<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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J.D. EDWARDS & COMPANY
(Exact name of registrant as specified in its charter)
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<C> <C> <C>
DELAWARE 7372 84-0728700
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
8055 EAST TUFTS AVENUE
DENVER, COLORADO 80237
(303) 488-4000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
RICHARD G. SNOW, JR., ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
J. D. EDWARDS & COMPANY
8055 EAST TUFTS AVENUE
DENVER, COLORADO 80237
(303) 488-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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HERBERT P. FOCKLER, ESQ. ROBERT V. GUNDERSON, JR., ESQ.
WILSON SONSINI GOODRICH & ROSATI JAY K. HACHIGIAN, ESQ.
PROFESSIONAL CORPORATION BRIAN K. BEARD, ESQ.
650 PAGE MILL ROAD GUNDERSON DETTMER STOUGH VILLENEUVE
PALO ALTO, CALIFORNIA 94304 FRANKLIN & HACHIGIAN, LLP
(415) 493-9300 155 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 321-2400
</TABLE>
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Approximate date of commencement of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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==========================================================================================================
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, par value $0.001 per share.................... $300,000,000 $90,910
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (i) one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and (ii) the other to be used in connection with a concurrent
offering outside of the United States and Canada (the "International
Prospectus"). The U.S. Prospectus and the International Prospectus are identical
in all respects except for the front cover page of the International Prospectus,
which is included herein after the final page of the U.S. Prospectus and is
labeled "Alternate Page for International Prospectus." Final forms of each of
the Prospectuses will be filed with the Securities and Exchange Commission under
Rule 424(b).
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
PROSPECTUS (Subject to Completion)
Issued July 3, 1997
Shares
LOGO
COMMON STOCK
---------------------
Of the Shares of Common Stock to be offered hereby, Shares are
being offered initially in the United States and Canada by the U.S.
Underwriters, and Shares are being offered initially outside of the
United States and Canada by the International Underwriters. See "Underwriters."
Of the Shares of Common Stock being offered hereby, Shares are
being sold by the Company and Shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of Shares by the Selling Stockholders.
Prior to this offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
will be between $ and $ per Share. See "Underwriters" for a
discussion of the factors to be considered in determining the initial public
offering price. Application has been made to list the Common Stock on the Nasdaq
National Market under the symbol "JDEC."
---------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 HEREOF.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
PRICE $ A SHARE
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and certain of the Selling Stockholders have granted to the
U.S. Underwriters an option, exercisable within 30 days from the date
hereof, to purchase up to an aggregate of additional Shares at the
price to public less underwriting discounts and commissions for the
purpose of covering over-allotments, if any. If the U.S. Underwriters
exercise such option in full, the total price to public, underwriting
discounts and commissions, proceeds to Company and proceeds to Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriters."
---------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel for
the Underwriters. It is expected that delivery of the Shares will be made on or
about , 1997, at the office of Morgan Stanley & Co. Incorporated, New
York, N.Y., against payment therefor in immediately available funds.
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MORGAN STANLEY DEAN WITTER
DEUTSCHE MORGAN GRENFELL
ROBERTSON, STEPHENS & COMPANY
, 1997
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary..................... 3
The Company............................ 4
Risk Factors........................... 5
Use of Proceeds........................ 16
Dividend Policy........................ 16
Capitalization......................... 17
Dilution............................... 18
Selected Consolidated Financial Data... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 20
Business............................... 30
Management............................. 46
Certain Transactions................... 54
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PAGE
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Principal and Selling Stockholders..... 56
Description of Capital Stock........... 58
Shares Eligible for Future Sale........ 60
Certain U.S. Federal Income Tax
Considerations for Non-U.S. Holders
of Common Stock...................... 62
Underwriters........................... 64
Legal Matters.......................... 67
Experts................................ 67
Change in Accountants.................. 67
Additional Information................. 68
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
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J.D. Edwards & Company and J.D. Edwards are registered trademarks of the
Company. WorldSoftware, OneWorld, WorldVision, Genesis and Configurable Network
Computing are trademarks of the Company. All other trade names and trademarks
referred to in this Prospectus are the property of their respective owners.
------------------------
Unless the context otherwise requires, the "Company" or "J.D. Edwards"
refers to J.D. Edwards & Company and its consolidated subsidiaries. Except as
otherwise noted herein, all information in this Prospectus (i) assumes no
exercise of the Underwriters' over-allotment option and (ii) gives effect to the
Company's reincorporation in Delaware, which will be consummated prior to this
offering and pursuant to which 70 shares of Common Stock of the Delaware
corporation will be issued in exchange for each share of Common Stock of the
predecessor Colorado corporation.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
2
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[GATE FOLD -- SEE APPENDIX A]
<PAGE> 6
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the consolidated financial statements and notes
thereto appearing elsewhere in this Prospectus.
THE COMPANY
J.D. Edwards develops, markets and supports highly functional
Enterprise Resource Planning software solutions that operate on multiple
computing platforms and are designed to accelerate customers' time to
benefit, lower customers' cost of ownership and reduce information systems
risks arising from changes in technology and business practices. The
Company's integrated software application suites support manufacturing,
finance, distribution/logistics and human resources operations for
multi-site and multinational organizations. Through its Configurable
Network Computing architecture, the Company's ERP software is specifically
designed to enable customers to change technology and/or business
practices while minimizing costs and business interruptions. The Company
provides implementation, training and support services designed to enable
customers to rapidly achieve the benefits of the Company's ERP solutions.
The Company has developed and marketed ERP solutions for over 20 years,
principally for operation on AS/400 and other IBM mid-range systems and,
more recently, on leading UNIX and Windows NT servers through Windows- and
Internet browser-enabled desktop clients.
The Company's family of application suites is designed to improve most
organizations' core business processes. In addition, the Company extends
its application suites to address certain vertical markets with specific
configurations, templates and additional software features designed to
meet these industries' needs. The Company offers two versions of its
application suites -- WorldSoftware and OneWorld. WorldSoftware operates
in a host-centric environment on the AS/400 platform. OneWorld
incorporates the Company's CNC architecture and operates on leading UNIX
and NT servers, as well as the AS/400 platform. The Company believes its
network-centric CNC architecture provides a valuable extension beyond
traditional client/server architectures by masking complexity, lowering
cost of change and facilitating greater scalability. In addition,
WorldSoftware and OneWorld are capable of operating together in a unified
enterprise-wide environment. The Company also provides WorldSoftware and
OneWorld toolsets to enable rapid implementation, customization and
modification of its application suites.
The Company distributes, implements and supports its products
worldwide through 46 offices and 172 third-party business partners. To
date, the Company has more than 4,000 customers in over 90 countries
including Lexmark International, Inc., SmithKline Beecham plc, Paradyne
Corporation and Praxair, Inc.
THE OFFERING
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U.S. offering...................................... shares
International offering............................. shares
Total...................................... shares (including shares by the
Company and shares by the Selling Stockholders)
Common Stock to be outstanding after the
offering......................................... shares(1)
Use of proceeds.................................... For general corporate purposes, including
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol............. JDEC
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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TEN MONTHS SIX MONTHS ENDED
ENDED YEAR ENDED OCTOBER 31, APRIL 30,
OCTOBER 31, ----------------------------------------- -------------------
1992(2) 1993 1994 1995 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total revenue................................ $119,513 $196,834 $240,587 $340,766 $478,048 $208,142 $268,675
Total costs and expenses..................... 116,154 184,546 223,140 311,888 434,421 198,350 255,745
Operating income............................. 3,359 12,288 17,447 28,878 43,627 9,792 12,930
Net income (loss)............................ (267) 7,380 12,063 18,209 26,326 5,941 7,178
Earnings (loss) per common share(3).......... $ (0.00) $ 0.09 $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
Weighted average common shares
outstanding(3)............................. 80,960 81,488 81,755 82,006 87,169 86,489 93,416
</TABLE>
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APRIL 30, 1997
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PRO PRO FORMA AS
ACTUAL FORMA(4) ADJUSTED(5)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 29,907 $ 29,907 $
Total assets................................................ 276,421 289,146
Mandatorily redeemable shares, at redemption value.......... 99,076 5,500 --
Stockholders' equity (deficit).............................. (22,530) 83,462
</TABLE>
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(1) Based on the number of shares outstanding as of April 30, 1997.
Excludes (i) 22,200,430 shares of Common Stock issuable upon exercise
of outstanding options at April 30, 1997, with a weighted average
exercise price of $ 4.52 per share and (ii) 17,114,790 shares of
Common Stock reserved for issuance under the Company's stock plans as
of April 30, 1997. See "Management -- Employee Benefit Plans" and
Notes 7 and 10 of Notes to Consolidated Financial Statements.
(2) In 1992, the Company changed its fiscal year end from December 31 to
October 31. The consolidated statement of operations data for the
period ended October 31, 1992 reflects 10 months of operating activity
as compared with 12 months for all other fiscal year periods.
(3) See Note 1 of Notes to Consolidated Financial Statements for a
discussion of the computation of earnings (loss) per common share and
weighted average common shares outstanding.
(4) Reflects the elimination of the mandatory redemption feature of the
mandatorily redeemable ESOP shares and the income tax benefits
resulting from the lapse of restrictions on certain shares of the
Company's outstanding Common Stock, both of which will occur
automatically upon the closing of this offering. See Note 1 of Notes
to Consolidated Financial Statements.
(5) Pro forma as adjusted to reflect the receipt by the Company of the
estimated net proceeds from the sale of the shares of Common Stock
offered by the Company hereby at an assumed initial public offering
price of $ per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by
the Company. See "Capitalization" and "Use of Proceeds."
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3
<PAGE> 7
THE COMPANY
J.D. Edwards develops, markets and supports highly functional Enterprise
Resource Planning ("ERP") software solutions that operate on multiple computing
platforms and are designed to accelerate customers' time to benefit, lower
customers' cost of ownership and reduce information systems risks arising from
changes in technology and business practices. The Company's integrated software
application suites support manufacturing, finance, distribution/logistics and
human resources operations for multi-site and multinational organizations.
Through its Configurable Network Computing ("CNC") architecture, the Company's
ERP software is specifically designed to enable customers to change technology
and/or business practices while minimizing costs and business interruptions. The
Company provides implementation, training and support services designed to
enable customers to rapidly achieve the benefits of the Company's ERP solutions.
The Company has developed and marketed ERP solutions for over 20 years,
principally for operation on the IBM AS/400 platform and other IBM mid-range
systems and, more recently, on leading UNIX and Windows NT ("NT") servers
through Windows- and Internet browser-enabled desktop clients.
ERP systems are designed to enhance an organization's ability to manage and
execute business functions such as manufacturing, finance,
distribution/logistics and human resources. These systems manage and store large
amounts of diverse business information, providing continuous and simultaneous
availability of data to geographically dispersed employees, customers and
suppliers. According to Advanced Manufacturing Research (AMR), an industry
consulting firm, the worldwide market for ERP software license revenue was
approximately $3.5 billion in 1996, and it is expected to reach $16.2 billion by
2001, a compound annual growth rate of 36%.
Historically, ERP solutions have primarily consisted of host-centric
systems that operate on mainframes or mid-range computers. These systems,
developed over many years and representing considerable investments by
customers, provide high levels of performance, scalability, data security and
reliability. In addition, host-centric ERP systems designed as single-vendor
environments offer reduced complexity in implementation and management. In
recent years, ERP systems have been developed with client/server architectures.
These distributed systems generally offer users easier access to information, as
well as multi-site processing capabilities. In addition, as compared to
host-centric systems, client/server environments are better able to accommodate
diverse hardware, software and network technology changes that can result from
rapid organizational growth, acquisitions and consolidations. Both host-centric
and client/server systems require extensive initial implementation and ongoing
modifications to support an organization's current and continuously changing
business practices. The implementation of a new ERP system may in some cases
require an organization to subordinate or re-engineer its established business
practices to accommodate system or architectural constraints. These requirements
can increase the cost of ownership of an ERP system and overwhelm organizations
with limited internal information technology ("IT") staffs, particularly rapidly
growing and resource-constrained mid-sized organizations. In addition, the
difficulties associated with implementation and modification can put
organizations at risk of costly interruptions to normal business operations.
The Company's family of application suites is designed to improve most
organizations' core business processes. In addition, the Company extends its
application suites to address certain vertical markets with specific
configurations, templates and additional software features designed to meet
these industries' needs. The Company offers two versions of its application
suites -- WorldSoftware and OneWorld. WorldSoftware operates in a host-centric
environment on the AS/400 platform. With the addition of the WorldVision thin
client interface, WorldSoftware applications can be operated through a
Windows-based graphical user interface. OneWorld incorporates the Company's CNC
architecture and operates on leading UNIX and NT servers, as well as the AS/400
platform. The Company believes its network-centric CNC architecture provides a
valuable extension beyond traditional client/server architectures by masking
complexity, lowering cost of change and facilitating greater scalability. In
addition, WorldSoftware and OneWorld are capable of operating together in a
unified enterprise-wide environment. The Company also provides WorldSoftware and
OneWorld toolsets to enable rapid implementation, customization and modification
of its application suites.
The Company distributes, implements and supports its products worldwide
through 46 offices and 172 third-party business partners. To date, the Company
has more than 4,000 customers in over 90 countries including Lexmark
International,Inc., SmithKline Beecham plc, Paradyne Corporation and Praxair,
Inc.
The Company was incorporated in Colorado in March 1977 and will be
reincorporated in Delaware in August 1997. The Company's principal executive
office is located at 8055 East Tufts Avenue, Denver, Colorado 80237, and its
telephone number is (303) 488-4000.
4
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Actual results may differ
materially from those indicated in such forward-looking statements. Factors that
may cause such a difference include, but are not limited to, those discussed
below and in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
Variability of Quarterly Operating Results; Seasonality. The Company's
quarterly operating results have fluctuated significantly in the past, and will
likely continue to fluctuate in the future, as a result of a number of factors,
many of which are outside the Company's control. These factors include the
demand for the Company's software products and services; the size and timing of
specific sales; the level of product and price competition that the Company
encounters; the length of sales cycles; the timing of new product introductions
and product enhancements by the Company or its competitors; market acceptance of
new products; changes in pricing policies by the Company or its competitors; the
Company's ability to hire sales and consulting personnel to meet the demand, if
any, for implementations of the OneWorld version of its application suites; the
Company's ability to establish and maintain relationships with third-party
implementation providers; the Company's ability to establish and maintain
relationships with hardware and software suppliers; the announcement of new
hardware platforms that cause delay of customer purchases; variations in the
length of the implementation process for the Company's software products; the
Company's ability to complete fixed-price consulting contracts on budget; the
mix of products and services sold; the mix of distribution channels through
which products are sold; the mix of international and domestic revenue; changes
in the Company's sales incentives; changes in the renewal rate of support
agreements; product life cycles; software defects and other product quality
problems; seasonality of technology purchases; personnel changes; changes in the
Company's strategy; the activities of competitors; the extent of industry
consolidation; expansion of the Company's international operations; general
domestic and international economic and political conditions; and budgeting
cycles of the Company's customers. The timing of large individual sales has been
difficult for the Company to predict, and large individual sales have, in some
cases, occurred in quarters subsequent to those anticipated by the Company.
There can be no assurance that the loss or deferral of one or more significant
sales would not have a material adverse effect on the Company's quarterly
operating results.
The Company's software products are typically shipped when orders are
received, and consequently, license backlog at the beginning of any quarter has
in the past represented only a small portion of that quarter's expected revenue.
As a result, license fee revenue in any quarter is difficult to forecast because
it is substantially dependent on orders booked and shipped in that quarter.
Moreover, the Company typically recognizes a substantial amount of its revenue
in the last month of the quarter, frequently in the last week or even days of
the quarter. Since the Company's operating expenses are based on anticipated
revenue levels and because a high percentage of the Company's expenses are
relatively fixed in the near term, any shortfall from anticipated revenue or a
delay in the recognition of revenue could result in significant variations in
operating results from quarter to quarter. Quarterly license fee revenue is also
difficult to forecast because the Company's sales cycles, from initial
evaluation to delivery of software, vary substantially from customer to
customer. If revenue falls below the Company's expectations in a particular
quarter, the Company's operating results could be materially adversely affected.
See "-- Lengthy Sales Cycle."
The Company has experienced, and is expected to continue to experience, a
high degree of seasonality, with a disproportionately greater amount of the
Company's revenue for any fiscal year being recognized in its fourth fiscal
quarter and an even greater proportion of net income being recognized in such
quarter. For example, in fiscal 1996, 32% of total revenue, 39% of license fee
revenue, 28% of service revenue and 67% of net income were recognized in the
fourth fiscal quarter. In addition, because the Company's operating expenses are
relatively fixed in the near term, the Company's operating margins have
historically been significantly higher in its fourth fiscal quarter than in its
other quarters. The Company believes that such seasonality is primarily the
result of the efforts of the Company's direct sales force to meet or exceed
fiscal year-end sales quotas and the tendency of certain customers to finalize
sales contracts at or near the Company's fiscal year end. Because revenue,
operating margins and net income are greater in the fourth
5
<PAGE> 9
quarter, any shortfall from anticipated revenue, particularly license fee
revenue, in the fourth quarter would have a disproportionately large adverse
effect on the Company's operating results for the fiscal year. In addition, the
Company's total revenue, license fee revenue, service revenue and net income in
its first fiscal quarter have historically been lower than those in the
immediately preceding fourth quarter. For example, total revenue, license fee
revenue, service revenue and net income in the first quarter of fiscal 1997
decreased 20%, 41%, 3% and 87%, respectively, from the fourth quarter of fiscal
1996. The Company's first quarter revenue has historically slowed during the
holiday season in November and December.
Based on all of the foregoing, the Company believes that future revenue,
expenses and operating results are likely to vary significantly from quarter to
quarter. As a result, quarter to quarter comparisons of operating results are
not necessarily meaningful or indicative of future performance. Furthermore, the
Company believes it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts or
investors. In such event, or in the event that adverse conditions prevail, or
are perceived to prevail, with respect to the Company's business or generally,
the market price of the Company's Common Stock would likely be materially
adversely affected. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Limited Deployment of OneWorld Version; Entering New Markets. The Company
first shipped the OneWorld version of its application suites in late calendar
1996. The Company's future revenue growth is substantially dependent upon the
market acceptance of these OneWorld application suites and the ability of the
Company to license OneWorld application suites to new customers who are not
currently users of the Company's WorldSoftware. The Company does not expect to
generate substantial OneWorld license fee revenue from its existing installed
base of WorldSoftware users. The Company expects that it will take a longer time
to implement the OneWorld version of its application suites than it takes to
implement the WorldSoftware version, which typically takes six to 18 months. To
date, only a limited number of the Company's customers have completed
implementation of the Company's OneWorld application suites on UNIX and NT
servers. Potential and existing customers may find it difficult, or be unable,
to successfully implement OneWorld application suites, or may not purchase
OneWorld application suites for a number of reasons, including a lack of
implementation experience by the Company or its third-party implementation
providers in complex multi-platform environments; a customer's lack of the
necessary hardware, software or networking infrastructure; an absence of
required functionality in OneWorld application suites; excessive time and cost
of implementation; the failure of the OneWorld version to be competitive with
other products on the market; defects or "bugs" in OneWorld application suites;
and a failure to meet customer expectations. In addition, because the Company is
using OneWorld application suites to target potential customers in new markets,
the Company must overcome certain significant obstacles, including new
competitors who have significantly more experience and name recognition with
open systems customers, implementations and platforms; the Company's limited
relationships with third-party implementation providers; the limited experience
of the Company's sales and consulting personnel in the open systems environment;
and the Company's limited existing reference accounts in the open systems
market. If, for any reason, the Company is unable to successfully sell or
implement OneWorld in the UNIX or NT markets, the Company's reputation would be
damaged, and such failure would have a material adverse effect on the Company's
business, operating results and financial condition. Moreover, if the Company
fails to meet the expectations of market analysts or investors with regard to
sales or implementations of OneWorld application suites, the market price of the
Company's Common Stock would likely be materially adversely affected.
