised by NYNEX at any time during the term of this Agreement
subject to sixty (60) days' advance written notice to Representative. In the
event of additions of new Services, such sixty (60) days notice may be waived
and replaced by a letter of notification. NYNEX shall deliver conforming
appendices to Representative.
3. NYNEX shall provide to Representative an annual sales quota.
Representative shall review the quota and the parties shall reach agreement
within thirty (30) days from Representative's receipt of quota. In the event
agreement is not reached within 30 days, then either party may terminate this
agreement without further obligation.
4. In addition to an annual sales quota, NYNEX shall also provide to
Representative a minimum annual sales quota which if Representative fails to
<PAGE>
<PAGE>
meet may result in this Agreement being terminated at the end of the calendar
year. Notwithstanding the above, when this Agreement or any renewal thereof
expires or if Representative fails to meet its annual and or minimum quotas,
NYNEX, in its sole discretion, may renew this Agreement for an additional
term.
5. If Representative becomes insolvent, makes an assignment for the
benefit of creditors or files a petition for reorganization; if a petition in
bankruptcy is filed by or against Representative; if the financial
responsibility of Representative becomes impaired or is otherwise
unsatisfactory to NYNEX; or if Representative is in breach of this Agreement
or is otherwise in default to NYNEX under this or any other agreement, NYNEX
may terminate this Agreement immediately upon giving notice to Representative,
without prejudice for any claim for damages or any other right of NYNEX under
this Agreement at the time of such termination.
6. Representative shall advise NYNEX as soon as possible if a change
of ownership of Representative is contemplated or occurs during the term of
this Agreement. In the event of an ownership change NYNEX reserves the right
to terminate the existing Agreement and at NYNEX's sole discretion enter into
a new Agreement with the new ownership.
7. If Representative is otherwise in breach of this Agreement or is
otherwise in default, then NYNEX shall give Representative notice of such
breach or default and may terminate this agreement if such breach or default
is not cured by Representative within a mutually agreed upon period.
D. Representative's Responsibilities
1. General:
Representative agrees to:
a. Develop market plans; negotiate sales; take orders; analyze
and design Service proposals; coordinate with NYNEX as appropriate and
necessary; jointly develop with NYNEX an annual written program with specific
commitments relating to dates, timelines, quotas, promotions, and training of
salespersons; manage and monitor NYNEX service levels and measurements; and,
except as specified herein, perform any additional functions necessary to the
marketing and sale of the Services;
b. Permit NYNEX to conduct upon request periodic sales reviews
and account reviews with Representative's salespersons or such other persons
designated by Representative;
c. Establish and maintain a trained and capable field sales
force adequate to market the Services. Representative further agrees that
such sales force shall be registered with NYNEX and meet all reasonable
quality and/or certification standards which may be established by NYNEX from
time to time. Representative shall assure that its salespersons complete
certification requirements, as specified in the NASA Channel Plan, not later
than six (6) months from date the sales person is initially registered, unless
otherwise approved by NYNEX. Other training shall be mutually agreed upon by
the parties. If Representative, fails to meet the registration or
certification requirements of this paragraph, then NYNEX shall not be
obligated to pay Representative commissions for any Services sold hereunder;
d. Pay a fee of $350 for each day an employee of
Representative's fails to attend scheduled training, or fails to participate
in or complete such training to NYNEX's satisfaction, unless Representative
provides NYNEX notice of cancellation at least fourteen (14) calendar days
prior to the start of the course. If the Representative arranged to "live in"
during the course and fails to cancel within fourteen (14) days,
Representative shall also pay any applicable hotel cancellation charges;
<PAGE>
<PAGE>
e. Market the Services to customers in accordance with the
prices, terms and conditions set forth in applicable tariffs filed by NYNEX
and from time to time explain applicable tariff provisions;
f. Make only such representations concerning the price, tariff
terms and conditions, functions, capabilities, characteristics, design,
installation date or availability of any Service as have been approved by
NYNEX. Any other representations are beyond the authority granted herein;
g. Market the Services in a manner consistent with the
standards for marketing of such Services which NYNEX shall specify as
necessary to protect trademarks or trade names used in connection with the
Services. All activities of Representative hereunder shall be in compliance
with such sales, service and engineering standards promulgated by NYNEX as are
then in effect;
h. Act professionally and ethically at all times to provide
prompt, courteous and efficient service to customers; advise customers that
Representative is a NYNEX Authorized Sales Agent; act in accordance with the
highest standards of honesty, integrity and fair dealing in all dealings with
customers and NYNEX as well as other NYNEX authorized representatives; and do
nothing which would tend to discredit, dishonor, reflect adversely upon or in
any manner injure the reputation of NYNEX, its customers, and other NYNEX
authorized representatives;
i. Explain and demonstrate the Services and advise customers on
the use of the Services and the compatibility of the Services with other
products and services offered for sale by Representative; Representative
assumes primary responsibility for customer training in conjunction with
Service installations and shall instruct in the use of such Services to assure
that customers know how to use such Services;
j. Conduct advertising, as appropriate, to establish and
maintain its corporate identity. Unless otherwise agreed, Representative
specifically agrees not to conduct any service specific advertising for any of
the Services. At Representative's option, Representative may participate in
such cooperative advertising and promotional sales ventures as may be proposed
by either party from time to time and on such terms and conditions as NYNEX
may specify;
k. Utilize its best efforts actively and continuously to
promote and sell, on NYNEX's behalf, each of the Services;
l. Notify NYNEX immediately upon notice to it of any customer
canceling any order for Services placed by Representative;
m. Take all necessary steps to assure compliance with
Representative's obligations under this Agreement by the Representative and
any individual acting on its behalf;
n. Maintain and provide proof to NYNEX of a minimum of one
million dollars in liability insurance, to protect NYNEX from any and all
claims, demands, expenses, costs and other liabilities arising out of acts,
omissions and/or misrepresentations of the Representative;
o. Maintain, in accordance with standard recognized accounting
practices, accurate and complete books of account, documents and records
("Records") supporting the sales of Services which are the subject of his
Agreement;
p. Retain such Records for a period of three (3) years from the
date of final payment by NYNEX for services rendered under this Agreement.
NYNEX and its authorized agents and representatives shall have access to such
records for purposes of audit during normal business hours during the term of
this Agreement and for three (3) years from the date of final payment. NYNEX
shall notify Representative in writing at least seven (7) days before NYNEX
intends to conduct such an audit;<PAGE>
<PAGE>
q. Cooperate fully in the collection, compilation and
maintenance of data required to be reported by NYNEX pursuant to any federal
or state statute, regulation or order;
r. Obtain, as necessary, from customer(s) an executed agency
authorization in a format prescribed by NYNEX;
s. Neither represent for sale, refer, promote, negotiate or
otherwise market any other network service which displaces, or is in
competition with, IntraLATA service offered by NYNEX. Such limitation shall
apply to any Affiliate of Representative. Furthermore, for a period of twelve
(12) months after the expiration or termination of this Agreement
Representative may not sell, represent, or promote any non-NYNEX IntraLATA
services to any NYNEX Business Customer for whom Representative was
responsible under the AMP program, or to whom Representative sold any NYNEX
Service, within 12 months prior to such expiration or termination. It is
NYNEX's intent to have Representative exclusively market all Services offered
by NYNEX and expects that Representative shall put forth a reasonable best
effort to accommodate such expectation;
t. Not offer customers any discount, rebate, cash payment or
other financial incentive (hereinafter collectively referred to as
"Discounts") in connection with the sale of any Service. Discounts shall not
be associated with NYNEX prices, and the customers should not be led to
believe that NYNEX discounts its prices;
u. Assure that any promotional program and/or printed material
offered by Representative, which is in any way associated with NYNEX and/or
its services, has prior written concurrence from NYNEX before such program or
material is offered;
v. Neither subcontract nor telemarket the sale of Services
without obtaining prior written concurrence or separate contract agreement
from NYNEX;
w. Not unhook a sales order placed by another NYNEX
representative;
x. Comply with all applicable Federal, state, local laws,
rules, regulations and orders, including but not limited to, the Massachusetts
Uniform Procurement Act.
y. Establish and maintain an automated order entry capability
for the purpose of placing sales orders with NYNEX. NYNEX shall advise
Representative of the minimum requirements necessary to establish and maintain
such automated access.
2. Account Management Plan (AMP)
At Representative's option and subject to NYNEX's approval,
Representative may participate in the Account Management Plan ("AMP Program").
The Representative's responsibilities under the AMP Program are detailed in
the NASA Channel Plan.
E. NYNEX's Responsibilities
NYNEX agrees to:
1. Advertise the Services and provide promotional literature to
Representative in such quantities as NYNEX deems appropriate. NYNEX further
agrees to provide reasonable advance notice to Representative of all planned
major advertising campaigns for the Services;
2. Perform all billing and collection functions for the Services sold
by Representative under this Agreement;
<PAGE>
<PAGE>
3. In accordance with NYNEX's applicable tariffs, install, maintain
and support the Service(s) sold by Representative pursuant to this Agreement,
but NYNEX shall have no responsibility for or liability in connection with any
other services or products sold by Representative. NYNEX reserves the right
to deal directly with the customer(s) in all matters, including but not
limited to those involving the installation, maintenance, repair, support and
removal of the Services;
4. Be sufficiently self-insured to protect Representative from any
and all claims, demands, expenses, costs and other liabilities arising out of
acts, omissions and/or misrepresentations of NYNEX;
5. Act in accordance with the highest standards of honesty, integrity
and fair dealing in all dealings with Representative; and;
6. Upon Representative's reasonable request, and in NYNEX's sole
discretion, install without charge to Representative, the network facilities
necessary for demonstration of the Services sold by Representative hereunder.
Representative will not be charged for, or responsible for paying the monthly
rates associated with, such network facilities as long as Representative has
demonstrated minimum levels of satisfactory sales performance as shall, from
time to time, be determined by NYNEX, and so long as such facilities are used
solely for demonstration purposes. Such demonstration facilities may be
removed at any time upon ten (10) days notice, at the request of
Representative or in the discretion of NYNEX. Upon such expiration or
termination of this Agreement, demonstration services will be removed by NYNEX
at NYNEX's own expense.
F. Compensation
1. Commissions
a. Except as may otherwise be provided herein, NYNEX will pay
Representative a commission ("Commission"), at the rate set forth in Appendix
B. hereto, for the sale of Services to Business Customers within the
Designated Service Area. Commission will be paid on net sales, which shall be
defined in guidelines to be issued by NYNEX from time to time.
b. NYNEX shall pay to Representative Commissions for sales of
those Services covered by this Agreement and sold by certified sales persons.
c. NYNEX, in its sole discretion, may pay a commission for the
sale of any individually priced special assembly service offered by NYNEX.
The commission will be calculated by NYNEX on an individual case basis and
will be presented to Representative with the service's pricing proposal.
d. It is NYNEX's intent to pay commissions not later than
thirty (30) days following the end of the month during which a fully
negotiated and accurate order is issued by NYNEX (Order Issuance Date),
provided that the appropriate order issuance tracking system exists, as
determined by NYNEX, and that a Commission will not be requested or paid where
withdrawal of the Service within ten (10) months of the Order Issuance Date is
reasonably foreseeable at the time of sale. Notwithstanding the above, in
those cases where an appropriate tracking system does not exist, then NYNEX
shall pay commissions not later than thirty (30) days following the end of the
month during which the installation of a Service sold by Representative is
verified by NYNEX. A statement listing all sales of Services for which
Representative is being paid and debited will be provided by NYNEX.
e. In the event that NYNEX disconnects or otherwise
discontinues any Service, for any reason, within ten (10) months of the
completed installation date, NYNEX reserves the right to recover from
Representative any commission, paid with respect thereto. In the case of
services under contract. NYNEX will recover the commission based on the
following schedule: within 10 Months, 100%; 11 - 23 Months, 50%; and 24 - 36
Months, 25%.<PAGE>
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f. A sale of a Service will be compensated under the Commission
schedule in effect at the time NYNEX acknowledges an accurate and fully
negotiated order submitted by Representative. However, where as a result of
customer action an order is postponed beyond six (6) months from the Order
Issuance Date, the Commission in effect when the customer reorders the Service
will be the Commission paid.
g. Notwithstanding the foregoing, no Commission will be paid to
Representative in connection with the sale of any Service:
1. to Representative, Representative's employees or any
other NYNEX representative(s) including Affiliates, subsidiaries, parent
companies or divisions of either party unless receiving prior written
concurrence from NYNEX;
2. to Strategic Business Accounts, unless otherwise
specified by NYNEX, or to other NYNEX accounts as designated by NYNEX in its
sole discretion;
3. for which an order was placed by Representative prior
to the effective date of this Agreement;
4. for which an order, still pending, was previously
placed with NYNEX by anyone other than Representative; or
5. for any order made in which Representative has offered
to the customer a Discount not authorized by NYNEX in connection with such
sale.
6. for any order that has been sold by a party, or
subcontractor other than Representative unless otherwise approved by NYNEX;
7. for any order that merely moves the same Service from
one tariff to another or shifts the Service from one customer bill to another
without, at the same time, placing that Service under a longer than current
term contract period, Rate Stability Plan or Service Discount Plan;
8. for any order where misrepresentation or fraudulent
activity is uncovered. Furthermore, NYNEX has the right to recover any
compensation paid relative to fraudulent activity regardless of when the sales
order was placed or the length of time the Service has been installed;
9. for any sale of Services outside the Designated Sales
Area, except for qualifying sales made in the Incidental Sales Area or with
prior written concurrence from NYNEX;
10. for any order not completed or Service not installed
for any reason.
2. Account Management Plan (AMP) Compensation
a. As compensation for Representative's participation in the
AMP Program NYNEX agrees to pay Representative as set forth in Appendix B.
hereto.
b. Payment hereunder shall be made monthly during the term of
the AMP Program. AMP compensation will be paid not later than thirty (30)
days following the end of the month during which an account plan is approved
by NYNEX. Notwithstanding the above, NYNEX in its sole discretion may declare
a moratorium on accepting for approval new AMP account plans.
c. Compensation hereunder with respect to any AMP account
plan(s) may be discontinued or reduced should a NYNEX review reveal a lack of
performance by Representative in connection with the AMP Program. In
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addition, NYNEX may recover payments made with respect to any AMP Program in
the event that such audit or other similar findings reveal that a substantial
lack of performance by Representative has existed.
d. All AMP required documentation, such as account plans,
customer profiles, progress status reports, and proposals must be provided to
NYNEX upon request, and in any event within ten (10) business days after the
termination or expiration of this Agreement. After such termination or
expiration, Representative may not use information about NYNEX customers which
Representative obtained or developed under the AMP program to compete against
NYNEX in the provision of intraLATA services, and may not disclose any such
information to any third party.
e. The AMP Program as specified in the NASA Channel Plan shall
be considered an appendix to this Agreement.
3. Promotional Compensation
a. From time to time and with the consent and assistance of
Representative, NYNEX may offer to eligible employees of Representative awards
in connection with promotional sales programs. In addition, NYNEX may offer
to Representative bonus compensation for Representative's sales performance
during such promotional sales programs.
b. NYNEX shall notify Representative in writing of the terms
and conditions of such programs and the compensation amounts for which
Representative and its employees may be eligible under such programs. Such
compensation amounts shall be in effect for only as long as the promotional
program is in effect and shall be subject to change with each new promotional
sales program.
c. No compensation shall be paid hereunder unless
Representative shall have submitted to NYNEX prior to the commencement of the
promotional sales program a detailed plan as to how it intends to stimulate
sales of Services during the promotional period.
d. Payment of compensation hereunder to Representative's
employees shall not make an employee of the Representative's an employee of
NYNEX.
e. Any sale credited for cash awards or other compensation must
be reported by Representative against the sales person responsible for the
sale.
4. Set Off
NYNEX shall have the right to set off against any payment due by
it hereunder any amounts owed to it by Representative under this Agreement or
under any other agreement between the parties. If, for any reason whatsoever
(including by reason of termination of this Agreement), at the end of any
calendar month any amount is due from Representative to NYNEX, NYNEX, at its
option, may demand that such amount be paid to it in cash by Representative
within thirty (30) days after the last day of such calendar month.
5. Separation Payment
In the event that NYNEX determines to eliminate its third party
marketing sales channel, NYNEX, at its option, agrees to:
a. either terminate this Agreement only upon twelve (12) months
prior written notice, except that, in the event of Representative's
substantial lack of performance hereunder (including, but not limited to,
Representative's failure to meet its quota), NYNEX may terminate this
Agreement by providing Representative with notice pursuant to Section C. of
this Agreement,
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or
b. pay to Representative a separation payment based on 50% of
the Representative's earned compensation during the twelve (12) months
preceding termination.
G. Service Ordering Procedures, Credit
1. From time to time, NYNEX shall inform Representative of the terms
on which it is willing to accept orders for the Services, including customer
payment, standards of customer credit worthiness, standard installation
intervals, physical availability of facilities, order format, data
requirements and other specifications as to the manner of conducting business.
2. All orders for Services entered by Representative shall conform to
the requirements established by NYNEX pursuant to paragraph G.l., above.
3. Representative shall place all customer orders for Services to be
sold with NYNEX in such manner or on such forms as NYNEX may require. NYNEX
agrees to receive and process customer orders for Services from Representative
in accordance with its normal practices.
4. All orders for the Services shall be subject to the availability
of suitable facilities, which shall be determined in the sole discretion of
NYNEX. All orders for the Services shall be further subject to approval and
acceptance by NYNEX.
5. NYNEX reserves the right to require a deposit from any customer in
an amount which NYNEX, in its sole discretion, will determine in accordance
with applicable tariff provisions.
6. When requested, Representative shall obtain accurate and
appropriate credit information as specified by NYNEX. which it shall forward
to NYNEX with the order for Services. Representative does not guarantee the
credit of any customer.
7. NYNEX reserves the right independently to verify the credit
worthiness of any customer.
H. Authorized Use of NYNEX Name and Marks
1. Representative may refer to itself during the term of this
Agreement as a "NYNEX Authorized Sales Agent" identifying this relationship
solely in connection with Services sold by Representative hereunder.
2. Representative shall provide to NYNEX for its review and prior
written approval all promotional, advertising, or other material or any other
activity using or displaying NYNEX's name or referring to Representative as a
NYNEX Authorized Sales Agent. Representative agrees to change or correct, at
Representative's expense, any such material or activity which NYNEX, in its
sole judgment, determines to be inaccurate, misleading or otherwise
objectionable.
3. Upon expiration or termination of this Agreement, Representative
shall immediately cease referring to itself as a "NYNEX Authorized Sales
Agent."
4. NYNEX grants Representative the non-exclusive, personal and
non-transferable right and license to use the mark in the trade name NYNEX or
the NYNEX logo collectively referred to as Marks) only in connection with the
marketing of Services under this Agreement.
5. Use of the marks NYNEX must be in accordance with the graphic
standards and use requirements set forth in Paragraph H.8. Representative
shall not use the Marks as part of any corporate or trade name or with any
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prefix, suffix or other modifying words, terms, designs, symbols, or in any
modified form. Nor may Representative use the Marks in connection with any
authorized product or service or in any manner not expressly authorized by
this Agreement. Any unauthorized use of the Marks by Representative, or any
use not in compliance herewith, shall constitute an infringement of the rights
of NYNEX and its affiliates in and to the Marks.
6. Representative acknowledges that its right to use the Marks is
derived solely from this Agreement and is limited to the identification of
Representative as an "NYNEX Authorized Sales Agent." No rights are granted to
Representative to use the Marks other than in connection with the marketing of
Services under this Agreement.
7. If it becomes advisable at any time in NYNEX's sole discretion for
Representative to modify or discontinue use of any Marks or substitute one or
more additional trade or service marks to identify its relationship with
NYNEX, Representative agrees to comply within a reasonable time after notice
by NYNEX. In addition, Representative shall replace, at Representative's
expense, obsolete identification signs or identification material with new
signs or identification material should NYNEX adopt new Marks replacing one or
more Marks identified by NYNEX.
8. Representative shall provide NYNEX samples of all materials using
the Marks, including but not limited to stationery, business cards,
literature, packages, labels, labeling, and advertising prepared by or for
Representative and intended to be used by Representative prior to any public
release of same. NYNEX retains the unequivocal right to refuse release of any
material in its sole discretion. When using the Marks under this Agreement,
Representative shall comply with: a) the graphic standards and other
requirements of use set forth in writing by NYNEX as they may be amended from
time to time; and b) all laws pertaining to Marks in force from time to time,
including, but not limited to, compliance with Marketing requirements.
9. The right and license granted in Paragraph H.4. shall not be
transferable without NYNEX's prior written consent.
10. Representative agrees that upon the expiration or termination of
this Agreement, Representative shall: a) not use any actual or similar Marks,
or any actual or similar trade name, service mark, trademark, logo, insignia,
symbols or decorative designs owned by NYNEX or its affiliates specifically in
the conduct of its business, in any manner or for any purpose; b) will not
utilize for any purpose any actual or similar name, trade or service mark or
other commercial symbol that suggests or indicates a connection or association
with NYNEX, or directly or indirectly, at any time or, in any manner, identify
itself or any business associated with NYNEX or such affiliated company; c)
discontinue all use of the Marks and destroy or, if requested by NYNEX, return
to NYNEX ail advertising and marketing materials, forms and other materials
containing any Mark or otherwise identifying or relating to NYNEX's business.
11. All rights in the Marks other than those specifically licensed
herein are reserved by NYNEX.
12. Representative acknowledges the representations of NYNEX and its
affiliates that it is the owner of the exclusive right, title and interest in
and to the Marks, and Representative will not at anytime do or cause to be
done any act or thing anyway impairing or tending to impair any part of such
right, title and interest in connections with the use of the Marks.
Representative shall not in any manner represent that if has any ownership in
the Marks or registration thereof, and Representative acknowledges that use of
the Marks shall not create in Representative's favor any right, title or
interest in or to the Mark, but all uses of the Marks by Representative shall
inure to the benefit of NYNEX and its affiliates. Furthermore, Representative
will at no time adopt or use, without NYNEX's written consent, any work or
Mark which is likely to be similar to or confusing with the Marks.
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<PAGE>
13. NYNEX makes no representation or warranty, expressed or implied,
with respect to the Marks, including without limitations, any representation
or warranty with respect to:
a. Validity or enforceability of the Marks or NYNEX's exclusive
ownership thereof;
b. Whether or not the Marks infringe the rights of third
parties; and
c Whether or not the Marks have been infringed.
Representative shall not be entitled to any compensation from
NYNEX for any direct or indirect damages or loss of profits suffered by
Representative as the result of Representative's use of the Marks hereunder.
14. NYNEX assumes no liability to Representative or to third parties
with respect to the use of the Mark, and Representative indemnifies and holds
harmless NYNEX against all losses, damages and expense, including attorney's
fees, incurred as a result of or related to claims of third persons involving
Representative's use of the Marks. Such indemnity shall survive the
termination of this Agreement.
15. Except as permitted under this Agreement, Representative agrees
not to issue or release for publication any articles or advertising or
publicity matter relating to this Agreement or mentioning or implying the name
of NYNEX, or any of their personnel or affiliates, unless prior written
consent is granted by NYNEX.
16. Representative agrees to promptly notify NYNEX of any potential
infringements of the Marks.
17. Recognizing and acknowledging that any use of the Marks by
Representative in a manner inconsistent with the provisions of this Agreement
may cause NYNEX irreparable damage for which other remedies may be inadequate,
Representative agrees that NYNEX shall have the right to petition for
injunctive or other equitable relief from a court of competent jurisdiction as
may be necessary and appropriate to prevent any unauthorized use of the marks
by Representatives, its employees, or its agents, and Representative shall not
oppose such injunction on the grounds that an adequate remedy is available at
law. Such remedy be in addition to other remedies available to NYNEX.
I. Confidential Information
1. To the extent that the disclosure of confidential information is
legally permissible, all information disclosed by either party to the other
pursuant to this Agreement, other than such information as may be generally
available to the public or the industry, is and will be disclosed to it in
confidence solely in accordance with FCC regulations for its use in connection
with carrying out the terms and conditions of this Agreement. Each party
agrees to keep such information secret and confidential and not to disclose it
to any other person or use it during the term of this Agreement or after its
termination except in currying out its obligations hereunder or in response to
obligations imposed by tariff or order of a court or regulatory body.
2. Each party shall take effective precautions, contractual and
otherwise, reasonably calculated to prevent unauthorized disclosure or misuse
of such information by any of its employees or by any other person having
access to such information.
3. Within thirty (30) days after the expiration of this Agreement or
the termination of this Agreement by either party and for any reason, each
party shall return to the other any physical or written records containing
such confidential information of the other then in its possession, regardless
of whether such physical or written records were prepared by Representative or
by NYNEX.
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J. Indemnification
1. Representative agrees to indemnify and hold NYNEX harmless from
any and all claims, actions, damages, losses, forfeitures, penalties, expenses
and other liabilities, including reasonable attorney's fees and costs of
litigation, resulting from Representative's acts or acts by any person or
subcontractor supplied by Representative, omissions, misrepresentations, or
violations of Federal, state or local laws, including but not limited to, the
Massachusetts Uniform Procurement Act, regardless of the form of action.
2. NYNEX agrees to indemnify and hold Representative harmless from
any and all claims, actions, damages, expenses and other liabilities,
including reasonable attorney's fees and the costs of litigation, resulting
from NYNEX's acts, omissions or misrepresentations by NYNEX or by any person
or subcontractor supplied by NYNEX, regardless of the form of action,
PROVIDED, HOWEVER, THAT NYNEX'S LIABILITIES TO REPRESENTATIVE FOR ANY CLAIM
ARISING OUT OF THE PROVISION OF A TARIFFED SERVICE SHALL IN NO EVENT EXCEED
ITS LIABILITY TO A CUSTOMER UNDER THE TARIFFS ON FILE WITH THE STATE OR
FEDERAL AGENCIES WHICH HAVE REGULATORY AUTHORITY OVER THE SERVICES WHICH ARE
THE SUBJECT OF THIS AGREEMENT.
3. In the event that the negligence of both parties or the failure of
both parties to perform their obligations under this Agreement contributes to
loss or damage giving rise to a claim or suit, the parties agree to bear the
responsibility of such claim in proportion to the degree of fault attributable
to each party PROVIDED, HOWEVER, THAT NYNEX's LIABILITY SHALL BE LIMITED BY
THE APPLICABLE TARIFF(S). In no event shall Representative or NYNEX be liable
for any acts or omissions of the other occurring prior to the effective date
of this Agreement.
K. Non-Discrimination/Conflict of Interest
The applicable provisions in Appendix C., entitled "NonDiscrimination
Compliance," and Appendix D., entitled "Conflict of Interest Statement," both
of which are attached hereto, shall form a part of this Agreement and any
amendments hereto.
L. Arbitration
Upon mutual agreement, any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Rules of the American Arbitration
Association, and judgment upon the award may be entered in any Court having
jurisdiction thereof.
M. General Provisions
1. Non-Assignability: Representative may not assign or broker this
Agreement, in whole or in part, without the prior written consent of NYNEX.
Any attempt to assign or broker any of the rights, duties or obligations of
this Agreement without such consent shall be void and shall be considered by
NYNEX to be grounds for immediate termination of this Agreement without notice
to Representative.
2. Amendment:
a. Except as otherwise provided herein, this Agreement can be
modified only by a written amendment duly signed by, persons authorized to
sign agreements on behalf of the Representative and NYNEX and shall not be
modified or supplemented by any courses of dealing or trade usage.
b. Except as otherwise provided herein, the provisions of the
appendices hereto may be renegotiated at the request of either party.
Amendments of the appendices shall be evidenced by a signed writing but shall
not require re-execution of this Agreement. In the absence of agreement
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<PAGE>
concerning any modification or amendment thereto, this Agreement and the
current appendices shall continue in full force and effect. Upon sixty (60)
days notice to Representative, NYNEX shall, however, have the authority to
amend or effect a change in the appendices without Representative's approval
and without a writing signed by the Representative.
3. Waiver No course of dealing or failure of either party to strictly
enforce any term, right or condition of this Agreement shall be construed as a
waiver of such term, right or condition.
4. Force Majeure: Neither party shall be held liable for any delay or
failure in performance of any part of this Agreement because of cause or
circumstance beyond its control such as acts of God; acts of civil or military
authorities; legislative, executive or judicial acts of any governmental
entity; government regulations; embargoes; epidemics; war; terrorist acts;
riots; insurrections; fires; explosions; earthquakes, nuclear accidents,
floods, or other major environmental disturbances; power blackouts; strikes;
or from any other cause of whatsoever kind arising without its actual fault
(collectively referred to as "Force Majeure Conditions"). In the event of a
Force Majeure Condition affecting either party, both parties shall cooperate
as appropriate to perform their obligations under this Agreement.
5. Surviving Obligations: All obligations and duties which by their
nature extend beyond the expiration or termination of this Agreement shall
survive and remain in effect beyond any expiration or termination.
6. Choice of Law: This Agreement is governed by the laws of the State
of New York.
7. Successors Bound: This Agreement shall be binding upon and inure
to the benefit of any successors or assigns of the parties.
8. Agency Orders: All obligations under this Agreement shall be
subject to legislation and to valid and applicable government agency orders,
regulations, tariff provisions, and decisions and orders of courts of
competent jurisdiction.
9. Severability: Both parties expressly agree that it is not the
intention of either party to violate public policy or state or federal
statutory or common laws and that if any sentence, paragraph, clause, or
combination thereof in this Agreement is in violation of the same, such
paragraph, clause, or sentence, or combination of the same shall be
inoperative and the remainder of this Agreement shall remain binding upon the
parties hereto.
10. Headings: The headings in this Agreement are for convenience only
and shall not be construed to define or in any way limit any terms herein.
11. Notice: All notices, requests, or other communications, other than
orders or related communications placed with NYNEX's vendor services group
and/ or Account Team Centers, made under this Agreement shall be made in
writing and shall be deemed to have been duly given when delivered in person
or deposited in the United States Mail, certified or registered, postage
pre-paid and addressed as follows:
If NYNEX
NYNEX
125 High Street, Room 435
Boston, Massachusetts 02110
Attn: Managing Director - NASA
To Representative
Attn:
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or as such addressee or address is changed by written notice to
the other party.
12. Entire Agreement: This Agreement together with the appendices
attached hereto shall constitute the entire Agreement between the parties.
Both parties represent they have read this Agreement, understand it and agree
to be bound by all the terms and conditions stated herein.
COMPUTER TELEPHONE CORP. NEW YORK TELEPHONE COMPANY
NEW ENGLAND TELEPHONE AND
TELEGRAPH COMPANY
By: /s/ Robert Fabbricatore By: /s/ Jerome P. Lovasco
Robert Fabbricatore Jerome P. Lovasco
(Typed Name) (Typed Name)
Title: Chairman Title: Managing Director
Date: 3/14/96 Date: 4/17/96
(Affix Corporate Seal Below)
EXHIBIT 10.7
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
NETWORK SERVICES MARKETING AGREEMENT
THIS AGREEMENT is effective as of 5-1-97, by and between PACIFIC BELL, a
California corporation ("Pacific Bell"), and CTC Communications Corp., a
Massachusetts corporation ("Authorized Sales Representative" or "ASR").
This Agreement replaces any and all previous agreements between Pacific Bell
and ASR with respect to the subject matter contained herein, and any and all
such agreements are hereby terminated.
APPOINTMENT OF ASR
1. Appointment and Responsibility
(a) (i) Pacific Bell hereby appoints ASR as an authorized sales
representative, to market, promote the sale of, and solicit orders for the
Network Services. Pacific Bell reserves the right to appoint other authorized
sales representatives.
(ii) Pacific Bell reserves the right to add to, alter or
subtract from, the Network Services at any time.
(b) ASR accepts this appointment and agrees to exert commercially
reasonable efforts to promote, on Pacific Bell's behalf, certain of Pacific
Bell's Network Services (defined in Exhibit C of this Agreement, "Network
Services and Commissions"), to provide sales support activity, to meet the
volume expectations established in Exhibit D of this Agreement, "Volume
Expectations", and to meet the quality targets established by Pacific Bell.
Results will be measured against the volume expectations on a prorated monthly
basis and any failure to meet such expectations and/or any failure to make any
sales within a consecutive two month period may lead to cancellation of this
Agreement under Section 13(b)(i) below.
(c) ASR agrees:
(i) To act as a single point of contact for customer's
Network Services needs;
(ii) To employ a sufficient sales and service staff physically
located and working in California, in each geographic area being marketed to,
in order to provide adequate marketing coverage for new Network Services
customers;
(iii) To place orders with Pacific Bell's Sales Agency Sales
Support Center ("SSC"), or with any other Pacific Bell designated sales
support center, in a manner consistent with the then current documented
standards, order format, data requirements, method of transmission of orders,
procedures and timeframes, set by the applicable sales support center;
(iv) To only submit orders for Network Services on behalf of
customers who have requested ASR to place orders on their behalf;
1
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
(v) Before requesting information from Pacific Bell about a
customer's account, to provide Pacific Bell with a letter of authorization
signed by the customer authorizing such disclosure;
(vi) To complete a minimum level of training on the Network
Services to be able to fulfill the obligations of this Agreement. This
requirement shall apply to the principal and sales personnel of ASR Pacific
Bell shall determine what constitutes a minimum level of training. ASR
further agrees that if it schedules any training with Pacific Bell, fails to
cancel such training at least three business days prior to the scheduled day,
and fails to attend such training or send an alternate from ASR's company,
Pacific Bell may charge ASR for such training;
(vii) Not to use random or sequential dialers or automatic
dialing and announcing devices ("ADADS") in placing calls to customers;
(viii) To sell Network Services to customers regardless of
whether such customers purchase CPE from ASR;
(ix) Upon notification from Pacific Bell, to put in place and
use designated electronic funds transfer and/or electronic data interchange
capability, and to enter into an agreement with Pacific Bell with respect to
use of such capabilities;
(x) If required by Pacific Bell pursuant to Pacific Bell's
internal rules and practices, to submit to Pacific Bell a Minority, Women, and
Disabled Veteran Business Enterprise subcontracting plan; and
(xi) Upon request from Pacific Bell, to provide Pacific Bell
with the Federal Taxpayer Identification Number and/or, as appropriate, the
Social Security number, for ASR to be used for tax reporting purposes.
(d) If ASR elects to telemarket any of the services listed in Exhibit
C, they must first secure written permission from Pacific. The employees
engaged in telemarketing must be physically located upon ASR's business
premises in California unless authorized in writing in advance by Pacific.
(e) All activities of ASR hereunder shall be in compliance with any
applicable provisions of Pacific Bell's tariffs, sales and customer service
standards. ASR agrees, if ASR provides CPE, it will include in its product
line CPE compatible with the Network Services listed in Exhibit C, in
accordance with such standards as may be prescribed by Pacific Bell and to
employ only such compatible products in connection with the Network Services.
If ASR provides CPE, it must coordinate its installation of CPE for all of
ASR's Network Services customers with installation of any services to be
provided by Pacific Bell, in a manner and within
2
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
installation intervals acceptable to Pacific Bell, and in conformance with any
agreements between ASR and such customers with respect to due date. In
addition, ASR will provide Network Services sales support functions including,
but not limited to: continuing Network Services consulting; regular personal
contacts with ASR's customers; provision to customers of information available
regarding technical, functional and other Network Services developments;
ongoing training for new and existing Network Services features; handling of
requests from its customers for new or changed Network Services; answering
customer billing questions regarding ASR's products and Network Services ASR
has sold to customer; and resolving issues relating to customer's Pacific Bell
Network Services. ASR shall refer all other customer questions on Network
Services, including billing questions, to Pacific Bell. Upon request, ASR
shall provide their account management plans to Pacific in a format specified
by Pacific. ASR will take action as needed to meet customer service
requirements and to ensure that its activities are properly coordinated to
customers' and Pacific Bell's satisfaction.
(f) Any advertising, sales or promotional material of ASR referring to
Pacific Bell's Network Services, Pacific Bell, or Pacific Bell's Sales Agency
Program must be approved in advance in writing by Pacific Bell. If such
approval is not requested or granted before ASR prints items referring to
Pacific Bell's Network Services, Pacific Bell, or Pacific Bell's Sales Agency
Program, then ASR will be liable for all charges associated with re-printing
such items and ASR shall at its expense completely destroy all unauthorized
material. ASR agrees that Pacific Bell shall have the right, at no charge, to
include in advertising by Pacific Bell unlimited reference to ASR as an
Authorized Sales Representative.
(g) Each party agrees that during the term of this Agreement it will
not solicit any employee of the other party to terminate his/her employment to
become an employee of the first party. This provision does not apply to
situations in which an employee of one party initiates contact with the other
party with regard to possible employment.
(h) Pacific Bell reserves the right at its option to market or service
any and all Network Services to customers requesting Network Services from
Pacific Bell. Pacific Bell reserves the right at any time to provide
additional Network Services sales and marketing services with respect to ASR's
Network Services customers and will not pay any commission for such services.
Pacific Bell reserves the right to market CPE in competition with ASR.
(i) ASR agrees at all times to act in a professional and ethical
manner and maintain a level of quality of service to its customers
satisfactory to Pacific Bell in its sole discretion in accordance with
standards established by Pacific Bell and then in effect. Without limiting
the generality of the foregoing, ASR agrees it will not offer customers
rebates or discounts contingent upon the purchase of Network Services, make
misleading statements to customers, give money, gifts or any other
consideration to Pacific Bell's employees, do anything that will dishonor,
discredit, reflect adversely on, or injure the reputation of Pacific Bell, or
create sales that do not provide value to the customer and/or Pacific Bell, or
to manipulate the compensation system. ASR further agrees to comply with
California Public Utilities Commission Decision
3
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
Nos. 86-05-072 (1986) and 90-02-043 (1990) by observing the restrictions which
apply to Pacific Bell employees marketing similar products to similar
customers. ASR will take and permit to be taken by Pacific Bell all actions
reasonably requested in order to ensure adequate opportunity for review of
ASR's performance by Pacific Bell, including, but not limited to, observation
by Pacific Bell of ASR's employees in their performance of the duties and
obligations of this Agreement and periodic review and analysis by Pacific Bell
of the customer service provided by ASR and to maintain, on its premises,
service observation equipment adequate to allow Pacific Bell to assure itself
that all of the rules and requirements of the law and this Agreement are being
complied with. Pacific Bell may conduct periodic sales reviews and account
reviews with ASR's account executives or such other persons designated by ASR
to handle accounts for customers and potential customers of ASR.
(i) Pacific Bell reserves the right to provide to ASR
mutually agreeable scripts to be used in the sale of Network Services, and ASR
agrees to use such scripts.
(k) Pacific Bell reserves the right to alter or amend ASR's
obligations and the commission structure (Exhibit C) hereunder upon sixty days
prior written notice; provided, however, that ASR shall have the right within
sixty days of receipt of notice of such changes to terminate this Agreement.
(l) ASR agrees if Pacific Bell identifies a situation in which ASR's
activities are violating this Agreement and customers are being negatively
impacted by such activities, Pacific Bell may (1) withhold payment of
commission during the investigation of suspect sales or of any other such
violation, and (2) require ASR to cease all activities hereunder. Failure to
cease the activities hereunder as directed by Pacific is cause for immediate
cancellation of this Agreement.
ASR shall work with Pacific Bell to resolve the issues causing Pacific
Bell to impose such requirement(s), and shall not resume activities hereunder
until such issues are resolved.
(m) ASR shall specify, in section 22 of this Agreement, whether, it
elects to market intraLATA services exclusively on behalf of Pacific Bell or
to also market or otherwise promote the intraLATA network services of other
providers. Market exclusively on behalf of Pacific Bell means that the ASR
agrees it will obtain from Pacific Bell and use Pacific Bell's intraLATA
services to meet its intraLATA service requirements, ASR will not use the
intraLATA services of another provider, except in those instances where
Pacific Bell does not provide a similar functional service in which case ASR
may, with Pacific Bell's written consent, and only for so long as Pacific Bell
does not have a similar functional service, use the intraLATA service of
another provider, and ASR will not take any action, in return for compensation
of any type from another provider, which would result in an end user's
intraLATA service being provided in any way using the services of any provider
other than Pacific Bell. Subsections i. and ii. following describe the
characteristics of each alternative.
4
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
(i) If ASR elects to be a non-exclusive ASR, ASR shall
receive payment of commissions on a per unit basis, as described in Exhibit C,
and ASR shall not be permitted to use Pacific Bell's logo, trademarks, and/or
service marks.
(ii) If ASR elects to be an exclusive ASR, ASR shall receive
payment of commissions on a per unit basis, as described in Exhibit C, and ASR
shall be permitted to use Pacific Bell's logo, trademarks, and/or service
marks as provided herein.
(iii) Pacific Bell may, as Pacific Bell deems appropriate, make
available to ASR additional opportunities including, but not limited to:
contests, co-operative advertising, lists of leads for sales of Network
Services, referrals for sales of Network Services, participation in module
management and/or account management programs, and participation in other
similar programs which Pacific Bell may from time to time deem appropriate.
Such opportunities shall be offered solely at Pacific Bell's discretion and
shall be defined by Pacific Bell if and when offered.
(iv) During the effective period of this Agreement, an ASR may
change from non-exclusive to exclusive. Such change shall be prospective
only. This means, but is not limited to, payment of residual commissions will
be made for Network Services sold by ASR after the change, but no residual
commissions will be paid for ASR's base of Network Services in place at the
time the change is made.
2. Information And Material Furnished By Pacific Bell. Pacific Bell shall
supply ASR, from time to time, with a reasonable number of brochures, price
lists and other material necessary for promoting the sale of Network Services,
and with reasonable support for training ASR's personnel. If ASR requires
unusual support or excess services, a charge may be applied for such support
or services. Any portion of the foregoing material for which ASR has been
charged which remains unused at the time Pacific Bell makes changes in any
Network Services when such changes make such material unusable, or upon the
termination or cancellation of this Agreement, except where such termination
or cancellation results from ASR's acts or omissions, may be promptly returned
to Pacific Bell for credit.
PRICES, TERMS OF SALE, COMMISSIONS
3. Prices. The prices and terms and conditions under which Network
Services will be provided by Pacific Bell to customers shall be the prices and
terms and conditions authorized by Pacific Bell's tariff Schedules in effect.
ASR shall not under any circumstances offer any Network Services at prices or
terms and conditions different from those in Pacific Bell's tariff Schedules.
Pacific Bell reserves the right at any time to seek regulatory approval to
change the specifications of any Network Services as shown in tariffs, to
alter or eliminate any Network Services or any aspect thereof, or to change
any Network Service rates.
5
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
4. (a) Orders and Acceptance. All orders entered by ASR from customers
shall be in accordance with subparagraph l(c)(iii). ASR shall determine
availability of Network Services on the basis of information received from
Pacific Bell. All orders shall be subject to the availability of suitable
facilities, which shall be determined in the sole discretion of Pacific Bell.
All orders for Network Services shall be further subject to approval and
acceptance by Pacific Bell. In the event an order submitted by ASR is
rejected, Pacific Bell will supply ASR with a specific and timely reason for
such rejection.
(b) Credit Information. In the event that Pacific Bell has indicated
that it is willing to extend credit to a customer or customers, ASR shall
obtain accurate and appropriate credit information as specified by Pacific
Bell, which it shall forward to Pacific Bell with the order involving the
extension of credit. All extensions of credit must be approved by Pacific
Bell, and Pacific Bell reserves the right to deny credit to any customer.
Pacific Bell further reserves the right to require a deposit and/or advance
payment from any customer in any amount which it, in its sole discretion, will
determine in accordance with applicable tariff provisions. ASR does not
hereby guarantee the credit of any customer, but does warrant that it will use
commercially reasonable efforts to obtain accurate credit information.
(c) Billing. Pacific Bell shall have sole responsibility for billing
customers for Network Services.
5. Commissions
(a) Subject to the restrictions regarding sales of Network Services to
the entities specified in 5(b) below, and provided that ASR has fulfilled its
obligations under this Agreement, for each Network Service sale made by ASR,
Pacific Bell shall pay to ASR the commission provided for in Exhibit C for the
particular Network Service ordered. If the customer terminates its Network
Services within the time period specified in Exhibit C for the specific
Network Services involved, if applicable, any such commission shall be, at
Pacific Bell's choice, refunded to Pacific Bell or deducted from later
commissions otherwise due ASR. After termination or cancellation of this
Agreement, any debit commission balance for ASR shall be paid by ASR to
Pacific Bell within thirty days written notice of such debit commission
status. Until such debit balance is paid to Pacific Bell, ASR will not be
considered for participation in any Pacific Bell channel programs including,
but not limited to, Pacific Bell's Value Solutions Program. Commissions for
subsequent sales of Network Services shall be separately computed as described
in Exhibit C.
6
PROPRIETARY AND Confidential INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
(b) ASR will receive no commissions or residuals for ASR's sales of
Network Services to:
(i) ASR or to affiliates of ASR;
(ii) A Telemanagement Service Company, whether the
Telemanagement Service Company is an ASR, an affiliate of an ASR, or an
unrelated entity. Telemanagement Service Companies, include, but are not
limited to those companies listed in Exhibit B;
(iii) Pacific Bell Value Solutions Program participants;
(iv) Resellers of Pacific Bell services, and
(v) Pacific Bell or its affiliates.
(c) ASR's eligibility for a commission based on a sale of Network
Services accrues as of the date of service order completion. Except as
provided in subparagraph 13(c), amounts due hereunder shall be paid by Pacific
Bell to ASR within thirty working days after ASR's eligibility for such
amounts accrues.
(d) No commission shall be paid to ASR for any orders for Network
Services (i) sold to a customer directly by Pacific Bell, (ii) sold to another
ASR by ASR, or (iii) sold to a customer by any other entity, including another
authorized sales representative.
(e) Pacific Bell shall have the right to set off against any payment
due by it to ASR hereunder any amounts owed to it by ASR hereunder, including,
but not limited to, customer account adjustments, amounts due for advertising,
or amounts due for failure to attend scheduled training or other seminars or
workshops. Pacific Bell shall also have the right to require ASR to pay to
Pacific Bell any amounts owed to Pacific Bell by ASR.
(f) Pacific Bell shall have the right to (1) increase or decrease the
commission rates and residual commission rates applicable to sales made after
the effective date of the change, and (2) substantially alter the structure of
its payment plans, including, but not limited to paying commissions over time.
Such changes will be effective as set forth above in Section 1(k). ASR shall
have the right within sixty days of receipt of notice of such change to
terminate this Agreement.
(g) ASR shall have one year from the date of completion of a service
order in which to claim payment for such sale of Network Services. Pacific
Bell shall have no obligation to make payments beyond such one year period.
7
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
(h) For Network Services sales for customers using the Education First
promotional tariff, ASR will not receive commissions or residuals, if
applicable.
6. Confidentiality
(a) All information relating to either party's customers and business,
including but not limited to the terms and conditions of this Agreement, and
all information that is marked confidential or is designated as confidential
when disclosed, which is disclosed by either party to the other pursuant to
this Agreement, other than such information as may be generally available to
the public or the industry, is and will be disclosed in confidence solely for
use in the conduct of business hereunder Nothing contained herein shall grant
either party any right, title, or interest to any information provided by the
other party hereunder. Each party agrees to keep such information secret and
confidential and not to disclose it to any other person or use it during the
term of this Agreement or after its termination or cancellation except in
carrying out its obligations hereunder or in response to obligations imposed
by tariff or order of a court or regulatory body.
(b) Each party shall take effective precautions,.contractual and
otherwise, reasonably calculated to prevent unauthorized disclosure or misuse
of such information by any of its employees or by any other person having
access to such information.
(c) Within ninety days after the termination or cancellation of this
Agreement, by either party and for any reason, each party shall notify the
other which specific information disclosed by it pursuant to this Agreement is
to be returned. Each party agrees promptly to return to the other any
physical or written records containing such specifically identified
information then in its possession, regardless of whether such physical or
written records were prepared by ASR or by Pacific Bell. The duty to keep
information confidential shall continue notwithstanding the termination or
cancellation of this Agreement. Upon the termination or cancellation of this
Agreement, all confidential information in tangible form provided to ASR by
Pacific Bell shall be returned to Pacific Bell.
(d) or a period of ninety days after the date of termination or
cancellation of this Agreement, ASR agrees that it will not market the
intraLATA network services of any other provider to any customers- I) to whom
they sold a Pacific Bell Network Service; 2) to whom they made a written
proposal, or presented a proposal in person, which included a Pacific Bell
Network Service, or 3) for which ASR received any customer information or
compensation under this Agreement.
8
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
7. Trademarks and Trade Names
(a) ASR shall not be deemed by anything contained in this Agreement or
done pursuant to it to acquire any right, title or interest in or to the use
of the name "Bell", the Bell symbol, nor in or to any other trademark or
service-mark now or hereafter owned by Pacific Bell or Pacific Telesis Group
("PTG") or any affiliate thereof. ASR shall not use in its business or trade
or corporate name the names "Bell", "Telesis" or the Bell or Telesis symbol,
nor shall it use any trademark or service-mark owned by Pacific Bell or PTG,
or adopt or use any similar mark or symbol without the express written consent
of Pacific Bell or PTG, except that, subject to Pacific Bell's right to review
and forbid any such use from time to time, ASR may, during the term of this
Agreement or until ASR is notified to the contrary by Pacific Bell, use such
names, trademarks and service-marks in its advertising, as provided in
subparagraph l(f), and in its promotion of Network Services. Any such use of
such names, trademarks, and service-marks must be pre-approved in writing by
Pacific Bell. Such use of such names, trademarks and service-marks is
permitted hereunder solely for purposes of promoting Pacific Bell's Network
Services, and such names, trademarks and service-marks may not, in any
instance, be used to promote the services of any other provider. ASR agrees
that it will comply with any standards for usage of such names, trademarks and
service-marks issued or to be issued by Pacific Bell or PTG. Immediately upon
termination or cancellation of this Agreement, ASR will destroy or turn over
to Pacific Bell any materials using any trademark or service-mark of Pacific
Bell or PTG, unless Pacific Bell or PTG has consented to such use pursuant to
a separate agreement.
(b) Except as otherwise stated in subparagraph 1 (f), Pacific Bell
shall not be deemed by anything contained in this Agreement or done pursuant
to it to acquire any right, title or interest in or to the use of ASR's name,
trademarks and service-marks. Subject to ASR's right to review and forbid any
such use from time to time, Pacific Bell may, during the term of this
Agreement or until Pacific Bell is notified to the contrary by ASR, use such
names, trademarks and service-marks in its advertising. Pacific Bell agrees
that it will comply with any standards for usage of such names, trademarks and
service-marks issued or to be issued by ASR. Immediately upon termination or
cancellation of this Agreement, Pacific Bell will destroy or turn over to ASR
any materials using any trademark or service-mark of ASR, unless ASR has
consented to such use pursuant to a separate agreement.
(c) Pacific Bell may withhold payment of commissions if, and for so
long as, ASR fails to comply with this paragraph 7 and standards provided to
ASR pursuant thereto, with respect to use of any names, trademarks, or
service-marks as specified in this paragraph 7.
8. Invention and Patent Rights. Neither party shall be deemed by anything
contained in this Agreement or done pursuant to it to acquire any right, title
or interest in or to any design, invention, improvement, process or system now
or hereafter embodied in any services or products provided by the other party,
whether or not such design, invention, improvement, process or system is
patented or patentable under the laws of any country.
9
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
9. Relationship of Parties
(a) Pacific Bell agrees at all times to act in a professional and
ethical manner. Pacific Bell agrees that it will not do anything that will
dishonor, discredit, reflect adversely on, or injure the reputation of ASR.
(b) The relationship between the parties established by this Agreement
is that of independent contractors. Neither is an agent or employee of the
other and, neither has any right or any authority to enter into any contract
or undertaking in the name of or for the account of the other, or to assume or
create any obligation of any kind, express or implied, on behalf of the other,
nor shall the acts or omissions of either create any liability for the other.
ASR shall conduct its business at its own initiative, responsibility and
expense.
(c) Notwithstanding the foregoing, when Pacific Bell confirms customer
eligibility for Network Services, ASR shall be considered the agent of Pacific
Bell for the purposes of receiving and safeguarding such eligibility
information. "Receiving" shall mean to take possession of eligibility
information. "Safeguarding" shall mean the obligation to take all reasonable
steps to ensure against the unauthorized release or use of eligibility
information. ASR shall receive and use such eligibility information for the
sole purpose of marketing the Network Services. The terms and conditions of
Section 6 shall also apply to the provision of this eligibility information.
10. Records and Audits. Each party shall maintain records of all sales made
pursuant to this Agreement. All such records and all other records pertaining
to its performance under this Agreement shall be retained by each party for a
reasonable period of time, for at least three years from the date of final
payment by Pacific Bell for services rendered under this Agreement. Each
party and its authorized agents and representatives shall have access to such
records of the other party for purposes of audit during normal business hours
during the term of this Agreement and for three years from the date of final
payment. A party shall notify the other party in writing at least seven days
before it intends to conduct such an audit.
11. (a) Indemnification. Each party agrees to indemnify and hold the
other party harmless from any and all claims, actions, damages, expenses and
other liabilities, including reasonable attorneys' fees and costs, resulting
from the first party's acts, omissions or misrepresentations, from any defect
or failure of any kind in any product or service provided by the first party,
or from infringement by the first party of any copyright, trademark, service
mark, trade name or similar proprietary rights.
(b) Exclusion of Damages. In no event shall either party be liable to
the other for consequential, indirect, special or incidental damages resulting
from breach of this Agreement even if such party had been advised of the
possibility of such potential loss or damage.
10
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
12. Insurance. Without limiting the obligation to indemnify undersection
11, each party shall maintain sufficient liability insurance, or provide a
certificate of self-insurance, to protect themselves and the other party from
any and all claims, demands, expenses, costs and other liabilities arising out
of their acts, omissions and/or misrepresentations. ASR shall provide a copy
of such insurance to Pacific upon request.
TERM AND TERMINATION; CANCELLATION
13. (a) Term and Termination. The term of this Agreement shall commence
as of the effective date written above, and shall continue:
(i) for ASRs, who have not participated for three full years
in Pacific's ASR program, through December 31 of the year in which this
Agreement is signed;
(ii) for ASRs, who have participated for three full years in
Pacific's ASR program, until otherwise terminated or cancelled as provided
herein; or
(iii) until either party provides written notice of
termination. Such notice shall be effective sixty days from the date of
mailing. This Agreement may also be terminated or cancelled in accordance
with the provisions hereof.
(b) Cancellation. This Agreement may be cancelled by one party
immediately upon the giving of notice of any of the following events:
(i) if the other party fails to perform or to observe, or
commits a breach of any section, provision or covenant of this Agreement,
including, but not limited to, the volume expectations set forth in Exhibit D,
and the quality targets established by Pacific Bell, and fails to cure such
breach or failure to perform within thirty days, or such lesser period as
Pacific Bell may require because of legal, business, or regulatory
restrictions applicable to Pacific Bell, following delivery to such defaulting
party of a written notice of the alleged breach; provided, however, that if
the breach is a violation by an ASR of any legal or regulatory restriction,
policies, rules, orders, or other requirements, such as, but not limited to,
placing orders for customers who have not requested service, misrepresentation
of Pacific Bell, our Network Services or the Sales Agency program, charging
customers for or accepting fees for adjustments to which the customers are
entitled, misrepresentation of ASR's relationship with Pacific Bell, actions
which dishonor, discredit, reflect adversely on or injure the reputation of
Pacific Bell, or is a breach of section l(e), 1 (i) or 7 of this Agreement,
Pacific Bell may cancel this Agreement immediately without providing a period
to cure such breach. If the cause of a breach or failure to perform is an act
of God, fire or other casualty, strike, material shortages or other cause
similar or dissimilar to the foregoing that is beyond the control of the
defaulting party, the period for remedying such breach or failure to perform
shall be extended by the time measured by any such cause of delay and for a
reasonable time thereafter, and the defaulting
11
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/l/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
party shall not be liable for damages to the other party to the extent they
result from such cause; or
(ii) if the other party becomes insolvent or makes an
assignment for the benefit of its creditors, or if a committee of creditors or
other representative is appointed to represent its business, or if a voluntary
or involuntary petition under any section of a bankruptcy or similar act shall
be filed by or against such other party and that party fails within thirty
days following the appointment of such committee or representative or the
filing of any such involuntary petition to cause the discharge of such
committee or representative or the dismissal of such involuntary petition.
(iii) In accordance with Section 17 below, no delay by either
party in sending any notice specified in (i) or (ii) of this subparagraph
shall constitute a waiver of its rights to terminate or cancel this Agreement.
(iv) Without waiving any of its rights under this Agreement,
Pacific Bell may do any of the following short of cancellation if ASR violates
any of the terms of this Agreement: at its sole discretion, (1) withhold or
cease paying residual commission payments, and (2) prohibit ASR from using
Pacific's logos, trademarks, and service marks, and from participation in any
additional opportunities including, but not limited to, contests, co-operative
advertising, lists of leads for sales of Network Services, referrals for sales
of Network Services, participation in module management and/or account
management programs, and participation in other similar programs, until such
time as the violation(s) of this Agreement are cured.
(c) (i) Subject to Pacific Bell's right of counterclaim or
setoff, ASR shall be entitled to commissions earned by it under paragraph 5
based only on sales of Network Services, including adds, for which the ASR
placed an order with Pacific Bell prior to the termination or cancellation of
this Agreement. Any commissions owed and outstanding at the time of
termination or cancellation of this Agreement shall be paid to ASR by Pacific
Bell within six months following the date of termination or cancellation. No
commissions will be due on any Network Services ordered from Pacific Bell
after termination or cancellation.
(ii) If ASR has earned residual commissions, and if this
Agreement is terminated or cancelled by Pacific Bell or is not renewed by
Pacific Bell at the end of the term for reasons other than those specified in
section 13 (b)(i), Pacific Bell will, subject to the other provisions of this
Agreement, pay to ASR the residual commissions earned by ASR prior to
termination or cancellation for a period of three months following the
termination or cancellation of this Agreement; provided, however, that if ASR
represents itself during the three month period as an ASR of Pacific Bell,
such residual commissions will cease immediately.
(d) In particular, but not by way of limitation, no such termination
or cancellation shall affect the post-agreement rights and obligations of the
parties contained in paragraphs 5, 6, 7, 9, 10, and 11.
12
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
(e) The parties agree that any termination or cancellation of this
Agreement according to the formalities specified herein shall not constitute
an unfair or abusive termination or cancellation or create any liability not
set forth in this Agreement.
(f) The right of either party to terminate or cancel this Agreement is
not an exclusive remedy, and either of them shall be entitled, alternatively
or cumulatively, to remedies as determined pursuant to paragraph 18 of this
Agreement.
(g) Upon termination or cancellation, Pacific Bell may designate, with
respect to each of ASR's customers, another of Pacific Bell's Network Services
authorized sales representatives or Pacific Bell itself to act as a successor
to ASR in providing Network Services to such customer
(h) ASR recognizes that volume expectations will generally be
negotiated on a calendar year basis, that exceptions to this include but are
not limited to additions of products, deletions of products, and changes in
the competitive environment, and that new commission structures for subsequent
years, and any changes thereto, will become part of this Agreement.
14. Assignment and Subcontracting
a) Assignment. ASR acknowledges that it has been specifically
selected to participate in Pacific Bell's Sales Agency Program after careful
evaluation by Pacific Bell of ASR's financial stability, product line and
reputation in the business community, as well as the individual abilities and
reputation of ASR's management and sales force. Accordingly, the parties
agree that neither this Agreement, nor any right or obligation hereunder is
assignable, in whole or in part, whether by operation of law or otherwise, by
ASR without the prior written consent of Pacific. Changes of the form in
which ASR does business (including but not limited to sole proprietorships,
partnerships, LLPs, and corporations, and changes due to mergers or being
acquired), shall be considered to be assignments which will require the prior
written consent of Pacific and requalification of ASR in its new form under
the then existing qualification requirements. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties
hereto, their successors and assigns. If ASR assigns the Agreement pursuant
to this provision, the existing Agreement shall be terminated and a new
Agreement shall be entered into with ASR's assignee.
b) Subcontracting. ASR agrees that it will not subcontract or
attempt to subcontract any of its duties or obligations hereunder without the
prior written consent of Pacific Bell.
13
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
15. Affiliates. For the purposes of this Agreement, an "affiliate" of any
entity shall respectively mean:
for Pacific Bell:
a) any corporation or business entity in which Pacific Telesis or
any subsidiary of Pacific Telesis, any successor corporation to Pacific
Telesis or any subsidiary of such successor, or any corporation of which
Pacific Telesis becomes a wholly owned subsidiary or any subsidiary of such
corporation, has any ownership interest; and
for ASR:
b) any corporation or business entity in which ASR has any
ownership or potential ownership in any form or from which ASR receives or has
the option to receive any profits generated by such corporation or business
entity.
Upon request, each party shall provide the other party with a list of their
affiliates.
16. Notices and Other Communications. Every notice, consent, approval or
other communication required or contemplated by this Agreement by either party
shall be in writing and shall be delivered in person, by postage prepaid mail,
by overnight courier service, by facsimile or by electronic messaging
addressed to the party for whom intended at the address specified below or at
such other address as the intended recipient previously shall have designated
by written notice to the other party; provided, however, that any notices with
respect to ASR's status as such may not be given by electronic messaging.
Where specifically required, notices shall be by certified or registered mail.
Unless otherwise provided in this Agreement, notice by mail shall be effective
on the date it is officially recorded as delivered by return receipt or
equivalent, and, in the absence of such record of delivery, it shall be
presumed to have been delivered the fifth day, or next business day
thereafter, after it was deposited in the mails. Notice given by overnight
courier service shall be effective on the date it is recorded by such courier
service as delivered. Notice given by facsimile shall be effective on the
date noted on the facsimile log as the date sent. Notice given by electronic
messaging shall be effective on the date sent, as indicated by the electronic
messaging system. Except for notice given by electronic messaging, notice not
given in writing shall be effective only if acknowledged in writing by a duly
authorized officer of the party to whom it was given.
To: ASR: To: Pacific Bell:
1010 Wilshire Blvd. W420A
Los Angeles, CA 90017
Attn: Attn: Sales Director, Sales Agency
17. No Waiver of Rights. Failure of either party at any time to require the
other party's performance of any obligation under this Agreement shall not
affect the right to require performance of that obligation. Any waiver by
either party of any breach of any provision hereof shall not be construed as a
waiver of any continuing or succeeding breach of such provision, a
14
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
waiver or modification of the provision itself, or a waiver or modification of
any right under this Agreement.
18. Dispute Resolution
(a) If a dispute arises out of or relates to this Agreement, and if
such dispute cannot be settled through negotiation, the parties agree first to
try in good faith to settle the dispute by mediation under the commercial
Mediation Rules of the American Arbitration Association, before resorting to
arbitration, litigation, or some other dispute resolution procedure.
(b) If the parties cannot resolve the dispute by mediation as
discussed in paragraph a. above, any controversy or claim arising out of or
relating to this Agreement shall be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
(c) Nothing in paragraphs (a) and (b) above shall prevent the parties
from mutually agreeing to use an alternative means to resolve the dispute,
such as a "mini-trial" or other procedure, whether or not it is sponsored by
the American Arbitration Association. However, if the parties cannot mutually
agree to such an alternative procedure, the proceeding paragraphs are binding.
(d) If either party institutes suit or arbitration to enforce or
interpret this Agreement, the prevailing party in any such proceeding shall be
entitled to recover from the losing party its costs, including reasonable
attorneys' fees.
19. Governing Law and Regulatory Changes
(a) Governing Law. This Agreement will be governed by and construed
in accordance with the Laws of California, excluding its rules governing
conflict of laws. If any provision of this Agreement is not valid, it will
not affect other provisions and the parties agree that, if that invalidity
reveals a situation not provided for by this Agreement, they will jointly seek
an agreement having a valid legal and economic effect as similar as possible
to the ineffective provision and covering the scope of any missing provision
in a manner reasonably directed to the purpose of this Agreement.
(b) Regulatory Changes. This Agreement shall at all times be subject
to such changes or modifications by the Public Utilities Commission of the
State of California as said Commission may from time to time direct in the
exercise of its jurisdiction. Pacific Bell reserves the right to amend or
terminate this Agreement to conform it to any requirement of applicable laws
or regulations or to any requirement imposed by the California Public
Utilities Commission or the Federal Communications Commission in the exercise
of their jurisdiction over Pacific Bell, or to any requirement of the United
States Department of Justice or the federal courts in
15
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
connection with that certain consent decree entered in Civil Action No.
82-0192 in the U.S. District Court for the District of Columbia. ASR shall
have the right within sixty days of receipt of notice of any amendments made
pursuant to this Section 19 to terminate this Agreement.
20. Discontinuance of Program. Pacific Bell reserves the right, on six
months' notice to ASR, to discontinue its Sales Agency Program as to all its
authorized sales representatives on a prospective basis.
21. Compliance with Laws
(a) Each party will comply with any and all applicable tariffs, rules
and orders of judicial and regulatory bodies, and local, state, and federal
laws, including specifically, but not limited to, laws, rules and orders
relating to monitoring of employees' telephone conversations with customers,
and shall defend, indemnify and hold the other party harmless from and against
any and all loss, cost, damage or liability, including but not limited to
reasonable attorneys fees and costs, arising from or in connection with any
failure of the first party to so comply.