Dependence on IBM AS/400 Platform. Although the Company has recently
released the OneWorld version of its application suites to run on leading UNIX
and NT servers, the Company is and, for an extended period, expects to remain
substantially dependent upon the market for software products for the IBM AS/400
platform. All of the Company's revenue in fiscal 1994, 1995 and 1996 and
substantially all of the Company's revenue in the first six months of 1997 was
derived from its software products and related services for the AS/400 market.
The market for the AS/400 platform is expected to grow at a minimal rate;
however, there can be no assurance that the AS/400 market will grow at all in
the future. Similarly, there can be no assurance that AS/400 customers or
prospective customers will respond favorably to the Company's future or enhanced
software products or that the Company will continue to be successful in selling
its software products or
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services in the AS/400 market. The Company's future growth will depend in part
on its ability to gain market share in the AS/400 market; however, there can be
no assurance that the Company will be able to achieve any such market share
gains or maintain its current market share. Moreover, the Company's goal of
gaining market share in the AS/400 market will be more difficult to achieve
since the Company is also focusing on the UNIX and NT markets. See
"-- Management of Growth; Need for Additional Qualified Personnel." If the
Company's AS/400 installed customer base erodes, resulting in a decline in
recurring support and other service revenue, the Company's business, operating
results and financial condition will be materially adversely affected.
Competition. The market for ERP software solutions is intensely
competitive, subject to rapid technological change and significantly affected by
new product introductions and other market activities of industry participants.
The Company's products are designed and marketed for the AS/400 market and, more
recently, for leading UNIX and NT servers. The Company's primary competition
comes from a large number of independent software vendors including: (i)
companies offering products that run on the AS/400 platform and other mid-range
computers, including System Software Associates, Inc., Marcam Corporation,
Infinium Software, Inc. (formerly Software 2000) and JBA Holdings plc; (ii)
companies offering products that run on UNIX or NT servers in a client/server
environment, such as SAP Aktiengesellschaft ("SAP"), Baan Company N.V. ("Baan"),
PeopleSoft, Inc. ("PeopleSoft") and Oracle Corporation ("Oracle"); and (iii)
companies offering either standard or fully customized products that run on
mainframe computer systems, such as SAP. Additionally, the Company faces
indirect competition from suppliers of custom-developed business application
software that focus mainly on proprietary mainframe and mid-range computer-based
systems, such as systems consulting groups of major accounting firms, and from
IT departments of potential customers that develop systems internally. The
Company's competitors currently offer products that run on the AS/400 platform
and/or UNIX and NT servers or have announced their intent to introduce such
products in the near future. As a result, the Company will experience increased
competition. There can be no assurance that the Company will be able to
successfully compete with new or existing competitors or that such competition
will not have a material adverse effect on the Company's business, operating
results or financial condition. See "Business -- Competition."
Many of the Company's competitors, and SAP and Oracle in particular, have
significantly greater financial, technical, marketing and other resources than
the Company, as well as wider name recognition and larger installed customer
bases. Moreover, the Company has traditionally competed only in the AS/400
market, which primarily consists of mid-sized organizations, and has only
recently entered the UNIX and NT markets. In contrast, each of SAP, Baan,
PeopleSoft and Oracle has significantly more experience with UNIX and NT
implementations and platforms, name recognition with potential UNIX and NT
customers, and reference accounts with UNIX and NT customers. Accordingly, such
competitors have significantly more customers in the UNIX and NT markets to use
as references when competing against the Company. Additionally, several of the
Company's competitors have well-established relationships with current and
potential customers of the Company. These relationships may prevent the Company
from competing effectively in divisions or subsidiaries of such customers. Many
of the Company's competitors, such as SAP, Baan, PeopleSoft and Oracle, also
offer, or have announced their intention to offer, vertical applications
targeted to mid-sized organizations, which market comprises a substantial
portion of the Company's revenue. Further, several of the Company's competitors
regularly and significantly discount prices on their products. If these
competitors continue to discount or increase the amount or frequency of such
discounts in response to increased competition or other factors, the Company may
be required to similarly discount its products, which could have an adverse
effect on the Company's margins. There can be no assurance that the Company will
be able to compete successfully against any of these competitors.
The Company relies, and expects to increase its reliance, on a number of
third-party implementation providers and other customer support services, as
well as for recommendations of its products during the evaluation stage of the
purchase process. A number of the Company's competitors, including SAP, Baan,
PeopleSoft, and Oracle, have significantly more well-established relationships
with such providers and, as a result, such firms may be more likely to recommend
competitors' products rather than the Company's products. Furthermore, there can
be no assurance that these third parties, many of which have significantly
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greater financial, technical, marketing and other resources than the Company,
will not market software products in competition with the Company in the future.
If the Company is unable to maintain or increase the number and quality of its
relationships with providers who recommend, implement or support ERP software,
the Company's business, operating results and financial condition will be
materially adversely affected.
Lengthy Sales Cycle. The Company's software is generally used for division-
or enterprise-wide, business-critical purposes and involves significant capital
commitments by customers. Potential customers generally commit significant
resources to an evaluation of available enterprise software and require the
Company to expend substantial time, effort and money educating them about the
value of the Company's solutions. Sales of the Company's software products
require an extensive sales effort throughout a customer's organization because
decisions to license such software generally involve the evaluation of the
software by a significant number of customer personnel in various functional and
geographic areas, each often having specific and conflicting requirements. A
variety of factors, including factors over which the Company has little or no
control, may cause potential customers to favor a particular supplier or to
delay or forego a purchase. As a result of these or other factors, the sales
cycle for the Company's products is long, typically ranging between six and 15
months. Moreover, the Company expects that the sales cycle for the recently
released OneWorld version of its application suites may be longer than that of
the WorldSoftware version, at least until the Company's sales force becomes
familiar with the needs of customers operating on UNIX and NT servers. As a
result of the length of the sales cycle for its software products, the Company's
ability to forecast the timing and amount of specific sales is limited, and the
delay or failure to complete one or more large license transactions could have a
material adverse effect on the Company's business, operating results or
financial condition and cause the Company's operating results to vary
significantly from quarter to quarter. See "-- Variability of Quarterly
Operating Results; Seasonality."
Lengthy Implementation Process. The Company's software products are complex
and perform or directly affect business-critical functions across many different
functional and geographic areas of the enterprise. Consequently, implementation
of the Company's software is a complex, lengthy process that involves a
significant commitment of resources by the Company's customers and that is
subject to a number of significant risks over which the Company has little or no
control. The Company expects that implementation of the OneWorld version of its
application suites on UNIX and NT servers is likely to be more complex and
require more time than implementation on the AS/400 platform. In addition, the
Company's lack of experience in implementing the OneWorld version of its
application suites may contribute to the length of the implementation process.
Delays in the completion of implementations of any of its application suites
whether by the Company or its business partners, may result in customer
dissatisfaction or damage to the Company's reputation and could have a material
adverse effect on the Company's business, operating results or financial
condition.
Reliance on Third Parties and Development of Certain Relationships. The
Company intends to rely primarily on third-party implementation providers for
the implementation of the OneWorld version of its application suites. Although
the Company has historically subcontracted a portion of its implementation
services to third parties, the Company has adopted a strategy in which an
increasing number of OneWorld implementations will be performed by third parties
that will contract directly with the Company's customers to provide such
services. Executing this strategy will require that third-party implementation
providers with which the Company has existing relationships allocate additional
resources to OneWorld implementations and that the Company enter into new
relationships with additional third-party implementation providers to provide
such services. Due to the limited resources and capacities of many third-party
implementation providers and the reluctance of such providers to switch partners
or enter into new relationships with additional suppliers, there can be no
assurance that the Company will be able to establish or maintain relationships
with third parties having sufficient resources to provide the necessary
implementation services to support demand, if any, for the OneWorld version. If
such resources are unavailable, the Company will be required to perform such
services internally, and there can be no assurance that the Company will have
sufficient resources available for such purposes. In addition, there can be no
assurance that any third-party implementation provider with which the Company
has, or intends to establish, such a relationship will provide the level and
quality of service required to meet the needs and expectations of the Company's
customers. If the Company is unable to
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establish and maintain effective, long-term relationships with such providers,
or if such providers do not meet customer needs, the Company's business,
operating results or financial condition will be materially adversely affected.
The Company has established a number of relationships with third parties,
including consulting and systems integration firms, hardware suppliers, and
database, operating system and other independent software vendors, in order to
enhance its sales, marketing and customer service efforts. Many of these third
parties have better established relationships with one or more of the Company's
competitors and may, in specific instances, select or recommend ERP software
offerings of the Company's competitors rather than the Company's software. In
addition, certain of these third parties, including Oracle, compete with the
Company in developing and marketing ERP software applications. Competition
between the Company and these third parties may cause a deterioration in or
termination of such relationships, which could have a material adverse effect on
the Company's business, operating results or financial condition. See
"-- Competition."
Management of Growth; Need for Additional Qualified Personnel. Although the
Company has experienced significant revenue growth in past years, such growth is
not necessarily indicative of future revenue growth. This growth has resulted in
new and increased responsibilities for management personnel and has placed, and
continues to place, a significant strain upon the Company's management,
operating and financial resources. There can be no assurance that such strain
will not have a material adverse effect on the Company's business, operating
results or financial condition. The rapid growth of the Company's business has
required the Company to make significant recent additions in personnel,
particularly in product development and sales and marketing. The Company
believes that its future operating results depend in significant part on its
ability to attract and retain highly skilled technical, managerial, sales,
marketing, service and support personnel. Although the Company has increased the
number of its sales, services and support personnel in recent years, the Company
has experienced, and expects to continue to experience, difficulty in recruiting
such personnel. The Company anticipates that it will need to continue to
increase the size of its direct sales, services and support personnel in future
periods. If the Company is unable to hire qualified personnel on a timely basis,
the Company's business, operating results and financial condition will be
materially adversely affected.
To manage its operations, the Company must continuously evaluate the
adequacy of its management structure and its existing procedures, including,
among others, its financial and internal controls. There can be no assurance
that management will adequately anticipate all of the changing demands that
growth may impose on the Company's procedures and structure. Any failure to
adequately anticipate and respond to such changing demands may have a material
adverse effect on the Company's business, operating results or financial
condition. As a result of the Company's development and release of the OneWorld
version of its application suites, a significant amount of the Company's
resources has been focused on the UNIX and NT markets. To maintain a focus on
the AS/400 market, as well as on the UNIX and NT markets, the Company is
considering implementation of certain internal changes to its organization. If
the Company's efforts to maintain a focus on both markets are unsuccessful, the
Company's business, operating results and financial condition may be materially
adversely affected.
Fixed-Price Service Contracts. The Company offers a combination of ERP
software, implementation and support services to its customers. Typically, the
Company enters into service agreements with its customers that provide for
consulting and implementation services on a "time and materials" basis. Certain
customers have asked for, and the Company has from time to time entered into,
fixed-price service contracts. These contracts specify certain milestones to be
met by the Company regardless of actual costs incurred by the Company in
fulfilling those obligations. The Company believes that fixed-price service
contracts may increasingly be offered by its competitors to differentiate their
product and service offerings. As a result, the Company may enter into more
fixed-price contracts in the future. There can be no assurance that the Company
can successfully complete these contracts on budget, and the Company's inability
to do so could have a material adverse effect on its business, operating results
and financial condition.
Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. Beginning in the year 2000, these date code fields will need to accept
four digit entries to distinguish 21st century dates from 20th century dates. As
a result, in less than
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three years, computer systems and/or software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. Although the Company currently offers software
products that are designed to be Year 2000 compliant, there can be no assurance
that the Company's software products contain all necessary date code changes.
The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company. In addition, it is possible that certain of the Company
customers are purchasing support contracts only to ensure that they become Year
2000 compliant and that, once such customers believe they are Year 2000
compliant, they will not renew support contracts. If a significant number of the
Company's customers do not renew support contracts for this or other reasons,
the Company's business, operating results and financial condition would be
adversely affected. Many potential customers may also choose to defer purchasing
Year 2000 compliant products until they believe it is absolutely necessary, thus
resulting in potentially stalled market sales within the industry. Conversely,
Year 2000 issues may cause other companies to accelerate purchases, thereby
causing an increase in short-term demand and a consequent decrease in long-term
demand for software products. Additionally, Year 2000 issues could cause a
significant number of companies, including current Company customers, to
reevaluate their current ERP system needs, and as a result consider switching to
other systems or suppliers. Moreover, the Company believes that some customers
may be purchasing the Company's products as an interim solution to their Year
2000 needs until their current suppliers reach compliance. There can be no
assurance that such customers will purchase support services from the Company or
that they will upgrade beyond their current version of the Company's software
once their current software suppliers reach compliance. Any of the foregoing
could result in a material adverse effect on the Company's business, operating
results and financial condition.
International Operations and Currency Fluctuations. International revenue
as a percentage of total revenue ranged between 35% and 37% from fiscal 1994
through the first half of fiscal 1997, and the Company expects that revenue from
international customers will continue to account for a significant portion of
the Company's total revenue. The Company currently has 27 international sales
offices located throughout Canada, Europe, Asia, Latin America and Africa. To
service the needs of its customers with international operations, the Company
and its support partners must provide worldwide product support services. One of
the Company's strategies is to continue to expand its existing international
operations and enter additional international markets, which will require
significant management attention and financial resources. Traditionally,
international operations are characterized by higher operating expenses and
lower operating margins. As a result, if international revenue increases as a
percentage of total revenue, operating margins may be adversely affected. Costs
associated with international expansion include the establishment of additional
foreign offices, the hiring of additional personnel, the localization and
marketing of its products for particular foreign markets, and the development of
relationships with additional international service providers. If international
revenue is not adequate to offset the expense of expanding foreign operations,
the Company's business, operating results or financial condition could be
materially adversely affected.
A significant portion of the Company's revenue is received in currencies
other than U.S. dollars and, in the past, the Company has engaged in minimal
hedging activities. As a result, the Company is subject to risks associated with
foreign exchange rate fluctuations. In the first half of fiscal 1997 and fiscal
1996, the Company incurred foreign exchange losses of approximately $1.3 million
and $1.7 million, respectively. Accordingly, due to the substantial volatility
of foreign exchange rates, there can be no assurance that foreign exchange rate
fluctuations will not have a material adverse effect on the Company's business,
operating results or financial condition.
The Company's international operations are subject to other risks inherent
in international business activities, such as the imposition of governmental
controls, export license requirements, restrictions on the export of certain
technology, cultural and language difficulties associated with servicing
customers, the impact of a recessionary environment in economies outside the
United States, reduced protection for intellectual
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property rights in some countries, the potential exchange and repatriation of
foreign earnings, political instability, trade restrictions, tariff changes,
localization and translation of products for foreign countries, difficulties in
staffing and managing international operations, difficulties in collecting
accounts receivable and longer collection periods, and the impact of local
economic conditions and practices. The Company's success in expanding its
international business will be dependent, in part, on its ability to anticipate
and effectively manage these and other risks. There can be no assurance that
these and other factors will not have a material adverse effect on the Company's
business, operating results or financial condition.
Risks Associated with New Versions and New Products; Rapid Technological
Change; Risks of Software Defects. The market for the Company's products is
characterized by rapid technological change, evolving industry standards in
computer hardware and software technology, changes in customer requirements and
frequent new product introductions and enhancements. The introduction of
products embodying new technologies and the emergence of new industry standards
can render existing products obsolete and unmarketable. The life cycles of the
Company's software products are difficult to estimate. As a result, the
Company's future success will depend, in part, upon its ability to continue to
enhance existing products and develop and introduce in a timely manner new
products that keep pace with technological developments, satisfy customer
requirements and achieve market acceptance. There can be no assurance that the
Company will successfully identify new product opportunities and develop and
bring new products to market in a timely and cost-effective manner, or that
products, capabilities or technologies developed by others will not render the
Company's products or technologies obsolete or noncompetitive or shorten the
life cycles of the Company's products. See "-- Competition." Although the
Company has addressed the need to develop new products and enhancements
primarily through its internal development efforts, the Company has also
addressed this need through the licensing of third-party technology. Licensing
third-party technology involves numerous risks. See "-- Limited Protection of
Proprietary Technology; Risks of Infringement." If the Company is unable to
develop on a timely and cost-effective basis new software products or
enhancements to existing products, or if such new products or enhancements do
not achieve market acceptance, the Company's business, operating results and
financial condition may be materially adversely affected.
Historically, the Company has issued significant new releases of its family
of software products periodically, with interim releases issued even more
frequently. As a result of the complexities inherent in software development,
and in particular for multi-platform environments, and the broad functionality
and performance demanded by customers for ERP products, major new product
enhancements and new products can require long development and testing periods
before they are commercially released. The Company has on occasion experienced
significant delays in the scheduled introduction of new and enhanced products,
and there can be no assurance that such delays will not be experienced in the
future. The Company recently released OneWorld, the network-centric version of
its application suites. Because the development of enhancements in
network-centric environments is more complex than in host-centric systems, there
can be no assurance that the introduction of future enhancements will not be
delayed. See "Business -- Products."
Complex software products such as those offered by the Company frequently
contain undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. The Company has in the past
discovered software errors in new versions of its ERP software after their
release. To date, the Company's business, operating results or financial
condition have not been materially adversely affected by the release of products
containing errors. There can be no assurance, however, that errors will not be
found in the Company's products or that such errors will not result in delay or
loss of revenue, diversion of development resources, damage to the Company's
reputation, increased service and warranty costs, or impaired market acceptance
of these products, any of which could result in a material adverse effect on the
Company's business, operating results or financial condition. See
"Business -- Products."
Dependence on Key Personnel. The Company's success depends to a significant
extent upon a limited number of members of senior management and other key
employees. The loss of one or more key employees could have a material adverse
effect on the Company. Although the Company currently maintains key man life
insurance on C. Edward McVaney, Chairman, President and Chief Executive Officer,
such insurance is minimal and is not maintained on other key personnel. The
Company does not have employment agreements
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with its executive officers. In addition, the Company believes that its future
success will depend in part on its ability to attract and retain highly skilled
technical, managerial, sales and marketing personnel. Competition for such
personnel in the computer software industry is intense. There can be no
assurance that the Company will be successful in attracting and retaining such
personnel, and the failure to do so could have a material adverse effect on the
Company's business, operating results or financial condition.
Limited Protection of Proprietary Technology; Risks of Infringement. The
Company's ability to compete is dependent in part upon its internally developed,
proprietary intellectual property. Although the Company relies on patent,
trademark, trade secret and copyright law, as well as confidentiality procedures
and licensing arrangements, to establish and protect its rights in its
technology, the Company believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements, name recognition, customer training and reliable product support,
are more essential to protect its market position. There can be no assurance
that others will not develop technologies that are similar or superior to the
Company's technology. The Company typically enters into confidentiality or
license agreements with its employees, consultants and suppliers, and typically
controls access to and distribution of its software, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's products or
technology without authorization, or to develop similar technology independently
through reverse engineering or other means. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as do
the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that competitors will not independently develop similar
technology. Preventing or detecting unauthorized use of the Company's products
is difficult. There can be no assurance that the steps taken by the Company will
prevent misappropriation of its technology or that its license agreements will
be enforceable. In addition, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results or financial condition.
The Company typically licenses its products to end users under the
Company's standard license agreements, although each license is individually
negotiated and may contain variations. The Company's products are licensed not
only to end users, but also to independent, third-party distributors with a
right to sublicense. Although the Company seeks to establish the conditions
under which the Company's products are licensed by such distributors to end
users, the Company cannot ensure that its distributors do not deviate from such
conditions. Moreover, in order to facilitate the customization required by most
of the Company's customers, the Company generally licenses its software products
to end users in both object code (machine-readable) and source code
(human-readable) format. Although this practice facilitates customization,
making software available in source code also makes it easier for third parties
to copy or modify the Company's software for non-permitted purposes.