(b) If any work to be performed by ASR under this Agreement is at
variance with any law, ordinance, order, regulation, or safety or health
standards, ASR shall properly notify Pacific Bell before performance of the
work.
(c) ASR will be responsible for obtaining, at its own expense, any
applicable permits, licenses, bond, or other necessary legal authorization for
work it is to perform.
(d) ASR expressly agrees not to discriminate against any employee or
applicant because of race, color, religion, age, sex, national origin or
physical handicap during the performance of this Agreement and to comply with
the applicable provisions of Exhibit A (Nondiscrimination Compliance
Requirements), incorporated herein and made a part of this Agreement. As used
in Exhibit A, "Contractor" shall refer to ASR. ASR agrees to submit to
Pacific Bell, on Pacific Bell's request, a statement that it is in compliance
with this subsection.
22. ELECTION. ASR ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD THE
PROVISIONS OF SUBSECTIONS 1.(m)(i) AND (ii) AND HEREBY MAKES AN ELECTION AS
REQUIRED IN THOSE SUBSECTIONS BY INDICATING BELOW, WITH INITIALS, ITS CHOICE.
(X) EXCLUSIVE ASR. ASR ELECTS TO MARKET OR
OTHERWISE PROMOTE EXCLUSIVELY THE INTRALATA
NETWORK SERVICES OF PACIFIC BELL, TO OBTAIN
FROM PACIFIC BELL AND USE PACIFIC BELL'S
INTRALATA SERVICES TO MEET ASR'S INTRALATA
SERVICE REQUIREMENTS, AND TO RECEIVE THE
16
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific BelL
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
COMPENSATION AND OPPORTUNITIES DESCRIBED IN
SUBSECTION l.(m)(ii) ABOVE.
(X) NON-EXCLUSIVE ASR. ASR ELECTS NOT TO MARKET OR
OTHERWISE PROMOTE EXCLUSIVITY THE INTRALATA
NETWORK SERVICES OF PACIFIC BELL, AND/OR EXCEPT
AS PERMITTED HEREUNDER TO USE THE INTRALATA
SERVICES OF ANOTHER PROVIDER AND TO RECEIVE
THE COMPENSATION DESCRIBED IN SUBSECTION l.(m)(i)
ABOVE.
23. Modification. No modification or amendment of this Agreement shall be
valid or binding on the parties unless such modification or amendment is made
by Pacific Bell in accordance with sections l (k), 5.(g), or 19 hereof or is
in writing and duly executed by the authorized representative of each party.
24. Entire Agreement. This Agreement sets forth the entire understanding
and supersedes prior agreements between the parties relating to the subject
matter contained herein and merges all prior discussions between them.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PACIFIC BELL CTC COMMUNICATIONS
By: /s/ Hilary Nickerson By: /s/ Tom Fabbricatore
Hilary Nickerson Tom Fabbricatore
_________________________ _________________________
(Print Name) (Print Name)
Title: Sales Director Title: Vice President
Date Signed: 5-2-97 Date Signed: 4-29-97
ASR Federal Taxpayer
ID No.: 04 2731202
17
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97<PAGE>
<PAGE>
PACIFIC BELL PROPRIETARY AND CONFIDENTIAL
Exhibit B
Telemanagement Service Companies
Telemanagement Service Companies, include but are not limited to the
following:
Access America Telemanagement
Integrated Telemanagement Systems
Telecom Management Systems, Inc.
PROPRIETARY AND CONFIDENTIAL INFORMATION
Not for use or disclosure outside Pacific Bell and ASR
except under written agreement approved in writing by Pacific Bell.
ASR1997_.DOC 3/1/97
EXHIBIT 10.8
MARKETING AGREEMENT
BETWEEN
SNET AMERICA, INC.
AND
COMPUTER TELEPHONE CORPORATION
PROPRIETARY INFORMATION
96 SAI/AGCY July 9, 1996
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TABLE OF CONTENTS
Section Page
1.1 Definitions 4
1.2 Scope; Appointment of Agent 4
1.3 Agent's Responsibilities 5-6
1.4 SNET's Responsibilities 6-7
1.5 Governing Law 7
1.6 Confidentiality and Protection of Information 8-10
1.7 Estimates and Forecasts 10
1.8 Term and Termination 10-13
1.9 Indemnification 13
1.10 Limitation on Liability 14
1.11 Insurance 14
1.12 Limitations Period 14
1.13 Responsibilities of Each Party 15
1.14 Force Majeure 15
1.15 Governmental Compliance 15-16
1.16 Certain State and Local Taxes 16
1.17 Publicity and Filings 16
1.18 Amendments; Waivers 16-17
1.19 Notices 17
1.20 No Rights to Third Parties 17
1.21 Severability 17
1.22 Delegation and Assignment 17-18
1.23 Entire Agreement; Survival of Terms 18
1.24 Executed in Counterparts 18
i.25 Table of Contents and Headings 18
1.26 Audits 19
1.27 Advertising, Promotion, and Use of SNET's Name
and Trademarks 19-20
1.28 Agent Reviews 20
1.29 Sales Reports 20
1.30 Compensation; Payment 20-22
1.31 Agent Training, New Sales Personnel 22-23
1.32 Agreement to Terms 23
1.33 Sales Plan 23-24
1.34 Refunds 24
1.35 Customer Information 24
Attachment A - The Services and Fee Schedule
Attachment B - Letter of Authorization
Attachment C - Non-Agent Accounts
Attachment D - Support Services and Applicable Fees
Attachment E - Sales Report
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96 SAI/AGCY July 9, 1996
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MARKETING AGREEMENT
BETWEEN
SNET AMERICA, INC.
AND
This Agreement (Agreement) is entered as of the 1st day of January, 1996
by and between SNET America, Inc., a Connecticut corporation having its
principal place of business at 127 Washington Avenue, North Haven, Connecticut
06473 (SNET), and Computer Telephone Corporation, a Massachusetts corporation
having its . principal place of business at 360 Second Avenue, Waltham, MA
02154 (Agent) (collectively referred to herein as the Parties).
RECITALS
WHEREAS, SNET is in the business of providing domestic and international
telecommunications services; and
WHEREAS, Agent is engaged in the marketing and sale of
telecommunications products and services; and
WHEREAS, SNET and Agent agree that it is ln their mutual best interest
that Agent market and provide marketing related services for certain of SNET's
telecommunications services as more fully set forth herein;
NOW THEREFORE, SNET and Agent agree as follows:
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96 SAI/AGCY July 9, 1996
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1.1 DEFINITIONS
The following definitions shall apply for all Articles and Sections of
this Agreement:
1.1.1 "Affiliate" means (i) an entity having an ownership interest in a
Party of 50% or more; or (ii) an entity in which a Party has an ownership
interest of 50% or more; or (iii) an entity having more than 50% ownership
interest in an Affiliate as defined in (i) or (ii); or (iv) an entity in which
an Affiliate as defined in (i) or (ii) has an ownership interest of 50% or
more.
1.1.2 "Customer" means those business customers that purchase the
Services from Agent.
1.1.3 "Information" means any writing, drawing, sketch, model, sample,
data, computer program, software, recording, customer lists, account plans,
market data, or other documentation of any kind.
1.1.4 "Marketing", including the various verb forms thereof, means
performing sales functions and related sales support functions, but excludes
strategic planning functions and responses to billing inquiries.
1.1.5 "Services", also referred to as SNET Services", means those
domestic and international telecommunications services provided by SNET that
are listed on Attachment A, "The Services and Fee Schedule", attached hereto
and incorporated herein by reference, and any additions thereto. SNET
reserves the right to add Services to, or delete Services from, the list on
Attachment A, in its sole discretion, on written notice to Agent.
1.2 SCOPE; APPOINTMENT OF AGENT
1.2.1 SNET hereby appoints Agent, and Agent hereby accepts appointment,
as an Agent of SNET for Marketing the Services to Customers, upon the terms
and subject to the conditions set forth in this Agreement.
1.2.2 Notwithstanding any other provision of this Agreement, it is
understood that SNET may appoint any other agent to perform similar services
to those undertaken by Agent under this Agreement, and expressly reserves the
right to sell directly or through one or more of its Affiliates to customers
as it may deem appropriate .
1.2.3 During the term of this agreement the Agent agrees not to market
the directly competitive services of any other carrier, reseller, or other
business offering such services in lieu of the Services unless such carrier,
reseller, or other business is an affiliate of SNET.
PROPRIETARY INFORMATION
July 11, 1996
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1.3 AGENT'S RESPONSIBILITIES
1.3.1 Agent shall use its best efforts to promote and sell the Services
to Customers in accordance with the Sales Plan developed pursuant to Section
1.33 hereof.
1.3.2 Agent's Marketing responsibilities shall include proposing the
Services to Customers, making sales presentations and giving demonstrations as
appropriate, negotiating sales with Customers consistent with Section 1.32
hereof, negotiating sales orders and placing accurate and complete orders with
SNET in accordance with SNET's standard format, responding promptly to any
Customer requests or complaints relative to installation and maintenance for
such Services, providing any required training for Customers in use of the
Services sold, and timely processing of termination of Service orders.
Billing questions from Customers shall be referred promptly to designated SNET
personnel. In all cases sales proposals shall be developed, with
documentation, and made in the best interests of Customers and SNET's positive
relationship with Customers. Agent shall use its best efforts at all times to
propose the best long term solutions for Customers, and avoid unnecessary
Service chum and the associated Customer inconvenience.
1.3.3 Agent shall maintain records of all agreements, orders and
transactions for sales, terminations, Customer disputes, and any other
transactions hereunder, including without limitation copies of all sales
proposals and supporting documentation and any written communications with
Customers, for a minimum period of two (2) years after the creation or receipt
of such records. Agent shall provide such records to SNET at SNET's request.
1.3.4 Agent shall obtain a Letter of Authorization (LOA) generally in
the form set forth in Attachment B "Letter of Authorization", attached hereto
and incorporated herein by reference, from each Customer and submit such LOA
to SNET at order placement. SNET shall not accept any orders without such
LOA.
1.3.5 During the term of this Agreement, Agent shall maintain in good
standing Marketing Agreement with The Southern New England Telephone Company
for the marketing of The Southern New England Telephone Company's intrastate
telecommunications services. SNET reserves the right to terminate this
Agreement in the event Agent does not maintain in good standing such Marketing
Agreement or in the event such Marketing Agreement is terminated, for any
reason, with The Southern New England Telephone Company.
1.3.6 During the term of this Agreement, Agent shall not Market the
Services to those entities listed in Attachment C, "Non-Agent Accounts",
attached hereto and incorporated herein by reference.
1.3.7 Agent shall identify a management level employee as its point of
contact for implementation of this Agreement whose responsibilities shall
include, but not be limited to, working with SNET for development and
negotiation of the Sales Plan in accordance with
PROPRIETARY INFORMATION
July 11, 1996
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1.3.6 During the term of this Agreement, Agent shall not Market the
Services to those entities listed in Attachment C, "Non-Agent Accounts",
attached hereto and incorporated herein by reference
1.3.7 Agent shall identify a management level employee as its point of
contact for implementation of this Agreement whose responsibilities shall
include, but not be limited to, working with SNET for development and
negotiation of the Sales Plan in accordance with Section 1.33 hereof~.
participating in Agent Reviews, arranging for training of Agent's employees
receiving and distributing product and promotional materials to Agent's sales
personnel arranging for support such as network analysis, and other general
coordination activities relating to its performance hereunder
1.3.8 Except as man t)e otherwise agreed in writing, Agent shall provide
SNET with a list of its employees with assigned responsibility for the sale or
support of the Services and notify SNET of any additions, deletions, or other
modifications within thirty (30) days after such change.
1.3.9 Agent shall. upon instruction from SNET and at SNET's sole
discretion, confirm orders for the Services only via a written authorization
form. Such form shall contain the signature of an authorized Customer
representative, the name of the Agent salesperson, the date of sale, the
applicable rates and charges and such other information as SNET may require.
1.3.10 Agent's personnel with assigned responsibility for Marketing the
Services shall successfully complete such training as SNET shall deem
necessary prior to Marketing the Services, including but not limited to
Initial Training and any Subsequent Training as described in Attachment D
"Agent Support Services and Applicable Fees", attached hereto and incorporated
herein by reference.
1.4 SNET'S RESPONSIBILITIES
1.4.1 SNET shall provide Agent with order processing, tariff and sales
support, and promotional materials and related procedures for the Services.
1.4.2 SNET shall make available to Agent the training specified in
Attachment D at the fees set forth therein. Such training shall enable
Agent's sales personnel to perform all required Customer training for sales
made by Agent under this Agreement.
PROPRIETARY INFORMATION
96 SAI/AGCY July 9, 1996
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<PAGE>
1.4.3 At Agent's request, subject to the availability of equipment and
personnel, SNET shall perform network studies and assist in making Customer
specific written sales recommendations at no charge to Agent, so long as Agent
is meeting or exceeding its sales quotas set forth in the Sales Plan developed
pursuant to Section 1.33 hereof. In the event Agent is not meeting or
exceeding its sales quotas, SNET reserves the right to charge Agent for such
studies and assistance at the rates set forth in Attachment D.
1.4.4 At Agent's request, SNET shall design and price specific networks
for individual Customer proposals at no charge to Agent, so long as Agent is
meeting or exceeding its sales quotas set forth in the Sales Plan developed
pursuant to Section 1 33 hereof. In the event Agent is not meeting or
exceeding its sales quotas, SNET reserves the right to charge Agent for such
design and pricing at the rates set forth in Attachment D.
1.4.5 SNET shall provide at no charge to Agent a reasonable number of
promotional and product specific brochures and other sales materials for
Agent's use in Marketing the Services.
1.4.6 SNET, or its subcontractor, shall perform all Customer billing and
collection functions according to its standard procedures applicable to such
functions, including responses to billing queries from Customers. Agent shall
respond promptly to SNET and work cooperatively with SNET to satisfy any
Customer questions or concerns.
1.4.7 SNET shall accept and process Agent s orders submitted in standard
format, and shall install the Services as ordered and maintain such Services
in accordance with its standard intervals applicable to installation and
maintenance. Exceptional treatment may be negotiated, at SNET's sole
discretion, for individual Customers where business conditions allow.
1.4.8 SNET shall designate a management employee who shall be Agent's
point of contact for implementation of this Agreement including, but not
limited to, matters relating to the Sales Plan developed pursuant to Section
1.33 hereof, training, ordering, Customer issues, billing questions, and other
provisions of support by SNET under this Agreement.
1.4.9 Services to be provided by SNET under the terms of this Agreement
shall be provided in accordance with the applicable SNET Tariffs in effect
from time to time.
PROPRIETARY INFORMATION
96 SAI/AGCY July 9, 1996
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1.5 GOVERNING LAW
This Agreement shall bc deemed to be a contract made under the laws of
the State of Connecticut, and the construction, interpretation, and
performance of this Agreement shall be governed by the laws of such State.
PROPRIETARY INFORMATION
96 SAI/AGCY July 9, 1996
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1.6 CONFIDENTIALITY AND PROTECTION OF INFORMATION
1.6.1 Any Information that is furnished, made available, or otherwise
disclosed by one Party (Disclosing Party) to the other Party (Receiving Party)
in consequence of the existence of this Agreement, shall be deemed and remain
the property of the Disclosing Party.
1.6.2 Unless Information was previously known to the Receiving Party
free of any obligation to keep it confidential, or has been or is subsequently
made public by any act not attributable .o the Receiving Party, or has been
agreed by the Disclosing Party in writing not to be regarded as confidential,
and if the Information is marked as "confidential" or "proprietary by an
appropriate stamp, mark or label thereon, or, if orally disclosed, summarized
in writing by the Disclosing Party, stamped or marked as "confidential" or
"proprietary' and delivered to the Receiving Party within ten (10) business
days after such disclosure, it shall be deemed Proprietary Information of the
Disclosing Party and shall be held in confidence by the Receiving Party, and
shall be disclosed by the Receiving Party only to those of its employees who
have a need for such Proprietary Information to carry out this Agreement;
provided, however, that all Customer information, including without
limitation, Customer lists, Customer call detail or Customer network
information provided by SNET to Agent hereunder shall be deemed Proprietary
Information of SNET for all purposes whether or not it is marked as
"confidential" or "proprietary". Except as the Parties may otherwise agree in
writing, Proprietary Information (a) shall be used only for the purpose of
performing under this Agreement; (b) shall not be reproduced or copied, in
whole or in part, except as necessary for use as authorized herein; and (c)
shall, together with any copies thereof, be returned when no longer needed or
upon termination of this Agreement, whichever occurs~first; provided, however,
that in lieu of returning Proprietary Information, the Receiving Party may
certify in writing to the Disclosing Party that the Proprietary Information,
along with any copies thereof, has been destroyed.
1.6.3 Except as other vise provided in Section 1.6.4 hereof, Proprietary
Information may be provided to third parties only upon written authorization
of the Disclosing Party. p Any third party to whom Proprietary Information is
provided pursuant to such authorization of the Disclosing Party must agree in
writing (a copy of which writing shall be furnished to the Disclosing Party at
its request) to the conditions respecting use of Proprietary Information
contained in Sections 1.6.1, 1.6.2, 1.6.4, and 1.6.5 of this Agreement.
PROPRIETARY INFORMATION
96 SAI/AGCY July 9, 1996
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1.6.4 The Receiving Party shall give prompt notice to the Disclosing
Party of any demand by any third party to provide Proprietary Information
under lawful process prior to furnishing Proprietary Information, and shall
cooperate in seeking reasonable protective arrangements requested by the
Disclosing Party. In addition, the Receiving Party may provide Proprietary
Information of the Disclosing Party requested by a government agency having
jurisdiction over the Receiving Party, provided prompt notice of such request
's given to the Disclosing Party and that the Receiving Party uses its
reasonable best efforts to obtain protective arrangements for any such
Information that is filed; provided, however, that SNET may file this
Agreement without protective arrangements as it deems appropriate with the
Connecticut Department.of Public Utility Control or the Federal Communications
Commission.
1.6.5 The Disclosing Party shall have the right to demand, upon
unauthorized disclosure of any Proprietary Information by the Receiving Party
to a third party, the return of any or all Proprietary Information disclosed
to the Receiving Party. Further, the Disclosing Party may require that the
Receiving Party use its best efforts to obtain the return from the third party
of any or all Proprietary Information improperly disclosed, in addition to any
other remedies the Disclosing Party may have.
1.6.6 Except as may be otherwise agreed in writing or in other written
agreements between the Parties, Agent agrees that it (i) shall not use
Proprietary Information provided by SNET for any other purpose of any kind
whatsoever except for Marketing the Services on behalf of SNET, (ii) shall not
disclose Proprietary Information ,provided by SNET except to those of its
personnel who have a need for such Proprietary Information for Marketing the
Services. and (iii) shall take adequate precautions and develop adequate
procedures, subject to review by SNET, to ensure that its personnel understand
and adhere to the restrictions contained herein.
1.6.7 Notwithstanding any other provision hereof, Agent may disclose a
new Service of SNET's to customers on or after the date that a tariff for such
new Service is filed with the appropriate regulatory agency, or on the date on
which SNET orally advises Agent that disclosure of such Service may be made to
customers, whichever is earlier.
1.6.8 The Parties acknowledge that the terms of this Agreement
constitute commercially confidential Information that may be considered
Proprietary Information by, either or both Parties, and, except as otherwise
set forth herein, agree to treat the terms hereof in accordance with the
provisions of this Section 1.6.
PROPRIETARY INFORMATION
96 SAI/AGCY July 9, 1996
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1.8 TERM AND TERMINATION
1.8.1 Term
This Agreement shall be effective as of January 1, 1996 (Effective Date)
and shall continue through December 31, 1996 (Initial Term) unless terminated
in accordance with the provisions hereof. The compensation rates contained
herein shall apply for all sales by Agent for which orders are processed by
SNET on or after the Effective Date hereof. This Agreement shall be
automatically extended under the terms and conditions contained herein for
successive one (1) year periods (Successive Term(s)) unless terminated by
either Party on at least two (2) months written notice to the other prior to
the end of the Initial Term or any Successive Terms as may apply.
1.8.2 Termination
1.8.2.1 Either Party may terminate this Agreement in the event that the
other Party commits a material breach of this Agreement and fails to cure such
breach within ten (10) days after receipt of written notice of such breach
from the non-breaching Party; provided, however, that in the event that the
material breach involves any violation of Section 1.6 or Section 1.32 hereof,
no opportunity to cure shall be allowed. In such event the non-breaching
Party shall promptly notify the breaching Party in writing of its intent to
terminate this Agreement, and such termination shall be effective after a
transition period (Transition Period) of seven (7) days after the date of
delivery, or if mailed, the date of mailing of the notice of termination by
the non-breaching Party; provided, however, that if the material breach
involves any violation of Section 1.6, Section 1.27 or a violation of Section
1.32 hereof, the effective date of termination shall be the date of delivery
of the notice of material breach.
1.8.2.2 SNET may terminate this Agreement in the event that Agent's
performance is unsatisfactory and Agent fails to correct its performance
within seven (7) days after receipt of written notice of such unsatisfactory
performance from SNET. In the event that performance is not brought up to
satisfactory levels during such seven (7) day period, SNET shall notify Agent
in writing of its intent to terminate this Agreement and such termination
shall be effective after a Transition Period of seven (7) days after the date
of delivery, or, if mailed, the date of mailing of such notice. For purposes
hereof, any one of the following conditions shall be deemed unsatisfactory
performance: (i) poor service quality as indicated by ratings on Customer
surveys that are five (5) percentage points or more below the average ratings
of SNET's agents similarly situated; (ii) an inordinately high Service
cancellation rate, defined as a cancellation rate within six (6) months of
installation of Services sold by Agent at five (5) percentage points or more
above the average comparable cancellation rate of SNET's agents similarly
situated; (iii)
PROPRIETARY INFORMATION
96 SAI/AGCY July 19, 1996
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the event that performance is not brought up to satisfactory levels during
such seven (7) day period, SNET shall notify Agent in writing of its intent to
terminate this Agreement and such termination shall be effective after a
Transition Period of seven (7) days after the date of delivery, or, if mailed,
the date of-mailing of such notice. For purposes hereof, any one of the
following conditions shall be deemed unsatisfactory performance: (i) poor
service quality as indicated by ratings on Customer surveys that are five (5)
percentage points or more below the average ratings of SNET's agents similarly
situated; (ii) an inordinately high Service cancellation rate, defined as a
cancellation rate within six (6) months of installation of Services sold by
Agent at five (5) percentage points or more above the average comparable
cancellation rate of SNET's agents similarly situated; (iii) use of sales
personnel not trained in accordance with the provisions of Sections 1.3.10,
1.31.1 and Attachment D; (iv) failure to meet objectives as set forth in the
Sales Plan developed pursuant to Section 1.33 hereof, including without
limitation the failure to meet at least 80 % of objectives; (v) repeated
incidents of withheld compensation pursuant to Sections 1.30.9 or 1.30.10
hereof; or (vi) or an excessive (in SNET's sole determination) number of
Customer complaints regarding Agent.
1.8.2.3 SNET may terminate this Agreement on thirty (30) days prior
written notice to Agent if there occurs any significant change in the
ownership or control of Agent, or of its parent company if any, or if Agent
merges with or acquires any other company; provided, however, that prior to
any such change in ownership or control, Agent may request in writing that
SNET waive its right to terminate this Agreement under this Section 1.8.2.4 in
writing based on information about the change in ownership or control provided
by Agent.
1.8.2.4 It is understood by Agent that, because of its status as an
agent for SNET, Agent owes SNET a fiduciary duty to use its best efforts to
Market SNET's Services, to enhance SNET's revenues and to optimize SNET's
position with Customers. In addition to any other provisions hereof, SNET
may, without waiving any other right or remedy, on written notice to Agent,
terminate this Agreement or terminate the authorization to Market its Services
to any Customer, in the event that Agent fails to use its best efforts to
Market the Services. For purposes of this Section 1.8.2.4, it shall be
understood .that failure to use best efforts shall include without limitation
marketing, by Agent or any Affiliate of Agent, the directly competitive
services of any other carrier, reseller or other business offering such
services in lieu of the Services unless such other carrier, reseller or other
business is an Affiliate of SNET.
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1.8.2.5 The Parties shall use their best efforts to ensure that any
Transition Period required under this Section 1.8 shall be executed in a
timely and orderly fashion and in a manner that is in the Customer's best
interest and consistent with any applicable legal requirements. At the end
of any such Transition Period, neither Party shall have any obligation to the
other under this Agreement, except that, subject to the provisions of Section
1.23.2 hereof, those provisions that by their sense and context are intended
to survive the termination hereof shall survive such termination.
1.8.2.6 For a period of three (3) years after the date of termination of
this Agreement, whether or not such termination is pursuant to this Section
1.8 (except for any such termination directly resulting from SNET's
elimination of the "Agency Program" giving rise hereto, in which case a period
of one (1) year rather than a period of three (3) years shall apply), Agent
agrees that neither it nor any Affiliate shall market the domestic or
international services of any other carrier, reseller or other business
offering such services (other than an Affiliate of SNET) to any Customer to
which Agent Marketed Services on behalf of SNET under this Agreement, and for
which Agent received any compensation from SNET under this Agreement.
1.8.2.7 Without limiting the provisions of Sections 1.8.2.1 or 1.8.2.2
above, in the event Agent commits a material breach of this Agreement, or in
the event Agent's performance is unsatisfactory as such term is defined in
Section 1.8.2.2 hereof, then SNET may, in lieu of issuing a notice of breach
or a notice of unsatisfactory performance, issue a notice of probation. Upon
the issuance of such notice, Agent shall, among other things, receive 80% of
the compensation otherwise due and owing Agent for the period such probation
is in effect, with the remaining 20% of compensation being held by SNET in
reserve. Agent shall remain on probation until the condition giving rise to
the notice, in SNET's sole judgment, has been cured, except that Agent shall
remain on probation for a minimum of thirty (30) days and a maximum of ninety
(90) days. If Agent cures the condition giving rise to the notice during such
ninety (90) day period, then SNET shall pay Agent the 20% of compensation
being held in reserve and remove Agent from probation. If Agent does not cure
such condition within such ninety (90) day period, the Agent shall forfeit
such 20% of compensation, and SNET may immediately terminate this Agreement.
1.8.2.8 Agent may, on sixty (60) days prior written notice to SNET,
terminate this Agreement within sixty (60) days after: (i) notice from SNET of
a significant change in the fee schedule set forth on Attachment A pursuant to
Section
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1.30.4 hereof; or (ii) notice from SNET of significant deletion of Services
from Schedule A hereto pursuant to Section 1.1.5 hereof.
1.9 INDEMNIFICATION
1.9.1 To the extent not prohibited by law, Agent shall indemnify and
hold SNET harmless against any loss, cost, claim, liability, damage, or
expense (including reasonable attorneys' fees) brought by any third party
relating to or arising out of the negligence or misconduct, or wrongful acts
or omissions of Agent, its employees, agents, Affiliates, or contractors, in
the performance of this Agreement, and shall further indemnify and hold SNET
harmless against any loss, cost, claim, . liability, damage, or expense
(including, reasonable attorneys' fees) arising from any third party claim
relating to or in consequence of any provision by SNET to Agent of any
Customer Information hereunder, and shall defend any action or suit brought
against SNET for any such loss, cost, claim, liability, damage, or expense as
set forth herein.
1.9.2 To the extent not prohibited by law or applicable tariff, SNET
shall indemnify and hold Agent harmless against any loss, cost, claim,
liability, damage, or expense (including reasonable attorneys' fees) brought
by any third party relating to or arising out of the negligence or willful
misconduct of SNET, its employees, Affiliates, or contractors in the
performance of this Agreement, and shall defend any action or suit brought
against Agent for any such loss, cost, claim, liability, damage, or expense as
set forth herein.
1.9.3 The Indemnified Party shall notify the Indemnifying Party promptly
in writing of any written claims, lawsuits, or demands for which the
Indemnified Party alleges that the Indemnifying Party is responsible under
this Section 1.9. The Indemnified Party shall cooperate in every reasonable
manner with the defense or settlement of such claim, demand, or lawsuit. The
Indemnifying Party shall not be liable under this Section l.9 for settlement
by the Indemnified Party of any claim, demand, or lawsuit unless the
Indemnifying Party has approved the settlement in advance or unless the
defense of the claim, demand, or lawsuit has been tendered to the Indemnifying
Party in writing and the Indemnifying Party has failed promptly to undertake
the defense.
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1.10 LIMITATION ON LIABILITY
Except as otherwise provided in Section 1.9 hereof, the liability, if
any, of either Party to the other for any loss, cost, claim, injury,
liability, damage, or expense (including reasonable attorneys' fees) arising
out of its negligence or misconduct in the performance of this Agreement
(loss) shall be limited to the amount of direct damages actually incurred,
unless such loss was the result of its gross negligence or willful misconduct;
and, except as otherwise provided in Section 1.9 and Section 1.32 hereof and
as set forth above, neither Party shall be liable to the other for any
indirect, incidental, special, or consequential damages of any kind
whatsoever, even if advised of the possibility thereof.
1.11 INSURANCE
The Agent agrees that all of its employees used in the performance of
this Agreement are covered under its Workers' Compensation insurance. Agent
shall also maintain and deliver to SNET at the signing of this Agreement, or
anytime thereafter upon SNET's request, satisfactory proof of: (i) Workers'
Compensation insurance with statutory benefits and limits that fully comply
with all state and federal requirements; (ii) employers' liability insurance
with a combined single limit of at least $500,000.00; (iii) comprehensive
general liability insurance with SNET named as an additional insured with
bodily injury and property damage or combined single limits of not less than
$1,000,000.00 per occurrence; (iv) if the use of automobiles is required,
comprehensive automobile liability insurance with the limits set forth in
(iii) above; and (v) such additional insurance as may be required by
applicable law. Notwithstanding the' above, and subject to written approval
by SNET, Agent may elect to self-insure; provided, however, that Agent shall
provide SNET, at SNET's request, with satisfactory proof of its coverage in
all applicable areas.
1.12 LIMITATIONS PERIOD
No claim under Section 1.9, or any other claims with respect to this
Agreement may be made more than two (2) years after the date of the event
giving rise to such claim; and no claim for indemnity under the provisions of
Section 1.9 hereof may be made more than two (2) years after the right to
recover under such indemnity provisions arises, or is known or reasonably
should have been known, to have arisen.
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1.13 RESPONSIBILITIES OF EACH PARTY
Each Party is an independent contractor, and has and hereby retains the
right to exercise full control of and supervision over its own performance of
its obligations under this Agreement and retains full control over the
employment, direction, compensation, and discharge of all employees assisting
in the performance of such obligations. Each Party shall be solely
responsible for all matters relating to payment of such employees, including
compliance with social security taxes, withholding taxes, and all other
regulations governing such matters. Subject to the limitations on liability
and except as otherwise provided in this Agreement, each Party shall be
responsible for its own acts and those of its own Affiliates, employees,
agents, and contractors during the performance of that Party's obligations
hereunder.
1.14 FORCE MAJEURE
Neither Party shall be liable for any delay or failure in performance of
any part of this Agreement caused by a force majeure condition, including
fires, strikes, embargoes, explosions, power blackouts, earthquakes, volcanic
action, floods, wars, water, the elements, labor disputes, civil disturbances,
government requirements, civil or military authorities, acts of God or a
public enemy, inability to secure raw materials, inability to secure product
of manufacturers or outside vendors, inability to obtain transportation
facilities, acts or omissions of transportation common carriers, or other
causes beyond its reasonable control whether or not similar to the foregoing
conditions. If any force majeure condition occurs, the Party whose
performance fails or is delayed because of such force majeure condition shall
give prompt notice to the other Party and shall take reasonable steps to cure
such force majeure condition. Upon cessation of such force majeure condition,
the affected Party shall give like notice and commence performance hereunder
as promptly as reasonably practicable.
1.15 GOVERNMENTAL COMPLIANCE
1.15.1 Each Party shall perform this Agreement in compliance with all
applicable federal, state, county, and local laws, regulations, government
agency orders or decisions, tariffs and codes, and shall obtain permits and
certificates where needed. In the event that such permits or certificates
cannot be obtained, or in the event that legislative, regulatory, other legal
action or changes in laws invalidate a material term or terms of this
Agreement or adversely affect a Party's ability to perform a material term(s)
of this Agreement, the Parties shall attempt to renegotiate a new term or
terms
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as may be required to allow the Agreement to continue. In the event that such
new term(s) cannot be renegotiated, and the ability of one or both Parties to
perform the Agreement has been significantly adversely affected, then, to the
extent allowable, a three (3) month Transition Period shall commence
immediately for termination of this Agreement.
1.15.2 All obligations under this Agreement shall be performed in
compliance with those statutes, government agency orders, and regulations
prohibiting discrimination against any employee or applicant for employment
because of race, color, religion, sex, national origin, age, or handicap.
Where required by law, certificates of compliance shall be provided. Each
Party shall comply with the provisions of the Fair Labor Standards Act of
1938, as amended, the Federal Occupational Safety and Health Act of 1970, as
amended, and with any rules and regulations under such Acts.
1.16 CERTAIN STATE AND LOCAL TAXES
Any state or local excise, sales, or use taxes (excluding any taxes on
income) resulting from the performance of this Agreement shall be borne by the
Party upon which the obligation for payment is imposed under applicable law
even if the obligation to collect and remit such taxes is placed upon the
other Party. Any such taxes shall be billed as separate items on applicable
billing documents between the Parties. To the extent permitted by applicable
law, the Party obligated to pay any such taxes may contest the same in good
faith and shall be entitled to the benefit of any refund, provided that such
Party cannot permit any lien to exist on any assets of the other Party by
reason of any such contest.
1.17 PUBLICITY AND FILINGS
The Parties shall mutually agree in writing upon the content of any
public announcement, press releases, or publicity materials concerning this
Agreement or the performance of this Agreement prior to their release.
1.18 AMENDMENTS; WAIVERS
Except as otherwise provided in this Agreement, no amendment or waiver
of any, provision of this Agreement, and no consent to any default under this
Agreement, shall be effective unless the same is in writing and signed by an
authorized officer of the Party against whom such amendment, waiver, or
consent is claimed. In addition,
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no course of dealing or failure of a Party strictly to enforce any term,
right, or condition of this Agreement shall be construed as a waiver of such
term, right, or condition.
1.19 NOTICES
All notices, demands, requests, elections, or other communications herein
required to be given or which may be given by one Party to the other Party
shall be made in writing and, except as otherwise provided herein, shall be
signed by an officer or his/her designate. Such notices, demands, requests,
elections, or other communications shall be deemed to have been duly given
when received, and shall be delivered or mailed, postage prepaid, addressed:
(i) in the case of SNET, to: John N. Sievers, President, SNET General Business
Group, 1 Science Park, New Haven, CT 06511, (ii) in the case of Computer
Telephone Corporation Agent, to: Steve Milton, President, 360 Second Avenue,
Waltham, MA 02154 or (iii) in the case of either Party to such other address
or other person as such Party may from time to time designate in writing for
such purpose. All notices sent hereunder, whether by mail, carrier, or
personal delivery, shall be sent return receipt requested.
1.20 NO RIGHTS TO THIRD PARTIES
This Agreement shall not be deemed to provide third parties with any remedy,
claim, right of action, or other right.
1.21 SEVERABILITY
Except as otherwise set forth in Section 1.15.1 hereof, if any term,
condition, or provision of this Agreement is, or becomes, invalid or
unenforceable for any reason, such validity or unenforceability shall not
invalidate or render unenforceable the entire Agreement, but rather the entire
Agreement shall be construed, unless such construction would be unreasonable,
as if not containing the invalid or unenforceable provision or provisions, and
the rights and obligations of each Party shall be construed and enforced
accordingly.
1.22 DELEGATION AND ASSIGNMENT
1.22.1 Each Party has entered this Agreement because of its confidence
in the, other Party, which confidence is personal in nature . Neither Party
may assign, transfer, or sell its rights under this Agreement, or delegate its
obligations hereunder, without the prior written consent of the other Party;
except that SNET may assign,
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transfer, or sell its rights under this Agreement or delegate its obligations
hereunder to a wholly owned subsidiary, its parent or a wholly owned
subsidiary of its parent without such consent.
1.22.2 Subject to the above restrictions, the provisions of this
Agreement shall be binding upon and shall inure to the benefit of the Parties
and their permitted successors and assigns.
1.23 ENTIRE AGREEMENT; SURVIVAL OF TERMS .
1.23.1 This Agreement constitutes the entire agreement between the
Parties concerning the subject matter hereof. Any prior agreements,
representations, statements, negotiations, understandings, proposals, and
undertakings, oral or written, with respect to the subject matter expressly
set forth in this Agreement not heretofore terminated, are hereby terminated.
1.23.2 Any liability or obligation of a Party to the other Party for
acts or omissions prior to the cancellation or termination of this Agreement,
any obligation of a Party to pay charges accrued hereunder or to make
adjustments or to pay adjustments to any charges hereunder, any obligation of
a Party under the provisions of Section 1.6 regarding' Information, any
provisions regarding limitations on liability, and any provisions of this
Agreement which, by their terms, are contemplated to survive (or be performed
after) termination of this Agreement, shall, in each case, survive
cancellation or termination hereof.
1.24 EXECUTED IN COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute
but one and the same instrument.
1.25 TABLE OF CONTENTS AND HEADINGS.
The table of contents, titles, and headings of Articles and Sections of
this Agreement have been- inserted for convenience of reference only, and are
not to be considered a part hereof, and shall in no way define, modify, or
restrict the meaning or interpretation of the terms or provisions of this
Agreement.
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1.26 AUDITS
Not more than once annually, each Party shall have the right on not less
than thirty (30) days prior written notice to conduct an audit during normal
business hours to review records, books and documents relating to the other
Party's performance under this Agreement. Unless otherwise specified in
writing, any audit conducted pursuant to this Section 1.26 must be conducted
by an independent accounting firm acceptable to the Parties. It is understood
by the Parties that SNET may require such firm to sign a nondisclosure
agreement acceptable to SNET protecting its own information or that of other
agents or third parties that may be commingled with the material under review.
1.27 ADVERTISING, PROMOTION, AND USE OF
SNET'S NAME AND TRADEMARKS
1.27.1 SNET shall conduct such advertising with respect to the Services
as SNET deems appropriate in its sole discretion, and SNET shall endeavor to
provide to Agent prior notice and copies of such product literature and
promotional materials. Agent may, at its own expense, undertake promotions
and advertising featuring the Services, subject to prior written approval by
SNET. In order to avoid customer confusion, Agent shall not advertise any
Services in connection with, or in the same advertisement with, the
telecommunications services or other products or services of Agent, its
Affiliates or of any third party, unless authorized in writing by SNET. SNET
agrees to respond promptly, with approval, suggested changes or otherwise, to
advertising submitted by Agent. Any written material or presentations whether
oral or written, developed by Agent in which Agent refers to its relationship
with SNET under this Agreement other than in the words "is an authorized sales
agent for SNET America's domestic and international long distance business"
must receive prior written approval from SNET. In no event shall Agent's
employees represent themselves as employees of SNET America, Inc.
1.27.2 Agent is hereby granted a personal, nonexclusive and
nontransferable license to use such trademarks, service marks, trade names,
insignia, and symbols as are associated with the Services (hereinafter MARKS)
to be Marketed hereunder, only in conjunction with the Marketing of the
Services by Agent as SNET's representative hereunder, or as otherwise agreed
in writing, or in any other written agreements between SNET and Agent. Agent
acknowledges that its right to use the above MARKS arises solely from this
Agreement and any other written agreements between it and SNET, and Agent
agrees to comply with all applicable rules and
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procedures pertaining to the use of the MARKS prescribed by SNET. Agent
acknowledges that all usage of the MARKS by Agent and any good shall establish
thereby shall inure to the benefit of SNET. The license granted by SNET under
this section can be terminated at anytime.
1.28 AGENT REVIEWS
SNET and Agent shall participate in Agent Reviews held quarterly by SNET
at Agent's principal Connecticut location unless otherwise agreed to by the
Parties to review Agent's performance under this Agreement. As a part of the
Agent Reviews, the Parties shall (i) determine coincident with the execution
of this Agreement an appropriate Sales Plan, generally in the form set forth
on Attachment E, "Agent Sales Plan", attached hereto and incorporated herein
by reference, as more fully set forth in Section 1.33 hereof, (ii) discuss and
resolve any operational interface problems that may occur; (iii) review
Agent's sales proposal documentation, logs and other customer records, to
ensure record keeping satisfactory to SNET; (iv) evaluate overall performance
and performance against the Sales Plan in order to improve results; and (v)
review the results of SNET's periodic customer surveys in order to develop
plans to correct any deficiencies.
1.29 SALES REPORTS
1.29.1 Agent shall submit to SNET not later than Wednesday of each week
for the previous week, a Sales Report, in the format set forth on Attachment
F, "Sales Report", attached hereto and incorporated herein by reference, that
shows on a Service-by-Service basis the quantity sold during that week. At
SNET's request, Agent shall provide to SNET monthly results, including, but
not limited to, revenues by individual Customers as may be mutually agreed,
and such other information as the Parties may agree.
1.30 COMPENSATION; PAYMENT
1.30.1 Compensation for Agent's completed sales made pursuant to this
Agreement shall be calculated pursuant to the schedule set forth on Attachment
A. Compensation . is paid pursuant to this Agreement only for completed
sales to Customers.
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1.30.2 A sale to a Customer shall be completed, for purposes of
compensation under this Agreement, upon completion of installation.
Installation shall be deemed completed at the time at which the Service is
activated, or upon completion of acceptance testing where applicable.
1.30.3 SNET shall remit payment to Agent monthly, as calculated pursuant
to the provisions of Section 1.30.1 and Attachment A. Any undisputed payments
shall be made by SNET to Agent not later than forty-five (45) days after the
last day of the month to which the payment applies. SNET shall determine
Agent's payment using its own tracking, systems for completed installations,
and shall work cooperatively with Agent to resolve any disputes that may
arise.
1.30.4 SNET expressly reserves the right to make reasonable changes, not
more than three times annually, to the fees and adjustment factors set forth
on Attachment A; except that SNET may exceed such three times annual
limitation if the change is related to the introduction of New Services that
are cross-elastic with Existing Services; and except that SNET may also
exceed, not more than three times annually, such limitation if the change is
solely related to the fees and adjustment factors for the sale of Services to
Major Accounts, provided, however, that SNET shall give Agent a minimum of
thirty (30) days' prior written notice of any such change; provided further
that the foregoing shall not be deemed to preclude SNET from adding services
or deleting services from the Services set forth on Attachment A at SNET's
sole discretion on written notice. Such additions or deletions shall not
effect any Monthly Residual Compensation being paid to Agent for sales of any
such added or deleted services. SNET's written notice of such change to Agent
shall be sent to Agent pursuant to Section 1.19 hereof and shall constitute an
automatic amendment to this Agreement. Any such changes shall apply
prospectively only. Any orders-placed by Agent that are processed prior to
the effective date of any such changes shall be paid at the rates in effect at
that time, rather than the rates in effect at the time of installation.
1.30.5 During the term of this Agreement SNET has the right to offer to
Agent special sales incentives upon notice to Agent. Such notice shall inform
Agent of the details of such incentive, including the duration of such
incentive, the Services to be included in and the compensation to be received
by Agent for sales of such Services.
1.30.6. During the term of this Agreement SNET has the right to offer
Customer promotions. It is understood by the Parties that in the event any
Customer promotion provides Customers with free monthly usage Agent's Customer
Acquisition Fee shall not be negatively impacted.
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1.30.7 Except as otherwise set forth herein, Agent shall receive no
compensation under this Agreement for sales of Services made by SNET, any
other of SNET's agents or for sales by Agent to a Customer for which Agent did
not make the initial sale.
1.30.8 Upon termination of this Agreement for a material breach or
unsatisfactory performance, SNET's obligation to compensate Agent shall cease
effective with the termination date of this Agreement.
1.30.9 SNET reserves the right to withhold compensation for any sale in
which SNET determines, in its sole judgment, that Agent in making such sale
engaged in unprofessional conduct, sold a Service that was not in the
Customer's best interest, unnecessarily replaced an existing Service causing
unwarranted churn, acted in a manner that might adversely affect SNET's
relationship with the Customer, or otherwise failed to use its best efforts on
SNET's behalf as required by Section 1.8.2.4 hereof.
1.30.10 The Compensation for Services that are (i) removed from service
within six (6) months of completion of installation (except where such
removals are associated with seasonal or special campaigns approved by SNET),
or (ii) that are withheld pursuant to Section 1.30.9 above, may be subtracted
from the next due payment or payments. In the event of a removal after 6
months but within the Customer'.s original contract term, SNET reserves the
right to subtract from future compensation payable to the Agent such amounts
as SNET shall deem appropriate in view of the remaining length of the term.
1.30.11 In the event SNET terminates this Agreement pursuant to Sections
1.8.1 or Section 1.8.2 above, SNET reserves the right, without limiting other
rights, to hold in escrow for up to eight (8) months compensation payments
attributable to the period beginning with the issuance of a notice of
termination pursuant to Section 1.8.1 or Section 1.8.2.1 hereof, or a notice
of i) material breach, ii) unsatisfactory performance, or iii) probation
pursuant to Section 1.8.2 hereof, and ending on the date of termination. SNET
may hold such payments in escrow pending a final true-up, including any
adjustments under Section 1.30.10 above for Services removed within six (6)
months completion of installation.
1.31 AGENT, TRAINING, NEW SALES PERSONNEL
1.31.1 SNET shall have the right on a case by case basis to determine,
in its sole judgment, whether Agent's new sales personnel may represent SNET
hereunder. In the event SNET determines that such sales personnel may Market
SNET services,
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such personnel shall have the independent duty to attend Initial Training and
any Subsequent Training that may be required prior to Marketing SNET Services.
1.32 AGREEMENT TO TERMS
Agent agrees (i) that all sales shall be in accordance with SNET's
tariffed rates and terms and conditions, and, for those Services not covered
by tariff, SNET's standard price lists and terms and conditions, and SNET's
standard practices and procedures relative to, inter alia, credit requirements
and service intervals; (ii) that all applicable rates, for both tariffed and
non-tariffed Services, shall be quoted by Agent to Customers in any oral or
written communication with Customers with respect to pricing; (iii) that it
shall represent SNET's Services and all applicable tariffs and procedures
accurately to Customers; (iv) that it shall engage in no waiving, discounting
or rebating of nonrecurring charges or rates of any kind whatsoever either
directly or through third parties; (v) that it shall make no variation or
exception to such tariffs and no variation or exception to such procedures
except as specifically approved in writing by SNET; and (vi) that it shall
engage in no fee splitting with third parties or payments to third parties for
referrals or sales leads or any other Marketing function hereunder, all of
which functions must be performed by Agent's own employees unless otherwise
agreed in writing by SNET. SNET is entitled to request, and Agent shall be
required to provide, if requested, adequate proof that its obligations with
this Agreement are being performed by its own employees and not by
subcontractors or any other third party. In the event of any violation of
this Section 1.32, Agent shall bear the complete responsibility for resolving
any resulting problems to SNET's and Customer's satisfaction. Violation of
this Section 1.32 shall constitute a material breach for purposes of Section
1.8.2.1 hereof.
1.33 SALES PLAN
For each Term of this Agreement (whether Initial or Successive Term, as
applicable), coincident with the execution of this Agreement, Agent shall
incorporate into the Sales Plan covered under the Marketing Agreement with The
Southern New England Telephone Company its plans for attainment of the
objectives set forth in the Sales Plan.
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1.34 REFUNDS
In the event SNET issues a refund to a Customer resulting from or
arising out of i) Agent's error or mistake, ii) Agent's violation of the terms
of Section 1.32 hereof, or iii) Agent's participation in conduct for which
compensation may be withheld pursuant to Section 1.30.9 hereof, then SNET
shall have the right to bill Agent for such refund. Any such bill shall be
due and payable upon receipt.
1.35 CUSTOMER INFORMATION
1.35.1 After establishment of a Customer account, SNET shall provide
Customer information to Agent which shall include call summary, toll summary
and management reports. Agent shall receive such Customer information for
only those Customers to which Agent has Marketed and sold the Services.
IN WITNESS WHEREOF, the Parties have executed this Agreement through
their authorized representatives this day of , 1993.
SNET AMERICA, INC. AGENT
/s/ /s/ Steven Milton
_________________________ _________________________
Signature Signature
Steven Milton
_________________________ _________________________
Printed Name Printed Name
President
_________________________ _________________________
Title Title
9-3-96
_________________________ _________________________
Date Date
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ATTACHMENT A
PAGE 1 OF 1
THE SERVICES AND FEE SCHEDULE
Agent shall receive compensation for the services listed as follows:
Agent shall receive a flat fee based on the Schedule below. This fee will be
paid on the third Friday of the month following the installation of the
Service. In addition, the Agent will also receive Commission of 4% of the
term plan value based of the 4th month's net interstate billing (number of
months X 4th. month billing X 4%) payable forty-five (45) days following the
4th. billing month. Digital Private Line Services will be compensated based
on 4% of the 4th, month's Interexchange billing times the number of months in
the term.
FLAT FEES
UNIFIED TERM PLAN
LENGTH OF TERM <$200 PER MONTH >200 PER MONTH
INTERSTATE INTERSTATE
1 YEAR $ 62.50 $125
2 YEAR $ 87.50 $175
3 YEAR $125.00 $250
4 YEAR $137.50 $275
5 YEAR $162.50 $325
DIGITAL PRIVATE LINE
DDS $ 50
T1 $200
SIMPLE SOLUTIONS
($50 PER MONTH MINIMUM)
$50
BONUSES
QUOTA BONUS - Upon attainment of 120% of quota, the Commission rate will be
raised form 4% to 5% for all term plan revenue.
UNIFIED TERM PLAN BONUS - A year-end bonus will be paid based on 100%
attainment of the Term Plans quota. A bonus of 1% of term plan revenue will
be paid when 60% of the plans sold are Unified (both intrastate and
interstate) and 2% for attaintment of 75%.
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
<PAGE>
<PAGE>
ATTACHMENT B
PAGE 1 OF 2
SNET AMERICA
LETTER OF AUTHORIZATION
I HEREBY AUTHORIZE THE UNDERSIGNED AGENCY REPRESENTATIVE TO ORDER AND HAVE
INSTALLED THE FOLLOWING:
[ ] SNET AMERICA DISTANCE SERVICE [ ] SNET AMERICA DISTANCE PLUS
[ ] P I C CHANGE (OUTBOUND CALLING) [ } SIMPLE SOLUTIONS
[ ] CALLING CARD [ ] UNIFIED SELECT TERM PLAN
[ ] 800 SERVICE [ ] SELECT TERMS (INTERSTATE ONLY)
[ ] SELECT STATES
CUSTOMER
NAME___________________________ AGENCY ________________________
AUTHORIZED ACCOUNT
SIGNATURE _____________________ EXECUTIVE _____________________
TITLE _________________________ DATE __________________________
DATE __________________________
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
<PAGE>
<PAGE>
ATTACHMENT B
PAGE 2 OF 2
SNET AMERICA
P I C CHANGE REQUEST
BILLED TELEPHONE NUMBER:
CUSTOMER NAME _____________________________ _________________________
CONTACT NAME ______________________________
ADDRESS ___________________________________
CITY _________________________________ STATE ________ ZIP _________
[ ] P I C ALL LINES
PLEASE LIST ALL TELEPHONE NUMBERS TO BE CHANGED TO SNET AMERICA.
Attach a signed list if more space is required.
1. _________________________
2. _________________________
3. _________________________
4. _________________________
5. _________________________
With this signature l authorize SNET America to provide my long distance
service and I authorize SNET America to notify my local telephone company of
this choice for the telephone numbers listed on this form. I understand that
I may choose only one long distance company for each number. I also
understand that the local telephone company may charge a fee for this and any
later change.
Signature DATE
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
<PAGE>
<PAGE>
ATTACHMENT C
PAGE 1 OF 2
NON-AGENT ACCOUNTS
Non-Agent Accounts are accounts to which Agent is not authorized to market on
SNET's behalf under this Agreement. No compensation is paid to the Agent for
orders placed with SNET for the Accounts as listed below:
A. TELECOMMUNICATIONS CARRIERS - any customers that are in the
business of providing telecommunications services to third parties either
through their own facilities or through facilities purchased from others, and
includes such providers as resellers, aggregators, alternate operator services
providers, and telemanagement companies. These include, but are not limited
to:
Except (with Prior Approval from SNET) the sale of services
required to conduct their own Business as opposed to the Service Required to
provide their own Services to their Customers.
- AT&T
- Centex Telemanagement, Inc.
- MCI
- Metromobile
- SNET
- Sprint
B. GOVERNMENT
1) GOVERNMENT ACCOUNTS - All government accounts due to security, public
safety and welfare concerns associated with government communications. These
include, but are not limited to:
- Federal Government
- State of Connecticut - All departments and locations.
- Municipalities
2) CANDIDATES FOR ELECTED GOVERNMENT OFFICES - All candidates for
elected government offices because of security, collection and other
procedural concerns associated with running a campaign for elected office.
These include, but are not limited to:
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
<PAGE>
<PAGE>
ATTACHMENT C
PAGE 2 OF 2
C-2
- Federal Government - President, Vice-President, etc.
- State of Connecticut - Governor, Secretary of State, Lt. Governor,
Treasurer, Comptroller, Attorney General, etc.
- Municipalities - Mayor, Selectman, etc.
C. TELEPHONE ANSWERING SERVICES - any Account that provides remote
answering services to the general public. Services (such as private lines)
used by individual customers to reach telephone answering services are
excluded from compensation.
Except (with Prior Approval from SNET) the sale of services required to
conduct their own Business as opposed to the Services Required to provide
their own services to their customers
D. ALARM AND SECURITY' SERVICES - any Account that provides remote
monitoring of such conditions as fire, theft, intrusion, vandalism, medical
emergencies, and utility meters. Services (such as private lines) used by
individual customers to reach alarm and security services are excluded from
compensation.
Except (with Prior Approval from SNET) the sale of services required to
conduct their own Business as opposed to the services Required to provide
their own services to their customers
E. CUSTOM BUSINESS GROUP ACCOUNTS - all Accounts identified by SNET as
Custom Business Group Accounts in information provided electronically to the
Agent.
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
<PAGE>
<PAGE>
ATTACHMENT D
PAGE 1 OF 1
AGENT SUPPORT SERVICES AND APPLICABLE FEES
This Attachment D sets forth the support services available to the Agent
and the fees applicable to such services. SNET reserves the right to charge
or change the fees contained herein, on a prospective basis on thirty (30)
days prior written notice to Agent. In such event, SNET's notice shall be
pursuant to Section 1.18 and shall constitute an automatic amendment to this
Attachment D.
I. TRAINING
A. Training is designed to accommodate the minimum requirements of the
Agent's personnel Marketing the Services.
B. Initial Training shall be available upon execution of this Agreement
at no charge to Agent and is required by all Agent personnel with assigned
responsibility for Marketing the Services. Agent shall be responsible for
scheduling its personnel for Initial Training. Initial Training shall be held
at a location(s) to be determined by SNET.
C. Training in any new service(s) (Subsequent Training) shall be made
available at introduction of the new service(s) and is required by all Agent
personnel with assigned responsibility for Marketing the Services. SNET shall
provide Agent with proper notification of Subsequent Training. Subsequent
Training shall be provided at no charge and shall be provided to all of
Agent's sales personnel who have satisfactorily completed Initial Training.
II. TECHNICAL SUPPORT
Service Provided Routine Non-Routine
- - Toll Analysis $100.00 $40.00/hour
- - Network Studies $250.00 $40.00/hour
- - Special Networks ------- $60.00/hour
- - Engineering Support ------- $100.00/hour
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
<PAGE>
<PAGE>
ATTACHMENT 3
PAGE 1 OF 1
SNET AMERICA, INC. AUTHORIZED SALES AGENT SALES REPORT
UNIFIED TERM PLANS SOLD - WEEKLY SUMMARY
WEEK ENDING _______________ AGENT NAME _______________________________
INTRASTATE INTERSTATE
CUSTOMER NAME BTN AE NAME 1 2 3 4 5 MO. BILLING MO. BILLING
______________________________________________________________________________
______________________________________________________________________________
TOTALS _______________________________________________
PROPRIETARY INFORMATION
96 SAI/AGCY July 11, 1996
EXHIBIT 10.9
AMENDMENT NO. 2 TO
TELECOMMUNICATIONS SERVICE AGREEMENT
This Amendment No. 2 to Telecommunications Service Agreement (this
"Agreement") is made as of August 23, 1996 (the "Amendment Effective Date") by
and between IXC Long Distance, Inc., a Delaware corporation ("Supplier"), and
Computer Telephone Corp., a Massachusetts corporation ("Customer").
Background
This Amendment is made with reference to the following facts:
A. Customer and Supplier are parties to that certain
Telecommunications Service Agreement dated as of June 23, 1995 (the
"Agreement").
B. The parties desire to amend the Agreement pursuant to the terms
set forth below.
Terms of Amendment
Accordingly, in consideration of the mutual promises set forth below,
the parties hereto hereby agreed as follows:
1. The following is hereby added to the Agreement as Paragraph C of
Section 2. Customer Responsibilities and shall read in its entirety as
follows:
C. Customer shall use Services from Supplier to service ANI's
representing at least seventy-five percent (75%) of its new business each
month (measured in minutes of traffic) and shall keep such ANI's on Supplier's
system until one (1) year after the Amendment Effective Date. An officer of
Customer shall deliver to Supplier each quarter an officer's certificate
certifying that Customer has satisfied the requirement of the preceding
sentence. Customer shall allow Supplier, upon request, access to such of its
books and records as necessary to satisfy Supplier as to the compliance with
this paragraph.
2. Section 8. Term of the Agreement is hereby amended to read in its
entirety as follows:
This Agreement is effective as of the Amendment Effective Date and
shall remain in force and effect until for a period of three (3) years unless
earlier terminated pursuant to its terms. This Agreement shall be
automatically extended at the expiration of the initial and any subsequent
term for an additional term of one year unless: (i) earlier terminated; or
(ii) written notice is given by any party at least ninety (90) days before
such expiration that such party does not consent to such extension.
3. Paragraph (B) of Section 9 Charges, Payment and Security Interest
of the Agreement is hereby amended to read in its entirety as follows:
B. Volume Rates. Subject to the terms and conditions herein,
Customer shall pay for any Services hereunder at the rates reflected in
Exhibits A-1 through A-7. Customer shall be billed only for actual usage of
minutes and shall not be required to meet a minimum monthly commitment level.
Notwithstanding the foregoing, Customer shall be obligated to give to Supplier
<PAGE>
<PAGE>
a percentage of its new business as set forth in Section 2, Paragraph C,
herein.
4. The following is hereby added to the Agreement as Paragraph H of
Section 9. Charges, Payment and Security Interest and shall read in its
entirety as follows:
G. Debit Cards. Supplier shall use its best efforts to
provision debit cards (each, a "Debit Card," and collectively, the "Debit
Cards") to Customer at the rates set forth in Exhibits A-2, A-4, A-5 and A-7
for distribution by Customer to its End-Users. Customer understands and
agrees that each End-User may purchase ("Recharge") additional minutes to add
to its Debit Card by charging such purchase to a credit card of its choice
which amount, less any applicable service or financing fees, shall
automatically be payable to Supplier (each, an "IXC Received Amount").
Supplier shall credit Customer with 100% of each IXC Received Amount during
the second month following the month in which Supplier actually receives such
IXC Received Amount.
5. The following is hereby added to the Agreement as Section 23.
Termination Service and shall read in its entirety as follows:
23. Termination Service.
A. Service Interconnection. In order to utilize Termination
Service, one or more full time dedicated connection between Customer's network
and the Supplier network at one or more Supplier designated locations
("Supplier HUB") must be established ("Service Interconnection(s)"). Each
Service interconnection shall be comprised of one or more DS- 1 circuit.
B. Customer Responsibilities. Customer shall be solely
responsible for establishing and maintaining each Service Interconnection
subject to Supplier's approval in accordance with the terms of this Agreement.
If a Service Interconnection is proposed to be made using a LEC, Supplier may
require Customer to utilize Supplier's entrance facilities or local service
arrangement ("LSA") with the relevant LEC, and Customer shall be subject to a
non-discriminatory charge therefor from Supplier. The monthly recurring
charge relevant to Customer's use of LSA capacity shall be subject to upward
adjustment by Supplier from time to time. Such adjustment, if any, shall not
exceed the rate that otherwise would be charged for the equivalent service
from the LEC pursuant to its published rates for such service.
C. Cancellation. Once ordered, and unless otherwise provided
for in this Agreement, Service Interconnections and the circuits comprising
each Service Interconnection may only be canceled by Customer upon at least
thirty (30) days prior written notice to Supplier, or if longer, the length of
the cancellation period of the underlying carrier.
D. Certification. Customer shall provide Supplier with a
written certification (the "Certification") of the percentage of interstate
(including international) and intrastate minutes of use relevant to the
minutes of traffic to be terminated in the same state in which the Supplier
HUB is located to which the Service Interconnection is made. This
Certification is attached as Exhibit H and shall be provided by Customer prior
to commencement of Service for any Service Interconnection and may be modified
from time to time by Customer and subject to recertification upon the request
of Supplier which requests shall not be made unilaterally by Supplier more
than once each calendar quarter. Any such modification(s) or Certification(s)
shall be effective as of the first day of any calendar month and following at
least forty-five (45) days notice from Customer. In the event Customer fails
to make such Certification, the relevant minutes of use will be deemed to be
subject to the Intrastate Rates provided for in the pricing exhibit. In the
event Supplier or any other third party requires an audit of Supplier's <PAGE>
<PAGE>
interstate/intrastate minutes of traffic, Customer agrees to cooperate in such
audit at its expense and make its call detail records, billing systems and
other necessary information reasonable available to Supplier or any third
party solely for the purpose of verifying Customer's interstate/intrastate
minutes of traffic. Customer agrees to indemnify Supplier for any liability
Supplier incurs in the event Customer's Certification is different than that
determined by the audit.
6. Exhibit A-7 of the Agreement, IXC Standard Interstate Switched and
Dedicated 1+ and 1-800 Rates is hereby amended and restated in the form
attached to this Amendment as Exhibit A-7 and Exhibit A-5 of the Agreement,
IXC Xclusive Card Services is hereby amended and restated in the form attached
to this Amendment as Exhibit A-5.
7. The additional Exhibits A-8 through A-10 and Exhibits F, G and H
to this Amendment shall be deemed to be attached to, and made a part of, the
Agreement.
8. This Amendment is effective as of the date hereof.
9. All other terms and conditions of the Agreement not specifically
amended herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment.
IXC LONG DISTANCE, INC. COMPUTER TELEPHONE CORP.
/s/John Fleming /s/David E. Mahan
By: ____________________ By: ____________________
Name: John Fleming Name: David E. Mahan
Title: Executive V.P. Title: Vice President
Date: 8/23/96 Date: 8/23/96
<PAGE>
<PAGE>
AMENDMENT NO.1 TO TELECOMMUNICATION SERVICE AGREEMENT
This Amendment No.1 to Telecommunications Service Agreement (this
"Agreement") is made as of January 15, 1996 by and between IXC Long Distance,
Inc., a Delaware corporation ("Supplier") and Computer Telephone Corp., a
Massachusetts corporation ("Customer").
Background
This Amendment is made with reference to the following facts:
A. Customer and Supplier are parties to that certain
Telecommunications Service Agreement dated as of June 23, 1995 (the
"Agreement").
B. The parties desire to amend the Agreement pursuant to the terms
set forth below.
Terms of Amendment
Accordingly, in consideration of the mutual promises set forth below,
the parties hereto hereby agreed as follows:
1. Section 8. Term of the Agreement is hereby amended to be in force
and effect until May 31, 2000.
2. Paragraph (B) of Section 9. Charges. Payments and Security
Interest of the Agreement is hereby amended to read in its entirety as
follows:
B. Customer represents to Supplier that it expects to purchase
Services hereunder in at least the following amounts (the "Commitment"): (i)
$350,000.00 each month, commencing June 1, 1996 and ending November 30, 1996;
(ii) $750,000.00 each month, commencing December 1, 1996 and ending May 31,
1997; and (iii) $ 1,000,000.00 each month, commencing June 1, 1997 and ending
May 31, 2000. The rates Supplier shall charge Customer for Services are
dependent on the aggregate amount of Services (the "Volume") per month
provided hereunder to Customer. The initial rates were based on Customer's
commitment to purchase the Services at the $1,000,000.00 level. Supplier
shall review the rates charged to Customer six months from the date the first
order is placed, and every six months thereafter for the term of this
Agreement. In the event Customer has failed to purchase the Commitment level
on average for each designated six-month period, then Customer's rates shall
not have been consistent with the rate the parties have agreed is appropriate
for such Service level (in accordance with Standard Rates in Exhibit A) and
Customer's rates shall be adjusted. The rate adjustment for any such six
month period shall be made in the amount equal to the difference between the
actual charges for the Volume purchased over such six month period and the
applicable rate for the shortfall between the purchased Volume and the
Commitment level. Customer shall, immediately upon the receipt of Supplier's
invoice therefor, pay to Supplier the amount of such rate adjustment.