In the future, the Company may receive notice of claims of infringement of
other parties' proprietary rights. Although the Company does not believe that
its products infringe the proprietary rights of third parties, there can be no
assurance that infringement or invalidity claims (or claims for indemnification
resulting from infringement claims) will not be asserted or prosecuted against
the Company or that any such assertions or prosecutions will not materially
adversely affect the Company's business, operating results or financial
condition. Regardless of the validity or the successful assertion of such
claims, defending against such claims could result in significant costs and
diversion of resources with respect to the defense thereof, which could have a
material adverse effect on the Company's business, operating results or
financial condition. In addition, the assertion of such infringement claims
could result in injunctions preventing the Company from distributing certain
products, which would have a material adverse effect on the Company's business,
operating results and financial condition. If any claims or actions are asserted
against the Company, the Company may seek to obtain a license to such
intellectual property rights. There can be no assurance, however, that such a
license would be available on reasonable terms or at all.
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The Company also relies on certain other technology which it licenses from
third parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. Most
notably, the Company licenses the graphical user interface to the WorldSoftware
version of its application suites (which the Company markets as WorldVision).
There can be no assurance that these third-party technology licenses will
continue to be available to the Company on commercially reasonable terms. The
loss of, or inability to maintain, any of these technology licenses,
particularly that for WorldVision's graphical user interface, would result in
delays or reductions in product shipments until equivalent technology could be
identified, licensed or developed, and integrated. Any such delays or reductions
in product shipments could materially adversely affect the Company's business,
operating results or financial condition. Moreover, although the Company is
generally indemnified by third parties against claims that such third parties'
technology infringes the proprietary rights of others, such indemnification is
not always available for all types of intellectual property rights (for example,
patents may be excluded) and in some cases the geographic scope of
indemnification is limited. The result is that the indemnity that the Company
receives against such claims is often less broad than the indemnity that the
Company provides to its customers. Even in cases in which the indemnity that the
Company receives from a third-party licensor is as broad as the indemnity that
the Company provides to its customers, the third-party licensors from whom the
Company would be receiving indemnity are often not well-capitalized and may not
be able to indemnify the Company in the event that such third-party technology
infringes the proprietary rights of others. Accordingly, the Company could have
substantial exposure in the event that technology licensed from a third party
infringes another party's proprietary rights. The Company currently does not
have any liability insurance to protect against the risk that licensed
third-party technology infringes the proprietary rights of others. There can be
no assurance that infringement or invalidity claims arising from the
incorporation of third-party technology, and claims for indemnification from the
Company's customers resulting from such infringement claims, will not be
asserted or prosecuted against the Company or that any such assertions or
prosecutions will not materially adversely affect the Company's business,
operating results or financial condition. Regardless of the validity or
successful assertion of such claims, the Company could incur significant costs
and diversion of resources with respect to the defense thereof, in addition to
potential product redevelopment costs and delays, all of which could have a
material adverse effect on the Company's business, operating results or
financial condition.
Security; Product Liability. The Company has included security features in
certain of its Internet browser-enabled products that are intended to protect
the privacy and integrity of customer data. Despite the existence of these
security features, the Company's software products may be vulnerable to
break-ins and similar disruptive problems caused by Internet users. Such
computer break-ins and other disruptions may jeopardize the security of
information stored in and transmitted through the computer systems of the
Company's customers. Break-ins often involve hackers bypassing firewalls and
misappropriating confidential information. Addressing problems caused by such
third parties may require significant expenditures of capital and resources by
the Company, which may have a material adverse effect on the Company's business,
operating results or financial condition.
Although the Company's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential
liability for damages arising out of use of or defects in the Company's
products, it is possible that such limitation of liability provisions may not be
effective as a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions. Although the Company has not
experienced any such product liability claims to date, there can be no assurance
that the Company will not be subject to such claims in the future. Because the
Company's software products may be used in business-critical applications, a
successful product liability claim brought against the Company could have a
material adverse effect on the Company's business, operating results or
financial condition. Moreover, defending such a suit, regardless of its merits,
could entail substantial expense and require the time and attention of key
management personnel, either of which could have a material adverse effect on
the Company's business, operating results or financial condition.
General Economic and Market Conditions. Segments of the software industry
have experienced significant economic downturns characterized by decreased
product demand, price erosion, work slowdowns and layoffs. The Company's
operations may in the future experience substantial fluctuations from period to
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period as a consequence of general economic conditions affecting the timing of
orders from major customers and other factors affecting capital spending.
Although the Company has a diverse client base, it has targeted certain vertical
markets. Therefore, any economic downturns in general or in the targeted
vertical segments in particular would have a material adverse effect on the
Company's business, operating results and financial condition.
Control by Existing Stockholders; Antitakeover Provisions. Immediately
after the closing of this offering, % of the outstanding Common Stock
( % if the Underwriter's over-allotment option is exercised in full) will be
held by the directors and executive officers of the Company, together with
certain entities affiliated with them, assuming no exercise of outstanding stock
options. In addition, C. Edward McVaney, Robert C. Newman and Jack L. Thompson
(the "Founders") are expected to enter into an Amended and Restated Shareholder
Agreement (as defined herein) with the Company, which provides, among other
things, that the Founders must vote their shares in accordance with the
provisions of such agreement. See "Certain Transactions." As a result, these
stockholders, if acting together, would be able to control substantially all
matters requiring approval by the stockholders of the Company, including the
election of all directors and approval of significant corporate transactions.
See "Management -- Executive Officers and Directors" and "Principal and Selling
Stockholders."
Section 203 of the General Corporation Law of the State of Delaware (as
amended from time to time, the "DGCL"), which is applicable to the Company,
prohibits certain business combinations with certain stockholders for a period
of three years after they acquire 15% or more of the outstanding voting stock of
a corporation. See "Description of Capital Stock -- Delaware Law and Certain
Provisions of the Company's Certificate of Incorporation and Bylaws." In
addition, the authorized but unissued capital stock of the Company includes
5,000,000 shares of preferred stock. The Board of Directors is authorized to
provide for the issuance of such preferred stock in one or more series and to
fix the designations, preferences, powers and relative, participating, optional
or other rights and restrictions thereof. Accordingly, the Company may in the
future issue a series of preferred stock, without further stockholder approval,
that will have preference over the Common Stock with respect to the payment of
dividends and upon liquidation, dissolution or winding-up. Any of the foregoing
could adversely affect holders of the Common Stock or discourage or make
difficult any attempt to obtain control of the Company. See "Description of
Capital Stock -- Preferred Stock."
Shares Eligible for Future Sale. Sales of a substantial number of shares of
Common Stock (including shares issued upon the exercise of outstanding options)
in the public market after this offering could materially adversely affect the
market price of the Common Stock. Such sales also might make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that the Company deems appropriate. Upon completion
of this offering (based on shares outstanding at April 30, 1997), the Company
will have outstanding an aggregate of shares of Common Stock, assuming no
exercise of the Underwriters' over-allotment option and no exercise of
outstanding options. Of these shares, all of the shares sold in this offering
will be freely tradeable without restriction or further registration under the
Securities Act, unless such shares are purchased by "affiliates" of the Company
as that term is defined in Rule 144 under the Securities Act (the "Affiliates").
The remaining shares of Common Stock held by existing shareholders
are "restricted securities" as that term is defined in Rule 144 under the
Securities Act ("Restricted Shares"). Restricted Shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144 or 701 promulgated under the Securities Act. As a
result of the contractual restrictions described below and the provisions of
Rules 144 and 701, the Restricted Shares will be available for sale in the
public market as follows: (i) shares in addition to the shares offered
hereby will be eligible for immediate sale on the date of this Prospectus; (ii)
shares will be eligible for sale beginning 90 days after the date of this
Prospectus; and (iii) shares will be eligible for sale upon expiration
of the lock-up agreements 180 days after the date of this Prospectus. All
officers and directors and certain stockholders and certain option holders of
the Company have agreed not to offer, pledge, sell, contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly (or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of), any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock, for a period of 180 days
after the date of this Prospectus,
14
<PAGE> 18
without the prior written consent of Morgan Stanley & Co. Incorporated. The
Company intends to file a registration statement on Form S-8 which would allow
shares issuable upon exercise of options previously granted to be freely
tradeable following release of such lock-up obligations, subject to compliance
with Rule 144 in the case of Affiliates of the Company. See
"Management -- Employee Benefit Plans," "Shares Eligible for Future Sale" and
"Underwriters."
No Prior Public Market; Possible Stock Price Volatility. Prior to this
offering, there has been no public market for the Company's Common Stock, and
there can be no assurance that an active public market for the Common Stock will
develop or be sustained after this offering. The initial public offering price
will be determined by negotiations among the Company, the Selling Stockholders,
and the representatives of the Underwriters based on several factors and may not
be indicative of the future market price of the Common Stock after this
offering. The market price of the Company's Common Stock is likely to be highly
volatile and may be subject to significant fluctuations in response to actual or
anticipated variations in quarterly operating results and other factors, such as
announcements of technological innovations, new products or new contracts by the
Company or its competitors, conditions and trends in the software and other
technology industries, adoption of new accounting standards affecting the
software industry, changes in earning estimates or recommendations by securities
analysts, general market conditions or other events. In addition, equity markets
have also experienced extreme volatility that has particularly affected the
market prices of equity securities of many high technology companies and that
has often been unrelated or disproportionate to the operating performance of
such companies. Broad market fluctuations, as well as economic conditions
generally and in the software industry specifically, may result in material
adverse effects on the market price of the Company's Common Stock. There can be
no assurance that the market price for the Company's Common Stock will not
decline below the initial public offering price. In the past, following periods
of volatility in the market price of a particular company's securities,
securities class action litigation has often been brought against that company.
There can be no assurance that such litigation will not occur in the future with
respect to the Company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect upon the Company's business, operating results or financial
condition. See "Underwriters."
Dilution; Dividend Policy. Investors participating in this offering will
incur immediate and substantial dilution of pro forma net tangible book value
per share of $ from the initial public offering price. To the extent
outstanding options to purchase the Company's Common Stock are exercised, there
will be further dilution. There can be no assurance that the Company will not
require additional funds to support its working capital requirements or for
other purposes, in which case the Company may seek to raise such additional
funds through public or private equity financing or from other sources. There
can be no assurance that such additional financing will be available or that, if
available, such financing will be obtained on terms favorable to the Company and
would not result in additional dilution to the Company's stockholders. See
"Dilution." The Company has never paid or declared any cash dividends on the
Common Stock or other securities and does not anticipate paying cash dividends
in the foreseeable future. Additionally, the Company's bank line of credit
contains covenants which restrict the Company's ability to pay cash dividends.
See "Dividend Policy."
15
<PAGE> 19
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby are estimated to be approximately
$ million (approximately $ million if the Underwriters' over-allotment
option is exercised in full), at an assumed initial public offering price of
$
per share and after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by the Company. The Company will not
receive any proceeds from the sale of the Common Stock by the Selling
Stockholders. The primary purposes of this offering are to obtain additional
equity capital, create a public market for the Company's Common Stock,
facilitate future access by the Company to public equity markets, provide
liquidity to existing stockholders and provide increased visibility for the
Company in the marketplace.
The Company intends to use the net proceeds of this offering primarily for
general corporate purposes, including working capital. The Company may also use
a portion of the proceeds to acquire businesses, products or technologies that
are complementary to those of the Company, although no specific acquisitions are
currently planned and no portion of the net proceeds has been allocated for any
acquisition. Pending such uses, the Company intends to invest the net proceeds
from this offering in investment grade, short-term, interest-bearing securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common
Stock or other securities and does not anticipate paying cash dividends in the
foreseeable future. Under the terms of the Company's bank line of credit, the
Company's ability to pay dividends is restricted.
16
<PAGE> 20
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) as of April 30, 1997; (ii) on a pro forma basis, giving effect to
the elimination of the mandatory redemption feature of the mandatorily
redeemable J.D. Edwards & Company Employee Stock Ownership Plan (the "ESOP")
shares and the income tax benefits resulting from the lapse of restrictions on
certain outstanding shares of Common Stock, both of which will occur
automatically upon the closing of the offering; and (iii) on a pro forma as
adjusted basis, giving effect to the receipt by the Company of the estimated net
proceeds from the sale of shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $ per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company:
<TABLE>
<CAPTION>
AS OF APRIL 30, 1997
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Mandatorily redeemable shares, at redemption value.......... $ 99,076 $ 5,500 $ --
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none outstanding........................... -- -- --
Common stock, $.001 par value; 300,000,000 shares
authorized; 79,128,420 shares outstanding actual and
pro forma, and shares pro forma as
adjusted(1)............................................ 89 89
Additional paid-in capital................................ 11,175 23,591
Retained earnings......................................... 72,806 72,806
Treasury stock, at cost; 9,453,080 shares actual, pro
forma and pro forma as adjusted........................ (6,590) (6,590)
Cumulative translation adjustments and other, net......... (934) (934)
Adjustment for mandatorily redeemable shares.............. (99,076) (5,500) --
-------- -------- --------
Total stockholders' equity (deficit)................. (22,530) 83,462
-------- -------- --------
Total capitalization.............................. $ 76,546 $ 88,962 $
======== ======== ========
</TABLE>
- ---------------
(1) Excludes (i) 22,200,430 shares of Common Stock issuable upon exercise of
outstanding options as of April 30, 1997 with a weighted average exercise
price of $4.52 per share and (ii) 17,114,790 shares of Common Stock reserved
for issuance under the Company's stock plans as of April 30, 1997. See
"Management -- Employee Benefit Plans" and Notes 7 and 10 of Notes to
Consolidated Financial Statements.
17
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
April 30, 1997 was $64.4 million or $.81 per share. Pro forma net tangible book
value per share is equal to the Company's total tangible assets less its total
liabilities (adjusted to reflect the removal of the mandatory redemption feature
of the ESOP shares and the realization of income tax benefits from the lapse of
restrictions on certain of the Company's outstanding common stock), divided by
the pro forma shares of Common Stock outstanding as of April 30, 1997. After
giving effect to the issuance and sale of the shares of Common Stock
offered by the Company (based upon an assumed initial public offering price of
$ per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company), the
Company's as adjusted net tangible book value as of April 30, 1997 would have
been $ or $ per share. This represents an immediate increase
in the pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of April
30, 1997............................................... $ .81
Increase in pro forma net tangible book value per share
attributable to new investors..........................
--------
As adjusted net tangible book value per share after
offering..................................................
--------
Dilution per share to new public investors.................. $
========
</TABLE>
The following table summarizes on an as adjusted basis as of April 30,
1997, the difference between the existing stockholders and the purchasers of
shares of Common Stock in this offering (at an assumed initial public offering
price of $ per share and before deducting estimated underwriting discounts and
commissions and estimated offering expenses) with respect to the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price paid per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)..................... 79,128,420 % $38,455 % $.00
New public investors(1)......................
---------- ----- ------- -----
Total.............................. 100.0% $ 100.0%
========== ===== ======= =====
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders will reduce the number of shares of Common
Stock held by existing stockholders to shares or % of the
total number of shares of Common Stock outstanding after this offering
( or % assuming the Underwriters' over-allotment option is
exercised in full), and will increase the number of shares of Common Stock
held by new investors to shares or % of the total number of
shares of Common Stock outstanding after this offering ( shares or
% assuming the Underwriters' over-allotment option is exercised in
full). See "Principal and Selling Stockholders."
The foregoing discussion and tables assume no exercise of any stock options
outstanding as of April 30, 1997. As of April 30, 1997, (i) 22,200,430 shares of
Common Stock were issuable upon the exercise of outstanding options at a
weighted average exercise price of $4.52 per share and (ii) 17,114,790 shares of
Common Stock reserved for issuance under the Company's stock plans. To the
extent that any of these options are exercised, there will be further dilution
to new investors. See "Management -- Employee Benefit Plans" and Notes 7 and 10
of Notes to the Consolidated Financial Statements.
18
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the consolidated financial statements and
notes thereto and other financial information included elsewhere in this
Prospectus. The consolidated statements of operations data set forth below for
the years ended October 31, 1994, 1995 and 1996 and the consolidated balance
sheet data as of October 31, 1995 and 1996 are derived from, and are qualified
by reference to, the Company's consolidated financial statements audited by
Price Waterhouse LLP, independent accountants, which are included elsewhere in
this Prospectus. The consolidated statements of operations data for the ten
months ended October 31, 1992 and the year ended October 31, 1993 and the
consolidated balance sheet data as of October 31, 1992, 1993 and 1994 are
derived from consolidated financial statements audited by Price Waterhouse LLP,
independent accountants, which are not included in this Prospectus. The
consolidated statements of operations data for the six months ended April 30,
1996 and 1997 and the consolidated balance sheet data as of April 30, 1997 are
derived from unaudited consolidated financial statements included in this
Prospectus and which have been prepared on the same basis as the audited
consolidated financial statements and, in the opinion of the Company, include
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of such information. Historical results are not necessarily
indicative of results for any future period. See "Consolidated Financial
Statements."
<TABLE>
<CAPTION>
TEN MONTHS SIX MONTHS
ENDED ENDED
OCTOBER 31, YEAR ENDED OCTOBER 31, APRIL 30,
----------- ----------------------------------------- -------------------
1992(1) 1993 1994 1995 1996 1996 1997
----------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
License fees............................... $ 64,117 $ 94,518 $107,561 $134,138 $180,366 $ 72,278 $ 92,063
Services................................... 55,396 102,316 133,026 206,628 297,682 135,864 176,612
-------- -------- -------- -------- -------- -------- --------
Total revenue........................ 119,513 196,834 240,587 340,766 478,048 208,142 268,675
-------- -------- -------- -------- -------- -------- --------
Costs and expenses:
Cost of license fees....................... 6,861 10,401 12,832 18,461 27,443 12,855 17,084
Cost of services........................... 35,984 65,511 87,826 128,144 184,846 84,989 109,306
Sales and marketing........................ 49,874 70,662 76,169 102,310 128,759 57,601 73,735
General and administrative................. 15,188 22,488 27,377 38,677 53,052 24,712 31,087
Research and development................... 8,247 15,484 18,936 24,296 40,321 18,193 24,533
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses............. 116,154 184,546 223,140 311,888 434,421 198,350 255,745
-------- -------- -------- -------- -------- -------- --------
Operating income............................. 3,359 12,288 17,447 28,878 43,627 9,792 12,930
Other income (expense):
Interest income............................ 232 214 483 1,697 629 266 163
Interest expense........................... (163) (142) (101) (576) (899) (347) (500)
Foreign currency losses and other, net..... (148) (687) (486) (411) (1,403) (134) (1,154)
-------- -------- -------- -------- -------- -------- --------
Income before income taxes................... 3,280 11,673 17,343 29,588 41,954 9,577 11,439
Provision for income taxes(2).............. 3,547 4,293 5,280 11,379 15,628 3,636 4,261
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................ $ (267) $ 7,380 $ 12,063 $ 18,209 $ 26,326 $ 5,941 $ 7,178
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per common share(3).......... $ (0.00) $ 0.09 $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
======== ======== ======== ======== ======== ======== ========
Weighted average common shares
outstanding(3)............................. 80,960 81,488 81,755 82,006 87,169 86,489 93,416
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1997
OCTOBER 31, -------------------
-------------------------------------------------- PRO
1992 1993 1994 1995 1996 ACTUAL FORMA(4)
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 3,654 $12,636 $ 28,615 $ 34,897 $ 25,554 $ 29,907 $ 29,907
Total assets...................................... 59,937 86,077 127,131 175,191 243,786 276,421 289,146
Mandatorily redeemable shares, at redemption
value........................................... 7,126 12,441 14,290 19,973 47,024 99,076 5,500
Stockholders' equity (deficit).................... (1,513) 1,814 13,612 22,972 22,902 (22,530) 83,462
</TABLE>
- ---------------
(1) In 1992, the Company changed its fiscal year end from December 31 to October
31. The consolidated statement of operations data for the period ended
October 31, 1992 reflects 10 months of operating activity as compared with
12 months for all other fiscal year periods.
(2) The provision for income taxes for the 10 months ended October 31, 1992
included a valuation allowance provided against foreign tax loss
carryforwards totaling $2.4 million. This valuation allowance was eliminated
in the year ended October 31, 1994 as a result of the Company's
determination that it would likely realize these benefits.
(3) See Note 1 of Notes to Consolidated Financial Statements for a discussion of
the computation of earnings (loss) per common share and weighted average
common shares outstanding.
(4) Reflects the elimination of the mandatory redemption feature of the
mandatorily redeemable ESOP shares and the income tax benefits resulting
from the lapse of restrictions on certain shares of the Company's
outstanding Common Stock, both of which will occur automatically upon the
closing of this offering. See Note 1 of Notes to Consolidated Financial
Statements.
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in such
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, those discussed below and in the sections entitled "Risk
Factors" and "Business."
OVERVIEW
J.D. Edwards develops, markets and supports highly functional Enterprise
Resource Planning software solutions that operate on multiple computing
platforms and are designed to accelerate customers' time to benefit, lower
customers' cost of ownership and reduce information systems risks arising from
changes in technology and business practices. The Company's integrated software
application suites support manufacturing, finance, distribution/logistics and
human resources operations for multi-site and multinational organizations. The
Company was founded in 1977 as an information consulting firm that developed
business application software.
The Company's software application suites have historically been designed
to operate exclusively on certain mid-range computing platforms, most recently
the IBM AS/400 platform. The Company commenced shipment of the WorldSoftware
version of its application suites for use on the AS/400 platform in 1988, and
sales of such applications and related services have accounted for substantially
all of the Company's revenue in recent years. To take advantage of potential
opportunities in the UNIX and NT markets, as well as to enhance its position as
a leader in the AS/400 market, the Company released in late calendar 1996 the
OneWorld version of its application suites. The Company expects to continue to
generate a substantial portion of its revenue, for the foreseeable future, from
customers using the AS/400 platform; however, the Company does not expect to
generate substantial OneWorld license fee revenue from its existing installed
base of WorldSoftware users. The Company's future revenue growth will be
substantially dependent upon the market acceptance of OneWorld and the Company's
ability to license OneWorld applications to new customers.
The Company recognizes revenue in accordance with the provisions of
Statement of Position 91-1, "Software Revenue Recognition." The Company licenses
software under non-cancelable license agreements and provides related services,
including support, training, consulting and implementation. Training, consulting
and implementation services are not essential to the functionality of the
Company's software products, are separately priced and are available from a
number of suppliers. Accordingly, revenue from these services is recorded
separately from the license fee. License fee revenue is recognized when a
non-cancelable license agreement has been signed, the product has been
delivered, collection is probable and all significant contractual obligations
relating to this license have been satisfied. Revenue on all software license
transactions in which there are significant outstanding obligations is deferred
and recognized once such obligations are fulfilled. Typically, the Company's
software licenses do not include significant post-delivery obligations to be
fulfilled by the Company, and payments are due within a 12-month period from
date of delivery. Where software license contracts call for payment terms in
excess of 12 months from date of delivery, revenue is recognized as payments
become due and all other conditions for revenue recognition have been satisfied.
Revenue from training, and consulting and implementation services is recognized
as services are performed. Revenue from agreements for supporting and providing
periodic upgrades to licensed software is recorded as deferred revenue and is
recognized ratably over the support service period, and includes a portion of
the related license fee equal to the fair value of any bundled support services.
Total revenue from license fees and services has increased from year to
year. As a percentage of total revenue, service revenue has increased from year
to year primarily as a result of the Company's continued emphasis on providing
consulting and training services that complement its software products and
increased support revenue resulting from the Company's growing installed base of
customers. Gross margins on license fee revenue are generally higher than gross
margins on service revenue. The mix between license fee and service revenue may
change in future periods depending upon a number of factors, particularly the
Company's success in penetrating the UNIX and NT markets with the OneWorld
version of its application suites.
20
<PAGE> 24
Furthermore, the Company has historically subcontracted a portion of its
consulting and training services to third parties and in fiscal 1996, such
subcontracted services accounted for 40% of this revenue. However, the Company
is currently pursuing a strategy of relying on third-party implementation
providers to contract directly with its customers for OneWorld implementations
and related services. See "Business -- Strategy" and "Business -- Implementation
Services and Training." To the extent the Company is successful in implementing
this strategy and the OneWorld version of the Company's application suites
achieves market acceptance in future periods, revenue from subcontracted
services and total service revenue as a percentage of revenue will likely
decrease; however, there can be no assurance that the Company will be successful
in implementing its strategy or that such products will achieve market
acceptance. See "Risk Factors -- Limited Deployment of OneWorld Version;
Entering New Markets" and "Risk Factors -- Reliance On Third Parties and
Development of Certain Relationships."
The Company has experienced, and is expected to continue to experience, a
high degree of seasonality, with a disproportionately greater amount of the
Company's revenue for any fiscal year being recognized in its fourth fiscal
quarter and an even greater proportion of net income being recognized in such
quarter. For example, in fiscal 1996, 32% of total revenue, 39% of license fee
revenue, 28% of service revenue and 67% of net income were recognized in the
fourth fiscal quarter. In addition, because the Company's operating expenses are
relatively fixed in the near term, the Company's operating margins have
historically been significantly higher in its fourth fiscal quarter than in its
other quarters. The Company believes that such seasonality is primarily the
result of both the efforts of the Company's direct sales force to meet or exceed
fiscal year-end sales quotas and the tendency of certain customers to finalize
sales contracts at or near the Company's fiscal year end. Because total revenue,
operating margins and net income are greater in the fourth quarter, any
shortfall from anticipated revenue, particularly license fee revenue, in the
fourth quarter would have a disproportionately large adverse effect on the
Company's operating results for the fiscal year. In addition, the Company's
total revenue, license fee revenue, service revenue and net income in its first
fiscal quarter have historically been lower than those in the immediately
preceding fourth quarter. For example, total revenue, license fee revenue,
service revenue and net income in the first quarter of fiscal 1997 decreased
20%, 41%, 3% and 87%, respectively, from the fourth quarter of fiscal 1996. The
Company's first quarter revenue has historically slowed during the holiday
season in November and December.
The Company distributes its products and services through both direct and
indirect channels. Currently, the Company has 46 direct sales and consulting
offices located throughout the world. The first international office was
established in Europe in 1989, and the Company has since added offices
throughout Canada, Europe, Asia, Latin America and Africa, investing significant
resources in the start-up of these operations. The Company also utilizes 172
outside sales and consulting partners with offices throughout the world as an
indirect distribution channel to penetrate certain vertical markets or
geographic areas. Generally, operating margins are higher on domestic revenue
than on international revenue. International revenue as a percentage of total
revenue ranged between 35% and 37% from fiscal 1994 through the first half of
fiscal 1997.
Total costs and operating expenses have increased in general due to the
overall growth of the Company, primarily as a result of an increase in headcount
and related costs. The Company's total employees expanded from 934 at the
beginning of calendar 1992 to 3,167 as of April 30, 1997. In addition, the
Company opened new offices and expanded existing offices during this period,
which increased total facilities costs.
21
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of income as a percentage of total
revenue (except for gross margin data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenue:
License fees.............................. 44.7% 39.4% 37.7% 34.7% 34.3%
Services.................................. 55.3 60.6 62.3 65.3 65.7
----- ----- ----- ----- -----
Total revenue..................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs and expenses:
Cost of license fees...................... 5.3 5.4 5.7 6.2 6.4
Cost of services.......................... 36.5 37.6 38.7 40.8 40.7
Sales and marketing....................... 31.6 30.0 27.0 27.7 27.4
General and administrative................ 11.4 11.4 11.1 11.9 11.6
Research and development.................. 7.9 7.1 8.4 8.7 9.1
----- ----- ----- ----- -----
Total costs and expenses.......... 92.7 91.5 90.9 95.3 95.2
----- ----- ----- ----- -----
Operating income............................ 7.3 8.5 9.1 4.7 4.8
Other income (expense), net................. (0.1) 0.2 (0.3) (0.1) (0.5)
----- ----- ----- ----- -----
Income before income taxes.................. 7.2 8.7 8.8 4.6 4.3
Provision for income taxes................ 2.2 3.4 3.3 1.7 1.6
----- ----- ----- ----- -----
Net income.................................. 5.0% 5.3% 5.5% 2.9% 2.7%
===== ===== ===== ===== =====
Gross margin on license fee revenue......... 88.1% 86.2% 84.8% 82.2% 81.4%
Gross margin on service revenue............. 34.0% 38.0% 37.9% 37.4% 38.1%
</TABLE>
SIX MONTHS ENDED APRIL 30, 1997 AND 1996
Revenue. Total revenue increased to $268.7 million for the first half of
fiscal 1997 from $208.1 million for the first half of fiscal 1996, representing
an increase of 29%. This increase was primarily a result of greater acceptance
of the Company's software products by mid-sized organizations in key domestic
and international markets, together with new releases of the Company's
application suites, and enhanced services, support and custom programming
capabilities. International revenue as a percentage of total revenue was 37.2%
of total revenue in the first half of fiscal 1997 and 38.1% in the first half of
fiscal 1996.
License fee revenue increased to $92.1 million for the first half of fiscal
1997 from $72.3 million for the first half of fiscal 1996, representing an
increase of 27%. The increase was primarily due to a greater volume of license
transactions and an increase in average transaction size. For the first half of
fiscal 1996, all license fee revenue was generated from customers operating on
the AS/400 platform. For the first half of fiscal 1997, substantially all
license fee revenue was generated from customers operating on the AS/400
platform.
Service revenue increased to $176.6 million for the first half of fiscal
1997 from $135.9 million for the first half of fiscal 1996, representing an
increase of 30%. This increase was primarily due to higher revenue from
consulting, which is the largest component of services, although support and
training revenue also increased. Total service revenue is dependent upon the
amount and size of consulting engagements, the number of Company and business
partner consultants available to staff engagements, the number of customers on
support and the related fees, billing rates for consulting services and training
courses, and average training course sizes. Service revenue as a percentage of
total revenue was 65.7% for the first half of fiscal 1997 compared to 65.3% for
the first half of fiscal 1996. The Company has experienced increased demand for
services resulting from its continued emphasis on providing consulting and
training services that complement its software products and the growth in its
installed base of customers. However, to the extent the Company is
22
<PAGE> 26
successful in implementing its strategy of relying on third parties to contract
directly with the Company's customers for implementation of its OneWorld version
of its application suites and related services, service revenue is likely to
decrease as a percentage of total revenue.
Cost of license fees. Cost of license fees includes royalties, business
partner commissions, amortization of capitalized software development costs,
documentation costs and software delivery expenses. Cost of license fees
increased to $17.1 million for the first half of fiscal 1997 from $12.9 million
for the first half of fiscal 1996. Gross margin on license fee revenue declined
to 81.4% for the first half of fiscal 1997 from 82.2% for the first half of
fiscal 1996. The decline in gross margins was primarily a result of increased
amortization of capitalized software development costs, as well as higher
royalties on complementary products and increased business partner commissions.
Amortization of capitalized software development costs increased to $2.6
million for the first half of fiscal 1997 compared to $1.3 million for the first
half of fiscal 1996. This increase was the result of the amortization of
capitalized OneWorld development costs, which began upon the release of the
OneWorld version of the Company's application suites in late calendar 1996.
OneWorld development costs will be amortized through fiscal 1999. The Company
offers certain complementary software products that are subject to royalties.
License fees subject to royalties were higher during the first half of fiscal
1997 compared to the first half of fiscal 1996 primarily due to increased
license fee revenue from application suites incorporating WorldVision, a
graphical user interface for WorldSoftware that utilizes technology licensed
from third parties. Gross margin on license fee revenue varies, in part,
depending upon the proportion of the Company's software products that are
subject to royalty payments. Business partner commissions increased during the
first half of fiscal 1997 from the first half of fiscal 1996 due primarily to an
increase in license fee revenue from the Company's Genesis version of its
application suites, which is offered exclusively through business partners.
Cost of services. Cost of services includes the personnel and related
overhead costs for training and customer support services, together with fees
paid to third parties for subcontracted services. Cost of services increased to
$109.3 million for the first half of fiscal 1997 from $85.0 million for the
first half of fiscal 1996. This increase was due to increased personnel and
subcontracted services to support the growing demand for implementation and
consulting services. Gross margin on service revenue was relatively stable at
38.1% and 37.4% for the first half of fiscal 1997 and 1996, respectively.
Generally, gross margin on support revenue is higher than gross margin on
consulting and training revenue, and any change in the mix in services will
affect the gross margin on service revenue. In particular, the extent to which
the Company is successful in implementing its strategy of relying on third
parties to contract directly with the Company's customers for OneWorld
implementations and related services will affect gross margin on service
revenue.
Sales and marketing. Sales and marketing expense consists of personnel and
related overhead costs, including commissions, for the sales and marketing
activities of the Company, together with advertising and promotion costs. Sales
and marketing expense increased to $73.7 million for the first half of fiscal
1997 from $57.6 million for the first half of fiscal 1996, representing 27.4%
and 27.7% of total revenue, respectively. The increasing dollar amounts were
primarily the result of an increase in the direct sales personnel necessary to
support the Company's selling efforts, especially the OneWorld version of its
application suites.
General and administrative. General and administrative expense includes
personnel and related overhead costs for the support and administration
functions of the Company. General and administrative expense increased to $31.1
million for the first half of fiscal 1997 from $24.7 million for the first half
of fiscal 1996, representing 11.6% and 11.9% of total revenue. Total expense was
higher in the first half of fiscal 1997 primarily due to an increase in
personnel to support the growth in the Company's operations.
Research and development. Research and development expense includes
personnel and related overhead costs for product development, enhancements,
upgrades, quality assurance and testing. Research and development expense
increased to $24.5 million for the first half of fiscal 1997 from $18.2 million
for the first half of fiscal 1996. In addition, capitalized software development
costs were $2.4 million for the first half of fiscal 1997, down from $3.8
million for the first half of fiscal 1996. Total research and development
expenditures, which includes capitalized software development costs, were higher
in the 1997 period primarily due to a 29% increase in personnel, together with
increases in related facilities and equipment costs. During
23
<PAGE> 27
each period, development resources were devoted to continued enhancements of the
Company's application suites. Capitalized software development costs for both
periods primarily consisted of OneWorld development costs. Due to the release of
the OneWorld version in late calendar 1996, the Company ceased capitalizing
OneWorld development costs during the first half of fiscal 1997. The Company
anticipates that research and development expense will increase in subsequent
quarters.
While research and development expenditures, which include capitalized
software development costs, increased in the first half of 1997 from the first
half of 1996, these expenditures as a percentage of total revenue remained
relatively constant at 10.0% in the first half of fiscal 1997 and 10.6% in the
first half of fiscal 1996. As a percentage of license fee revenue, these
expenditures were 29.3% in the first half of fiscal 1997 and 30.4% in the first
half of fiscal 1996.
Other income (expense). Other income (expense) includes interest expense on
the Company's bank line of credit, interest income on cash and cash equivalents
and foreign currency gains and losses. Interest expense increased to $500,000
for the first half of fiscal 1997 from $347,000 for the first half of fiscal
1996, due to higher borrowings on the Company's line of credit during the 1997
period. Interest income decreased to $163,000 for the first half of fiscal 1997
from $266,000 for the first half of fiscal 1996 primarily due to lower cash and
cash equivalent balances. Foreign currency losses increased to $1.3 million for
the 1997 period from $315,000 for the 1996 period, primarily due to the
strengthening of the U.S. dollar against most of the European currencies.
Provision for income taxes. The Company's effective income tax rate
decreased to 37.2% for the first half of fiscal 1997 from 38.0% for the first
half of fiscal 1996, primarily as a result of a reorganization of the Company's
domestic operations.
FISCAL YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
Revenue. Total revenue increased to $478.0 million in fiscal 1996 from
$340.8 million in fiscal 1995 and $240.6 million in fiscal 1994, representing
increases of 40% in fiscal 1996 and 42% in fiscal 1995. These increases were
primarily a result of greater acceptance of the Company's software products by
mid-sized organizations in key domestic and international markets, together with
new releases of the Company's application suites, and enhanced services, support
and custom programming capabilities. International revenue as a percentage of
total revenue ranged from 34.9% to 36.8% during the last three fiscal years.
License fee revenue increased to $180.4 million in fiscal 1996 from $134.1
million in fiscal 1995 and $107.6 million in fiscal 1994, representing increases
of 34% in fiscal 1996 and 25% in fiscal 1995. These increases were primarily due
to the expansion of the Company's domestic and international direct and indirect
sales organizations, a greater volume of license transactions and an increase in
average transaction size. All of the license fee revenue recognized during the
fiscal years 1996, 1995 and 1994 were generated from customers that operate on
the AS/400 platform.
Service revenue increased to $297.7 million in fiscal 1996 from $206.6
million in fiscal 1995 and $133.0 million in fiscal 1994, representing increases
of 44% in fiscal 1996 and 55% in fiscal 1995. The increases were primarily due
to higher revenue from consulting and support, although training revenue also
increased. In fiscal 1995, the Company raised prices for support contracts
which, in addition to the increase in new support contracts, resulted in higher
support revenue. Service revenue as a percentage of total revenue was 62.3%,
60.6% and 55.3% in fiscal 1996, 1995 and 1994, respectively. These increases
were primarily a result of the Company's continued emphasis on providing
consulting and training services that complement its software products and the
growth in the Company's installed base of customers.
Cost of license fees. Cost of license fees increased to $27.4 million in
fiscal 1996 from $18.5 million in fiscal 1995 and $12.8 million in fiscal 1994.
Gross margin on license fee revenue declined to 84.8% for fiscal 1996 from 86.2%
for fiscal 1995 and 88.1% for fiscal 1994. These declines were primarily due to
higher royalties on complementary products, in particular royalties incurred in
connection with increased licenses of applications with WorldVision.
24
<PAGE> 28
Cost of services. Cost of services increased to $184.8 million in fiscal
1996 from $128.1 million in fiscal 1995 and $87.8 million in fiscal 1994. Gross
margin on service revenue was 37.9%, 38.0% and 34.0% in fiscal 1996, 1995 and
1994, respectively. Generally, gross margin on support revenue is higher than
gross margin on consulting and training revenue, and any change in the mix in
services will affect the gross margin on service revenue. Gross margin in fiscal
1996 as compared to fiscal 1995 remained relatively consistent. The increase in
gross margin in fiscal 1995 as compared to fiscal 1994 was primarily a result of
the Company raising prices for support contracts, as well as an increase in new
support contracts, which together resulted in increased support revenue as a
percentage of service revenue.
Sales and marketing. Sales and marketing expense increased to $128.8
million for fiscal 1996 from $102.3 million for fiscal 1995 and $76.2 million
for fiscal 1994, representing 27.0%, 30.0% and 31.6% of total revenue,
respectively. The increase in dollar amounts was primarily the result of an
increase in sales and marketing personnel and related costs, together with
increased advertising and promotion costs. The decline in sales and marketing
expense as a percentage of total revenue was primarily the result of growing
service revenue, increased productivity from the direct sales force and an
increase in the average transaction size.
General and administrative. General and administrative expense increased to
$53.1 million for fiscal 1996 from $38.7 million for fiscal 1995 and $27.4
million for fiscal 1994, representing 11.1%, 11.4% and 11.4% of total revenue,
respectively. The increase in dollar amounts was primarily the result of
additional support and administration personnel hired throughout this period to
support the expansion of the Company's operations.
Research and development. Research and development expense increased to
$40.3 million for fiscal 1996 from $24.3 million for fiscal 1995 and $18.9
million for fiscal 1994. In addition, capitalized software development costs
were $7.3 million for fiscal 1996 compared to $9.8 million for fiscal 1995 and
$2.1 million for fiscal 1994. Total research and development expenditures, which
include capitalized software development costs, rose 40% in fiscal 1996 and 62%
in fiscal 1995 primarily due to increases in personnel, facilities, equipment
costs and professional contract services. During fiscal 1996 and 1995, the
Company increased resources devoted to the development of the OneWorld version
of its application suites as well as continued enhancements of the WorldSoftware
version, including Genesis. Capitalized software development costs for fiscal
1996 primarily represented OneWorld development costs while, for fiscal 1995,
such costs primarily represented OneWorld and, to a lesser extent, Genesis
development costs.