3. Section 10. Calculation of Call Duration of the Agreement is
hereby amended to read in its entirety as follows:
Supplier will calculate call duration for Call Detail Records ("CDR's")
which will be sent to Customer by Supplier for Customer to rebill Customer's
End-Users, based upon the IXC On-line software specifications defined in the
User Guide. Customer may request CDR's from Supplier and Supplier shall
provide CDR's within five business days from the end of the month in which
service is rendered. Customer shall specify one of the following formats for
CDR's: (i) electronically transmitted, or (ii) CD Rom. CDR's shall be made
<PAGE>
<PAGE>
available for up to a year from the date of service. The information format
of the CDR's included in the User Guide.
4. Exhibit A-2. IXC Private Line Addendum is hereby amended and
restated in the form attached to this Amendment as Exhibit "A."
5. Exhibit C. IXC On-Line Software Agreement Requirements is hereby
amended and restated in the form attached to this Amendment as Exhibit "B."
6. Exhibit A-4. Xclusive International is hereby amended to included
rates set forth and attached to this Amendment as Exhibit "C."
7. This Amendment is effective as of the date hereof.
8. All other terms and conditions of the Agreement not specifically
amended herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment.
IXC LONG DISTANCE, INC. COMPUTER TELEPHONE CORP.
By: /s/ John R. Fleming By: /s/ David E. Mahan
Name: John R. Fleming Name: David E. Mahan
Executive Vice President
Title: and Chief Operating Officer Title: Vice President
Date: 1-15-96 Date: 1/10/96
<PAGE>
<PAGE>
Exhibit List
Exhibit A IXC Private Line Addendum
Exhibit B IXC On-Line Software Agreement
Exhibit C IXC Xclusive International Rates
<PAGE>
<PAGE>
Exhibit A
Private Line Addendum
This Private Line Addendum is attached to and made a part of that
certain Telecommunications Service Agreement entered into by and between IXC
Long Distance, Inc. ("Supplier") and Computer Telephone Corp., ("Customer")
with a service commencement date of June 23, 1995.
1. Definitions. For the purposes of this Agreement:
(A) "Available" shall mean, with respect to any Circuit, that all
necessary equipment with respect to such Circuit has been installed,
connected, tested and confirmed by Supplier to be operating in accordance with
the required specifications.
(B) "Activation Date" shall mean, with respect to any Circuit, the
date such Circuit is first made available to Customer's end user for
completion of calls.
(C) "Circuit" shall mean a DS-0, DS-1 or DS-3.
(D) "Circuit Lease Term" shall mean, with respect to any Circuit, the
period from the Activation Date of such Circuit to the later of (i) one year
from the Activation Date, or (ii) the date, if any, specified in the Dedicated
Access Order Form.
(E) "Circuit Mileage" shall mean, with respect to any Circuit, the
length of such Circuit in airline miles computed according to industry
standard V&H coordinates, as specified in the Dedicated Access Order Form
pursuant to which such Circuit is ordered.
(F) "City Pair" shall mean, with respect to any Circuit, the two
cities in which such Circuit terminates, as specified in the Dedicated Access
Order Form pursuant to which such Circuit is ordered.
(G) "Dedicated Access Order Form" shall mean Supplier's form to be
utilized by Customer in placing orders for Service hereunder as set forth as
Exhibit E attached hereto, and as such form may hereafter be amended or
modified by Supplier.
(H) "DS-0 Circuit Mile Rate" shall mean, with respect to any Circuit,
the rate, if any, so designated in Exhibit A attached hereto with respect to
such Circuit in the Dedicated Access Order Form pursuant to which such Circuit
is order.
(I) "DS-0" shall mean a Circuit complying with all applicable Bellcore
standards in accordance with TR-TSY-000333 "Switched and Special Access
Services - Transmission Parameter Limits and Interface Combinations" Issue 1,
July 1990.
(J) "DS-1 " shall mean a Circuit meeting the specifications set forth
in AT&T Technical Reference Pub. 62411, December 1990 and Bellcore
TR-MWT-000488, Issue 4, November 1991, Revision 1, April 1992.
(K) "DS-3" shall mean a Circuit meeting the specifications set forth
in AT&T Technical Reference Pub. 63914 Addendum 3, March, 1990 and Bellcore
TB-NWT-608488, Issue 4, November 1991, Revision 1, April 1992.
(L) "Monthly Lease Rate" shall mean, with respect to any Circuit, the
amount designated in Exhibit A attached hereto, or if different, in the
Dedicated Access Order Form accepted by Supplier pursuant to which such
Circuit is ordered. In the event no such amount is so designated, such term
shall mean (1) with respect to any DS-1, the product of (i) 24, (ii) the DS-0
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Circuit Mile Rate for such DS-1, and (iii) the Circuit Mileage for such DS-1,
and (2) with respect to any DS-3, the product of (i) 672, (ii) the DS-0
Circuit Mile Rate for such DS-3 and (iii) the Circuit Mileage for such DS-3.
On-net DS-0, DS-1, DS-3 and Ancillary Pricing is set forth in Exhibit B
attached hereto.
(M) "On-net Service" shall be service between any of the cities
identified in Exhibit C-1 (DS-0) and Exhibit C-2 (DS-1 and DS-3) attached
hereto. "On-net City" shall mean any such city. "On-net DS-0," "On-net
DS-1" or "On-net DS-3" shall mean a DS-0, DS-1 or DS-3, respectively, between
two On-net Cities. "Off-net Service" cities are set forth on Exhibit D
attached hereto.
(N) "Requested Service Commencement Date" shall mean, with respect to
any Circuit, the date Service on such Circuit is requested by Customer to
commence as specified in the Dedicated Access Order Form pursuant to which
such Circuit is ordered.
2. Scope and Lease Rates. Supplier shall provide Service to Customer upon
the terms and conditions set forth below:
(A) Service shall be provided with respect to each Circuit set forth
in each Dedicated Access Order Form between Supplier's locations in each city
of the City Pair specified in such Dedicated Access Order Form with respect to
such Circuit at the applicable Monthly Lease Rate.
(B) Supplier shall provide maintenance for all of Supplier's digital
transmission equipment installed between the Supplier's demarcation point in
one city location to the Supplier's demarcation point in the other city
location associated with the City Pair specified in the Dedicated Access Order
Form.
(C) Supplier shall use its best efforts consistent with its
obligations to its other customers to provide Service on each Circuit
commencing on the Requested Service Commencement Date specified with respect
to each Circuit.
(D) Supplier shall provide Service to each Circuit ordered hereunder
from the Activation Date of such Circuit for the Circuit Lease Term for such
Circuit.
(E) Customer may, at its option and upon 30 days' notice to Supplier,
reconfigure On-net Circuits originating in a particular city by canceling such
Circuits and simultaneously ordering new C)n-net Circuits originating in such
city from Supplier's unused capacity, but only if all the following conditions
are met (i) such Circuits to be canceled have been in service at the time of
such reconfiguration for at least 90 days; (ii) Service capacity on each such
new Circuit is available from Supplier (Supplier shall not be obligated to
construct new Circuit capacity to fill any Dedicated Access Order Form); (iii)
Customer shall pay for such reconfiguration all applicable charges set forth
in Exhibit B hereto; and (h) the aggregate monthly invoicing hereunder for the
new Circuits involved in such reconfiguration must be equal to, or greater
than, the aggregate monthly invoicing for the canceled Circuits.
3. Termination.
(A) Customer may terminate Service with respect to (i) any On-net
Circuit upon forty-five (45) days prior written notice thereof to Supplier and
(ii) any Off-net Circuit upon ninety (90) days prior written notice thereof to
Supplier, and, in either case, payment of all termination charges set forth
below. Such termination charges shall include:
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(i) In the event such termination occurs prior to the Activation Date
specified with respect to such Circuit, all nonrecoverable costs of the
implementation of, and expenditures or liabilities reasonably incurred and
directly connected with, the provision of Service, including but not limited
to, all professional, consulting and other costs incurred by Supplier in
furtherance of implementing such Service; and
(ii) In the event such termination occurs at or after the Activation
Date specified with respect to such Circuit, Customer shall pay all charges
hereunder for the period during which Service is rendered on such Circuit.
If Service on a Circuit is terminated prior to the expiration of the Circuit
Lease Term, Supplier shall make its best effort to lease Service on such
Circuit at no less than the Monthly Lease Rate for such Circuit. In the
event Supplier cannot lease Service on such Circuit on the same or
substantially similar terms and conditions as set forth herein, Customer shall
be liable for payment (1) for the total amount due through the end of the
Circuit Lease Term for such Circuit less (2) the total amount collected by
Supplier from any other lessee with respect to such Circuit.
(B) Customer shall give written notice to Supplier of any material
breach in performance hereunder. Supplier shall have forty-five (45) days
after such notice to cure such breach. If after such 45-day period, Supplier
fails to cure such breach, including, but not limited to, compliance with the
material technical and operational specifications applicable to a Circuit,
Customer may terminate Service on the such affected Circuit. In the event of
any such termination, Customer's liability with respect to such Circuits shall
be limited to the Monthly Lease Rate for the affected Service which was
properly rendered prior to the effective date of such termination.
(C) In the event Supplier fails to provide the Service within six
months (6) of the Requested Service Commencement Date for such Circuit, then
Customer, at its option may terminate that Service on the affected Circuit
without any liability whatsoever. Such right to terminate shall be
Customer's sole remedy for such failure to provide Service.
4. Allowance for Service Outage Periods.
(A) A Circuit shall be deemed to be in an outage condition under this
Agreement if, while Customer is using or attempting to use such Circuit, such
Circuit loses continuity and fails to comply with the applicable
specifications for such Circuit. An outage period begins when a report is
received by Supplier's Customer Service Group from Customer by telephone that
Service has been interrupted and that such Circuit is released for repair.
An outage period ends when Supplier notifies Customer by telephone that
Service has been restored.
(B) A credit for each outage period shall be allowed and calculated as
follows:
(i) No credit shall be allowed for an outage period of
seventy-two (72) hours or less in the case of a Catastrophic Outage (as
defined below), or one (1) hour or less in the case of a Non-Catastrophic
Outage (as defined below). Customer shall be credited for an outage period
to the extent such outage period exceeds seventy-two (72) hours or one (1)
hour, as the case may be, at the rate of 1/1440 of the monthly rate or charge
applicable to the Circuits which are subject to the outage period for each
half-hour or major fraction thereof that an outage period continues beyond
seventy-two (72) hours or one (1) hour, as the case may be. For purposes of
the foregoing, "Catastrophic Outage" includes outages caused by a cable cut or
radio failure, an equipment enclosure fire, an explosion, or any other
circumstances of an extraordinary and catastrophic nature and a Non-
Catastrophic Outage" includes all other outages.
<PAGE>
<PAGE>
(ii) No credit shall be allowed with respect to any period
during which Customer fails to afford access to any facilities provided by
Supplier for the purpose of investigating and correcting an interruption of
Service.
(iii) The Monthly Lease Rates used to determine any credit
hereunder shall be the then current Monthly Lease Rates being assessed.
(iv) The seventy-two (72) hour and One (1) hour periods set
forth above shall be extended by the period during which Supplier is unable to
restore Service due to an event or circumstance described in Paragraph 18 of
the Switched Minute Service Agreement.
(v) In no event shall any credit be allowed hereunder (1) in
excess of the then current Monthly Lease Rate for the applicable Circuit or
(2) with respect to any Circuit for which Customer (i) fails to make or (ii)
is excused from making any payment because of operation of law or any other
reason.
(C) Calculations of credits shall be based upon Supplier's Customer
Service Group Log maintained in Supplier's Network Status Center.
(D) No credit allowances will be made for outage periods:
(i) caused by Customer and/or Customer's end user;
(ii) caused by the failure of equipment or systems provided by
Customer and/or Customer's end user or persons other than Supplier, including
any provider of local access service to Supplier,
(iii) occurring with respect to a Circuit released by Customer to
Supplier to perform scheduled maintenance, to make rearrangements, or to
implement an order for a change in the Circuit; or
(iv) occurring with respect to a Circuit which Customer elects
not to release for testing or repair and continues to use on an impaired
basis;
(E) The credit provided for hereunder shall be Supplier's sole
liability and Customer's sole remedy in the event of any outage periods or
interruption of Service.
(F) In the event Supplier determines it is necessary to interrupt
Service on a Circuit for maintenance, Supplier shall use its best efforts to
give Customer notice thereof by telephone 48 hours prior to such Service
interruption. Supplier will use its best efforts to schedule such Service
interruptions on weekends between midnight and 3:00 am Credits will not be
allowed with respect to such Service interruptions.
To confirm their agreement to be bound hereby, the parties hereto have
executed this addendum below:
SUPPLIER: CUSTOMER:
IXC Long Distance, Inc. Computer Telephone Corp.
By: /s/ John R. Fleming By: /s/ David E. Mahan
Executive Vice President
Its: and Chief Operating Officer Its: Vice President
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TELECOMMUNICATIONS SERVICE AGREEMENT
This Agreement is made as of June 23, 1995, between IXC Long Distance,
Inc. ("Supplier"), and Computer Telephone Corp., a Massachusetts corporation
("Customer").
1. Scope. Supplier is authorized: (i) to use its best efforts (considering
the needs of its other customers) to start provisioning of telecommunications
services (such services, together with the use of the IXC Online Software, are
referred to as the "Services") to Customer on the Service Commencement Date,
July 1, 1995; and (ii) to act as Customer's agent in placing orders with other
carriers in order to provide telecommunications services, if requested. Usage
charges ("Usage Charges") hereunder shall be based on: (i) the rates for
Service set forth in Exhibit A-1 through A-7, as applicable; and (ii) actual
usage of Supplier's network from establishment of a connection between the
calling telephone and the called telephone to termination, as determined by
Supplier.
2. Customer Responsibilities.
A. Customer shall use its best efforts to solicit and market the
Services in accordance herewith and with applicable law. Customer shall at
all times conduct its efforts in a commercially reasonable and ethical manner.
Customer shall pay all its expenses in connection with its business and its
performance hereunder. Customer shall provide its own billing and customer
service to its customers ("End-Users"). Customer shall obtain a letter of
agency ("LOA") from each End-User in compliance with applicable Federal
Communications Commission ("FCC") and state regulations, however, Customer
must obtain a signed LOA from each End-User utilizing 800 service. Customer
shall retain the signed LOA's and promptly make originals available upon
request of Supplier, any local exchange carrier ("LEC") or any regulatory
agency. Customer shall be responsible for LEC Primary Interexchange Carrier
change charges ("PIC Charges") that may be imposed on Supplier as a result of
End-Users moving onto or off of the Supplier network. In the event of a
disputed transfer to the Supplier network, including, but not limited to those
resulting from Customer's inability or refusal to provide original End-User
LOA's when requested, Customer shall pay Supplier such PIC Charges, and any
other expenses or damages suffered by Supplier relating to any such transfer.
To the extent Customer makes any statements or representations to third
parties (including End-Users) with regard to Supplier, the Services, or the
terms here, such statements or representations shall be true and not
misleading. When applicable, Customer will be responsible for notifying each
End-User, in writing (or by any other means approved by the FCC that: (i) a
transfer charge will be reflected on such End-User's LEC bill for effecting a
change in their primary interexchange carrier, (ii) the entity name under
which such End-User's interstate, intrastate and/or operator services will be
billed (if different from Customer), and (iii) the "primary" telephone
number(s) to be used for maintenance and questions concerning such End-User's
long distance service and/or billing. Customer agrees to send Supplier a copy
of the documentation Customer uses to satisfy the above requirements promptly
upon request. Supplier may change the foregoing requirements at any time in
order to conform with applicable FCC and state regulations. Notwithstanding
the foregoing, however, Customer shall be solely responsible for ensuring that
the transfer of End-Users to the Supplier network conforms with applicable FCC
and state regulations, including, without limitation, the regulations
established by the FCC with respect to verification of orders for long
distance service generated by telemarketing.
B. Prior to the Service Commencement Date and by the end of each
quarter thereafter, Customer shall provide Supplier with forecasts covering a
good faith estimate of the monthly traffic volume and distribution for the
ordered Services for the next three calendar months. The forecasts are to be
in the format attached hereto as Exhibit B.
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3. Excluded ANIs. Supplier has the right to reject any automatic number
identifier ("ANI") supplied by Customer for any of the following reasons: (i)
Supplier is not authorized to provide or does not provide long distance
services in the particular jurisdiction in which the ANI is located; (ii) a
particular ANI submitted by Customer is not in proper form; (iii) Customer is
not certified to provide long distance services in the jurisdiction in which
the ANI is located; (iv) Customer is in default of this Agreement; (v)
Customer fails to cooperate with Supplier in implementing reasonable
verification processes determined by Supplier to be necessary or appropriate
in the conduct of business; or (vi) any other circumstance reasonably
determined by Supplier which could adversely affect Supplier's performance
under this Agreement or Supplier's general ability to transfer its other
customers or other End-Users to the Supplier network, including without
limitation, Supplier's ability to electronically effect PIC change with the
LEC's. However, whether or not Supplier is not electronically connected to
the LEC's, Supplier shall issue PIC orders on behalf of Customer. In the
event Supplier rejects an ANI, Supplier will notify Customer within
forty-eight (48) hours of its decision specifically describing the rejected
ANI and the reason(s) for rejecting that ANI. Further, any ANI requested by
Customer for Service may be deactivated by Supplier after five-days' written
notice to Customer if no Service billings relevant thereto have been generated
in any prior period of three consecutive calendar months. Supplier will be
under no obligation to accept ANIs within the three-month period preceding the
scheduled expiration of the term hereof.
4. Records. Customer will maintain documents and records ("Records")
supporting Customer's re-sale of Service, including, but not limited to,
appropriate and valid LOAs from End-Users for a period of not less than twelve
(12) months or such other longer period as may be required by applicable law,
rule or regulation. Customer shall indemnify Supplier for any costs, charges
or expenses incurred by Supplier arising from disputed PIC selections
involving Service to be provided to Customer for which Customer cannot produce
an appropriate LOA relevant to the ANI and PIC Charge in question, or when
Supplier is not reasonably satisfied that the validity of a disputed LOA has
been resolved.
5. Fraudulent Calls. Customer shall indemnify and hold Supplier harmless
from all costs, expenses, claims or actions arising from fraudulent calls of
any nature which may comprise a portion of the Service to the extent that the
party claiming the call(s) in question to be fraudulent is (or had been at the
time of the call) an End-User of the Service through Customer or an End-User
of the Service through Customer's distribution channels. Customer shall not
be excused from paying Supplier for Service provided to Customer or any
portion thereof on the basis that fraudulent calls comprised a corresponding
portion of the Service. In the event Supplier discovers fraudulent calls
being made (or reasonably believes fraudulent calls are being made), nothing
contained herein shall prohibit Supplier from taking immediate action (without
notice to Customer) that is reasonably necessary to prevent such fraudulent
calls from taking place, including without limitation, denying Service to
particular ANI's or terminating Service to or from specific locations.
6. SubCIC Option. Supplier shall, at the request of Customer, arrange
under Supplier's carrier identification code ("CIC") for a SubCIC for
Customer. Customer shall pay all incremental associated charges and expenses
incurred by Supplier in connection therewith, on a pass-through basis, without
markup by Supplier.
7. Authorized Use of Supplier Name. Without Supplier's prior written
consent, Customer shall not: (i) refer to itself as an authorized
representative of Supplier in promotional, advertising or other materials; or
(ii) use Supplier's logos, trade marks, service marks, or any variations
thereof in any of its promotional, advertising or other materials or in any
activity using or displaying Supplier's name or the Services to be provided by
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Supplier. Customer agrees to change or correct, at Customer's expense, any
such material or activity which Supplier, in its sole judgment, determines to
be inaccurate, misleading or otherwise objectionable. Customer is explicitly
authorized to only use the following statements in its sales literature: (i)
"Customer utilizes the Supplier network"; (ii) "Customer utilizes Supplier's
facilities; (iii) "Supplier provides only the network facilities"; and (iv)
"Supplier is our network services provider".
8. Term. This Agreement is effective as of the date hereof and shall
remain in force and effect until December 31, 1999, unless earlier terminated
pursuant to its terms. This Agreement shall be automatically extended at the
expiration of the initial and any subsequent term for an additional term of
one year unless: (i) earlier terminated; or (ii) written notice is given by
any party at least ninety (90) days before such expiration that such party
does not consent to such extension.
9. Charges. Payment and Security Interest.
A. All Usage Charges shall be due and payable by Customer to Supplier
within 60 days of the date of invoice, without demand or set off by Customer;
provided, however, that to the extent Customer disputes a portion of an
invoice because it has received what it considers in good faith to be
materially incorrect CDR's (as such term is defined in Section 10), the due
date for such disputed portion shall be delayed for as long as Customer
cooperates in good faith to resolve such dispute. Usage Charges are billed
and payable following the period in which actual usage has been incurred. All
Usage Charges contained in this Agreement are calculated according to the
rates set forth in Exhibit A
attached hereto. If any invoice is not paid when due: (i) a late charge shall
accrue equal to 1-1/2% (or the maximum legal rate, if less) of the unpaid
balance per month; (ii) Supplier may suspend or terminate the Service; or
(iii) Supplier may require additional deposits or a lock-box arrangement
acceptable to Supplier. Notwithstanding the foregoing, Customer may elect to
make payment within 15 days of the date of invoice, for which it shall be
allowed a 1% early payment discount; provided, however that once such election
is made, the 1% discount remains in effective only as long as such payments
are made within such 15 day period and upon the failure of Customer to make
such payments within such 15 day period, the 1% discount shall terminate and
the Customer may not elect to receive the 1% discount on any future payments.
B. Customer represents to Supplier that it expects to purchase
Services hereunder in at least the following amounts (the "Commitment"): (i)
$350,000.00 each month, commencing January 1, 1996 and ending June 30,
1996;(ii) $750,000.00 each month, commencing July 1, 1996 and ending December
31, 1996; and (iii) $1,000,000.00 each month, commencing January 1 , 1 997 and
ending December 31 , 1999. The rates Supplier shall charge Customer for
Services are dependent on the aggregate amount of Services (the "Volume") per
month provided hereunder to Customer. The initial rates were based on
Customer's commitment to purchase the Services at the $1,000,000.00 level.
Supplier shall review the rates charged to Customer six months from the
Service Commencement Date and every six months thereafter for the term of this
Agreement. In the event Customer has failed to purchase the Commitment level
on average for each designated six month period, then Customer's rates shall
not have been consistent with the rate parties have agreed is appropriate for
such Service level (in accordance with Standard Rates in Exhibit A) and
Customer's rates shall be adjusted. The rate adjustment for any such six
month period shall be made in the amount of the difference between the actual
charges for the Volume purchased over such six month period and the applicable
rate for the shortfall between the purchased Volume and the Commitment level.
Customer shall immediately upon the receipt of Supplier's invoice therefor,
pay to Supplier the amount of such rate adjustment.
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C. Prior to service activation, but in no event later than thirty
(30) days after the end of each fiscal quarter, Customer shall provide
Supplier with a consolidated balance sheet of Customer as of the end of such
quarter and consolidated statements of income and retained earnings for such
quarter and the fiscal year to date through such quarter, all in reasonable
detail and certified by Customer's chief financial officer as having been
prepared in accordance with generally accepted accounting principals,
consistently applied.
D. In the event Customer's monthly invoicing hereunder reaches Two
Million and No/100 Dollars ($2,000,000.00) per month (or any greater multiple
of $1,000,000.00), Supplier shall meet with Customer and negotiate in good
faith with Customer to agree to mutually agreeable rates appropriate for the
applicable monthly billing level customer has achieved; provided, however
that: (i) no such new rates shall be in effect prior to July I, 1996; and (ii)
no failure to reach agreement on such new rates shall effect the validity or
enforceability of this Agreement or any part hereof, including, without
limitation, the Commitment set forth above.
E. Concurrently herewith, Customer has deposited with Supplier an
irrevocable, standby letter of credit for the benefit of Supplier, in form and
substance reasonably satisfactory to Supplier from a lender reasonably
satisfactory to Supplier in the amount of $100,000.00 (the "Security
Deposit"), which amount is agreed to between Supplier and Customer hereunder
as security for the full and faithful performance of Customer of the terms,
conditions and covenants of this Agreement. If at any time during the term of
the Agreement, Customer defaults in the payment of any Usage Charges, or any
other amounts payable by Customer to Supplier hereunder, then Supplier may
appropriate and apply any portion of the Security Deposit reasonably necessary
to remedy any such default. If during the term of the Agreement, Supplier so
applies all or any portion of the Security Deposit, then Customer shall
restore the amount of the Security Deposit so applied by Supplier on or before
the next due payment of Usage Charges under this Agreement. If, however,
invoices for Services during any month provided by Supplier exceed one half of
the Security Deposit, at the request of Supplier, Customer shall within five
(5) days (i) provide an additional cash deposit; or (ii) other form of
security satisfactory to Supplier which in either case, shall be in an amount
equal to the amount by which the invoice for such month exceeds one-half of
the amount of the Security Deposit held by Supplier. In addition, if at any
time during the term of this Agreement there is a material and adverse change
in Customer's financial condition or business prospects, which shall be
determined by Supplier in its sole and absolute discretion, then Supplier may
demand that Customer increase the amount of the Security Deposit; provided,
however, that in no event shall the amount of the Security Deposit ever exceed
two months' estimated Usage Charges and other amounts payable by Customer to
Supplier hereunder.
F. Notwithstanding anything to the contrary in Section 9.E, above, at
any time during the term of the Agreement, Supplier shall release the Security
Deposit to Customer, in consideration of Customer's undertaking of any of the
following actions: (i) Obtaining for the benefit of Supplier an irrevocable,
standby letter of credit, in form and substance reasonably satisfactory to
Supplier, from a lender reasonably satisfactory to Supplier, securing the
prompt payment, when due, of the estimated Usage Charges and other amounts due
and payable by Customer to Supplier hereunder during any given two-month
period; (ii) (a) granting to Supplier a continuing, floating, first priority
security interest and lien in and to the Collateral (as defined below) on the
terms and subject to the conditions of a security agreement in form and
substance reasonably satisfactory to Supplier, and (b) depositing with
Supplier a Security Deposit in the amount of one months' estimated Usage
Charges and other amounts due and payable by Customer to Supplier hereunder;
(iii) directing all of Customer's End-Users to deposit any money owed by such
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End-Users to Customer directly into a lock box account for the benefit of
Supplier, and authorize Customer's bank to make automatic clearing house fund
transfers from such lock box account to the account of Supplier in amounts
initially agreed to by Customer and Supplier, on the terms and subject to the
conditions of an escrow agreement in form and substance reasonably
satisfactory to Supplier. Customer shall execute from time to time such
additional instruments as may be reasonably required by Supplier to preserve
and perfect any security interest created hereunder. For purposes of this
subparagraph (ii), the term "Collateral" shall mean all of the following
assets of Customer, now or hereafter existing, wherever located, and all
additions, substitutions, proceeds, products, offsprings, rents and profits
thereof; all accounts receivable, all customer lists, mailing lists, customer
information and customer data bases, including, without limitation, any and
all tangible assets embodying any or all of the foregoing information, and any
and all computer software or printouts embodying any or all of the foregoing
information.
10. Calculation of Call Duration. Supplier will calculate call duration for
Call Detail Records ("CDR's") which will be sent to Customer by Supplier for
Customer to rebill Customer's End-Users, based upon the IXC On-line software
specifications defined in Exhibit C. Customer may request CDR's from Supplier
and Supplier shall provide CDR's within five business days from the end of the
month in which service is rendered. Customer shall specify one of the
following formats for CDR's: (i) electronically transmitted, (ii) floppy disk,
or (iii) hard copy. CDR's shall be made available for up to a year from the
date of service. The information format of the CDR's is attached hereto as
Exhibit D.
11. Failure of Performance.
A. Customer shall immediately notify Supplier of any problems or
End-User complaints associated with the Service, including, but not limited
to, excess noise, echo or loss of Service. The liability of Supplier for
damages for mistakes, omissions, interruptions, delays, errors or defects in
transmission (herein called a "Failure of Performance") occurring in the
furnishing of Services hereunder shall be limited to not charging Customer for
any Services which Supplier failed to provide. In the event of a Failure of
Performance, Supplier shall use its reasonable efforts to correct such failure
as soon as reasonably practicable after Supplier is notified of such failure.
Except in the case of an event described in Section 18. Force Majeure, in the
event (i) Supplier notifies Customer that Supplier cannot correct a Failure of
Performance; or (ii) of a failure by Supplier to deliver Services meeting
industry standards of performance, which failure is not cured within five (5)
days of written notice thereof by Customer to Supplier; each of Supplier and
Customer, in its sole discretion, shall have the right to cancel the affected
Service(s). In the event all, or any portion of, the Services are terminated
pursuant to this paragraph, Customer shall remain liable for the Usage Charges
for the affected Services which were rendered prior to the effective date of
termination.
12. Limitation of Liability. Supplier's liability arising out of delays in
restoration of the Services to be provided under this Agreement or out of
mistakes, accidents, omissions, interruptions, or errors or defects in
transmission in the provision of Services or any other telecommunications
services, shall be subject to the limitations set forth above and in the
applicable Tariff. IN NO EVENT SHALL SUPPLIER BE LIABLE TO CUSTOMER OR ANY OF
THE CUSTOMER'S OWN CUSTOMERS OR ANY OTHER THIRD PARTY IN ANY RESPECT,
INCLUDING, WITHOUT LIMITATION, FOR ANY DAMAGES, EITHER DIRECT, INDIRECT,
CONSEQUENTIAL, SPECIAL INCIDENTAL, ACTUAL, PUNITIVE, OR ANY OTHER DAMAGES, OR
FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER, ARISING OUT OF
MISTAKES, ACCIDENTS, ERRORS, OMISSIONS, INTERRUPTIONS, OR DEFECTS IN
TRANSMISSION, OR DELAYS, INCLUDING THOSE WHICH MAY BE CAUSED BY REGULATORY OR
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JUDICIAL AUTHORITIES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OBLIGATIONS OF SUPPLIER PURSUANT TO THIS AGREEMENT. SUPPLIER MAKES NO
WARRANTY TO CUSTOMER OR ANY OTHER PERSON OR ENTITY, WHETHER EXPRESS, IMPLIED,
OR STATUTORY, AS TO THE DESCRIPTION, QUALITY, MERCHANTABILITY, COMPLETENESS OR
FITNESS FOR ANY PURPOSE OF ANY SERVICE PROVIDED HEREUNDER OR DESCRIBED HEREIN,
OR AS TO ANY OTHER MATTER, ALL OF WHICH WARRANTIES BY SUPPLIER ARE HEREBY
EXCLUDED AND DISCLAIMED. For purposes of this Section, the term "Supplier"
shall be deemed to include Supplier, its shareholders, directors, officers and
employees, and any, person or entity assisting Supplier in its performance
pursuant to this Agreement.
13. Suspension of Service: Termination of Agreement. In the event of a
"Customer Default", Supplier may, upon notice to Customer (in addition to such
other rights or remedies as Supplier may have under this Agreement, at law or
in equity): (i) suspend Services to Customer until such time as such
circumstance is corrected (provided Supplier shall not be prohibited from
terminating this Agreement after suspending Services); or (ii) terminate this
Agreement. "Customer Default" shall mean Customer: (i) breaches any material
provision of this Agreement, including, but not limited to, the provisions
regarding payment, and does not cure such breach within thirty (30) days (five
days with respect to the first three payment breaches and no notice period
with respect to any further payment breach) of notice thereof by Supplier; or
(ii) files or initiates proceedings or has proceedings filed or initiated
against it, relating to its liquidation, insolvency, reorganization or other
relief (such as the appointment of a trustee, receiver, liquidator, custodian
or other official) under any bankruptcy, insolvency or other similar law or
makes an assignment for the benefit of its creditors or enters into an
agreement for the composition, extension or readjustment of its obligation in
connection with the foregoing. Supplier shall have the right to review
Customer's credit at any time during the Term of this Agreement, and to
require an additional cash deposit, or other security satisfactory to
Supplier. If Customer uses the Services for any unlawful purpose or in any
unlawful manner, Supplier shall have the right to suspend any or all services
hereunder to Customer until the unlawful use ceases. Notwithstanding anything
herein to the contrary, no termination shall affect or reduce Customer's
obligation to make the "take or pay commitment" payments required by Section
9.
14. System Maintenance. In the event Supplier determines to interrupt
Services for the performance of routine system maintenance, Supplier will use
reasonable efforts to notify Customer prior to the interruption and to conduct
such maintenance during non-peak hours. In no event shall interruption for
system maintenance constitute a Failure of Performance.