Although research and development expenditures, including capitalized
software development costs, increased in the first half of 1997 from the first
half of 1996, as a percentage of total revenue these expenditures remained
relatively stable at 10.0% for fiscal 1996 and 1995 compared to 8.7% for fiscal
1994. As a percentage of license fee revenue, these expenditures were 26.4%,
25.4% and 19.6% for fiscal 1996, 1995 and 1994, respectively.
Other income (expense). Interest income was $629,000 for fiscal 1996
compared to interest income of $1.7 million for fiscal 1995 and $483,000 for
fiscal 1994. During fiscal 1996, the Company had lower cash and cash equivalent
balances and related interest income than in prior fiscal years due to a $19.4
million investment in land in early fiscal 1996. Interest expense was $899,000,
$576,000 and $101,000 for fiscal years 1996, 1995 and 1994, respectively.
Interest expense increased in each fiscal year due to higher borrowings on the
Company's bank line of credit. Foreign currency losses increased to $1.7 million
in fiscal 1996 from $237,000 for fiscal 1995 and $223,000 for fiscal 1994. This
increase was primarily due to the strengthening of the U.S. dollar against the
Japanese yen and certain European currencies.
Provision for income taxes. The Company's effective income tax rate was
37.3% in fiscal 1996, 38.5% in fiscal 1995 and 30.4% in fiscal 1994. The
effective income tax rate decreased in fiscal 1996 from fiscal 1995 primarily
due to a reorganization of the Company's domestic operations. The effective
income tax rate in fiscal 1994 was lower than the rates for subsequent fiscal
years due to the elimination of a valuation allowance for foreign tax loss
carryforwards as a result of the Company's determination that it would fully
utilize these benefits.
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<PAGE> 29
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated statements of
income data, both in absolute dollars and as a percentage of total revenue
(except for gross margin data), for each of the Company's last six quarters.
This data has been derived from unaudited consolidated financial statements that
have been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of the Company, include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of such information. These unaudited quarterly results should be read in
conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus. The consolidated results of operations
for any quarter are not necessarily indicative of the results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30,
1996 1996 1996 1996 1997 1997
----------- --------- -------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenue:
License fees.......................... $35,201 $ 37,077 $ 38,220 $ 69,868 $ 40,934 $ 51,129
Services.............................. 62,731 73,133 77,421 84,397 81,887 94,725
------- -------- -------- -------- -------- --------
Total revenue................... 97,932 110,210 115,641 154,265 122,821 145,854
------- -------- -------- -------- -------- --------
Costs and expenses:
Cost of license fees.................. 6,705 6,150 6,942 7,646 7,698 9,386
Cost of services...................... 40,257 44,732 48,184 51,673 51,493 57,813
Sales and marketing................... 27,674 29,927 33,236 37,922 34,706 39,029
General and administrative............ 11,858 12,854 12,407 15,933 14,772 16,315
Research and development.............. 8,207 9,986 9,635 12,493 10,142 14,391
------- -------- -------- -------- -------- --------
Total costs and expenses........ 94,701 103,649 110,404 125,667 118,811 136,934
------- -------- -------- -------- -------- --------
Operating income........................ 3,231 6,561 5,237 28,598 4,010 8,920
Other income (expense), net............. 414 (629) (827) (631) (313) (1,178)
------- -------- -------- -------- -------- --------
Income before income taxes.............. 3,645 5,932 4,410 27,967 3,697 7,742
Provision for income taxes............ 1,370 2,266 1,679 10,313 1,368 2,893
------- -------- -------- -------- -------- --------
Net income.............................. $ 2,275 $ 3,666 $ 2,731 $ 17,654 $ 2,329 $ 4,849
======= ======== ======== ======== ======== ========
Earnings per common share............... $ 0.03 $ 0.04 $ 0.03 $ 0.20 $ 0.03 $ 0.05
======= ======== ======== ======== ======== ========
Weighted average common shares
outstanding........................... 85,009 87,969 87,883 87,815 92,838 93,994
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
License fees.......................... 35.9% 33.6% 33.1% 45.3% 33.3% 35.1%
Services.............................. 64.1 66.4 66.9 54.7 66.7 64.9
------- -------- -------- -------- -------- --------
Total revenue................... 100.0 100.0 100.0 100.0 100.0 100.0
------- -------- -------- -------- -------- --------
Costs and expenses:
Cost of license fees.................. 6.8 5.6 6.0 5.0 6.3 6.4
Cost of services...................... 41.1 40.5 41.7 33.5 41.9 39.6
Sales and marketing................... 28.3 27.1 28.8 24.6 28.2 26.8
General and administrative............ 12.1 11.7 10.7 10.3 12.0 11.2
Research and development.............. 8.4 9.1 8.3 8.1 8.3 9.9
------- -------- -------- -------- -------- --------
Total costs and expenses........ 96.7 94.0 95.5 81.5 96.7 93.9
------- -------- -------- -------- -------- --------
Operating income........................ 3.3 6.0 4.5 18.5 3.3 6.1
Other income (expense), net............. 0.4 (0.6) (0.7) (0.4) (0.3) (0.8)
------- -------- -------- -------- -------- --------
Income before income taxes.............. 3.7 5.4 3.8 18.1 3.0 5.3
Provision for income taxes............ 1.4 2.1 1.4 6.7 1.1 2.0
------- -------- -------- -------- -------- --------
Net income.............................. 2.3% 3.3% 2.4% 11.4% 1.9% 3.3%
======= ======== ======== ======== ======== ========
Gross margin on license fee revenue..... 81.0% 83.4% 81.8% 89.1% 81.2% 81.6%
Gross margin on service revenue......... 35.8% 38.8% 37.8% 38.8% 37.1% 39.0%
</TABLE>
In the last six quarters, expenses and operating income as a percentage of
total revenue have varied primarily due to seasonality, which has resulted in
disproportionately higher license fee revenue in the fourth
26
<PAGE> 30
fiscal quarter. Expenses have decreased as a percentage of revenue in the fourth
quarter due to seasonally higher license fee revenue. Gross margin on license
fee revenue has varied quarterly from 81.0% to 89.1% within the last six
quarters due to fluctuations in license volume and the mix of fixed and variable
cost of licenses. Gross margin on service revenue has remained stable except for
the first quarters of fiscal 1996 and fiscal 1997 due to lower service revenue
during the holiday season in November and December.
The Company's quarterly operating results have fluctuated significantly in
the past, and will likely continue to fluctuate in the future, as a result of a
number of factors, many of which are outside the Company's control. These
factors include the demand for the Company's software products and services; the
size and timing of specific sales; the level of product and price competition
that the Company encounters; the length of sales cycles; the timing of new
product introductions and product enhancements by the Company or its
competitors; market acceptance of new products; changes in pricing policies by
the Company or its competitors; the Company's ability to hire sales and
consulting personnel to meet the demand, if any, for implementations of
OneWorld; the Company's ability to establish and maintain relationships with
third-party implementation providers; the Company's ability to establish and
maintain relationships with hardware and software suppliers; the announcement of
new hardware platforms that cause delay of customer purchases; variations in the
length of the implementation process of the Company's software products; the
Company's ability to complete fixed-price consulting contracts on budget; the
mix of products and services sold; the mix of distribution channels through
which products are sold; the mix of international and domestic revenue; changes
in the Company's sales incentives; changes in the renewal rate of support
agreements; product life cycles; software defects and other product quality
problems; seasonality of technology purchases; personnel changes; changes in the
Company's strategy; the activities of competitors; the extent of industry
consolidation; expansion of the Company's international operations; general
domestic and international economic and political conditions; and budgeting
cycles of the Company's customers. The timing of large individual sales has been
difficult for the Company to predict, and large individual sales have, in some
cases, occurred in quarters subsequent to those anticipated by the Company.
There can be no assurance that the loss or deferral of one or more significant
sales would not have a material adverse effect on the Company's quarterly
operating results.
The Company's software is generally used for division- or enterprise-wide,
business-critical purposes and involves significant capital commitments by
customers. Potential customers generally commit significant resources to an
evaluation of available enterprise software and require the Company to expend
substantial time, effort and money educating them about the value of the
Company's solutions. As a result, sales of the Company's software products
require an extensive sales effort throughout the customer's organization because
decisions to license such software generally involve the evaluation of the
software by a significant number of customer personnel in various functional and
geographical areas, each often having specific and conflicting requirements. A
variety of factors, including factors over which the Company has little or no
control, may cause potential customers to delay or forego a purchase. As a
result of these or other factors, the sales cycle for the Company's products is
long, typically ranging between six and 15 months. Moreover, the Company expects
that the sales cycle for the recently released OneWorld version of its
application suites may be longer than that of the WorldSoftware version, at
least until the Company's sales force becomes familiar with the needs of
customers operating on UNIX and NT servers. As a result of the length of the
sales cycle for its software products, the Company's ability to forecast the
timing and amount of specific sales is limited, and the delay or failure to
complete one or more large license transactions could have a material adverse
effect on the Company's business, operating results or financial condition and
cause the Company's operating results to vary significantly from quarter to
quarter. See "Risk Factors -- Variability of Quarterly Operating Results;
Seasonality."
The Company's software products are typically shipped when orders are
received, and consequently, license backlog at the beginning of any quarter has
in the past represented only a small portion of that quarter's expected revenue.
As a result, license fee revenue in any quarter is difficult to forecast because
it is substantially dependent on orders booked and shipped in that quarter.
Moreover, the Company typically recognizes a substantial amount of its revenue
in the last month of the quarter, frequently in the last week or even days of
the quarter. Since the Company's operating expenses are based on anticipated
revenue levels and because a high percentage of the Company's expenses are
relatively fixed in the near term any shortfall from
27
<PAGE> 31
anticipated revenue or a delay in the recognition of revenue could result in
significant variations in operating results from quarter to quarter. Quarterly
license fee revenue is also difficult to forecast because the Company's sales
cycles, from initial evaluation to delivery of software, varies substantially
from customer to customer. If revenue falls below the Company's expectations in
a particular quarter, the Company's operating results could be materially
adversely affected. See "Risk Factors -- Lengthy Sales Cycle."
Based on all of the foregoing, the Company believes that future revenue,
expenses and operating results are likely to vary significantly from
quarter-to-quarter. As a result, quarter-to-quarter comparisons of operating
results are not necessarily meaningful or indicative of future performance.
Furthermore, the Company believes it is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts or investors. In such event, or in the event that adverse conditions
prevail, or are perceived to prevail, with respect to the Company's business or
generally, the market price of the Company's Common Stock would likely be
materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and growth to date primarily through
cash generated from operating activities. As of April 30, 1997, the Company's
principal sources of liquidity consisted of $29.9 million of cash and cash
equivalents, and a $50 million, unsecured, revolving line of credit that it
borrows against for working capital requirements and other general corporate
purposes. As of April 30, 1997, no amounts were outstanding under the Company's
bank line of credit. As of April 30, 1997, the Company had working capital of
$28.7 million. Included in such amounts is a short-term deferred revenue
liability of $75.0 million. Short-term deferred revenue primarily represents
annual support payments billed to customers and is recognized ratably as revenue
over the support service period. Without the short-term deferred revenue,
working capital would have been $103.7 million.
The Company generated operating cash flow of $7.5 million for the first
half of fiscal 1997 and $42.4 million, $41.3 million and $27.2 million for
fiscal 1996, 1995 and 1994, respectively. Operating cash flow is affected by
seasonality, among other factors, and is disproportionately higher in the second
half of the fiscal year than the first half of such fiscal year. The increases
in operating cash flow from year to year were due primarily to increasing net
income. During these periods growth in operating assets such as accounts
receivable has been funded by similar growth in operating liabilities, primarily
deferred revenue and accrued liabilities.
The Company utilized cash for investing activities of $2.7 million for the
first half of fiscal 1997 and $51.2 million, $29.2 million and $10.9 million for
fiscal 1996, 1995 and 1994, respectively. During these periods, the Company
experienced significant growth and invested funds in the purchase of furniture,
fixtures and equipment that were necessary to support its expanding operations.
In the first half of 1997, the Company's cash utilized for investing activities
was offset in part by $8.6 million of proceeds from the sale of assets. In
fiscal 1996, the Company invested $19.4 million in the purchase of land in
Denver, Colorado, a portion of which is being used by the Company for a
headquarters facility.
The Company did not have significant net financing activities for the first
half of fiscal 1997 or for fiscal 1996, 1995 or 1994. The Company utilized its
bank line of credit for working capital and other general corporate purposes but
repaid all amounts borrowed within each of these periods.
Management believes the net proceeds from this offering, together with its
cash and cash equivalents balance, amounts available under existing credit
facilities and funds generated from operations, will be sufficient to meet its
cash needs through fiscal 1998. However, there can be no assurance that the
Company will not require additional funds to support its working capital
requirements or for other purposes, in which case the Company may seek to raise
such additional funds through public or private equity financing or from other
sources. There can be no assurance that such additional financing will be
available or that, if available, such financing will be obtained on terms
favorable to the Company and would not result in additional dilution to the
Company's stockholders.
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<PAGE> 32
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has determined that the adoption of the recently issued
Statements of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," and No. 129, "Disclosure of Information about Capital Structure," will
not have a material impact on its financial condition or results of operations.
The pro forma effect of SFAS No. 128 is disclosed in the notes to the
consolidated financial statements included herein.
29
<PAGE> 33
BUSINESS
J.D. Edwards develops, markets and supports highly functional Enterprise
Resource Planning ("ERP") software solutions that operate on multiple computing
platforms and are designed to accelerate customers' time to benefit, lower
customers' cost of ownership and reduce information systems risks arising from
changes in technology and business practices. The Company's integrated software
application suites support manufacturing, finance, distribution/logistics and
human resources operations for multi-site and multinational organizations.
Through its Configurable Network Computing ("CNC") architecture, the Company's
ERP software is specifically designed to enable customers to change technology
and/or business practices while minimizing costs and business interruptions. The
Company provides implementation, training and support services designed to
enable customers to rapidly achieve the benefits of the Company's ERP solutions.
The Company has developed and marketed ERP solutions for over 20 years,
principally for operation on AS/400 and other IBM mid-range systems and, more
recently, on leading UNIX and Windows NT ("NT") servers through Windows- and
Internet browser-enabled desktop clients.
The Company's family of application suites is designed to improve most
organizations' core business processes. In addition, the Company extends its
application suites to address certain vertical markets with specific
configurations, templates and additional software features designed to meet
these industries' needs. The Company offers two versions of its application
suites -- WorldSoftware and OneWorld. WorldSoftware operates in a host-centric
environment on the AS/400 platform. With the addition of the WorldVision thin
client interface, WorldSoftware applications can be operated through a
Windows-based graphical user interface. OneWorld incorporates the Company's CNC
architecture and operates on leading UNIX and NT servers, as well as the AS/400
platform. The Company believes its network-centric CNC architecture provides a
valuable extension beyond traditional client/server architectures by masking
complexity, lowering cost of change and facilitating greater scalability. In
addition, WorldSoftware and OneWorld are capable of operating together in a
unified enterprise-wide environment. The Company also provides WorldSoftware and
OneWorld toolsets to enable rapid implementation, customization and modification
of its application suites.
The Company distributes, implements and supports its products worldwide
through 46 offices and through 172 third-party business partners. To date, the
Company has more than 4,000 customers in over 90 countries including Lexmark
International, Inc., SmithKline Beecham plc, Paradyne Corporation and Praxair,
Inc.
INDUSTRY BACKGROUND
ERP systems are designed to enhance an organization's ability to manage and
execute business functions such as manufacturing, finance,
distribution/logistics and human resources. These systems manage and store large
amounts of diverse business information, providing continuous and simultaneous
availability of information to geographically dispersed employees, customers and
suppliers. According to Advanced Manufacturing Research (AMR), an industry
consulting firm, the worldwide market for ERP software license revenue was
approximately $3.5 billion in 1996, and is expected to reach $16.2 billion by
2001, a compound annual growth rate of 36%.
Historically, ERP solutions have primarily consisted of host-centric
systems that operate on mainframes or mid-range computers. These systems,
developed over many years and representing considerable investments by
customers, provide high levels of performance, scalability, data security and
reliability. In addition, host-centric ERP systems designed as single-vendor
environments offer reduced complexity in implementation and management. However,
such systems generally do not have the flexibility to support diverse and
changing operations within a customer's business or to respond effectively to
changing technologies. Despite these limitations, many host-centric systems are
still being widely deployed for ERP applications because of their strengths.
In recent years, ERP systems have been developed with client/server
architectures. These distributed systems generally offer users easier access to
information, as well as multi-site processing capabilities. In addition, as
compared to host-centric systems, client/server environments are better able to
accommodate diverse hardware, software and network technology changes that can
result from rapid organizational growth,
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acquisitions and consolidations. However, such systems are inherently complex
and generally require lengthy and costly implementation efforts, extensive user
training and substantial ongoing support.
Both host-centric and client/server systems require extensive initial
implementation and ongoing modifications to support an organization's current
and continuously changing business practices. The implementation of a new ERP
system may in some cases require an organization to subordinate or re-engineer
its established business practices to accommodate system or architectural
constraints. These requirements can increase the cost of ownership of an ERP
system and overwhelm organizations with limited internal IT staffs, particularly
rapidly growing and resource-constrained mid-sized organizations. In addition,
the difficulties associated with implementation and modification can put
organizations at risk of costly interruptions to normal business operations.
Accordingly, the Company believes there is a substantial market opportunity for
ERP solutions that offer faster time to benefit, reduce risks associated with
implementation and modification and lower overall cost of ownership. These
solutions should consist of an integrated suite of ERP applications and services
that offer the reliable performance, ease of implementation and ease of
management available in host-centric systems as well as the flexibility to
support multi-site, multi-supplier, multi-platform environments found in
client/server systems. At the same time, these solutions should mask the
complexities of the underlying hardware, software and network technologies.
THE J.D. EDWARDS SOLUTION
J.D. Edwards develops, markets and supports highly functional ERP software
solutions that operate on multiple computing platforms and are designed to
accelerate customers' time to benefit, lower customers' cost of ownership and
reduce information systems risks arising from changes in technology and business
practices. The Company's integrated software application suites support
manufacturing, finance, distribution/logistics and human resources operations
for multi-site and multinational organizations. Through its CNC architecture,
the Company's ERP software is specifically designed to enable customers to
change technology and/or business practices while minimizing costs and business
interruptions. The Company provides implementation, training and support
services designed to enable customers to rapidly achieve the benefits of the
Company's ERP solutions. The Company has developed and marketed ERP solutions
for over 20 years, principally for operation on AS/400 and other IBM mid-range
systems and, more recently, on leading UNIX and NT servers through Windows- and
Internet browser-enabled desktop clients.
The Company's ERP solutions are designed to offer the following customer
benefits:
DELIVER AND SUPPORT COMPREHENSIVE SOLUTIONS FOR GLOBAL ENTERPRISES. The
Company's ERP software supports an organization's core business processes
through a family of application suites, including manufacturing, finance,
distribution/logistics and human resources. These application suites are
designed to enable a customer to integrate business information across its
organization and throughout its entire supply chain; accommodate diverse
business practices across a geographically dispersed organization; and support
multiple languages, currencies and jurisdictions. The Company's experienced
service organization provides training, support and a tested methodology to
enable rapid implementation of its ERP solutions.
FACILITATE CHANGES IN TECHNOLOGY AND BUSINESS PRACTICES. The Company's CNC
architecture is designed to mask the complexities of underlying platform
technologies, thus enhancing flexibility and simplifying software modification.
Using the Company's highly flexible software toolset, customers can modify the
Company's application suites to accommodate their business practices without
regard to the underlying hardware, software and network technologies. By masking
the complexity of the underlying technology, the Company's CNC architecture
facilitates the incorporation of new technologies and enables customers to
modify business practices without extensive low-level software code modification
or support.
OFFER TECHNOLOGY CHOICES FOR DIFFERENT MARKET SEGMENTS. Customers can
select between two versions of the Company's application suites. The Company
offers its WorldSoftware version to customers who seek the reliable performance
and lower cost of ownership associated with host-centric systems. The Company
provides its OneWorld version to customers who want the accessibility of
information and ease of use typically associated with client/server systems,
without the burdens often associated with these complex systems. OneWorld's
object-based technology is designed to enhance programmer productivity,
facilitate modification
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of business practices and leverage network scalability. OneWorld, introduced in
late 1996, operates on leading UNIX and NT servers, in addition to the AS/400
platform. By offering two versions of its software, the Company addresses
different market segments and allows customers to maintain consistent business
functionality while combining different technologies to meet their specific
requirements.
PRESERVE AND EXTEND CUSTOMER INVESTMENT. The Company designed OneWorld to
provide customers with a migration path to a network-centric architecture, while
preserving the customers' existing investments in AS/400 platforms. The
Company's CNC architecture enables OneWorld and WorldSoftware application suites
to co-exist on the AS/400 platform, allowing customers to incorporate the new
technologies of OneWorld while maintaining consistent functionality with their
WorldSoftware systems. This architecture minimizes disruptions and reduces the
overall cost of change for customers.
LOWER COST OF OWNERSHIP. The Company's ERP solutions are designed to reduce
overall cost of ownership through a combination of advanced technology and
comprehensive service and support. The Company's CNC architecture is
specifically designed to enable customers to change business practices or
technology environments without significant costs or business interruptions. In
addition, the Company's OneWorld software version is platform independent,
allowing customers to select the best price and performance solutions from
multiple hardware and software suppliers. The Company also offers implementation
services and support enabling more rapid deployment of the Company's ERP
solutions, thus reducing customers' overall cost of ownership.
ESTABLISH LONG-TERM CUSTOMER RELATIONSHIPS. The Company has designed its
ERP software solutions with broad business functionality and flexibility to
reduce the need for significant custom modifications. By minimizing custom
modifications, the customer's ability to benefit from subsequent releases is
enhanced, as is the Company's ability to support the software as implemented.
The Company believes its investment in worldwide customer support services and
user groups facilitates customer communication and feedback, enhancing customer
satisfaction. The Company believes this focus on standard software functionality
and flexibility, and its investment in customer support and user groups,
contribute to long-term customer relationships.
STRATEGY
J.D. Edwards' objective is to strengthen and expand its position as a
leading supplier of ERP software and services. The key elements of the Company's
strategy are as follows:
LEVERAGE LEADERSHIP POSITION IN MIDDLE MARKET. The Company believes that
its ERP solutions address the needs of a broad spectrum of organizations,
ranging from organizations with revenue in the tens of millions to the largest
global enterprises. The Company has principally targeted mid-sized
organizations, including divisions and business units of larger companies, with
annual revenues between $100 million and $2 billion. The Company believes the
ease of implementation and lower cost of ownership associated with its
application suites meet important needs of rapidly growing and
resource-constrained mid-sized organizations. The Company's ERP solutions
provide robust functionality, reduced implementation time and ease of use.
Although the Company expects to devote a significant amount of its resources to
further penetrate this market, the Company also intends to leverage its
extensive ERP experience with mid-sized organizations to address the needs of
larger global enterprises.
LEVERAGE DEVELOPMENT RESOURCES THROUGH ADVANCED TECHNOLOGIES. The Company
uses advanced technologies to develop highly functional, integrated ERP
solutions in a rapid and efficient manner. The Company's OneWorld toolset is
specifically designed for rapid creation of business functionality and
incorporation of new technologies. The Company uses the OneWorld toolset to
develop OneWorld application suites, thus leveraging the Company's development
resources. Using its OneWorld toolset, the Company has been able to recreate
business functionality in OneWorld application suites in substantially less time
than it took to develop the same application suites for WorldSoftware. The
Company believes that this ability to rapidly create business functionality and
incorporate new technologies is an important competitive advantage in its
market.
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EXPAND VERTICAL MARKET FOCUS. Over the last 20 years, the Company has
acquired significant vertical market experience and expertise through
developing, selling and deploying ERP solutions for over 4,000 customers across
a variety of industries. The Company has leveraged this experience into the
development of customized application suites for a number of vertical markets.
These application suites include configurations and templates designed to
provide more rapid customization, implementation and time to benefit for
customers in these industries. In addition, the Company believes that the
ability to focus its development and sales personnel on the needs of specific
industries has made its sales and marketing efforts more efficient and effective
in these vertical markets. To date, the Company has developed customized
application suites for three vertical markets: (1) architecture, engineering,
construction, mining and real estate; (2) energy and chemical systems; and (3)
public sector. The Company is developing additional customized application
suites in vertical markets in which it has significant experience and expertise,
including automotive supply, consumer packaged goods, electronics, fabricated
metals and pharmaceuticals.
PROVIDE HIGH QUALITY SERVICES DIRECTLY AND THROUGH THIRD PARTIES. The
Company believes that its high-quality consulting, implementation, support and
training services enable the Company to achieve a high level of customer
satisfaction, strong customer references and long-term relationships, as well as
facilitate software improvement based on customer feedback. The Company is
committed to providing efficient, high-quality service. To this end, the Company
offers extensive worldwide implementation, training and support services for its
AS/400 customers directly through its customer service personnel and through
third-party implementation providers to whom the Company subcontracts such
services. The Company intends to rely primarily on third-party implementation
providers to contract directly with customers for the implementation of the
OneWorld version of its application suites. These relationships will enable the
Company to provide implementation services through third-party personnel with
extensive client/server expertise, while concentrating its own service resources
on those activities it can perform most efficiently. The Company believes that
this direct and third-party customer service strategy will enable it to deliver
comprehensive and timely services worldwide.
EXPAND STRATEGIC RELATIONSHIPS. The Company intends to expand its existing,
and develop new, strategic relationships with leading hardware and software
suppliers, such as IBM, Hewlett-Packard, Digital Equipment Corporation, Oracle
and Microsoft, as well as with third-party implementation providers, including
global accounting and consulting firms. The Company believes these activities
will provide greater access to a wider variety of potential customers and
leverage the technical expertise of such third parties, allowing the Company to
devote additional resources to product development and marketing activities.
EXTEND GLOBAL PRESENCE. The Company plans to extend its already significant
commitment to international sales and support to take advantage of worldwide ERP
market opportunities. The Company's ERP solutions have been designed to meet the
special requirements of multi-site and multinational organizations. Currently,
the Company employs over 1,600 international sales and customer service
representatives in 27 international offices. The Company also relies upon its
indirect channel of 172 consulting and sales partners with offices throughout
the world. The Company believes that further expansion of its direct and
indirect sales channels will enhance its competitive position, increase market
penetration and achieve greater name recognition.
PRODUCTS
The Company's family of application suites is designed to improve most
organizations' core business processes. In addition, the Company extends its
application suites to address certain vertical markets with specific
configurations, templates and additional software features designed to meet
these industries' needs. The Company offers two versions of its application
suites -- WorldSoftware and OneWorld. WorldSoftware operates in a host-centric
environment on the AS/400 platform. With the addition of the WorldVision thin
client interface, WorldSoftware applications can be operated through a
Windows-based graphical user interface. OneWorld incorporates the Company's CNC
architecture and operates on leading UNIX and NT servers, as well as the AS/400.
The Company believes its network-centric CNC architecture provides a valuable
extension beyond traditional client/server architectures by masking complexity,
lowering cost of change and facilitating greater scalability. In addition,
WorldSoftware and OneWorld are capable of operating
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together in a unified enterprise-wide environment. The Company also provides
WorldSoftware and OneWorld toolsets to enable rapid implementation,
customization and modification of its application suites.
APPLICATION SUITES
The Company's family of application suites includes manufacturing, finance,
distribution/logistics and human resources. The Company's application suites
accommodate different business practices across a geographically dispersed
organization, as well as multiple languages, currencies and jurisdictions. Each
suite can operate on a stand-alone basis, or can be integrated with other
Company suites and selected third-party applications and systems. The majority
of the Company's customers deploy multiple application suites.
MANUFACTURING
The Company's manufacturing application suite is designed to enable
organizations to optimize their manufacturing operations resources within a
single plant or across multiple locations and to provide information links to
other departments within the organization. The following describes the principal
functionality of the manufacturing application suite and its primary customer
benefits:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
PRINCIPAL FUNCTIONALITY PRIMARY CUSTOMER BENEFITS
- --------------------------------------------------------------------------------------------
- Requirements Planning - Tracks product variances in costs,
- Product Data Management margins, and quantity
- Engineering Change Management - Monitors inventory
- Configuration Management - Facilitates multi-site integration
- Shop Floor Management - Provides process and discrete
- Maintenance Management manufacturing capabilities in a single
plant environment
- Supports multi-mode manufacturing for
purposes of mass customization
- Manages tracking and communication of
engineering change orders from initial
modification through final approval
- Matches shop floor operations and
procedures with reporting needs
- --------------------------------------------------------------------------------------------
</TABLE>
FINANCE
The Company's finance application suite is designed to provide structure,
security and the ability to audit a customer's financial systems without
limiting the customer's ability to respond to operational and market changes.
The application suite provides a central repository of financial information
with simplified transaction processing. The following describes the principal
functionality of the finance application suite and its primary customer
benefits:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
PRINCIPAL FUNCTIONALITY PRIMARY CUSTOMER BENEFITS
- --------------------------------------------------------------------------------------------
- Cost-based Accounting - Offers flexible accounting and management
- Financial Modeling and Budgeting report formats
- General Accounting Functions - Provides real-time access to remote
- Accounts Receivable locations
- Accounts Payable - Facilitates forecasting through modeling
- Financial Reporting and budgeting functions
- Fixed Assets - Provides flexibility to accommodate
- Enterprise-wide Consolidations changing organizational structures
- --------------------------------------------------------------------------------------------
</TABLE>
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DISTRIBUTION/LOGISTICS
The Company's distribution/logistics application suite is designed to
provide enterprise-wide distribution chain, supply chain and logistics
management. The following describes the principal functionality of the
distribution/logistics application suite and its primary customer benefits:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
PRINCIPAL FUNCTIONALITY PRIMARY CUSTOMER BENEFITS
- --------------------------------------------------------------------------------------------
- Demand Management - Manages multi-site inventory, materials
- Forecasting and supplies through the supply chain
- Supplier Management - Simplifies planning for future demand and
- Inventory Management inventory deployment
- Warehouse Automation - Improves management of purchases and
- Electronic Data Interchange sales order processes
- Tailors order fulfillment process to
customer and item level
- --------------------------------------------------------------------------------------------
</TABLE>
HUMAN RESOURCES
The Company's human resources application suite is designed to address the
unique needs of human resource and payroll managers and offers close integration
with the Company's other application suites. The following describes the
principal functionality of the human resources application suite and its primary
customer benefits:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
PRINCIPAL FUNCTIONALITY PRIMARY CUSTOMER BENEFITS
- --------------------------------------------------------------------------------------------
- Applicant and Requisition Management - Reduces payroll administration cost
- Salary and Wage Administration - Complies with and responds to regulatory
- Benefits Administration requirements
- Legislative and Regulatory Compliance and - Allows HR/payroll team to reduce clerical
Reporting time
- Payroll - Manages complex payrolls including
- Labor Distribution multiple unions, contractors,
- Budgeting and Recruiting subcontractors, step progressions
- --------------------------------------------------------------------------------------------
</TABLE>
VERTICAL MARKET APPLICATION SUITES
Over the last 20 years, the Company has acquired significant vertical
market experience and expertise through developing, selling and deploying ERP
solutions for over 4,000 customers across a variety of industries. The Company
has leveraged this experience into the development of customized application
suites for a number of vertical markets. To date, the Company has developed
customized application suites for three vertical markets: (1) architecture,
engineering, construction, mining and real estate ("AEC"); (2) energy and
chemical systems; and (3) public sector. These industry-specific configurations
are designed to provide more rapid customization and implementation,
accelerating time to benefit for customers in these industries. Moreover, the
Company believes its vertical market strategy has improved the efficiency and
effectiveness of its own sales and service operations. Each of the current
targeted vertical markets is described below:
Architecture, Engineering, Construction, Mining and Real Estate. The
Company's AEC application suite includes templates for such common tasks as job
costing, work order management, contract and service billing and equipment
management, among others, while offering additional industry-specific functions
for each market.
Energy and Chemical Systems. The Company's energy and chemical application
suite enables customers to manage all phases of energy and chemical product and
process flow, which is particularly critical given the regulatory controls and
competitive environment of these industries. This template is used for equipment
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management, load and delivery management, procurement planning, bulk inventory
management and other related functions.
Public Sector. The Company provides its public sector application suite for
use by organizations and agencies such as government entities, school districts
and utilities. In addition to providing such organizations and agencies with
common functions, including financial administration, budgeting and reporting,
and human resources administration, this application suite provides
functionality specific to the needs of each sector.
The Company has significant expertise in the following additional vertical
markets: automotive supply, consumer packaged goods, electronics, fabricated
metals and pharmaceuticals. The Company plans to continue its strategy of
customizing application suites and templates for these vertical markets. As with
its existing vertical markets, the Company also plans to offer industry specific
training and services to these new markets. In addition to its vertical market
focus, the Company has developed Genesis, a version of WorldSoftware with
simplified implementation features for the small business market. Genesis is
designed to enable small businesses to obtain many of the benefits of
WorldSoftware while streamlining the implementation and training process.
TECHNOLOGY ARCHITECTURE
The Company offers two versions of its application suites -- WorldSoftware
and OneWorld. WorldSoftware operates in a host-centric environment on the AS/400
platform. OneWorld incorporates the Company's CNC architecture and operates on
leading UNIX and NT servers, as well as the AS/400. In addition, WorldSoftware
and OneWorld are capable of operating together in a unified enterprise-wide
environment.
SUITES AND ARCHITECTURE GRAPH--See Appendix A
WorldSoftware is a well established, procedural-based technology designed
to take advantage of the security, integrity and easily maintained architecture
of the AS/400 platform. Unlike many host-centric ERP systems, WorldSoftware
provides flexibility to make run-time changes in application suites without the
need to recompile software. WorldSoftware also incorporates features such as an
active data dictionary, user defined codes and a variety of run-time options.
With the addition of the WorldVision thin client interface, WorldSoftware
applications can be operated through a Windows-based graphical user interface.
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OneWorld is an object-based, event-driven technology designed to provide
the information access and other user benefits of traditional client/server
systems while masking complexity and accommodating future change. OneWorld's CNC
architecture enables the deployment of a single version of an application across
a network, regardless of the underlying technologies. The CNC architecture
consists of three components: (1) the application layer; (2) the toolset layer;
and (3) the technology layer.
The OneWorld application layer contains the specific business functionality
of the OneWorld manufacturing, finance, distribution/logistics and human
resources application suites. OneWorld application suites are composed of up to
3,000 reusable objects. The applications are distributed by the OneWorld
deployment server in object form to individual platforms where they are compiled
and executed. A customer changes the application logic by modifying the objects
or creating new objects using the OneWorld toolset. Applications containing the
modified or newly created objects are then redistributed to individual
platforms. The Company believes that this single-point-of-change architecture
significantly reduces the cost of change compared to traditional client/server
architectures.
The OneWorld toolset is used to create or modify OneWorld objects, allowing
customers or the Company's developers to quickly create new application
functionality. The toolset also insulates users from lower level technologies.
For example, OneWorld objects exist independent of any specific computer
language. Currently, the OneWorld toolset can generate objects in three computer
languages -- C, C++ and Java. The Company believes it can readily incorporate
new languages in the future as market requirements dictate. The Company also
believes that this unified toolset approach significantly reduces customers'
cost of ownership when compared to traditional client/server systems that
require a variety of tools.
The OneWorld technology layer is designed to mask the differences between
underlying platforms and provide a uniform interface for OneWorld applications.
This uniformity allows a single object to execute on a wide variety of
platforms, a "write once, run anywhere" capability. The technology layer
currently supports IBM's AS/400 and S/390 platforms; Digital Equipment
Corporation's Alpha- and Intel-based NT servers; IBM's RS/6000,
Hewlett-Packard's 9000, as well as other UNIX servers from Siemens/Nixdorf; and
NT servers from NEC and Fujitsu. Supported clients include personal computers
running Windows 95 and Windows NT or any desktop system running an Internet
browser. Supported databases include Oracle databases, the IBM DB2 family and
Microsoft's SQL Server. The Company intends to continue to integrate additional
platforms, servers and software as necessary to meet market demands.
The technology layer also integrates a variety of components not typically
integrated in traditional client/server architectures, including an object
request broker, a transaction processing monitor, a workflow engine, a C/C++
generator and a Java generator. In traditional client/server implementations,
customers often have to integrate these components obtained from multiple
suppliers. The Company believes that its architecture and high degree of
integration reduce the cost of ownership and facilitate change when compared to
traditional client/server implementations.
TOOLSETS
The Company's software application suites were developed with the Company's
WorldSoftware and OneWorld toolsets. These toolsets are also used for the
ongoing enhancement and modification of the Company's products. The Company
believes the advantages of these toolsets include increased productivity,
increased code consistency, self-documenting code and improved quality.
The WorldSoftware and OneWorld toolsets are bundled with the WorldSoftware
and OneWorld applications, providing customers the same productivity,
consistency and quality benefits enjoyed by the Company's own developers, thus
reducing the complexities typically associated with upgrades to new releases.
Since modifications made by customers to conform the applications to local
business practice and modifications made by the Company in the course of
creating new releases are made with the same toolset, it is easier and faster to
upgrade to new releases while preserving the customers' modifications. The
Company believes that this capability enables customers to incorporate new
functionality more rapidly, while also reducing the Company's support costs,
since fewer customers remain on older releases.
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The Company's WorldSoftware toolset provides a high-level architecture,
allowing the Company's development staff to express business practices as an
abstract model. The toolset then uses the model to generate RPG code that runs
on an AS/400 platform in a host-centric, procedural architecture. The Company
continues to use this toolset to add new functionality to the WorldSoftware
application suites.
The Company's OneWorld toolset incorporates more advanced technologies,
including object-based methods and event-driven models. The OneWorld toolset
generates code in C, C++ and Java for a multi-platform, network-centric
environment. Because the OneWorld toolset rigorously separates business logic
from underlying technologies, it also facilitates the incorporation of new
technologies. For example, in 1996, the Company incorporated a Java generator
into the OneWorld technology layer and then regenerated and released
approximately 1,000 existing OneWorld objects in Java in approximately three
months. This process was completed without rewriting the application code. The
Company believes that the ability to incorporate new technologies by
regenerating, rather than rewriting, applications provides a competitive
advantage.
IMPLEMENTATION SERVICES AND TRAINING
The Company believes that delivery of its ERP software together with high
quality consulting, implementation, support and training services enables the
Company to achieve a high level of customer satisfaction, strong customer
references and long-term relationships, as well as facilitate software
improvement based on customer feedback. The Company offers extensive
implementation and training services directly and through third parties to
assist customers in rapidly achieving benefits from its ERP solutions. As of
April 30, 1997, the Company had 1,075 employees in its customer services and
training departments, located worldwide, and had relationships with 172 business
partners with offices throughout the world.
IMPLEMENTATION SERVICES
The Company has designed an implementation process called the REP
methodology ("Rapidly, Economically and Predictably"), which offers a balance of
structure and flexibility for organizations implementing the Company's ERP
solutions. The goal of REP is to accelerate customers' time to benefit by taking
advantage of the Company's technology, business know-how and experience in the
ERP market. REP is a nine-step process designed to enable on-time and on-budget
implementation of the Company's ERP solutions. The nine steps are illustrated in
the following chart:
NINE-STEP GRAPH--See Appendix A
In addition to its standard implementation services, the Company also
offers a full range of custom implementation services, including conversion
programs, upgrade assistance, custom modifications and interfaces, and technical
documentation. Implementation services are generally provided on a time and
materials basis.