15. Subject to Laws. Customer hereby represents and warrants that it is
certified to do business in all jurisdictions in which it conducts business
and is in good standing in all such jurisdictions. Customer further
represents and warrants that it is certified by the proper regulatory agencies
to provide interstate, intrastate and international long distance services to
End-Users in those jurisdictions where such services are to be provided by
Customer. This Agreement is subject to, and Customer agrees to comply with,
all applicable federal, state and local laws, and regulations, rulings and
orders of governmental agencies, including, but not limited to, the
Communications Act of 1934, as amended, the Rules and Regulations of the FCC
and state public utility or service commissions ("PSC"), tariffs and the
obtaining and continuance of any required certification, permit, license,
approval or authorization of the FCC and PSC or any governmental body,
including, but not limited to regulations applying to feature group
termination and letters of agency.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and when taken
together shall constitute one document.
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17. Confidential Information and Nonsolicitation.
A. "Confidential Information" shall mean all information disclosed
orally or in writing by one party to the other party and which is clearly
identified by the disclosing party at the time of disclosure as confidential
information of the disclosing party. With respect to information orally
disclosed by one party to the other party, the disclosing party must provide
the recipient with a written summary of such information, designating such
information as confidential, within one week after the oral disclosure was
made in order for such information to be considered Confidential Information.
Each party shall safeguard Confidential Information utilizing the same degree
of care it utilizes in protecting its own confidential information. The
obligations of the recipient of Confidential Information set forth in this
Section shall not apply to the extent that: (i) such Confidential Information
becomes generally available to the public other than as a result of
unauthorized disclosure by the recipient or persons to whom the recipient has
made the information available; (ii) such Confidential Information has been
released without restriction by the disclosing party to another person or
entity, or (iii) such Confidential Information was received by the recipient
on a non-confidential basis, prior to receipt from such party from a third
party lawfully possessing and lawfully entitled to disclose such information.
Further, the recipient may disclose Confidential Information pursuant to
any judicial or governmental request, requirement or order. The recipient,
however, shall take reasonable steps to give the disclosing party sufficient
prior notice to contest such request, requirement or order. Confidential
Information shall remain the property of the disclosing party, and shall be
returned to the disclosing party or destroyed upon request of the disclosing
party.
B. All information concerning the Customer's traffic
volume/distribution and the identity of the Customer's customers given to
Supplier by Customer or learned in connection with this Agreement or any other
transaction between Supplier and Customer is hereby acknowledged by Supplier
to be Confidential Information regardless of whether it is so identified by
Customer.
C. All information concerning Supplier traffic volume/distribution
and the identity of Supplier's customers given to Customer by Supplier or
learned in connection with this Agreement or any other transaction between
Supplier and Customer is hereby acknowledged by the Customer to be
Confidential Information regardless of whether it is so identified by
Customer.
D. Accordingly, in the event of a breach or threatened breach of the
foregoing provisions, Supplier shall be entitled to an injunction or
restraining order, in addition to such other rights or remedies as may be
available under this Agreement, at law or in equity, including but limited to
money damages.
18. Force Majeure. Except for Customer's right to terminate the Agreement
pursuant to Section 8, Supplier shall not be liable for any failure of
performance hereunder due to causes beyond its reasonable control, including,
but not limited to: acts of God, fire, explosion, vandalism, cable cut, storm
or other similar catastrophes; any law, order, regulation, direction, action
or request of the United States government, or of any other government,
including state and local governments having jurisdiction over either of the
parties, or of any department, agency, commission, court, bureau, corporation
or other instrumentality of any one or more of said governments, or of any
civil or military authority, national emergencies, insurrections; riots; wars;
or strikes, lock outs, work stoppages or other labor difficulties.
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19. Survival. The covenants and agreements of Customer contained in this
Agreement with respect to payment of amounts due and indemnification shall
survive any termination of this Agreement. The rights and obligations under
this Agreement shall survive any merger or sale of either party and shall be
binding upon the successors and permitted assigns of each party.
20. Notices. All notices required under this Agreement shall be given in
writing and delivered by a nationally recognized overnight courier, postage
prepaid, to the addresses set forth below:
If to Supplier: IXC Long Distance Inc.
5000 Plaza on the Lake, Suite 200
Austin, Texas 78746
Attention: Executive Vice President and
Chief Operating Officer
If to Customer: Computer Telephone Corp.
____________________
____________________
____________________
21. Taxes. (i) Customer is responsible for payment of, or reimbursement to
Supplier for, Universal Service Fund and Lifeline Assistance Charges
(Presubscribed line charges) set forth in the National Exchange Carrier
Association (NECA) Tariff FCC #5, sections 8.5.1, 8.5.2 and 17.1.4 (A) & (B),
as the same may be amended from time to time, or any successor tariffs or
sections, with respect to any Customer ANI's subscribed to Supplier. In
addition, with respect to the Services, Customer is responsible for payment
of, or reimbursement to Supplier for, (i) telecommunication relay service
charges required by the Americans with Disabilities Act or otherwise (both
federal and state), (ii) Interexchange carrier fees payable to the FCC under
the Omnibus Budget Reconciliation Act of 1993 or otherwise, and (iii)
universal service fund charges, intraLATA compensation charges and other
federal or state fees or charges imposed on Supplier.
(ii) Within 10 business days after the date hereof, Customer
shall each furnish to Supplier, and keep current during the term of this
Agreement, valid and appropriate tax exemption certificates attached hereto as
Exhibit E, for all applicable jurisdictions (Federal, state and local) in
which it performs customer billing. Customer is responsible for properly
charging tax to its subscribers and for the proper and timely reporting and
payment of applicable taxes to the taxing authorities and shall defend and
indemnify Supplier from payment and reporting of all applicable federal, state
and local taxes, including, but not limited to, gross receipts taxes,
surcharges, franchise fees, occupational, excise and other taxes (and
penalties and interest thereon), relating to the Services. Such
indemnification, includes costs and expenses (including reasonable attorney's
fees) incurred by Supplier in settling, defending or appealing any claims or
actions brought against it relating to said taxes. If Customer fails to
provided and maintain the required certificates, Supplier may charge Customer
and Customer shall pay such applicable taxes.
22. General Terms. This Agreement shall be construed under the laws of the
state of Texas. The waiver of a breach hereof shall not be construed to be a
waiver of any subsequent breach. Supplier may terminate this Agreement
without liability if Customer becomes bankrupt or insolvent. Any dispute
relating hereto shall be resolved by binding arbitration in Austin, Texas
under the rules of the American Arbitration Association. If any term hereof
is held to be invalid or unenforceable, this Agreement shall be construed
without such invalid or unenforceable term. This Agreement is the entire
agreement between the parties pertaining to the Service. This Agreement may
only be modified by an instrument in writing executed by each party. Neither
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party may assign this Agreement without the written consent of the other
party; provided, however, that a security interest in this Agreement may be
granted by Supplier to its lenders. The rates hereunder do not include any
sales, use or utility taxes. Customer shall pay to Supplier any such taxes
that Supplier may be required to collect or pay.
To confirm their agreement to be bound hereby, the parties have executed this
agreement below:
IXC LONG DISTANCE, INC.: COMPUTER TELEPHONE CORP.:
/s/ /s/
By: ______________________ By: _________________________
Its: EVP & COO Its: Vice Chairman
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Exhibit List
Exhibit A-l IXC Interstate Switched and
Dedicated 1+ and 1-800 Rates and
Xclusive Intrastate 1+ and 1-800 Switched,
Dedicated and Switched Travel Card Rates
Exhibit A-2 IXC Private Line Addendum
Exhibit A-3 IXC Xclusive Extended State Rates
Exhibit A-4 IXC International Rates
Exhibit A-5 IXC Xclusive Card Services
Exhibit A-6 IXC Other Service Charges
Exhibit A-7 IXC Standard Interstate Switched and
Dedicated 1+ and 1800 Rates
Exhibit B IXC Forecast Form
Exhibit C IXC On-Line Software Agreement Requirements
Exhibit D IXC CDR Format
Exhibit E Tax Certificate (to be attached)
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Exhibit A-2
Private Line Addendum
This Private Line Addendum is attached to and made a part of that
certain Telecommunications Service Agreement entered into by and between IXC
Long Distance, Inc. and Computer Telephone Corp. with a service commencement
date of July 1, 1995.
1. Definitions. For the purposes of this :Agreement
(A) "Available" shall mean, with respect to any Circuit, that all
necessary equipment with respect to such Circuit has been installed,
connected, tested and confirmed by Supplier to be operating in accordance with
the required specifications.
(B) "Activation Date" shall mean, with respect to any Circuit, the date
such Circuit is first made available to Customer.
(C) "Circuit" shall mean a DS-0, DS-1 or DS-3.
(D) "Circuit Lease Term" shall mean, with respect to any Circuit, the
period from the Activation Date of such Circuit to the end of the term of this
Agreement.
(E) "Circuit Mileage" shall mean, with respect to any Circuit, the
length of such Circuit in airline miles computed according to industry
standard V&H coordinates, as specified in the purchase order pursuant to which
such Circuit is ordered.
(F) "City Pair" shall mean, with respect to any Circuit, the two cities
in which such Circuit terminates, as specified in the purchase order pursuant
to which such Circuit is ordered.
(G) "DS-0" Circuit Mile Rate" shall mean, with respect to any Circuit,
the rate, if any, so designated with respect to such Circuit in the purchase
order pursuant to which such Circuit is ordered.
(H) "DS-0" shall mean a Circuit complying with all applicable Bellcore
standards in accordance with TR-TSY 000333 "Switched and Special Access
Services - Transmission Parameter Limits and Interface Combinations" Issue 1,
July 1990.
(I) "DS-1" shall mean a Circuit meeting the specifications set forth in
AT&T Technical Reference Pub. 62411, December 1990 and Bellcore
TR-MWT-000488, Issue 4, November 1991, Revision 1, April 1992.
(J) "DS-3" shall mean a Circuit meeting the specifications set forth in
AT&T Technical Reference Pub. 63914 Addendum 3, March, 1990 and Bellcore
TB-NWT-608488, Issue 4, November 1991, Revision 1, April 1992.
(K) "Monthly Lease Rate" shall mean, with respect to any Circuit, the
amount designated in Exhibit A hereto, or if different, in the purchase order
accepted by Supplier pursuant to which such Circuit is ordered. In the event
no such amount is so designated, such term shall mean (1) with respect to any
DS-1, the product of (i) 24, (ii) the DS-0 Circuit Mile Rate for such DS-1,
and (iii) the Circuit Mileage for such DS-I, and (2) with respect to any DS-3,
the product of (i) 672, (ii) the DS-0 Circuit Mile Rate for such DS-3 and
(iii) the Circuit Mileage for such DS-3. On-net DS-0 Ancillary Pricing is set
forth in Exhibit B attached hereto.
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(L) "On-net Service" shall be service between any of the cities
contained in Exhibit C attached hereto. "On-net City" shall mean any such
city. "On-net DS-0," "On-net DS-I" or "On-net DS-3" shall mean a DS-0, DS-I
or DS-3, respectively, between two On-net Cities. "Off-net Service" cities
are set forth on Exhibit D attached hereto and made a part hereof.
(M) "Requested Service Commencement Date" shall mean, with respect to
any Circuit, the date Service on such Circuit is requested by Customer to
commence as specified in the purchase order pursuant to which such Circuit is
ordered.
2. Scope and Lease Rates. Supplier shall provide Service to Customer upon
the terms and conditions set forth below:
(A) Service shall be provided with respect to each Circuit set forth in
each purchase order between Supplier's locations in each city of the City Pair
specified in such purchase order with respect to such Circuit.
(B) Supplier shall provide maintenance for all digital transmission
equipment used in connection herewith
(C) Supplier shall use its best efforts consistent with its obligations
to its other customers to provide Service on each Circuit commencing on the
Requested Service Commencement Date specified with respect to each Circuit.
(D) SuppLier shall provide Service to each Circuit ordered hereunder
from the Activation Date of such Circuit for the Circuit Lease Term for such
Circuit.
(E) Customer may, at its option and upon 30 days' notice to Supplier,
reconfigure On-net Circuits originating in a particular city by canceling such
Circuits and simultaneously ordering new On-net Circuits originating in such
city from Supplier's unused capacity, but only if all the following conditions
are met (i) such Circuits to be canceled have been in service at the time of
such reconfiguration for at least 90 days; (ii) Service capacity on each such
new Circuit is available from Supplier (Supplier shall not be obligated to
construct new Circuit capacity to fill any purchase order); (iii) Customer
shall pay for such reconfiguration all applicable charges; and (iv) the
aggregate monthly invoicing hereunder for the new Circuits involved in such
reconfiguration must be equal to, or greater than, the aggregate monthly
invoicing for the canceled Circuits.
3. Termination.
(A) Customer may terminate Service with respect to any Circuit upon
ninety (90) days prior written notice thereof to Supplier and payment of all
termination charges set forth below. Such termination charges shall include:
(i) In the event such termination occurs prior to the Activation Date
specified with respect to such Circuit, all nonrecoverable costs of the
implementation of, and expenditures or liabilities reasonably incurred and
directly connected with, the provision of Service, including but not limited
to, all professional, consulting and other costs incurred by Supplier in
furtherance of implementing such Service; and
(ii) In the event each termination occurs at or after the Activation
Date specified with respect to such Circuit, Customer shall pay all charges
hereunder for the period during which Service is rendered on such Circuit. If
Service on a Circuit is terminated prior to the expiration of this Agreement,
Supplier shall make its best efforts to lease Service on such Circuit at no
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less than the Monthly Lease Rate for such Circuit. In the event Supplier
cannot lease Service on such Circuit on the same or substantially similar
terms and conditions as set forth herein, Customer shall be liable for payment
(1) for the total amount due through the end of the term of this Agreement
with respect to such Circuit less (2) the total amount collected by Supplier
from any other lessee with respect to such Circuit
(B) Customer shall give written notice to Supplier of any material
breach in performance hereunder. Supplier shall have forty-five (45) days
after such notice to cure such breach If after such 45-day period, Supplier
fails to cure such breach, including, but not limited to, compliance with the
material technical and operational specifications applicable to a Circuit.
Customer may terminate Service on the such affected Circuit In the event of
such termination, Customer's liability with respect to such Circuits shall be
limited to the Monthly Lease Rate for the affected Service which was properly
rendered prior to the effective date of such termination.
(C) In the event Supplier fails to provide the Service within six months
of the Requested Service Commencement Date for such Circuit, then Customer, at
its option, may terminate that Service on the affected Circuit without any
liability whatsoever. Such right to terminate shall be Customer's sole remedy
for such failure to provide Service.
4. Allowance for Service Outage Periods.
(A) A Circuit shall be deemed to be in an outage condition under this
Agreement if, while Customer is using or attempting to use such Circuit, such
Circuit loses continuity and fails to comply with the applicable
specifications for such Circuit An outage period begins when a report is
received by Supplier's Customer Service Group from Customer by telephone that
Service has been interrupted and that such Circuit is released for repair. An
outage period ends when Supplier notifies Customer by telephone that Service
has been restored.
(B) A credit for each outage period shall be allowed and calculated as
follows:
(i) No credit shall be allowed for an outage period of seventy-two (74
hours or less in the case of a Catastrophic Outage (as defined below), or one
(1) hour or less in the case~ of a Non-Catastrophic Outage (as defined below).
Customer shall be credited for an outage period to the extent such outage
period exceeds seventy-two (72) hours or one (1) hour; as the case may be, at
the rate of 1/1440 of the monthly rate or charge applicable to the Circuits
which are subject to the outage period for each half-hour or major fraction
thereof that an outage period continues beyond seventy-two (72) hours or one
(1) hour, as the case may be. For purposes of the foregoing, "Catastrophic
Outage" includes outages caused by a cable cut or radio failure, an equipment
enclosure fire, an explosion, or any other circumstances of an extraordinary
and catastrophic nature and "Non-Catastrophic Outage" includes all other
outages.
(ii) No credit shall be allowed with respect to any period during which
Customer fails to afford access to any facilities provided by Supplier for the
purpose of investigating and correcting an interruption of Service.
(iii) The Monthly Lease Rates used to determine any credit hereunder
shall be the then current Monthly Lease Rates being assessed.
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(iv) The seventy-two (72) hour and One (1) hour periods set forth above
shall be extended by the period during which Supplier is unable to restore
Service due to an event or circumstance described in Paragraph 19 of the
Switched Minute Service Agreement
(v) In no event shall any credit be allowed hereunder (1) in excess of
the then current Monthly Lease Rate for the applicable Circuit or (@ with
respect to any Circuit for which Customer (i) fails to make or (ii) is excused
from making any payment because of operation of law or any other reason
(C) Calculations of credits shall be based upon Supplier's Customer
Service Group Log maintained in Supplier's Network Status Center.
(D) No credit allowances will be made for outage periods:
(i) caused by Customer;
(ii) caused by the failure of equipment or systems provided by Customer
or persons other than Supplier, including any provider of local access service
to Supplier,
(iii) occurring with respect to a Circuit released by Customer to
Supplier to perform maintenance, to make rearrangements, or to implement an
order for a change in the Circuit; or
(iv) occurring with respect to a Circuit which Customer elects not to
release for testing or repair and continues to use on an impaired basis;
(E) The credit provided for hereunder shall be Supplier's sole liability
and Customer's sole remedy in the event of any outage periods or interruption
of Service.
(F) In the event Lesser determines it is necessary to interrupt
Service on a Circuit for maintenance, Supplier shall use its best efforts to
give Customer notice thereof by telephone. Supplier will use its best efforts
to schedule such Service interruptions on weekends between midnight and 3:00
am. Credits will not be allowed with respect to such Service interruptions.
To confirm their agreement to be bound hereby, the parties have executed
this agreement below:
IXC Long Distance, Inc. Computer Telephone Corp.
By: ____________________ By: ____________________
Its: ____________________ Its: ____________________
EXHIBIT 10.10
SERVICE AGREEMENT
THIS AGREEMENT is made this 19th day of August, 1996 by and between
Innovative Telecom Corporation, a Delaware corporation having its principal
office at 2 Harrison Street, Nashua, New Hampshire 03060 (hereinafter
"Innovative") and Computer Telephone Corporation, a Massachusetts corporation
having its principal office at 360 Second Avenue, Waltham, Massachusetts 02154
(hereafter "Client").
WHEREAS, Client desires to purchase certain telecommunications services
from Innovative as described herein;
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which both parties
acknowledge, the parties agree as follows:
1. SERVICES
During the term of this Agreement Innovative shall provide the following
services (the "Services") to and for the benefit of Client:
A. In General. Innovative shall provide prepaid transaction services
(the "Services") for Client, at Innovative's facilities located in New York,
New York. Services are described herein, and in detail in Exhibit A, attached
hereto and made a part hereof.
The Services involve receiving local, long distance or international
calls from Client's customers via Client's carrier facilities, performing
prepaid transaction processing services on those calls, and presenting those
calls for completion via Client's designated local, long distance or
international carriers.
Optional International Termination Service. Client may enter into an
agreement with any carrier or carriers of its choosing for the provision of
international telecommunications services. Innovative shall provide Services
with respect to Client's international calls using such carrier or carriers in
the same manner and for the same rates for domestic calls as specified in
Exhibit A. In the event that Client chooses to use Innovative as a carrier
for international telecommunications services, the-parties shall enter into a
separate agreement governing the rates, terms and conditions of such service.
Intellectual Property. All services and systems provided by INNOVATIVE,
including Services provided pursuant to Work Orders as described herein, shall
be proprietary to INNOVATIVE, and INNOVATIVE shall retain total intellectual
property rights in all Services provided in connection with this Agreement.
B. Responsibilities of the Parties.
This Agreement contains exclusivity and non-compete provisions (see
Section 2).
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1. Innovative. Innovative's switching services will be available 7
days per week, 24 hours per day, 365 days per year. Innovative shall meet the
quality standards described in Exhibit A, and shall provide all services as
further describe in Exhibit A. Services shall be provided in a good and
workmanlike manner.
Carrier Management. The parties shall cooperate to facilitate
Innovative's provision of Carrier management, as more fully described in
Exhibit A.
Call Records. INNOVATIVE will capture Call Detail Records
hereinafter "CDR" for each of Client's calls entering and exiting INNOVATIVE's
equipment. CDR will be stored at the switching location and transferred to a
location designated by Client.
2. Client. Except as provided in Exhibit A, Section 4, all circuit
connections to and from Innovative's equipment are the responsibility of
Client. Long distance access in sufficient capacity according to Client's
quarterly forecasts will be provided by Client to at Client's expense, in
consultation with Innovative. Client must provide a single point of contact
with adequate technical qualifications to communication with Innovative's
technical support personnel.
Tariffs, Taxes. As further defined in Section 3E, Client is
responsible for all state, federal and any required foreign tariffing
requirements, and for payment of all telecommunications, sales and use taxes
in connection with the Services. Except as described in Exhibit A, Section 4,
Client is also responsible for all data-lines and carrier access transport,
local carrier connections, and for providing the unique 800 access number for
the prepaid services.
CDR. Client will provide data line connection to Client's
location and computer equipment to capture the CDR from INNOVATIVE's switch.
B. Pricing. Client shall be billed for prepaid transaction services,
and live operator services if needed, and for Service Enhancements under this
Agreement.
C. Statements. Innovative shall provide billing statements to
Client including total billable minutes, for each category of the Services
described in Exhibit A. Each billing statement shall describe activity for
the previous billing period.
D. Service Enhancements. Enhancements to Innovative's services are
described in Work Orders which signed by both parties, specifying the required
enhancements to Innovative's base platform. Such Work orders, if needed to
provide the Services, are appended to Exhibit A, and are a part thereof. In
the future, further Service Enhancements shall take the form of additional
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Work Orders. Terms of payment pertaining to the changes specified in such
Work Order are defined in each such Work Order. Prices for underlying
Services may be changed in the future if changes or enhancements increase the
cost of providing Services. No patent, copyright or other proprietary or
intellectual property rights will be transferred to Client for any work done
hereunder, including under Work Orders.
Additional Enhancements. Client agrees to purchase Services under
Statements of Work for the implementation of standard post-paid telephone
calling card, or standard 1+ long distance "MTS" services, or other
enhancements as agreed by the parties. Client agrees to make advance payments
against completion of such Statements of Work, payable upon the signing of
such Statements of Work by both parties, and as further described in Exhibit
A. Any carrier functions provided by Innovative shall be dealt with under a
separate agreement.
2. TERM, TERMINATION, EXCLUSIVITY, NON-COMPETITION, RIGHT OF
REFUSAL
A. Term. This Agreement shall be effective on the date shown above
for a Term of 42 months.
B. Termination. Client may terminate at any time on sixty (60) days
written notice, subject to the provisions of C and D below. In addition,
Client may terminate this Agreement free of those provisions, on 60 days
written notice to Innovative, in the event Innovative raises its prices under
Section 3G, such that aggregate billing to Client is increased by more than
158 in any 12 month period, if all increases during the period were applied to
the last month of the period.
C. Exclusivity, Non-Competition. For a period of 18 months following
the effective date of this Agreement (the "Exclusivity and Non-compete
Period"), Client hereby agrees to purchase prepaid calling services through
Innovative exclusively if at all, and directly or indirectly through no other.
The parties agree that this provision is a material inducement to Innovative's
entering into this Agreement, and is consideration for Innovative's
substantial initial investment required to serve Client, which.investment is
not wholly covered by the initial set-up fees quoted herein. The sole
exceptions to this duty of exclusivity-and non-competition shall be (i) in the
event of termination following Innovative's uncured material Default, or (ii)
in the event of allowed termination following price changes as described
above. For purposes of this Section and Section D below, prepaid calling card
services are defined as any performance of the real-time debit function.
D. Right of First Refusal. For the period beginning with the end of
the Exclusivity and Non-compete Period defined in Section C above, and ending
42 months after the effective date of this Agreement, Client shall offer
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Innovative a right of first refusal on any purchase of prepaid calling
services from third parties, on the same terms as that offered to such third
parties. The sole exceptions to this right of first refusal shall be the
exceptions number (i) and (ii) described in C above.
3 PRICE AND PAYMENT
A. Invoices. Innovative shall invoice Client in accordance with the
prices set forth in Exhibit A.
B. Timing. Innovative shall invoice Client according to the schedule
appearing in Exhibit A. Client shall pay each invoice within the time frames
set forth. Innovative shall notify Client of all invoices not paid within
such time, and Client shall have five (5) days after receipt of such notice to
pay such invoices ("Grace Period").
C. Disputes. If any dispute exists with respect to the amount, Client
shall pay the undisputed amount to Innovative, and provide Innovative with a
written memorandum specifying the disputed portion of the invoiced amount and
the basis for such dispute. Client and Innovative each agree that they shall
discuss in good faith and resolve any such disputes if possible within ten
(10) days of receipt by of the written memorandum.
D. Definition of Late Payments. Payments of any invoiced amount
received after the five (5) day Grace Period shall be considered late
payments, and interest shall begin accruing as of the sixth day following the
receipt of notice. Failure to pay such amounts during the Grace Period, in
addition to triggering the accrual of interest, shall be an Event of Default
under this Agreement.
E. Taxes. Except as otherwise provided herein, the prices which
shall be paid by Client under this Agreement do not include any state or local
sales taxes. It is the responsibility of Client or Client's agents to collect
such taxes as may be required, except as explicitly provided herein, and
Client shall reimburse Innovative for applicable sales or use taxes. Client
shall be responsible for all telecommunications taxes.
F. Interest. Payments are deemed paid when received by Innovative.
Past due amounts shall bear interest at the rate of 1.5% per month or the
maximum allowed by applicable law, whichever is less. Client shall pay all
costs of collection.
G. Price Changes. Innovative may change its prices after 12 months,
on 90 days' written notice to Client. Such price changes may affect Client's
right to terminate this Agreement as described in Section 2.
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4. WARRANTY
A. Innovative hereby represents, warrants and agrees as follows:
1. Innovative warrants that it owns or has rights to systems and
equipment adequate to provide Services as specified herein, and that it shall
provide services without substantial and material deviation from those
described herein.
2. Because regulation of telecommunications services changes rapidly,
Innovative makes no warranty that its Services will be deemed in conformity
with state or federal laws or regulations. In the event that filings or other
actions are required by agencies to continue the Services, Innovative will
make all reasonable efforts to promptly conform to such requests.
3. This Agreement is a legal, valid and binding obligation of
Innovative and is and shall remain enforceable against Innovative in
accordance with its terms. Innovative is a corporation duly organized and
validly existing in good standing under the laws of Delaware.
B. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, Innovative MAKES
NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO CLIENT, ANY CONSUMER
OR OTHER PERSON RELATING TO MATTERS ADDRESSED IN THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION, ANY WARRANTIES REGARDING THE MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE OF THE SERVICES.
C. Limitations of Warranty. This Warranty shall not apply, and
Innovative shall have no liability for any harm to Client in the event that a
failure is the result of Client's negligence, or misuse or abuse of the
Services. Client shall notify its customers of the limitations of
Innovative's liability as set forth in this Agreement. Client shall hold
Innovative harmless against any expense, judgment or loss as a result of
Client's failure to notify its customers of Innovative's limited liability or
as a result of any other act or omission of Client. This warranty shall
terminate upon termination of this Agreement or the cessation of the provision
of Services by Innovative to Client.
5. DEFAULT
A. Event of Default Defined. It shall constitute an "Event of
Default" hereunder upon the occurrence of any one or more of the following:
1. Client. With respect to Client, upon Client's failure to pay any
invoiced amount during the Grace Period as defined above, or any other
material breach of this Agreement which remains uncured for 30 days following
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receipt of notice of the breach by the other party.
2. Innovative. With respect to Innovative, if Service is interrupted
for forty-eight (48) continuous hours after written notice by Client to
Innovative of the interruption (a "Material Interruption"), or any other
material breach of this Agreement which remains uncured for 30 days following
receipt of notice of the breach by the other party.
3. Either Party. With respect to either party, if such party either
(i) files a petition under the United States Bankruptcy Code or is adjudicated
a bankrupt, or (ii) a petition in bankruptcy is filed against such party and
not discharged within thirty (30) days of such filing, or (iii) such party
becomes insolvent or makes an assignment for the benefit of its creditors or
any arrangement pursuant to any bankruptcy law, or (iv) such party
discontinues its business or a receiver is appointed for it or its business,
or (v) such party takes steps to liquidate, reorganize or otherwise dissolve.
B. Remedies. Upon the occurrence of any Event of Default hereunder,
then, as to the party who was not in breach (the "Aggrieved Party"), the
following constitute the Aggrieved Party's exclusive remedies:
1. Termination. The Aggrieved Party may terminate this Agreement,
and all of its unaccrued obligations hereunder.
2. Damages, etc. The Aggrieved Party may proceed by alternative
dispute resolution to enforce performance or to recover damages;
3. Right of Cure. In all cases involving termination for breach, a
breaching party may avoid termination and liability for damages by curing such
default within the time frames specified in 5.A. above. In all cases, the
time periods shall be measured from the breaching Party's receipt of the
notice of breach from the Aggrieved Party. In the case of breaches allowing a
30 day cute period, the breaching party shall provide, within 5 days of
- -receipt of the Aggrieved Party's notice, a written motion to cure describing
the steps to be taken to cure the breach.
4 Additional Limitation as to Certain Interruptions. Except for
Innovative's gross negligence or wilful misconduct, Client's right to
terminate shall be its exclusive remedy. Innovative shall not be responsible
for costs associated with obtaining substitute services.
6. INDEMNIFICATION, LIMITATION OF LIABILITY
A. Indemnification. Except as otherwise stated in Section 5,
DEFAULT, each party to this Agreement hereby agrees to
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indemnify, defend and otherwise hold the other harmless from and against all
suits, claims and any other losses (any of the foregoing, a "Loss"), including
but not limited to attorneys' fees, that arise from or are in any way related
to the Services or this Agreement, but only to the extent that such loss
results directly from the negligence, willful misconduct or Event of Default
of or by the party obligated to indemnify, and does not result proximately
from the negligence or willful misconduct or Event of Default of or by the
party seeking indemnification. In the event a party receives notice of any
action or event which would give rise to the indemnification obligations
contained herein, such party shall within twenty (20) days of receipt of such
notice, notify the other of the occurrence of such action or event, as the
case may be; provided, however, that the indemnitor's failure to receive such
notice shall not relieve it of its obligation to provide such indemnity except
to the extent such failure prejudices the indemnitor's ability to avoid
liability under this Section 6. Upon receipt of such notice, the indemnifying
party shall immediately take all actions necessary to protect the indemnitee's
interests and to defend, settle or otherwise resolve such Loss.
B. Limitation on Liability. All other provisions in this Agreement
notwithstanding, liability of Innovative under this Agreement shall be limited
to the greater of the total amount billed by Innovative for Services to Client
in the one (1) month prior to an Event of Default, or the total amount of
disputed invoices. Client must notify Innovative within 60 days of receipt of
any invoice, for purposes of including the invoice amount under this section
B.
7. COMPETITION, NONDISCLOSURE
A. ComPetition. Either party may provide or procure similar services
to or from any third party or parties except as provided under Section 2.
B. Nondisclosure. Neither party shall directly or indirectly divulge
or communicate, to any other entity, any information concerning any matters
affecting or relating to the
business of the other party. This nondisclosure section applies but is not
limited to customer lists, credit classifications, records, statistics, the
identity of any of the customers of the party, pricing, methods of operation,
or other data. The parties hereto stipulate that as between them, this
information is important, material and confidential and gravely affects the
success of the business of the parties. Any breach of the terms of this non
disclosure section shall be a material breach of this Agreement. This
non-disclosure section shall survive the termination of the business
relationship between the parties for any reason.
C. Promotion. The parties may disclose the existence and general nature of
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this contractual relationship for marketing purposes. The disclosing party
shall, prior to such disclosure, provide the other party with a copy, and
obtain written permission to make such disclosure. Such permission shall not
be unreasonably delayed or withheld.
8. ASSIGNMENT
This Agreement and the Services provided hereunder may not be assigned
by either Party, unless the express written consent of the other party has
been obtained prior to any assignment, and such consent shall not be
unreasonably delayed or withheld.
9. NOTICES
Any notice hereunder shall be in writing to the addresses first shown
above, and shall be effective when received by the Parties hereto, or on the
business day following postmark for delivery via United States Postal Service
Express Mail, return receipt requested at the time designated by the Postal
Service for delivery, whichever occurs first.
10. CUMULATIVE RIGHTS
The rights and remedies reserved to the parties herein are cumulative
and in addition to any further rights and remedies available at law or in
equity.
11. GOVERNING LAWS AND ALTERNATIVE DISPUTE RESOLUTION
This Agreement shall be deemed to have been entered into in the state of
New Hampshire and shall be governed by, construed and interpreted in
accordance with the laws of the State of New Hampshire. If a dispute arises
between the parties about the performance of this Agreement, Innovative and
Client shall attempt in good faith to resolve or cure the dispute by mutual
- -agreement before initiating legal action to enforce any rights or remedies
hereunder. If the parties cannot resolve the matter by discussion, they will
engage in nonbinding mediation within ten (10) working days. If the matter
cannot be resolved by mediation within 30 days, the parties will select one
(1) arbitrator, in accordance with the then-existing expedited commercial
dispute resolution procedures of the American Arbitration Association. The
binding arbitration shall be held in Boston, Massachusetts. The arbitrators
shall render their decision in less than thirty (30) days after their
selection in a ruling that sets forth the specific factual findings and, if
applicable, legal conditions on which the decision is based.
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12. MERGER
This Agreement, together with any exhibits or attachments hereto, and
any subsequent amendments hereto, and nondisclosure agreements entered into
between the parties, contains the entire agreement between the parties hereto
with respect to the subject matter hereof, and supersedes all prior
negotiations and representations by or between them, whether oral or written,
and all prior or contemporaneous agreements, whether oral or written. This
Agreement may be amended from time to time by mutual written agreement of both
parties. The headings used in this Agreement are for the convenience of the
parties and are not deemed to be part of this Agreement.
13.SEVERABILITY
If any portion of this Agreement is found to be invalid or
unenforceable, the parties agree that the remaining portions shall remain in
effect. If one portion limiting liability is found unenforceable, remaining
portions limiting liability shall remain in effect. The parties further agree
that in the event such invalid or unenforceable portion is an essential part
of this Agreement, it shall be replaced with one which most nearly reflects
the intentions of the parties as expressed in the portion.
14 WAIVER
No delay or omission to exercise any right or remedy accruing to
Innovative or Client hereunder upon any breach or breaches or event of default
or defaults by Innovative or Client shall impair any right or remedy on
subsequent breach or default.
15.SCOPE
Nothing contained herein shall be construed to constitute the parties
hereto as partners, joint venturers or as agents of each other, but the
relationship shall be one of independent contractors with Innovative providing
the Services described hereunder to Client for the considerations set forth in
this Agreement and any attachments hereto.
16. BENEFIT
This Agreement and the Services to be rendered hereunder are solely for
the benefit of the parties hereto, their successors and assigns. No third
person shall acquire any rights or claims, by reason of or under this
Agreement, except as both parties hereto shall agree in writing, or in cases
where substantially all of the assets of a party are purchased by another
party.
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17. FORCE MAJEURE
No default in performance of any obligation hereunder shall constitute
an event of default or a breach of this Agreement, to the extent that such
failure to perform, delay or default arises out of a cause that is beyond the
reasonable control and without negligence of the party otherwise chargeable
with such default, including, but not limited to acts of God, interruption of
power, utility, transportation or communications services, action of civil or
military authority, sabotage, national emergencies or catastrophe. Either
party desiring to rely upon any of the foregoing as an excuse for default
shall give to the other party prompt written notice of the facts which
constitute such excuse, and when such excuse ceases to exist, prompt notice
thereof to the other party. This Section shall in no way limit the right of
either party to make any claim against any third party for any damages
suffered due to said causes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective executive officers being hereunto duly
authorized.
Innovative: Client:
By: /s/ Mark A. Tubinis By: /s/ Steven P. Milton
Name: Mark A. Tubinis Name: Steven P. Milton
Title: President Title: President
Date: 8/20/96 Date: 8/20/96
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Exhibit A - Description and Pricing of Services
Invoices are payable within 15 days from receipt. Facsimile transmission
shall be acceptable. Invoices shall be issued twice monthly. The period
between invoices shall be referred to as the "Billing Cycle." Service shall be
available within 60 days of contract signing.
1. Transaction Processing.
Innovative will install switches as required for Client's long distance
and prepaid card services.
Features. Features include standard prepaid phone card call flow
(attached), English and Spanish prompts and operators, switching and database
transaction processing, branded product announcement (if desired), value
remaining messages balance transfer, language selection, repeat calling,
barge-in, time-out or zero-out live to operator, balance announcements, and
call rating announcements.
Quality Standards; Network. Innovative shall engineer the network in
conjunction with input from Client to adhere to a P.01 grade of service level,
to meet Client's volume forecasts. Innovative shall provide data to Client
such that both parties may analyze incoming and outgoing traffic patterns, and
make facilities procurement decisions to work towards a non-blocking
configuration, based on Client's terminating location-specific monthly traffic
forecasts. This data shall be included as part of the Reports selected by
Client. Client and Innovative recognize the importance of traffic monitoring
and the inherent difficulties in achieving efficient network configurations to
accommodate changing traffic usage and destination patterns.
Quality Standards; Platform. The platform(s) shall be available to
process all presented and fully entered transactions to a standard of 99.0%
operability as measured over each month.
Pricing. Prepaid Transaction Processing Services shall be performed.for
a price of $0.0095 per answered minute billed to consumers, one minute
minimum, each call rounded up to the nearest full minute.
If Client does not incur billing for at least 25,000,000 minutes in total
through January 31, 1998, this pricing shall be replaced by the revised
stepped pricing schedule below, as of February 1, 1998:
Monthly Billed Minutes Per Minute Rate
0 - 5,000,000 $0.0200
5,000,001 - 10,000,000 $0.0150
10,000,001 and over $0.0095
2. Customer Care.
Innovative will provide 24 hour, 7 day per week live customer care, at a
price of $0.75 per live operator call minute, one minute minimum, each
subsequent minute rounded up to the next higher 0.10 minute (six second)
increment.
3. Number Generation, PIN Expiration Activation Deposit.
Innovative will provide Client with unique PIN numbers and load these
numbers into the Client-allocated prepaid calling card centralized database
maintained by Innovative.
PIN Lifetime. Innovative will generate PIN numbers in batches as
requested by Client and will maintain these numbers on the database until card
expiration, or 24 months following PIN loading, whichever occurs first. The
price for this service is per PIN loaded for immediate or later activation.
Order Frequency. Client must notify Innovative in writing 7 days in advance
of requested delivery time for PINs.
ExPiration. PINs shall expire on a date certain; all cards or other
materials shall disclose this date. Expired PINs may be deleted from
Innovative's records.
Price Per PIN Order. PIN orders equal to or in excess of 250,000 PINs
will be billed at $0.010 per PIN. All other PIN orders shall be billed at
$0.020 per PIN with a minimum order of $250.00.
4. Call Flow, Reports, Carrier Management Technical Support
Innovative will manage Client's carrier relations and local loop
requirements as part of their services to Client, as well as provide technical
support for Client's carriers, carrier connections and clients.
Call Flow. Innovative will provide its standard call flow (attached) as
modified with Client's customized greetings. Other changes to the standard
call flow or rate structure besides Client's initial customized greetings
shall be pursuant to Work Orders.
Additional Lunacies. For additional languages beyond Spanish and
English, Work Orders may include costs of operator services procurement and
training.
RePorts. Innovative will provide up to 10 standard reports, including a
liability report, and a facilities occupancy report, at no extra charge.
Additional or modified reports will be pursuant to Work Order and additional
monthly charges as quoted. Additionally, CDR shall be provided every three
months on diskette or via modem.
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CDR. Alternatively, Innovative shall provide raw Call Detail Records
(CDR) as a data feed to Client's equipment. Client will be responsible for
data line connections from Innovative to Client in order to transfer CDR, and
shall provide its own equipment to receive the transfers of CDR from
Innovative. Innovative's work to make Client's systems compatible with
Innovative's shall be performed under a Work Order, if needed.
Innovative shall retain archives of CDR for 3 months after providing
same.
In addition, Innovative shall provide CDR on demand, by the end of the
second business day following a request, for an additional charge of $125.00
per request.
Carrier Management. Innovative will manage Client's carrier connections
to and from its switching facilities. Services will include configuring and
wiring of new facilities, moves, adds, and changes, routine testing, carrier
trouble shooting and emergency service for up to 40 hours per month, provided
during weekdays (except holidays). For services over 40 hours per month, or
for services performed during evenings, weekends or holidays, a surcharge of
575.00 per hour shall apply.
Innovative shall provide Reports to Client to facilitate the making of
decisions as to configuration, timing and quantity issues, for Client's
installation of carrier facilities to be connected to Innovative's switching
platform. Client shall provide required assistance in the form of quarterly
traffic forecasts.
The parties desire both efficient use of switch trucking capacity, and
the ability to utilize multiple carriers each with varying traffic and
destination patterns. As of the date of this Amendment, the parties have
agreed upon a platform and network configuration designed to best and most
efficiently accommodate these two desires. Client acknowledges that
successful implementation also requires ongoing cooperation and joint efforts
to apply Client's accurate destination-specific traffic forecasts to issues of
carrier trucking allocation, installation and configuration.
Technical SupPort. In case of an emergency service call for Client's
carriers, Innovative's will respond within 4 hours of notification by Client
or its representatives.
Innovative will provide 24 hour technical support and system back up-and
rerouting support. Innovative will also provide activation support and card
printing support.
Least cost routing may be provided at Client's option pursuant to a Work
Order.
Innovative shall have the authority to respond to all subpoena's and
similar orders issued by local, state, federal and government agency
officials. Each request will be filled for a $125.00 fee per request.
Price: $50.00 per DS1 connected to Innovative's platform for all
services described in this Section 4. A minimum monthly charge of $3,000
("take or pay") will apply until this Agreement expires or is otherwise
terminated.
5. Initial DePosit; SetuP Fee, PrePaid Software Engineering.
Client shall pay, upon contract signing, a deposit of $50,000, which
shall be applied to all billing under 1 through 4 above, as incurred.
Client shall also pay, upon contract signing, a non-refundable setup fee
of $80,000 partially offsetting Innovative's startup expenses associated with
establishment of the prepaid program for Client. If Client is billed for
25,000,000 minutes or more in total during the first 18 months of this
Agreement, Innovative, shall issue Client, with the next monthly invoice, a
credit for $20,000, applicable to any and all future billing from that point
forward.
Upon contract signing Client shall also pre-pay $20,000 representing a
non-refundable initial prepayment against Work Orders (as described in Section
6), for custom software development involving standard-billed calling card
services, or the implementation of standard measured toll service "MTS" for
Client, or other services. These Work orders will be performed within the
first 12 months of this Agreement, covering these contemplated expedited
enhancements to the Services.
6. Statements of Work.
For custom alterations beyond capabilities described herein, Client will
submit a Work Order, to be separately negotiated and signed by both parties.
Changes to Services not within the scope of this Agreement, and other
non-routine items shall require a Work Order.
Price: Work Orders will be carried out at the following hourly rates:
Senior Level Management Support $145.00
Engineering Development (Software) $135.00
Technical Support, Installation Support $120.00
Program Management and Marketing Support $100.00
Innovative will invoice Client upon completion of the Service described in the
Statement of Work, unless progress payments or other terms are specified
therein.
7. Quarterly Capacity Forecast, Addition of Additional Capacity
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Innovative and Client will both monitor network traffic levels. Client
will submit a written forecast, broken out by region, to Innovative 45 days
prior to each calendar quarter, applicable to the upcoming calendar quarter.
Innovative will add additional switching capacity, and work with Client to
determine needed carrier facilities, as required in connection with Client's
forecasted volume levels. Client recognizes that capacity upgrades may
require up to 90 days from receipt of the Forecast.
Client must provide 90 days advance notice of initiation of programs,
promotions or other events which impact volume levels. Client will provide
copies of all applicable publicity, and examples of all printed materials seen
by end users.
8. Fulfillment
Upon request, Innovative will provide fulfillment as per the attached
Fulfillment Services description.
Point of Sale activation and inventory system shall be made available
under a Statement of Work.
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FULFILLMENT SERVICES
Innovative will provide, at CTC's option, the following Telecard and point of
sale material fulfillment services:
1. General Description of Fulfillment Services
a) Fulfillment System. Innovative will maintain a computerized
fulfillment system to process card and POS materials fulfillment orders,
generate invoices and packing slips to CTC's distributors, monitor perpetual
inventory and monitor account balances due from customers.
b) Warehousing and Inventory. Innovative will warehouse up to
2,000,000 cards and provide up to 500 square feet of rack storage space for
point of sale materials.
c) CTC's Responsibility. CTC shall be responsible for
providing Innovative with its credit policies in writing, providing bank
accounts into which Innovative may make direct deposits, and shall bear all
financial responsibility for returns, customers credits, and bad debt. CTC
shall also provide Master Card/Visa merchant account for fulfillment, the 800
line for fulfillment order taking, fax machines and blank invoices, paper,
packaging materials, cards and point of sale material.
2. Fulfillment Order Entry
Innovative will enter fulfillment orders received by telephone or fax
for established accounts, and Master Card/VISA. Innovative shall have the
right to issue credits and refunds.
Price. $2.75 per order.
3. Fulfillment
Innovative will fill orders within 72 hours of receipt via UPS.
Price. $3.25 per order plus postage (UPS) for orders up to 100 cards or
POS pieces. Quantities of over 100 cards will be billed at $3.00, plus an
additional $0.03 per card.
4. Billing and Collection
- Innovative will invoice customers for all shipped orders within 72
hours from shipment.
- Innovative will provide weekly sales reports and monthly
perpetual inventory reports.
- Innovative will establish accounts on the fulfillment system for
wholesale customers.
- Innovative will perform credit checking functions, shall call
customers requesting payments due, and utilize other escalation procedures,
all in accordance with CTC's credit policies.
Price. Credit Application Processing - $50.00 per account, plus any out
of pocket credit reference-related expenses (Dun & Bradstreet, etc.)
Billing - $2.00 per invoice, plus postage.
Collection Services - $3.00 per call made or letter written, plus
postage.
5. Activation (other than Batch Activations)
Card activation shall be done via touch tone system to be created under
a Work Order. CTC shall provide the 800 line.
Price. $0.02 per card activated.
6. Minimum Billing
The services described above shall amount to at least $2,500 per month,
excluding postage. CTC shall be billed for any shortfall occurring in any
month (no carry-forward).
EXHIBIT 10.11
FRONTIER
AMENDMENT #3 TO AGREEMENT
CTC Communications Corp.
November 4, 1996
This is Amendment #3 to the Agreement Terms and Conditions between Frontier
Communications International, Inc., f/k/a/ RCI Long Distance, Inc.
("frontier") and CTC Communications Corp., f/k/a Computer Telephone Corp.
("Purchaser"), dated October 20, 1994, as amended (the "Agreement").
1. Purchaser's Directory Assistance Rates for all switched and dedicated
outbound traffic shall reflect the postalized rate of $ per call. These rates
shall become effective no later than thirty (30) days from the date of
execution by Frontier.
2. The balance of the Agreement and any amendments, addenda or other
written modifications thereto not modified by this Amendment remain in full
force and effect. Except as otherwise stated, capitalized terms used herein
have the same meaning as set forth in the Agreement.
Frontier Communications CTC Communications Corp.
International, Inc
/s/ /s/
By: _________________________By: _________________________
Brian Fitzpatrick, Steven P.Milton,
Vice President President
Date: December 12, 1996 Date: 11/18/96
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AMENDMENT #2 TO AGREEMENT
This is Amendment #2 to the Agreement Terms and Conditions between Frontier
Communications International Inc. f/k/a RCI Long Distance, Inc. ("Frontier")
and CTC Communications Corp. f/k/a Computer Telephone Corp. ("CTC" or
"Purchaser") dated 10/20/94, as amended (the "Agreement").
1. Except as otherwise stated, capitalized terms used herein have the same
meaning as set forth in the Agreement. The terms of this Amendment apply to
the National Origination Services (NOS) serviced by Frontier's Michigan
platform. If there is a conflict between the terms of this Amendment and the
terms of the Agreement with respect to such services, the terms of this
Amendment control.
2. The interstate (48 contiguous United States) rates for the switched NOS
under the Agreement are replaced with the following: $ per minute for inbound
and outbound traffic. The new interstate rate for dedicated NOS inbound and
outbound traffic is $ per minute.
3. The NOS international rates under the Agreement are replaced with the
international rates set out in the attached pricing schedules.
4. The last paragraph of Section 8.1 of the Agreement dealing with CTC's
monthly minimum billing obligations is deleted.
5. The term of the Agreement is extended for a period of 5 years from the
effective date of this Amendment. Over such extension period, CTC shall be
liable for a minimum aggregate usage commitment for the Services of
$25,000,000. CTC shall be liable for any shortfall if it fails to meet the
minimum by the end of the extension period.
6. CTC commits to the following usage schedule for the remaining term of the
Agreement. For any month in which CTC falls below an applicable threshold
level, the rates in paragraph 2. above will be increased to $ and $ per
minute, respectively.
Monthly Usage
Time Period Threshold
Effective date of this Amendment thru 9/97$ 400,000
10/97 through 9/98 600,000
10/98 through 9/99 800,000
10/99 through 9/2000 1,000,000
10/2000 through end of Agreement term 1,200,000
7. This Amendment and the Agreement shall be binding on the permitted assigns
and any successor-in-interest of the parties.
8. The balance of the Agreement and any amendments, addenda or other written
modifications thereto not modified by this Amendment remain in full force and
effect. The parties agree that signed facsimile copies of this Amendment may
serve as originals and are binding on the parties. This Amendment is
effective as of the date signed by Frontier as set forth below.
Frontier Communications CTC Communications Corp.
International, Inc.
By: /s/ Anthony J. Cassara By: /s/ Steven P. Milton
Title: President Frontier Carrier Svcs Title: President
Printed Name: Anthony J. Cassara Printed Name: Steven P. Milton
Date:10/11/96 Date:10/3/96
10/1/96
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AMENDMENT #1 TO AGREEMENT
This is Amendment #1 to the Agreement Terms and Conditions between Frontier
Communications International Inc. f/k/a RCI Long Distance, Inc. ("Frontier")
and Computer Telephone Corp. ("CTC" or "Purchaser") dated 10/20/94 (the
"Agreement").
PURPOSE
Frontier is making additional transport services available to CTC for CTC's
switched traffic originating and terminating on Frontier's network and
serviced on Frontier's Michigan platform (such services hereafter defined as
the "National Origination Services")
1. Except as otherwise stated in Exhibit A attached hereto and made a part
hereof capitalized terms used herein have the same meaning as set forth in the
Agreement. The terms of this Amendment apply to all services provided to CTC
via Frontier's Michigan Platform. If there is a conflict between the terms of
this Amendment and the terms of the Agreement with respect to such services,
the terms of this Amendment control.
2. Exhibit C attached hereto is made a part of this Amendment.
3. CTC shall be subject to the applicable charges under the Ancillary Fee
Schedule attached hereto as Exhibit B and made a part hereof.
4. The services are expanded to include the National Origination Services at
the applicable rates set out in the attached Switched Outbound Services
Schedule.
5. The balance of the Agreement and any amendments, addenda or other written
modification thereto not modified by this Amendment remain in full force and
effect. The parties agree that signed facsimile copies of this Amendment may
serve as originals and are binding on the parties. This Amendment is
effective as of the date signed by Frontier as set forth below.
Frontier Communications Computer Telephone Corp.
International Inc.
/s/ /s/ Robert Fabbricatore
By: _________________________ By: __________________________
Chairman
Title: _____________________ Title: _______________________
Printed Name: _______________ Printed Name: ________________
Date: _______________________ Date: ________________________
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EXHIBIT A
GENERAL DEFINITIONS
for National Origination Services
(not otherwise defined in the body of
the Agreement or its attachments)
1. Frontier 800 Numbers are 800/888 telephone numbers ordered onto the
Frontier network by Purchaser and for which Frontier has either (i) been
appointed the RespOrg, or (il) reserved and issued the 800 telephone number to
Purchaser, Frontier shall be deemed to be the RespOrg for all 800/888
telephone numbers reserved and issued by it under (ii) above.
2. ANI is a telephone number.
3 ANI Information is the adds, moves and terminations of End-User ANIs.
4. Billing Cycle is the Frontier billing cycle to which Purchaser's account
hereunder is assigned by Frontier (a full billing cycle equals approximately
30 days of Services usage).
5. Business Day is Monday through Friday, 8:30 am to 5:30 pm Detroit, MI,
local time, excluding nationally recognized holidays. Unless otherwise
stated, "days" refers to calendar days.
6. Prescribed means that (i) an End-User has had its ANIs placed on
Frontier's CIC, or (ii) an End-User's ANIs have been placed on Purchaser's CIC
and such CIC has been directed or translated to the Frontier network. For
example, if Purchaser has ordered an End-User onto Frontier's network
directly, or if an End-User has selected Purchaser as its primary carrier and
Purchaser has directed its CIC to Frontier, such End-Users are deemed to be
Presubscribed to Frontier.
7. Carrier 800 Numbers are 800/888 telephone numbers ordered onto the
Frontier network by Purchaser for which a party other than Frontier or
Purchaser has been appointed the RespOrg.
8. CDR means call detail records and CDR Tape is a magnetic tape containing
CDR.
9. Purchaser 800 Numbers are 800/888 telephone numbers ordered onto the
Frontier network by Purchaser for which Purchaser has been appointed the
RespOrg.
10. End users are customers of Purchaser for which Purchaser has submitted
an order that has been accepted by Frontier during the term of this Agreement.
To the extent that Purchaser subscribes to the Services for its own use,
Purchaser is deemed to be an End-User.
11. 800 Numbers collectively refers to the Frontier 800 Numbers, Carrier 800
Numbers and Purchaser 800 Numbers.
12. Guidelines refer to the telecommunications industry's general rules with
respect to 800/888 number portability, including but not limited to, (i) the
Federal Communications Commission's ("FCC") 800/888 number portability
policies and rules, (ii) the SMS 800 requirements set forth in the Bell
Operating companies' Tariff FCC No. 1, and (iii) the CLC 800 DataBase Ad-Hoc
Committee's Guidelines for 800 DataBase, as all of the foregoing may be
replaced or modified from time to time.
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13 RespOrg is a responsible organization as defined in the Guidelines. A
RespOrg is the entity that is responsible for managing and administering the
account records in the 800 Service Management System DataBase.
SERVICE DEFINITIONS
(for National Origination Services)
1. Directory Assistance Service consists of calls made by End-Users to
directory providers for assistance in locating a non-800 Number. "800
Directory Assistance" consists of calls made to directory providers for
assistance in locating a Frontier 800 Number.
2. Inbound Services refers to inbound traffic under the Switched Services.
3. International Services consist of international traffic generated via
the Switched Services.
4 Switched Services consist of switched inbound and outbound long distance
traffic generated by End-Users that originates and terminates on the Frontier
network.
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EXHIBIT C
CALL DETAIL RECORDS
ORDER PROCESSING REQUIREMENTS
(for National Origination Services)
I. Call Detail Records:
1. Purchaser has the option of receiving call detail records for
usage of the Services ("CDR") on (i) a monthly basis, (ii) a daily pre-bill
run basis, or (iii) no CDR at all. Purchaser may also elect both options (i)
and (ii), as further detailed below. Regardless of the option selected,
Purchaser shall upon its execution of this Agreement, pay Frontier the
non-refundable account set up fee set out in Exhibit B. Provided Purchaser is
not in default under this Agreement, the account set up fee will be credited
to the Invoice following the Billing Cycle in which Purchaser's Minimum Charge
first becomes effective and is met or paid.
2. If Purchaser elects option 1. (i), then on or about the fifth
Business Day following the end of a Billing Cycle. Frontier will deposit with
an overnight delivery service for delivery to Purchaser a CDR Tape in the
format established by Frontier. CDR Tapes rate the Services at the standard
Frontier rates in effect at the time the Services were provided and must be
re-rated by Purchaser at its tariffed rates. Purchaser shall pay the monthly
recurring charge set out in Exhibit B. Software modifications to the CDR Tape
format requested by Purchaser are subject to Frontier approval and will be
invoiced to Purchaser at the charges set out in Exhibit B.
3. If Purchaser elects option 1. (ii), then Frontier will provide CDR
on a pre-bill basis once a day, Monday through Saturday, excluding nationally
recognized holidays, for the prior period's traffic. For each pre-bill
computer run performed by Frontier (during Frontier established time periods),
Frontier will deliver CDR by electronic data exchange ("Electronic Exchange")
to either (i) Purchaser's designated mainframe computer via the IBM
Information Network ("IIN") via Network Data Mover ("IIN"), or (ii) dedicated
personal computer via Procomm+ software. Purchaser is liable for all
transmission charges together with the cost of hardware and software necessary
at its location for use of IIN, NDM or Procomm+, which hardware and software
must comply with the formats and technical specifications that Frontier from
time to time may promulgate. Frontier will archive CDR for 8 Business Days
and redeliver CDR to Purchaser upon request.
4. Purchaser may cancel an option at any time on 30 days written
notice. Purchaser may exchange an existing option or select a new option at
any time upon written notice and payment to Frontier of any then current set
up charge for such option. Changes or new selections are effective in the
second Billing Cycle following receipt of the request and any required set up
charge.
II. Order Processing Procedures:
1. Orders for the Services are transmitted in a format designated by
Frontier via the CDR transmission media selected by Purchaser. Ar the time
Purchaser submits an order for Service, Purchaser shall furnish Frontier with
the name, billing and service addressed and ANI of each presubscribed End-user
(the "End-User Information"). The End-User Information is required for LEC
account set-up, normal call processing and handling NXX level customer
service. The End-User Information is deemed to be Purchaser's proprietary
information under the Agreement.
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2. If the traffic is such that Frontier determines in its sole
discretion that a delay in processing orders is required, Frontier may delay
order processing for such period of time as Frontier deems necessary in its
reasonable business judgment. Any such delays will not, however, adversely
impact Purchaser for the purpose of determining whether Purchaser has met any
minimum usage requirements under the Agreement; Frontier agrees to adjust the
requirements to reflect such delay.
3. End-User ANIs:
A. Purchaser understands and agrees that activation of
End-User ANIs is contingent on the End-User Information associated with such
ANIs complying with LEC established criteria. Assuming receipt of properly
formatted End-User Information that complies with the LEC established
criteria, ANIs will generally be activated within 10 Business Days of receipt
by Frontier of the End-user Information. If the End-User Information does not
comply with LEC criteria, Frontier will return the same to Purchaser for
Purchaser's correction and resubmission.
B. Once each calendar month Frontier will provide Purchaser with a
written report of ANI Information. If Purchaser has elected to receive CDR
via Electronic Exchange, then the ANI Information will be transmitted via
Electronic Exchange, rather than by a written report. If 10% or more of the
aggregate End-User Information submitted by Purchaser in any calendar month
must be returned to Purchaser for corrections and resubmission, Frontier may
at its discretion either cease providing the ANI Information or charge
Purchaser for continuing to provide the same.
4. 800 Numbers:
Notwithstanding the order transmission media selected under the agreement,
until such time as Frontier determines in its sole discretion that Electronic
Exchange and/or magnetic tape processing is available for the reservation or
ordering of 800 Numbers (and informs Purchaser of such availability), orders
for activation or reservation of 800 Numbers will be by facsimile and subject
to the following.
A. Subject to (i) the Guidelines and (ii) delays attributable
to third parties, 800 Numbers will generally be activated and confirmed by
Frontier within 2 Business Days of receipt by Frontier of a proper order in
accordance with the order processing requirements set forth below.
(a) Orders must be submitted to Frontier via facsimile using the forms
supplied by Frontier, and must include (x) a letter of authorization in the
format attached hereto as Attachment 4.A.(a)(x) and made a part hereof, if
Frontier is being appointed the RespOrg, and (y) the End-User Information for
each 800 Number, including the ANI translation for each 800 Number.
(b) At such time as Frontier may make Frontier 800 Numbers
available to Purchaser, Purchaser may request reservation of a specific
Frontier 800 Number from the SMS 800 DataBase via facsimile using the forms
supplied by Frontier. Charges for requests will be invoiced to Purchaser at
the cost set out in Exhibit B. Frontier will either confirm reservation or
indicate unavailability via facsimile generally within 2 Business Days of its
receipt of the request. Verbal requests for, and verbal confirmations of,
reservations will not be honored by Frontier. Allnet reserves the right at any
time to limit the quantity or discontinue the availability of Frontier 800
Numbers.
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(c) If Frontier has reserved a Frontier 800 Number for Purchaser and
Purchaser does not order activation of the reserved number in accordance with
item (a) above within 10 Business Days from the date of Frontier confirmation
of the reservation, the reserved number will be assigned to the Frontier pool
of 800 numbers and be available to Frontier for its own business purposes.
Purchaser understands and agrees that it is responsible for all damages and
claims if Purchaser assigns a reserved Frontier 800 Number to an End-User
without having timely ordered activation of such 800 Number with Frontier and
such 800 Number is assigned by Frontier to a third party. Purchaser agrees to
defend and indemnify Frontier from any claims and costs (including reasonable
attorney fees) relating to Purchaser's assignment of 800 Numbers.
B. The Frontier facsimile numbers and contacts to be used for 800
Number reservations are 1-800-875-HELP(4357), Attention: Special Services, and
for 800 Number Orders 1-800-433-5132, Attention: Network Services/Order
Fulfillment. The Purchaser facsimile number and contacts to be used for said
purposes are 6174661263, Attention: CTCLD Group. Either party may change its
respective facsimile number or contact upon prior written notice to the other
party.
5. If the End-User information or other order information submitted by
Purchaser is incomplete or inaccurate, Frontier will return the same to
Purchaser for correction and resubmission.
6. Service Cancellation:
Upon Purchaser's request, Frontier will to the extent possible, block or
cancel service to End-Users. Frontier shall not be liable to Purchaser or
End-Users for any damages, costs or charges with respect to Frontier's
compliance with Purchaser's request; and Purchaser shall be solely responsible
for and shall defend and indemnify Frontier against any claims and costs
(including attorney fees) by End-users or other third parties related to the
blocking or cancellation of an End-User's service at the request of Purchaser.
III. Letter of Agency Requirements.
1. Purchaser is responsible for obtaining valid letters of agency
from prospective End-Users to be Presubscribed in accordance with the
following:
A. Frontier acknowledges that at times Purchaser may obtain
prospective End-Users through telemarketing and tape recorded third party
verifications in accordance with FCC Guideline Subpart K section 64.1100 (c)
as the same may be amended, interpreted or clarified ("Verbal LOA").
Purchaser understands that some LECs will not accept Verbal LOAs as valid
authorization for a change of long distance carriers and agrees that for
prospective End-users located in such LECs' jurisdictions it will use Written
LOAs. If Purchaser elects to use, or is required to use,written letters of
agency ("Written LOAs") for prospective End-Users it shall use a format that
complies with FCC Guideline Subpart K section 64.1150 as the same may be
amended, interpreted or clarified. Purchaser shall retain all Verbal LOAs
tapes and transcripts and Written LOAs used and promptly make the originals
available upon the request of Frontier, a LEC or any regulatory agency.
B. Purchaser agrees that a Verbal LOA may be used to presubscribe
a prospective End-User to Frontier, but that the Verbal LOA will not be
accepted by Frontier as documentation in any PIC or "slamming" claims.
Frontier is not obligated to "work" disputes with respect to "slamming" or
similar claims from End-Users or prospective End-Users. Frontier will refer
LEC inquiries,and pass ;through any LEC charges imposed on Frontier for such
claims, directly to Purchaser, including without limitation, Primary
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Interexchange Carrier charges or any other charges and penalties imposed by a
LEC or regulatory agency (collectively, PIC Charges") with respect to such
claims. PIC Charges will be billed to Purchaser periodically on an Invoice.
Verbal LOAs and Written LOAs are collectively referred to as "LOAs".
Purchaser shall defend and indemnify Frontier against any and all claims,
including without limitation, any End-User,LEC or regulatory agency
claims,arising from or related to purchaser's failure to use or provide valid
LOAs.
2. Purchaser shall not transfer a Presubscribed End-User to another
carrier (other than Purchaser's own network), except wi[h a valid LOA.
Notwithstanding the foregoing, if Frontier is in breach of this Agreement and
fails to cure the breach in accordance with the terms hereof, then Purchaser
may transfer End-Users to another carrier.
SWITCHED OUTBOUND SERVICES SCHEDULE
(NATIONAL ORIGINATION SERVICE)
The rates and discount credits described in this Schedule and any attachments
hereto are in lieu of any standard volume discounts and any promotional rates
or discounts that may from time to time be offered by Frontier for the
Services. Domestic means the 48 contiguous United States. Any discount
credits are applied against Purchaser's monthly interstate usage charges.
Unless otherwise stated, domestic switched calls are measured in 6 second
increments after an 18 second minimum and international calls are measured in
6 second increments after a 30 second minimum.