THIRD-PARTY IMPLEMENTATION PROVIDERS
The Company seeks to provide its customers with high quality implementation
services in the most efficient and effective manner. In cases where the Company
does not provide implementation services itself, it subcontracts such services
through third parties. The Company also has relationships with a limited number
of third-party implementation providers that contract directly with customers to
assist in the implementation of the Company's software. The Company selects
these third-party providers carefully to ensure that they have
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<PAGE> 42
the ability and knowledge to represent the Company and implement its ERP
solutions properly. Providers receive intensive training regarding the Company's
application suites and its REP implementation process. In addition, the Company
evaluates these providers on a regular basis to ensure quality service and
support to its customers. In the future, the Company intends to rely primarily
on third-party implementation providers to contract directly with customers for
the implementation of the OneWorld version of its applications suites. These
relationships will enable the Company to provide implementation services through
third-party personnel with extensive client/server expertise, while
concentrating its own service resources on those activities it can perform most
efficiently. The Company believes that this direct and third-party customer
service strategy will enable it to deliver comprehensive and timely services
worldwide.
EDUCATION AND TRAINING
The Company offers a comprehensive education and training program to its
customers and to the Company's third party implementation providers. Classes are
offered at in-house facilities located throughout the world, as well as at
customer locations. The Company's instructors are certified for each course they
teach, and their backgrounds generally include cross-functional experience in
product testing, customer support and implementation services.
SUPPORT
The Company believes that providing business solutions along with a high
level of on-going support to its customers is a critical element in establishing
long-term relationships and maintaining a high level of customer satisfaction.
The Company provides support services for an annual fee, which entitles the
customer to receive telephone customer support, as well as enhancements and
updates to its implemented version of the Company's software. The Company
provides customer support through three customer support centers located in
Denver, London and Singapore, which are connected to each other through a wide
area network. Customer support from these centers is provided in nine languages
on a 12-hour-per-day, five-day-per-week basis, and in English-only on a
24-hour-per-day, seven-day-per-week basis. Customer support personnel have the
ability to access customer systems remotely to diagnose and resolve problems. As
of April 30, 1997, the Company had 335 employees in its customer support
department.
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CUSTOMERS
As of April 30, 1997, the Company had licensed its application suites to
approximately 4,000 customers. During each of the last three fiscal years, no
customer accounted for more than 10% of total revenue. The following is a
representative sample of license and service customers:
ARCHITECTURE, ENGINEERING, CONSTRUCTION,
MINING AND REAL ESTATE
Benderson Development Company, Inc.
CBI Industries, Inc.
David Weekley Homes
Foster Wheeler Corporation
Gilbane Building Company
Hensel Phelps Construction Company
Hoffman Corporation
Hubbard Construction Company
Koll Construction Company
Sundt Corporation
Walt Disney Imagineering
AUTOMOTIVE
ASC, Inc.
Champion Laboratories, Inc.
Dana Corporation
Lectron Products, Inc.
Simpson Industries, Inc.
CONSUMER PRODUCTS
Bacardi Imports, Inc.
Estee Lauder International, Inc.
Prestone Products Corporation
Robert Mondavi Winery
Tambrands, Inc.
ELECTRONICS
Emerson Electric Company
General Instrument Corporation
Lexmark International, Inc.
Medtronic, Inc.
Paradyne Corporation
Philips Electronics Ireland Limited
ENERGY AND CHEMICAL SYSTEMS
Albright & Wilson Americas, Inc.
LaRoche Industries, Inc.
Praxair, Inc.
Sandoz Technology Limited
FABRICATED METALS
Electrolux AB
Ford New Holland
Krones, Inc.
Parker Hannifin Corporation
Zexel USA Corporation
PHARMACEUTICALS
Mallinckrodt Group, Inc.
Sanofi
SmithKline Beecham plc
Sterling Winthrop, Inc.
Warner Lambert Company
PUBLIC SECTOR
City of Troy, Michigan
Colorado Housing & Finance Authority
Idaho Housing Agency
Louisiana Employees' Retirement System
Manchester Airport (UK) plc
(McCarran Airport, Las Vegas (Clark County)
Missouri Department of Corrections
New Jersey Natural Gas
Texas Department of Criminal Justice
SALES AND MARKETING
Selling the Company's software to multinational organizations typically
requires the Company to engage in a lengthy sales cycle, generally between six
and 15 months, and to expend substantial time, effort and money educating
prospective customers regarding the use and benefits of the Company's products.
See "Risk Factors -- Lengthy Sales Cycles." The Company sells its software and
services through direct sales and business partner channels throughout the
world. As of April 30, 1997, the Company's direct sales force consisted of 507
employees based at the Company's 46 offices, including 19 offices in the United
States and 27 offices located throughout the rest of the world. In addition, the
Company utilizes 172 sales and consulting business partners worldwide as an
indirect distribution channel to penetrate certain vertical markets and
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geographic areas, in particular those areas in which the Company has not
invested resources to establish a direct presence. The Company expects to
increasingly rely on indirect channels in order to enhance its market
penetration and implementation capabilities. See "Risk Factors -- Management of
Growth; Need For Additional Qualified Personnel." International revenue as a
percentage of total revenue ranged between 35% and 37% from fiscal 1994 through
the first half of fiscal 1997, and the Company expects that revenue from
international customers will continue to account for a significant portion of
the Company's total revenue.
The Company's marketing strategy is to position the Company as a premier
provider of ERP solutions and to increase recognition of the J.D. Edwards name.
In support of this strategy, the Company's marketing programs include developing
and maintaining industry analyst and public relations, developing databases of
targeted customers, conducting advertising and direct mail campaigns, and
maintaining a World Wide Web home page.
PRODUCT DEVELOPMENT
The Company has invested and expects to continue to invest substantial
resources in research and product development. The research and product
development department is organized into three groups that work closely
together -- the development technologies group; the application development
group; and the documentation, localization and translations group. The efforts
of these groups is enhanced by cross-functional product management teams,
frequent solicitation of customer feedback and close contact with customers
through the Company's implementation services. As of April 30, 1997, the
Company's research and product development operations included 553 employees,
primarily located in Denver, Colorado. Research and development expenditures,
which include capitalized software development costs, were $26.9 million, $47.6
million, $34.1 million and $21.0 million for the six months ended April 30, 1997
and for the fiscal years ended October 31, 1996, 1995 and 1994, respectively.
The Company anticipates that research and development expenditures will increase
in the future.
The Company's development technologies group is responsible for both the
toolsets and underlying technologies of WorldSoftware and OneWorld. The
WorldSoftware development technologies team is primarily focused on maintaining
and enhancing the toolset and underlying technologies for WorldSoftware. The
OneWorld development technologies team focuses on enhancing the flexibility,
simplicity and performance of the OneWorld toolset, as well as OneWorld's CNC
technology layer. Both development technologies teams share responsibility for
cross-functional coordination with sales and support, as well as with hardware
and software suppliers with which the Company has relationships, to identify,
analyze, prioritize and schedule new features and functionalities. As of April
30, 1997, the development technologies group consisted of 144 employees, the
substantial majority of whom are assigned to the OneWorld team.
The application development group is responsible for developing, enhancing
and maintaining the WorldSoftware and OneWorld application suites, including the
vertical market application suites. Separate application development teams use
the toolsets developed by the development technologies group to create and
enhance each application suite. The Company has designed its toolsets to enable
application programming to be performed by nonprogrammers responsible for
business practices. These application development teams also work with customers
and third-party implementation providers to identify, analyze, prioritize and
schedule new functionality in the Company's existing application suites, as well
as to establish specifications and priorities for new vertical markets. As of
April 30, 1997, the application development group consisted of 287 employees.
The Company's documentation, localization and translations group is
responsible for the documentation and the localization and translation of the
Company's application suites for particular foreign markets, as well as the
vertical market application suites and templates, for both WorldSoftware and
OneWorld. The documentation, localization and translations group works closely
with domestic and international customers and third-party implementation
providers, as well as cross-functional Company teams of development,
implementation, support and training professionals, to ensure that appropriate
enhancements are incorporated into products, documentation and implementation
processes. This group also develops and maintains a single database for
documentation, which is currently translated into 15 languages. The Company
intends to offer
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additional language translations in the future. As of April 30, 1997, the
documentation, localization and translation group consists of 122 employees.
The market for the Company's products is characterized by rapid
technological change, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. The life cycles of the Company's ERP
software are difficult to estimate. As a result, the Company's future success
will depend, in part, upon its ability to continue to enhance existing products
and develop and introduce in a timely manner new products that keep pace with
technological developments, satisfy customer requirements and achieve market
acceptance. There can be no assurance that the Company will successfully
identify new product opportunities and develop and bring new products to market
in a timely and cost-effective manner, or that products, capabilities or
technologies developed by others will not render the Company's products or
technologies obsolete or noncompetitive or shorten the life cycles of the
Company's products. See "-- Competition." Although the Company has addressed the
need to develop new products and enhancements primarily through its internal
development efforts, the Company has also addressed this need through the
licensing of third-party technology. Licensing third-party technology involves
numerous risks. See "-- Proprietary Rights and Licensing." If the Company is
unable to develop on a timely and cost-effective basis new software products or
enhancements to existing products, or if such new products or enhancements do
not achieve market acceptance, the Company's business, operating results and
financial condition may be materially adversely affected.
Historically, the Company has issued significant new releases of its family
of software products periodically, with interim releases issued even more
frequently. As a result of the complexities inherent in software development,
and in particular for multi-platform environments, and the broad functionality
and performance demanded by customers for ERP products, major new product
enhancements and new products can require long development and testing periods
before they are commercially released. The Company has on occasion experienced
delays in the scheduled introduction of new and enhanced products and there can
be no assurance that such delays will not be experienced in the future. The
Company recently released OneWorld, the network-centric version of its
application suites. Because the development of enhancements in network-centric
environments are more complex than in host-centric systems, there can be no
assurance that the introduction of future enhancements will not be delayed.
Complex software products such as those offered by the Company frequently
contain undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. The Company has in the past
discovered software errors in new versions of its ERP software after their
release. To date, the Company's business, operating results or financial
condition have not been materially adversely affected by the release of products
containing errors. There can be no assurance, however, that errors will not be
found in the Company's products or that such errors will not result in delay or
loss of revenue, diversion of development resources, damage to the Company's
reputation, increased service and warranty costs, or impaired market acceptance
of these products, any of which could result in a material adverse effect on the
Company's business, operating results or financial condition.
COMPETITION
The market for ERP software solutions is intensely competitive, subject to
rapid technological change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are designed and marketed for the AS/400 market and, more
recently, for leading UNIX and NT servers. The Company's primary competition
comes from a large number of independent software vendors including: (i)
companies offering products that run on the AS/400 platform and other mid-range
computers, including System Software Associates, Inc., Marcam Corporation,
Infinium Software, Inc. (formerly Software 2000) and JBA Holdings plc; (ii)
companies offering products that run on UNIX- or Windows NT-based systems in a
client/server environment, such as SAP, Baan, PeopleSoft and Oracle; and (iii)
companies offering either standard or fully customized products that run on
mainframe computer
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systems, such as SAP. Additionally, the Company faces indirect competition from
suppliers of custom developed business applications software that focus mainly
on proprietary mainframe and mid-range computer-based systems, such as systems
consulting groups of major accounting firms and from IT departments of potential
customers that develop systems internally. The Company's competitors currently
offer products that run on the AS/400 platform and UNIX and NT servers or have
announced their intent to introduce such products in the near future. As a
result, the Company will experience increased competition. There can be no
assurance that the Company will be able to successfully compete with new or
existing competitors or that such competition will not have a material adverse
effect on the Company's business, operating results or financial condition.
Many of the Company's competitors, and SAP and Oracle in particular, have
significantly greater financial, technical, marketing and other resources than
the Company, as well as wider name recognition and a larger installed customer
bases. Moreover, the Company has traditionally competed only in the AS/400
market, which primarily consists of mid-sized organizations, and has only
recently entered the UNIX and NT markets. In contrast, each of SAP, Baan,
PeopleSoft and Oracle, has significantly more experience and name recognition
with UNIX and NT, implementations and platforms, name recognition with potential
UNIX and NT customers, and reference accounts with UNIX and NT customers.
Accordingly, such competitors have significantly more customers in the UNIX and
NT markets to use as references when competing against the Company.
Additionally, several of the Company's competitors have well-established
relationships with current and potential customers of the Company. These
relationships may prevent the Company from competing effectively in divisions or
subsidiaries of such customers. Many of the Company's competitors, such as SAP,
Baan, PeopleSoft and Oracle, also offer, or have announced their intention to
offer, vertical applications targeted to mid-sized organizations, which market
comprises a substantial portion of the Company's revenue. Further, several of
the Company's competitors regularly and significantly discount prices on their
products. If these competitors continue to discount or increase the amount or
frequency of such discounts in response to increased competition or other
factors, the Company may be required to similarly discount its products, which
could have an adverse effect on the Company's margins. There can be no assurance
that the Company will be able to compete successfully against any of these
competitors.
The Company relies, and expects to increase its reliance, on a number of
systems consulting and systems integration firms for implementation and other
customer support services, as well as for recommendations of its products during
the evaluation stage of the purchase process. A number of the Company's
competitors, including SAP, Baan, PeopleSoft, and Oracle, have significantly
more well-established relationships with such firms and, as a result, such firms
may be more likely to recommend competitors' products rather than the Company's
products. Furthermore, there can be no assurance that these third parties, many
of which have significantly greater financial, technical, marketing and other
resources than the Company, will not market software products in competition
with the Company in the future. If the Company is unable to maintain or increase
the number and quality of its relationships with third parties who recommend,
implement or support ERP software, the Company's business, operating results and
financial condition will be materially adversely affected.
The Company believes that the principal competitive factors affecting the
market for the Company's software products are responsiveness to customer needs,
product architecture, functionality, speed of implementation, ease of use,
performance and features, quality and reliability, breadth of distribution,
vendor and product reputation, quality of customer support and price. The
Company believes that it competes favorably with respect to these factors. In
order to be successful in the future, the Company must continue to respond
promptly and effectively to the challenges of technological change and its
competitors' innovations by continually enhancing its own product offerings.
There can be no assurance, however, that the Company's products will continue to
compete favorably or that the Company will be successful in the face of
increasing competition from new products and enhancements introduced by existing
competitors or by new companies entering this market.
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PROPRIETARY RIGHTS AND LICENSING
The Company's ability to compete is dependent in part upon its internally
developed, proprietary intellectual property. Although the Company relies on
patent, trademark, trade secret and copyright law, as well as confidentiality
procedures and licencing arrangements, to establish and protect its rights in
its technology, the Company believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements, name recognition, customer training and support and reliable
product support are more essential to protect a technology leadership position.
There can be no assurance that others will not develop technologies that are
similar or superior to the Company's technology. The Company typically enters
into confidentiality or license agreements with its employees, consultants and
vendors, and typically controls access to and distribution of its software,
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's products or technology without authorization, or to develop similar
technology independently through reverse engineering or other means. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights as fully as do the laws of the United States. There can be no
assurance that the Company's means of protecting its proprietary rights in the
United States or abroad will be adequate or that competitors will not
independently develop similar technology. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or to obtain and use information that the Company
regards as proprietary. Preventing or detecting unauthorized use of the
Company's products is difficult. There can be no assurance that the steps taken
by the Company will prevent misappropriation of its technology or that its
license agreements will be enforceable. In addition, litigation may be necessary
in the future to enforce the Company's intellectual property rights, to protect
the Company's trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results or financial condition.
The Company typically licenses its products to end users under the
Company's standard license agreements, although each license is individually
negotiated and may contain variations. The Company's products are not only
licensed to end users, but also to independent, third-party distributors with a
right to sublicense. Although the Company seeks to establish the conditions
under which the Company's products are licensed by such distributors to end
users, the Company cannot ensure that its distributors do not deviate from such
conditions. Moreover, in order to facilitate the customization required by most
of the Company's customers, the Company generally licenses its software products
to end users in both object code (machine-readable) and source code
(human-readable) format. Although this practice facilitates customization,
making software available in source code also makes it easier for third parties
to copy or modify the Company's software for non-permitted purposes.
In the future, the Company may receive notice of claims of infringement of
other parties' proprietary rights. Although the Company does not believe that
its products infringe the proprietary rights of third parties, there can be no
assurance that infringement or invalidity claims (or claims for indemnification
resulting from infringement claims) will not be asserted or prosecuted against
the Company or that any such assertions or prosecutions will not materially
adversely affect the Company's business, operating results or financial
condition. Regardless of the validity or the successful assertion of such
claims, defending against such claims could result in significant costs and
diversion of resources with respect to the defense thereof, which could have a
material adverse effect on the Company's business, operating results or
financial condition. In addition, the assertion of such infringement claims
could result in injunctions preventing the Company from distributing certain
products, which would have a material adverse effect on the Company's business,
operating results or financial condition. If any claims or actions are asserted
against the Company, the Company may seek to obtain a license to such
intellectual property rights. There can be no assurance, however, that such a
license would be available on reasonable terms or at all.
The Company also relies on certain other technology which it licenses from
third parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. Most
notably, the Company licenses the graphical user interface to its WorldSoftware
version of its application suites (which the Company markets as WorldVision).
There can be no assurance that these
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third-party technology licenses will continue to be available to the Company on
commercially reasonable terms. The loss of, or inability to maintain, any of
these technology licenses, particularly for WorldVision's graphical user
interface, would result in delays or reductions in product shipments until
equivalent technology could be identified, licensed or developed, and
integrated. Any such delays or reductions in product shipments could materially
adversely affect the Company's business, operating results or financial
condition. Moreover, although the Company is generally indemnified by third
parties against claims that such third parties' technology infringes the
proprietary rights of others, such indemnification is not always available for
all types of intellectual property rights (for example, patents may be excluded)
and in some cases the geographical scope of indemnification is limited. The
result is that the indemnity that the Company receives against such claims is
often less broad than the indemnity that the Company provides to its customers.
Even in cases in which the indemnity that the Company receives from a
third-party licensor is as broad as the indemnity that the Company provides to
its customers, the third-party licensors from whom the Company would be
receiving indemnity are often not well-capitalized and may not be able to
indemnify the Company in the event that such third-party technology infringes
the proprietary rights of others. Accordingly, the Company could have
substantial exposure in the event that technology licensed from a third party
infringes another party's proprietary rights. The Company currently does not
have any liability insurance to protect against the risk that licensed
third-party technology infringes the proprietary rights of others. There can be
no assurance that infringement or invalidity claims arising from the
incorporation of third-party technology, and claims for indemnification from the
Company's customers resulting from such infringement claims, will not be
asserted or prosecuted against the Company or that any such assertions or
prosecutions will not materially adversely affect the Company's business,
operating results or financial condition. Regardless of the validity or
successful assertion of such claims, the Company could incur significant costs
and diversion of resources with respect to the defense thereof, in addition to
potential product redevelopment costs and delays, all of which could have a
material adverse effect on the Company's business, operating results or
financial condition.
EMPLOYEES
As of April 30, 1997, the Company had 3,167 full-time employees: 505 in
management and administration; 553 in research and development; 699 in sales and
marketing; 1,075 in implementation services and training; and 335 in customer
support. The Company believes that its continuing success will depend, in part,
on its ability to retain a limited number of key employees and other members of
senior management, as well as its ability to attract and retain highly skilled
technical, marketing and management personnel, who are in great demand. See
"Risk Factors -- Management of Growth; Need for Additional Qualified Personnel."
The Company has not had a work stoppage, and no employees are represented under
collective bargaining agreements. The Company considers its employee relations
to be good.