1. For outbound traffic, Purchaser shall pay the rates set out in the
existing contract and to the extent not specifically listed in the existing
contract, then at the applicable rates set out in the attached pricing
schedule. In any given month, a minimum of 85% of Presubscribed End-User ANIs
must be located in Regional Bell Operating Company (RBOC) or GTE serviced
areas and be subject to RBOC/GTE tariffed rates. If Purchaser falls below the
minimum in any month, Frontier will notify Purchaser and allow Purchaser 30
days to correct; if Purchaser fails to correct, Frontier may apply a $0.04 per
minute surcharge to all of Purchaser's domestic outbound Switched Services
usage from non RBOC or GTE service areas in that month. Upon Purchaser
returning to 85% criteria, other penalty shall be removed.
2. Upon purchaser's request, Frontier may make available to Purchaser: (i)
an available 700 number (1-700-555-XXXX) and a recorded message that
identifies purchaser to Presubscribed End-Users as their carrier, (ii) 2,3,
and 4 digit non-validated accounting codes, and (iii) 3 digit Select 50 and 4
digit Select 200 validated accounting codes. Frontier will make the 700
number available for Purchaser's use within 15 Business Days after receipt of
the request. Two digit non-validated accounting codes are not available with
the Dedicated Services; no accounting codes are available for the Inbound
Services. Purchaser shall pay any installation and monthly recurring charges
for the 700 number and the accounting codes as set out in Exhibit B of the
Agreement. Purchaser shall be liable for all charges associates with Service
usage generated by accounting codes issued by Frontier under this Agreement.
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AGREEMENT
TERMS AND CONDITIONS
by and between
RCI LONG DISTANCE, INC.
AND
COMPUTER TELEPHONE CORP.
DATED:
OCTOBER 20, 1994
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TABLE OF CONTENTS
1. Service Provided
2. Connection Facilities
3. Charges
4. Cancellation of Service
5. Liability of RCI
6. Liability of CTC
7. CTC's Obligation
8. Term, Condition, Payment and Deposit
9. Independent Contractors
10. Force Majeure
11. Assignment
12. Notice
13. Confidentiality
14. Indemnification
15. General
EXHIBITS
EXHIBIT A : RCI Domestic Switched Rates
EXHIBIT B : RCI Canadian and International Switched Rates
EXHIBIT C : RCI Switched 800 Rates
EXHIBIT D : RCI Directory Assistance Rates
EXHIBIT E : Other Charges
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TERMS AND CONDITIONS
1. SERVICES PROVIDED
RCI Long Distance Inc., a Delaware Corporation with offices at 180 South
Clinton Avenue, Rochester, New York 14646 t"RCI"), will provide Computer
Telephone Corp., a Massachusetts Corporation with offices at 360 Second
Avenue, Waltham, Massachusetts 02154 ("CTC") with interstate, international
and, if permitted by applicable regulations in CTC's state, intrastate
transmission and switching facilities needed to transmit and terminate CTC's
traffic to all points specified within the Exhibits attached hereto. The
parties contemplate that CTC may order service to/from additional points from
time to time during the term of this Agreement. These new services shall be
governed by the terms and conditions of this Agreement, and will be described
within Addenda which will be made part hereof. The services contemplated
under this Agreement are non-exclusive and shall include switched services,
private line services as well as other dedicated facilities necessary to
permit the transmission of CTC's communication over the RCI Network.
2. CONNECTION FACILITIES
CTC's customers will originate on either dedicated access facilities to RCI's
point-of-presence (P.O.P.) or on RCI's switched network, utilizing CTC's CIC
code where sub-CIC billing is offered by the applicable local telephone
company.
3. CHARGES
3.1 CTC shall pay the charges for the services and the equipment, any,
provided hereunder as specified in any Exhibit or addendum to this Agreement.
The charges shown in each Exhibit or Addendum are fixed for the term of this
Agreement and/or when term of a specific service is stated in an Exhibit or
Addendum attached hereto, for the term specified therein, unless the action of
any governmental authority having jurisdiction over RCI's service increases
RCI's costs in providing such service, in which case, RCI may increase the
charges set forth in the affected section. Should the increased rates be
determined to be detrimental to CTC, then CTC shall have the right to
terminate this Agreement with thirty (30) days written notice. Should CTC not
request termination of the rate based on a rate modification within thirty
(30) days of the effective date of the modification, CTC shall forfeit the
right to terminate the Agreement based on the effected rate modification.
3.2 For Switched Minutes of Use (MOU) terminating in the domestic U.S., RCI
will bill CTC in six (6) second increments. Call duration will be measured by
RCI from time of answer (Time Point 6) to time of disconnect (Time Point 7).
Hardware answer supervision will be used whenever possible and will be passed
to CTC upon request. Rating periods for domestic traffic are as follows:
Daytime- Monday through Friday, 8:00 AM to 5:00 PM; Evening- Monday through
Friday and Sunday, 5:00 PM to 11:00 PM; Night/Weekend- Sunday through Friday
11:00 PM to 8:00 AM, Friday 11:00 PM to Sunday 5:00 PM. Time Zones for
billing of domestic traffic will be determined by point of interconnection
with the RCI network. For MOU terminating outside the U.S., RCI will bill CTC
for the initial thirty (30) second increment and six (6) second increments
thereafter for the remainder of each call. Call duration will be measured by
RCI from time of answer (Time Point 6) to time of disconnect (Time Point 7).
Hardware answer supervision will be used whenever possible and will be passed
to CTC upon request.
4. CANCELLATION OF SERVICE
Where CTC cancels service prior to RCI's incurring any charges, or starting
any internal processing of CTC's orders there shall be no termination charge.
Where the order process has begun, the installation of facilities and/or
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equipment has been started prior to the cancellation of service, a termination
charge of $500.00 per Access Service Request (ASR) will apply plus any/all
charges incurred by RCI, as agent or otherwise, will apply. The prices
contained in this Agreement or any Addenda are based on the expectation that
CTC will continue to subscribe to each of RCI's services described in this
Agreement or Addenda for the entire term of this Agreement.
5. LIABILITY OF RCI
RCI's sole liability under this Agreement for interruption of service or
failure of equipment shall be limited to the amount of actual RCI charges
incurred by CTC during a period of such interruption, provided that such
interruption was caused solely by RCI's willful act or omission or negligence.
RCI shall not be liable for any interruption caused by the negligence or any
act or omission of CTC or any third party furnishing any portion of the
service. RCI MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE. IN NO EVENT SHALL RCI BE LIABLE TO CTC OR ANY OTHER PERSON OR
ENTITY FOR INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO LOST REVENUES OR PROFITS, EVEN IF RCI HAS BEEN ADVISED OF THE
POSSIBILITY THEREOF.
6. LIABILITY OF CTC
CTC shall be liable to RCI for any loss or theft of or damage to any of RCI's
equipment located on CTC's premises, however caused. CTC assumes all
liability associated with any/all fraudulent traffic and unauthorized PIC
"slamming", however caused CTC shall indemnify and defend RCI from any cost or
expense due -to claims for libel, slander, infringement of copyright,
trademark, trade name or trade secret arising out of the contents of CTC's
transmissions using RCI's service and equipment and claims for patent
infringements arising from the combination or connection of the equipment to
any property of CTC. CTC shall not use RCI's service or the equipment for any
unlawful purpose.
7. CTC's OBLIGATION
7.1 CTC shall conform to all regulatory requirements required by any local,
state or federal agency having jurisdiction over the provision of long
distance service.
7.2 CTC shall notify RCI of a variance to CTC's original forecast of call
volume exceeding plus or minus twenty percent (+/-208). CTC will notify RCI
ten (10) business days in advance of such occurrence. In addition, CTC will
notify RCI of any new sales offices and sales efforts, so that RCI can
maintain a properly trunked network.
8. TERM, CONDITION, PAYMENT AND DEPOSIT
8.1 The term of this Agreement and, unless otherwise specified therein, each
Addenda made a part hereof shall be three (3) years from the first full month
of service ("Effective Date"). This Agreement will automatically renew for
consecutive one (1) year periods until either party provides the other with
written notification of their intent of non-renewal. Such notification must
be provided at least ninety (90) days prior to the termination date. In the
event of non-renewal, CTC must remove all lines ("ANI's") PIC'd to RCI's
feature groups by the termination date. Any ANI not removed from RCI's
feature group by such time will be deleted from RCI's switch.
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CTC agrees to maintain a monthly minimum billing obligation as defined below:
Month Amount Month Amount
1 $ 0 19 $325,000
2 $ 5,000 20 $350,000
3 $ 10,000 21 $350,000
4 $ 20,000 22 $350,000
5 $ 35,000 23 $350,000
6 $ 50,000 24 $350,000
7 $ 65,000 25 $350,000
8 $ 80,000 26 $350,000
9 $100,000 27 $350,000
10 $115,000 28 $350,000
11 $125,000 29 $350,000
12 $150,000 30 $350,000
13 $175,000 31 $350,000
14 $200,000 32 $350,000
15 $225,000 33 $350,000
16 $250,000 34 $350,000
17 $275,000 35 $350,000
18 $300,000 36 $350,000
CTC agrees to maintain a minimum monthly billing obligation for services
commencing upon the first full month service during the ramp-up period of
twenty (20) months as set forth above, and to maintain a three hundred and
fifty thousand($350,000) per month billing obligation thereafter for the term
of the Agreement. For the purpose of calculating CTC's total billing, RCI
will aggregate all domestic, international, Canadian and directory assistance
traffic originating on RCI's sub-CIC product. CTC agrees that RCI has the
right to terminate this Agreement if CTC is not billing a minimum of seventy
five thousand dollars ($75,000) per month by month twelve (12) through thirty
six (36) of this Agreement.
8.2 RCI shall bill CTC monthly and CTC shall pay such bills on or before the
due date specified therein. The cue date shall be Thirty (30) days from the
date of such bill ("Due Date"). If CTC's payment is not received by such Due
Date, RCI shall have the right to immediately terminate this Agreement and/or
deny service until payment is rendered, and/or impose a late charge of one and
one-half (1.5%) per month or the highest legal rate, whichever is lower. If
payment is not received within forty-five (45) days of the bill date and/or
payment is not received within thirty (30) days on three or more occasions
under this Agreement, RCI shall have the right to demand and receive a
security deposit or Letter of Credit equal to two full months billing.
Additionally, if at any time there is a material adverse change in CTC's
credit worthiness, RCI shall have the right to immediately terminate this
Agreement and/or deny service until payment is rendered and/or request a
security deposit or retain the deposit rendered prior to turn up if
applicable, and/or impose a late charge of one and one-half percent (1.5%) per
month or the highest legal rate, whichever is lower. If there is a dispute
with any section of the bill, CTC shall pay the undisputed portion of such
bill when due, and CTC will notify RCI in writing of the disputed section ten
(10) days prior to the due date. If the dispute is resolved in RCI's favor,
CTC will pay the once-disputed amount, plus finance charges calculated from
the original due date of the disputed amount in the next billing after
resolution. If the dispute is resolved in the CTC's favor, RCI will credit
the disputed amount on CTC's bill. CTC shall pay RCI for any costs or
expenses, including reasonable attorney fees, incurred by RCI in collection of
CTC's unpaid bills. RCI shall not be obligated to consider any CTC notice of
billing discrepancies which are received by RCI more than sixty (60) days
following the Due Date of the invoice in question. Any deposit required of
CTC may be applied to CTC's overdue bills and any other expenses for which CTC
becomes liable to RCI under this Agreement. Such deposit shall not bear <PAGE>
<PAGE>
interest unless required by law. CTC acknowledges and understands that RCI
computes all charges herein exclusive of any applicable federal, state or
local use, excise, gross receipts, sales and privilege taxes, duties, fees or
similar liabilities (other than general income or property taxes), whether
charges to or against RCI or CTC because of the service furnished to CTC
("Additional Charges"). CTC shall pay such Additional Charges in addition to
all other charges provided for herein.
8.3 For the purpose of this Agreement, CTC and RCI agree to the following
algorithm to determine adjustments, in the event that there is a discrepancy
between RCI and telco billing data.
(a) If the total RCI terminating billing data (all minutes of use ("MOU's")
terminated by RCI, originated by telco), is between 91.5%, +/- 2.5% of the
total telco invoice to RCI pertaining to CTC sub-CIC MOU, then the telco
invoice shall be allocated between RCI and CTC as follows:
(i) If the portion of the RCI invoice allocated to CTC's sub-CIC MOU's
("CTC Portion") is equal to 91.5%, +/- 2.5% of telco's originating billing
data, then no adjustment shall be applied.
(ii) If the CTC Portion is greater than 91.5%, +/- 2.5% of the RCI
sub-CIC invoice, then CTC will receive a corresponding debit on the RCI
invoice.
(iii) If the CTC Portion is less than 91.5%, +/- 2.5% of the RCI sub-CIC
invoice, then CTC will receive a corresponding credit on its RCI invoice.
(b) If the total RCI terminating billing data is greater or less than 91.5%,
+/- 2.5% of the total telco invoice to RCI, each party shall pay its
respective portion of the telco invoice.
For the purposes of the adjustment, when the percentage is greater than 94% or
less than 89%, the adjustment calculation will be back to 91.5%. RCI reserves
the right to review and modify the 91.5% calculation on a quarterly basis,
basing the percentage on a three month running average.
Notwithstanding the foregoing, in all events, CTC shall be responsible for
paying its portion of the telco invoice directly to telco and will receive
appropriate adjustment, as set forth above, on its RCI invoice. RCI agrees to
provide CTC a copy of the summary pages pertaining to CTC's local telephone
bill within forty eight (48) hours of receipt.
In addition, if CTC's payment to the local telephone company is not received
when due, RCI shall have the right to immediately terminate this Agreement
and/or deny service until payment is rendered and/or request an additional
security deposit or retain the deposit rendered prior-to turn up. RCI will
hold CTC liable for any unpaid balances appearing on RCI's local telephone
bill relating to the provision of service for CTC.
8.4 CTC must have available a signed Letter of Agency (LOA) for RCI from every
customer for each line ("ANI") PIC'd to RCI's feature groups. LOA format and
language must be pre-approved by RCI [or with any other means approved by the
Federal Communications Commission ("FCC") ] . A signed LOA must be available
for review by RCI and/or telco within forty eight (48) hours notice from RCI.
In the event that LOA is not made available within forty eight (48) hours, a
ten dollar ($10) surcharge for each missing LOA will be applied to the next
RCI invoice as well as any/all telco charges applied to RCI because of CTC.
CTC will provide ANI's via the IBM Information Network (IIN) or other
automated means acceptable to RCI.
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8.5 In the event, RCI notices an excessive amount of internal order rejects
(i.e. inaccurate information), RCI will pass through any additional
administrative charges to CTC to recover costs. For the purpose of this
Agreement, excessive will be defined as five (5) percent.
8.6 RCI and CTC agree that RCI will allow CTC to transition their customers
from switchless resale to sub-CIC. This will only be applicable where the
local telephone supports such a billing and service arrangement and where RCI
has feature groups to originate 1+ traffic.
8.7 The 1+ and 800 rates under this Agreement are based upon RCI's projected
network cost utilizing an assumed traffic distribution. RCI agrees to review
CTC's 1+ and 800 rates after a period of six full months billing. If RCI's
actual network cost for carrying CTC's 1+ and 800 traffic varies from RCI's
network cost projection over such six month period, RCI will adjust such rates
in accordance with the variance for the remainder of the term of this
Agreement.
9. INDEPENDENT CONTRACTORS
Each party agrees that it shall perform its obligations hereunder as an
independent contractor and not as the agent, employee or servant of the other
party. Neither party nor any personnel furnished by such party shall be
deemed an employee or agent of the other party nor be entitled to any benefits
available under any plans for such other party's employees. Each party has
and hereby retains the right to exercise full control of supervision over its
own performance of its obligations under this Agreement and retains full
control over the employment, direction, compensation and discharge of all
employees assisting the performance of such obligations. Each party will be
solely responsible for all matters relating to payment of its employees
including compliance with social security taxes, withholding taxes, worker's
compensation, disability and unemployment insurance, and all other regulations
governing such matters; and each party will be responsible for its own acts
and those of its own employees, agents, and subcontractors during the
performance of that party's obligations hereunder.
10. FORCE MAJEURE
10.1 RCI shall not be liable for any delay or failure in performance of any
part of this Agreement from any cause beyond its control and without its fault
or negligence, including but not limited to, acts of God, acts of civil or
military authority, government regulations, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fires, explosions, earthquakes, nuclear
accidents, floods, strikes, power blackouts, volcanic action, other major
environmental disturbances, unusually severe weather conditions, acts of third
parties, or acts or omissions of common carriers (collectively referred to as
"Force Majeure Conditions").
10.2 RCI shall also not be liable for any delay or performance failure caused
by CTC's failure to perform any of its obligations.
11. ASSIGNMENT
CTC may not assign any right, obligation or duty, in whole or in part, or any
other interest hereunder, except to a successor by merger or sale of all or
substantially all CTC's assets, without the prior written consent of RCI,
which shall not be unreasonably withheld or delayed. Any such proposed
assignee must at a minimum meet all RCI credit standards then in place. RCI
may assign any right, obligation or duty, in whole or in part, or any other
interest hereunder, to any of its affiliates without permission from CTC, upon
thirty (30) days notification to CTC.
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12. NOTICE
All notices required under this Agreement shall be given in writing and
delivered by a nationally recognized overnight courier, postage prepaid, to
the addresses set forth below and on the next page:
To RCI: RCI Long Distance, Inc.
Rochester Tel Center
180 South Clinton Avenue
Rochester, New York 14646-0500
Attention: Vice President-Network Systems & Services
To CTC: Computer Telephone Corp.
360 Second Avenue
Waltham, Massachusetts 02154
Attention: President
13 . CONFIDENTIALITY
Any and all information pertaining to the business relationship between RCI
and CTC shall be considered confidential and proprietary in all cases for the
entire term of this Agreement. Both parties agree to not disclose any of same
to any other person, firm or entity (except a governmental or regulatory body
which shall issue a formal subpoena) and shall use same only to further the
purpose of this Agreement. This confidentiality obligation shall not apply to
any information (i) independently developed by a party, or (ii) generally
available to the public other than by a party's breach of this Agreement, or
(iii) already known by a party at time of disclosure, or (iv) rightfully
received from a third party. Both parties hereby designate the terms,
conditions, appendices, exhibits and schedules of this Agreement to be
confidential. The parties agree that the confidential and proprietary
information received pursuant to this Agreement shall be disclosed only to
those employees and other persons who have a need for its use under this
Agreement.
14. INDEMNIFICATION
Each party shall indemnify, defend and hold the other party harmless from any
and all liability, loss, claim, damage or cost (including attorney's fees) and
expenses arising out of claims against such other party by any entity as a
result of any failure of the indemnifying party to perform its obligations
hereunder. Additionally each party shall indemnify the other party against
injuries and claims of any kind, arising out of the acts or failures to act of
the indemnifying party, its directors, officers, agents, employees,
representatives or subcontractors, including without limitation injury or
damage to the person or property of CTC, its agents, employees,
representatives or subcontractors.
15. GENERAL
This Agreement constitutes the entire understanding between RCI and CTC and
supersedes any and all oral and/or written statements and representations made
by either party to the other. All parts, sections, Exhibits, and Addendum to
this Agreement shall be considered confidential in all cases for the life of
this Agreement. Any assignment or other transfer by CTC of its rights under
this Agreement without RCI's prior written consent all entitle RCI to
immediately terminate this agreement. Failure on the part of RCI to enforce
any provision of this Agreement in any one instance shall not be construed as
a general waiver or relinquishment of the right to enforce such provision. If
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall in no way be affected thereby. This Agreement may be
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executed in counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts shall together constitute but one
and the same instrument. This Agreement shall be construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
Dated :
RCI LONG DISTANCE, INC. COMPUTER TELEPHONE CORP.
/s/ Jeffrey A. Gold /s/ Philip Richer
_________________________ __________________________
(Signature) (Signature)
JEFFREY A. GOLD PHILIP RICHER
_________________________ __________________________
(Print Name) (Print Name)
VICE CHAIRMAN
__________________________ _________________________
(Title) (Title)
EXHIBIT 10.12
Intermedia Communications Inc.
Frame Relay Service Reseller Agreement
THIS AGREEMENT is made and entered into as of this 21 day of January,
1997 by and between Intermedia Communications Inc., a Delaware corporation,
having its principal place of business at 3625 Queen Palm Drive, Tampa,
Florida 33619 ("ICI") and CTC Communications Corp., a Massachusetts
corporation having its principal place of business at 360 Second Avenue,
Waltham, Massachusetts 02154 ("Reseller").
WITNESSETH:
WHEREAS, ICI is a common carrier which owns and operates telecommunications
facilities and is in the business of providing telecommunications services.
WHEREAS, ICI desires Reseller to market ICI's Frame Relay Service Offering
(the "Service").
WHEREAS, Reseller desires to market the Service and is capable of properly
marketing such Service according to the terms hereof.
NOW THEREFORE, in consideration of the mutual covenants, terms and conditions
herein contained, the parties hereto agree as follows:
1. Grant: ICI hereby grants to Reseller the non-exclusive right to market the
Service pursuant to the rates, terms and conditions of this agreement and any
addendum referenced herein. ICI reserves the right, without obligation or
liability to Reseller for payment of a commission, compensation or otherwise,
to market the Service through its own employees or Resellers, through other
Resellers or otherwise.
2. Status of Reseller: The relationship between Reseller and ICI shall be
that of buyer and seller. Reseller shall conduct its business at its own
initiative, responsibility and expense. No employee of either party shall be
deemed to be in the employ of the other and neither party has any right or
authority to act on behalf of the other beyond that expressly granted herein.
No provision of this Agreement shall be construed to create a joint venture or
partnership between ICI and Reseller.
3. Duties of Reseller: CTC shall use its best efforts to market the Services.
"Best efforts" for this purpose will include the following: conducting an
active search to find customers whose profile of telecommunications and/or
data communications requirements is such that use of ICI Services may be
beneficial; educating those qualifying customers as to the benefits and
advantages of engaging ICI Services; introducing ICI sales staff as required
to qualifying customers; obtaining commitments and orders to procure ICI
Services; providing response on customer service issues relating to account
status and rudimentary technical issues. CTC also agrees to brand Intermedia
Frame Relay Services on CTC customer bills and charge no less than ICI tariff
pricing in billing CTC customers.
4. Duties of ICI: ICI shall furnish the Services. ICI activities will
include: providing pre and post sales technical support of CTC sales efforts;
coordinating the pricing, ordering, maintenance, and billing for all Local
Exchange Carrier services where CTC has no agency agreement in place with the
Local Exchange Carrier serving the location; providing single point of contact
management, maintenance and technical support in the operation of the service
to the customer.
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5. Tariff: ICI and Reseller agree that the provision of the Service shall be
controlled by and subject to all applicable tariffs as set forth in EXHIBIT A
- - INTERMEDIA FRAME RELAY PRICING.
6. Ordering: Reseller shall order services for their customers from ICI. The
Service will be billed by ICI directly to Reseller. ICI and Reseller shall
establish a mutually agreed upon service commitment date ( Service Date") and
reference number ("Reference Number") when services are ordered by Reseller
from ICI. ICI shall coordinate the pricing, ordering, maintenance, and
billing for all necessary Local Exchange Carrier, Access, and or Interexchange
Carrier services as required.
7. Billing: ICI shall invoice Reseller monthly for services ordered and
installed based on the final and agreed upon Service Date. The ICI invoice
shall contain a listing of detailed charges for ICI services, Local Exchange
Carrier services and Access services. CTC agrees to pay ICI 100% of the
monthly billed LEC services and 85% of the monthly billed ICI services.
Reseller shall have responsibility of invoicing and collecting payments from
its customers. Non-payment by Reseller's customer shall not constitute
grounds for non-payment by Reseller to ICI for services.
8. Confidential Treatment: The terms and conditions of this Agreement and
materials provided by ICI to Reseller or Reseller to ICI, including but not
limited to, customer lists, price sheets, price quotes, marketing and business
plans and projections, pursuant to this Agreement are disclosed in confidence,
solely for use in connection with carrying out the terms and conditions of
this Agreement. Both parties shall keep such information secret and
confidential and shall not release or disclose any of it to any third party
during the term of this agreement or for a period of 6 months following its
termination except in carrying out its obligations hereunder or on a
need-to-know basis Both parties shall take appropriate precautions,
contractual and otherwise, to prevent the unauthorized disclosure or misuse of
this confidential information by any of its employees or by any other person
having access to such information. At the expiration or sooner termination of
this Agreement, both parties shall return to the originator all confidential
or proprietary information received hereunder The foregoing obligations of
confidential treatment shall not apply, or shall terminate, with respect to
any particular portion of the confidential information which: i.) is known to
the receiving party at the time of disclosure to it; ii.) becomes publicly
known or available other than as a result of any disclosure hereunder; iii.)
is rightfully received from a third party; or, iv.) is independently
developed.
9. Limitation of Liability: ICI shall not be liable to Reseller or any
customers of Reseller in any way for any losses, including but not limited to,
loss of commissions, loss of or harm to Reseller's business, including, but
not limited to lost revenues, lost savings or lost profits, or incidental,
special or consequential damages due to mistakes, omissions, interruptions,
delays, errors, defects or otherwise occurring in the course of furnishing the
service. Nothing herein shall require ICI to accept responsibility for any
service provided by Reseller to its customers during this agreement or after
any termination hereof.
10. Indemnification: The Parties shall indemnify each other against, and hold
each other harmless from all liabilities, claims, demands, costs and judgments
(including reasonable attorneys' fees and causes of action arising; out of or
in connection with this Agreement caused by the failure to abide by the terms
and conditions of this Agreement or by the negligence or willful misconduct of
the Parties or of the Parties employees, Resellers or invitees.
<PAGE>
<PAGE>
11. Term and Termination: This agreement shall be effective as of the first
date written above and shall continue for a period of two (2) years ("Initial
Term") unless terminated in accordance with the provisions hereof. This
agreement can be terminated by either party upon (60) days written notice to
the other party. Any customer contracts entered into during the term of this
Agreement shall be subject to the terms of this Agreement and honored for the
committed contract terms by each party.
(a) Either party may terminate this Agreement in the event that the other
party commits a material breach of this Agreement and fails to cure such
breach within sixty (60) days after receipt of written notice of such breach
from the non-breaching party; provided, however, that in the event that the
material breach involves any violation of Section 8 (Confidential Treatment)
hereof, no opportunity to cure shall be allowed. In such event the
non-breaching party shall promptly notify the breaching party in writing of
it's intent to terminate this Agreement, and such termination shall be
effective after a transition period (~Transition Period-) of seven (7) days
after the date of delivery, or if mailed, the date of the mailing of the
notice of termination by the non-breaching party; provided, however, that if
the material breach involves any violation of Section 8 (Confidential
Treatment) hereof, the effective date of the termination shall be the date of
delivery of the notice of material breach.
(b) Bankruptcy - Either party may terminate this Agreement and any or all
outstanding customer arrangements placed hereunder by notice in writing, in
the event that the other makes an assignment for the benefit of creditors, or
admits in writing inability to pay debts as they mature; or a trustee or
receiver of the other, or of any substantial part of the other's assets is
appointed by any court; or a proceeding is instituted under any provision of
the Federal Bankruptcy Act by the other, or against the other and is
acquiesced in or is not dismissed within sixty (60) days or results in an
adjudication in bankruptcy.
(c} Both parties shall use their best efforts to ensure that any Transition
Period required under this Section 11 shall be executed in a timely and
orderly fashion and in a manner that is in the Customer's best interest and
consistent with any applicable legal requirements. At the end of such
Transition Period, neither Party shall have any obligation to the other under
this Agreement, except that, subject to the provisions of Section 21 (Entire
Agreement), hereof, those provisions that by their sense and context are
intended to survive the termination hereof shall survive such termination.
(d) Early Termination: In the event Reseller cancels or terminates all or any
portion of the services prior to the agreed expiration date, Reseller agrees
to pay to ICI a termination charge (as liquidated damages and not as a
penalty), as follows: (1) All non-recurring charges specified in the Service
Order, including those initially waived, plus (2) disconnection, early
cancellation or termination charges reasonably incurred by ICI on Resellers
behalf, plus (3) if cancellation occurs within the first year of the term of
the applicable Service Order, then the cancellation charge shall be the full
amount of the remaining recurring charges for Service due for the first year
plus fifty percent (50%) of the recurring charges for the second year of the
term plus twenty five (25%) of the remaining monthly charges for the remainder
of the term of the Service Order. If cancellation occurs after the first year
of the term, then the cancellation charge shall be fifty percent (50%) of the
remaining monthly charges for service due for the second year of the term plus
twenty five percent (25%) for the remainder of the term of the Service Order.
12. Force Majeure: Neither party shall be liable for delays in performing, or
failure to perform, this Agreement or any obligations hereunder, which are
directly attributable to causes beyond the reasonable control of the party so
<PAGE>
<PAGE>
delayed or failing to perform, including but not limited to, acts of God,
fires, strikes, war, failure of a common carrier, equipment or suppliers or
acts or intervention by any governmental authority. However, the party whose
performance is so delayed shall use good faith efforts to minimize the effects
of such delay.
13. Notices: All notices or other communications permitted or required
hereunder shall be in writing and mailed by certified mail, return receipt
requested, or sent by receipted overnight courier to the party at the address
first appearing above, to the attention of the signatories below. Notices
shall be deemed given three (3) days after deposit in the U.S. mail postage
prepaid, if sent by certified mail or when received or receipt is refused if
sent by receipted overnight courier.
14. Assignment: Either Party may not assign its rights or obligations under
this Agreement to any party without the prior written consent of the other
Party.
15. Governing Law: This Agreement shall be deemed to have been executed and
delivered in the State of Florida and it shall be governed by and construed in
accordance with the laws of the State of Florida.
16. Headings: The paragraph headings used in this Agreement are for purposes
of convenience only and shall not be deemed a part of this Agreement for
purposes of construction or interpretation.
17. No Inference: Neither this Agreement in its entirety nor any provision
herein shall be construed against either party as the drafter or originator
thereof.
18. Severability: In the event that any term or provision of this Agreement
shall be deemed or rendered void or unenforceable, the remainder of this
Agreement shall remain in full force and effect and such term or provision
shall be deemed stricken.
19. Waiver: No failure or delay by any party in exercising any right hereof
shall operate as a waiver.
20. Amendment: This Agreement may not be amended or modified except by in
writing, signed by both parties.
21. Entire Agreement: This Agreement and all attachments hereto, embody the
entire agreement and understanding between the parties and supersede all prior
oral and written, and contemporaneous oral, agreements and understandings
relating to the subject matter hereof. No representation, promise, inducement
or statement or intention has been made by either party which is not embodied
here in.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first written above
CTC Communications Corp. Intermedia Communications, Inc.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
CTC COMMUNICATIONS CORP.
(In Thousands Except Per Share Data)
Year ended March 31
1997 1996 1995
----------------------------------
Primary:
Average shares outstanding 9,600 9,446 7,830
Net effect of stock options, if
dilutive, based on the treasury
stock method using the average
market price 1,174 1,266 935
----------------------------------
Total 10,774 10,712 8,765
==================================
Net income $4,683 $4,094 $1,472
==================================
Net income per share $ .43 $ .38 $ .17
==================================
Fully diluted:
Average shares outstanding 9,600 9,446 7,830
Net effect of stock options, if
dilutive, based on the treasury
stock method using the year-end
market price 1,190 1,282 1,531
----------------------------------
Total 10,790 10,728 9,361
==================================
Net income $4,683 $4,094 $1,472
==================================
Net income per share $ .43 $ .38 $ .16
==================================
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-44337) pertaining to the Employee
Stock Purchase Plan of CTC Communications Corp. and the
Registration Statement (Form S-8 No. 333-17613) pertaining to the
1996 Stock Option Plan of CTC Communications Corp. of our report
dated May 12, 1997, with respect to the financial statements and
schedule of CTC Communications Corp. included in the Annual
Report (Form 10-K) for the year ended March 31, 1997.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
June 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,406
<SECURITIES> 0
<RECEIVABLES> 10,905
<ALLOWANCES> 377
<INVENTORY> 0
<CURRENT-ASSETS> 17,804
<PP&E> 7,268
<DEPRECIATION> 5,566
<TOTAL-ASSETS> 20,186
<CURRENT-LIABILITIES> 5,895
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 14,195
<TOTAL-LIABILITY-AND-EQUITY> 20,186
<SALES> 40,290
<TOTAL-REVENUES> 40,507
<CGS> 8,709
<TOTAL-COSTS> 32,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 7,960
<INCOME-TAX> 3,277
<INCOME-CONTINUING> 4,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,683
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