PROPERTIES
The Company's corporate headquarters and executive offices are in Denver,
Colorado, where the Company leases approximately 527,000 square feet of space in
multiple facilities. The leases on these facilities expire in 1998 through 2012.
The Company also leases approximately 215,000 square feet of space, primarily
for regional sales and support offices, elsewhere in the United States.
Additionally, the Company leases approximately 125,000 square feet of office
space in countries outside the United States, used primarily for sales and
support offices. Expiration dates on material sales and support office leases
range from fiscal 1998 to 2010. The Company believes that its current domestic
and international facilities will be sufficient to meet its needs for at least
the next twelve months. See Note 8 of Notes to Consolidated Financial Statements
and "Certain Transactions" for information regarding the Company's obligations
under its facilities leases.
LEGAL PROCEEDINGS
From time to time, the Company is involved in legal proceedings and
litigation arising in the ordinary course of business. While the outcome of
these matters cannot be predicted with certainty, in the opinion of management,
the adverse outcome of any such current legal proceedings would not have a
material adverse effect on the Company's results of operations or financial
condition.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of April 30, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
C. Edward McVaney........ 56 Chairman, President and Chief Executive Officer
Douglas S. Massingill.... 39 Executive Vice President and Chief Operating Officer
Richard E. Allen(1)(2)... 40 Vice President, Finance and Administration, Chief
Financial Officer and Director
Paul E. Covelo........... 42 Vice President of International Operations
David E. Girard.......... 42 Vice President and General Manager of the East Area
David M. Neal............ 36 Vice President and General Manager of the West Area
Pamela L. Saxton......... 44 Vice President of Finance, Controller and Chief
Accounting Officer
Jack D. Schneider........ 52 Vice President and General Manager of the South Area
Richard G. Snow, Jr...... 51 Vice President, General Counsel and Secretary
Daniel B. Snyder......... 39 Vice President and General Manager of the Midwest Area
Robert C. Newman(1)(2)... 53 Director
Jack L. Thompson......... 48 Director
Gerald Harrison(2)(3).... 65 Director
Delwin D. Hock........... 62 Director
Harry T. Lewis, 64 Director
Jr.(1)(3)..............
Michael J. Maples(4)..... 54 Director
Trygve E. Myhren(1)(4)... 60 Director
</TABLE>
- ---------------
(1) Member of the Finance Committee
(2) Member of the Governance Committee
(3) Member of the Audit Committee
(4) Member of the Compensation Committee
C. Edward McVaney is Chairman of the Board of Directors, President and
Chief Executive Officer of the Company, which he co-founded. He has held these
positions since the Company's inception, except that Mr. McVaney was not
President of the Company from September 1987 through September 1991. Prior to
founding the Company, he was partner-in-charge of information technology and
consulting services for the Denver, Colorado office of Alexander, Grant &
Company, a public accounting firm. Mr. McVaney holds a B.S. in mechanical
engineering from the University of Nebraska and an M.B.A. from Rutgers
University.
Douglas S. Massingill has been Executive Vice President and Chief Operating
Officer of the Company since March 1997. From February 1994 to March 1997, he
was Executive Vice President of Worldwide Operations, and from January 1993 to
March 1994, Mr. Massingill was Vice President and General Manager of the South
Area. Mr. Massingill joined the Company in June 1990 as Account Executive for
the Large Accounts Program. Prior to joining the Company, Mr. Massingill was
Regional Sales Vice President for Integral, an applications software company.
Mr. Massingill holds a B.A. in accounting from Shorter College and an M.B.A.
from Georgia Southern University.
Richard E. Allen has been a member of the Board of Directors since
September 1991. He has been Chief Financial Officer, Vice President, Finance and
Administration, Treasurer and Assistant Secretary since January 1990. From
August 1985 to September 1994, Mr. Allen served as Controller of the Company and
as Secretary from March 1986 to January 1990. Prior to joining the Company, he
worked as Controller for Luff Exploration Company, an oil and gas exploration
and production company, and as a senior accountant with Coopers & Lybrand,
L.L.P. Mr. Allen holds a B.S. in business administration from Colorado State
University.
Paul E. Covelo has been Vice President of International Operations since
August 1994. Prior to that, he served as Vice President and General Manager of
the West Area from January 1992 to September 1994 and Manager of the Newport
Beach Region from July 1988 to January 1992. Prior to joining the Company in
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1988, Mr. Covelo held various positions at IBM including Account Executive and
Advisory Executive. Mr. Covelo holds a B.A. in marketing from Loyola Marymount
University.
David E. Girard has been Vice President and General Manager of the East
Area since joining the Company in May 1994. From July 1992 to November 1993, Mr.
Girard served as Vice President and General Manager of the Northeastern Region
of Dun & Bradstreet Software. From March 1990 to July 1992, he served as Vice
President of Product Development, Client Services and Corporate Operations for
Information Associates, Inc., a division of Dun & Bradstreet Software. Mr.
Girard holds a B.S. in marketing from University of Connecticut and attended the
Columbia Executive Marketing Management Program at Columbia University.
David M. Neal has been Vice President and General Manager of the West Area
since January 1997. From December 1994 to December 1996, he served as Director
of Sales of the West Area. Prior to that, he served as Branch Manager of the
Southwest region from August 1992 to November 1994, Sales Manager from June 1990
to July 1992 and Account Executive of the Northwest region from March 1986 to
May 1990. Prior to joining the company, Mr. Neal was an Account Executive for
New Generation Software. He holds a B.S. in Management Information Systems from
Sacramento State University.
Pamela L. Saxton has been Vice President of Finance, Controller and Chief
Accounting Officer since joining the Company in September 1994. From 1989 to
1994, she was Vice President, Controller and Secretary for Amax Gold, Inc., a
mining company, and Assistant Controller for Cyprus Amax Minerals Company, a
mining company. Ms. Saxton holds a B.S. in accounting from University of
Colorado.
Jack D. Schneider has been Vice President and General Manager of the South
Area and the Energy and Chemical Systems Business Unit since October 1995. From
April 1994 to September 1995, he served as Vice President and General Manager of
the Energy and Chemical Systems and Architecture, Engineering, Construction,
Mining and Real Estate Business Units. From May 1993 to March 1994, Mr.
Schneider served as Vice President of Worldwide Operations, and from January
1993 to April 1993, he served as Vice President of European Sales. Prior to
that, he served as Director of Large Account Sales and European Support from
January 1992 to December 1992. Prior to joining the Company in January 1992, Mr.
Schneider held various management positions in sales and marketing at IBM.
Richard G. Snow, Jr. has been Vice President, General Counsel and Secretary
since joining the Company in January 1990. From February 1986 to January 1990,
Mr. Snow was Corporate Counsel and Secretary for Hathaway Corporation, a
manufacturer of computer components and power utility monitoring devices. Prior
to that, he was Vice President, General Counsel and Secretary for
Global-Ultimacc Systems, Inc., a systems integrator, and Senior Counsel for
Storage Technology Corporation, a manufacturer of computer storage devices. He
holds a B.S. in business administration from the University of California,
Berkeley and a J.D. from California Western University Law School.
Daniel B. Snyder has been Vice President and General Manager of the Midwest
Area since March 1992, and from January 1992 to March 1992, he served as
Director of Large Accounts for the Midwest Area. From June 1979 to January 1992,
Mr. Snyder held various positions at IBM, including marketing, field positions
and staff management positions. Mr. Snyder holds a B.S. in business
administration from Arizona State University, and an M.B.A. in finance from
University of Southern California.
Robert C. Newman is Senior Fellow, a member of the Board of Directors and
one of the co-founders of the Company. Mr. Newman has been a member of the Board
since 1978. He has also served as Vice President of Complementary Technologies.
Prior to joining the Company, Mr. Newman was President of Newman, Marcum &
Associates, a software consulting company, an information technology consultant
for Deloitte, Haskins & Sells, a public accounting firm, an engineering section
manager for Motorola, Inc., and a systems programmer for Rockwell International.
Mr. Newman holds a B.S. in industrial engineering from the University of
California, Berkeley, an M.B.A. from the University of California, Los Angeles
and a Ph.D. in high-technology management from Golden Gate University. Mr.
Newman serves as a director of Kinetics.com.
Jack L. Thompson is a member of the Board of Directors and one of the
co-founders of the Company. Mr. Thompson has been a member of the Board since
the Company's inception in March 1977. He served as Vice President of Technical
Foundations from the Company's inception to March 1996. Prior to joining the
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Company, Mr. Thompson was a consultant at Alexander Grant & Company, a public
accounting firm, and a programmer for National Farmers Union Life, an insurance
company.
Gerald Harrison has been a member of the Board of Directors since January
1997. He currently engages in private research and writing. From 1982 to 1984,
he was President and Chief Executive Officer of Stearns-Roger World Corporation,
an engineering and construction firm, and for 14 years prior to that, he served
in various other positions. Mr. Harrison holds a B.S. in economics from the
University of Colorado and his L.L.B. from the University of Colorado School of
Law.
Delwin D. Hock has been a member of the Board of Directors since March
1997. He retired from his position as Chief Executive Officer of Public Service
Co. of Colorado, a utility services company, in January 1996 and as Chairman of
the Board of Directors in July 1997. From September 1962 to January 1996, Mr.
Hock held various positions at Public Service Co. Mr. Hock received his B.S. in
accounting from the University of Colorado. He serves as a director of
Serv-Tech, Inc., Hathaway Corporation and American Century Investors.
Harry T. Lewis, Jr. has been a member of the Board of Directors since March
1995. Since April 1988, Mr. Lewis has been self-employed as a private investor
and financial consultant. From January 1981 to March 1988, he was Senior Vice
President for Dain Bosworth Incorporated, an investment banking firm. Prior to
that, Mr. Lewis was employed by Boettcher & Company, an investment banking firm.
Mr. Lewis has an A.B. from Dartmouth College and an M.B.A. from the Amos Tuck
School of Business Administration at Dartmouth College. He serves as a director
of The Berger Mutual Funds.
Michael J. Maples has been a member of the Board of Directors since January
1997. He is currently a consultant to Microsoft Corporation. From April 1988 to
July 1995, Mr. Maples held various management positions at Microsoft
Corporation, most recently as Executive Vice President of the Worldwide Products
Group. Prior to that, he served as a Director of Software Strategy for IBM. Mr.
Maples holds a B.S. in electrical engineering from Oklahoma University and an
M.B.A. from Oklahoma City University. He serves as a director of Lexmark
International, Inc. and PSW Technologies.
Trygve E. Myhren has been a member of the Board of Directors since January
1997. He is currently President of Myhren Media, Inc., which invests in and
advises media, telecommunications and consumer products companies. From November
1990 to March 1996, he served as President of The Providence Journal Company, a
company that owns and manages newspapers, broadcast television stations,
programming networks and interactive and multimedia ventures. During this same
time, he was Chief Executive Officer of King Holdings, an owner and manager of
broadcast and cable television properties. From 1981 to 1988, Mr. Myhren served
as Chairman and Chief Executive Officer of American Television and
Communications Corporation, a publicly traded subsidiary of Time, Inc. From 1986
to 1987, Mr. Myhren served as Chairman of the National Cable Television
Association. Mr. Myhren has a B.S. in political science and philosophy from
Dartmouth College, and an M.B.A. from the Amos Tuck School of Business
Administration at Dartmouth College. He serves on the boards of Peapod, Ltd.,
Advanced Marketing Systems, University of Denver, VERIO, Inc. and Founders Funds
Inc.
BOARD OF DIRECTORS
Currently, each director holds office until the next annual meeting of the
stockholders or until his or her successor is duly elected and qualified.
COMMITTEES. The Company's Board of Directors has an Audit Committee,
Compensation Committee, Finance Committee and Governance Committee.
The Audit Committee is responsible for reviewing and reporting to the Board
on the quality and performance of internal and external accountants and
auditors, the reliability of its financial information, and the adequacy of its
financial controls and policies, initiating and/or approving appropriate changes
in any or all of these areas when necessary.
The Compensation Committee is responsible for reviewing and reporting to
the Board on compensation and personnel policies, programs and plans, including
management development and succession plans, and to
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approve employee compensation and benefits and to administer the Company's stock
plans. See "-- Employee Benefit Plans."
The Finance Committee is responsible for the review of the Company's
capital structure, capital expenditures, financing arrangements, risk management
and long range financial planning.
The Governance Committee is responsible for acting on behalf of the Board
during intervals between meetings of the Board and then reporting to the Board
at its next regular meeting on any actions taken. Actions of the Governance
Committee may generally be limited to handling legal formalities and
technicalities concerning administrative operations, however, the Governance
Committee has the power to act on major matters where it deems action
appropriate.
DIRECTOR COMPENSATION. In January 1997, the Board approved compensation
guidelines for directors who are not officers or employees of the Company or any
of its subsidiaries ("Eligible Directors"). Eligible Directors receive $15,000
as an annual retainer, a fee of $1,000 for attendance at each meeting of the
Board of Directors, and a fee of $1,000 for attendance at each meeting of a
committee of the Board of Directors. After this offering, Eligible Directors may
elect to receive, in lieu of such cash compensation, options to purchase shares
having a fair market value of the foregone cash compensation. Eligible Directors
are reimbursed for expenses incurred in attending any Board of Directors or
committee meetings. Directors who are officers of or employed by the Company or
any of its subsidiaries do not receive additional compensation for serving as
directors of the Company or attending Board of Directors or committee meetings.
The compensation guidelines also provide that Eligible Directors will
automatically be granted under the Company's 1992 Nonqualified Stock Option Plan
an option to purchase 35,000 shares of Common Stock (the "First Option") on the
date on which each such person becomes an Eligible Director. After the First
Option has been granted to the Eligible Director, such director will
automatically be granted an option to purchase 7,000 shares on an annual basis.
The foregoing option provisions terminate upon completion of this offering.
Effective upon the date of this offering, Eligible Directors will be
eligible to participate in the Company's 1997 Equity Incentive Plan. Each
Eligible Director will automatically receive a grant of an option to purchase
25,000 shares of Common Stock on the date on which such person becomes an
Eligible Director. Additionally, beginning at the Company's annual meeting of
stockholders for the fiscal year ending October 31, 1997 and at each successive
annual stockholder meeting, each Eligible Director will receive an option to
purchase 5,000 shares of Common Stock. The options will become fully exercisable
over a four year period at the rate of 25% per year. The exercise price per
share for all options automatically granted to directors under the 1997 Plan
will be equal to the market price of the Common Stock on the date of grant.
Directors are also eligible to receive discretionary grants under the 1997 Plan.
See "Management -- Stock Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed to review and recommend to
the Board the compensation and benefits for the Company's executive officers,
administer the Company's stock purchase and stock option plans and make
recommendations to the Board of Directors regarding such matters. Prior to
January 1997, the Committee was composed of Jay S. Horowitz, a former member of
the Board. The Committee is currently composed of Mr. Myhren and Mr. Maples. No
interlocking relationship exists between any member of the Company's Board or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
49
<PAGE> 53
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information concerning total compensation received by the Company's Chief
Executive Officer and each of the Company's four most highly compensated
executive officers during the last fiscal year (collectively, the "Named
Officers") for services rendered to the Company in all capacities during the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- ----------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
C. Edward McVaney........................ $300,000 $404,500 -- --
Chairman, President and
Chief Executive Officer
Douglas S. Massingill.................... 253,333 175,117 112,000 $31,713(1)
Executive Vice President and Chief
Operating Officer
Paul E. Covelo........................... 204,700 144,000 112,000 26,059(2)
Vice President of International
Operations
David E. Girard.......................... 179,500 171,500 112,000 466(3)
Vice President and General Manager of
the East Area
Daniel B. Snyder......................... 162,366 203,500 112,000 714(4)
Vice President and General Manager of
the Midwest Area
</TABLE>
- ---------------
(1) Represents reimbursement of $31,647 for relocation expenses and payment of
$66 for insurance premiums.
(2) Represents reimbursement of $26,035 for relocation expenses and payment of
$24 for insurance premiums.
(3) Represents payment of insurance premiums.
(4) Represents payment of $714 for insurance premiums.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth, as to
the Named Officers, information concerning stock options granted during the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE DATE(3) 5% 10%
- ----------------------- ---------- --------------- -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Edward McVaney...... -- -- -- -- -- --
Douglas S.
Massingill........... 112,000 2% $6.24 02/01/06 $439,381 $1,113,478
Paul E. Covelo......... 112,000 2% 6.24 02/01/06 439,381 1,113,478
David E. Girard........ 112,000 2% 6.24 02/06/06 439,381 1,113,478
Daniel B. Snyder....... 112,000 2% 6.24 02/01/06 439,381 1,113,478
</TABLE>
- ---------------
(1) The options in this table are incentive stock options or nonqualified stock
options granted under the 1992 Incentive Stock Option Plan or the 1992
Nonqualified Stock Option Plan and have exercise prices equal to the fair
market value of the Company's Common Stock on the date of grant. All such
options have 10-year terms and vest over a period of 5 years at a rate of
20% of the shares per year.
(2) The Company granted options to purchase 5,572,560 shares of Common Stock to
employees in fiscal 1996.
(3) The options in this table may terminate before their expiration as a result
of the termination of optionee's status as an employee or consultant or upon
the optionee's disability or death.
(4) Under rules promulgated by the Securities and Exchange Commission (the
"SEC"), the amounts in these two columns represent the hypothetical gain or
"option spread" that would exist for the options in this table based on
assumed stock price appreciation from the date of grant until the end of
such options'
50
<PAGE> 54
ten-year term at assumed annual rates of 5% and 10%. The 5% and 10% assumed
annual rates of appreciation are specified in SEC rules and do not represent the
Company's estimate or projection of future stock price growth. There can be no
assurance that the actual stock price appreciation over the 10-year option
term will be at the assumed 5% and 10% annual rates of compounded stock
appreciation or at any other defined rate.
AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES. The following table sets forth, as to the Named Officers, certain
stock option information concerning the number of shares subject to both
exercisable and unexercisable stock options and the value of unexercised options
as of October 31, 1996. No options were exercised by Named Officers in the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
C. Edward McVaney............................ -- -- -- --
Douglas S. Massingill........................ 350,770 621,180 $2,797,555 $4,536,587
Paul E. Covelo............................... 410,620 646,030 3,279,527 4,736,704
David E. Girard.............................. 152,600 372,400 1,210,412 2,546,241
Daniel B. Snyder............................. 281,260 504,840 2,243,023 3,607,549
</TABLE>
- ---------------
(1) Based on the deemed fair market value of the Company's Common Stock at
fiscal year end, as determined by the Company's Board of Directors less the
exercise price payable for such shares.
EMPLOYEE BENEFIT PLANS
Corporate Plan for Retirement/The Profit Sharing/401(k) Plan
The Company's Corporate Plan for Retirement/The Profit Sharing/401(k) Plan
(the "401(k) Plan") was adopted in 1988, restated in its entirety in July 1994
and amended in June 1996. The 401(k) Plan is designed to enable eligible
employees to save for retirement. All employees who have completed six months of
consecutive service with the Company and have attained the age of 21 are
eligible to participate in the 401(k) Plan. Currently, the Company matches 50%
of an employee's eligible contributions up to a maximum match of 2% of eligible
compensation. The trustee under the 401(k) Plan invests the assets of the 401(k)
Plan in any of several investment options at the direction of each beneficiary.
The 401(k) Plan is intended to qualify under Section 401 of the Internal Revenue
Code of 1986, as amended (the "Code").
Employee Stock Ownership Plan
In 1989, the Company adopted the J.D. Edwards & Company Employee Stock
Ownership Plan (the "ESOP") and restated the ESOP in 1996. The ESOP is a stock
bonus plan designed to invest primarily in the Company's Common Stock for the
benefit of the Company's employees. With certain limitations, employees who work
for the Company within the United States, or in Canada prior to 1995, and
employees who are United States citizens who work outside the United States and
receive United States source pay are eligible to participate in the ESOP at the
first enrollment date after one year of service.
Company contributions to the ESOP, as determined by the Board of Directors,
are discretionary and, if made, may be in the form of cash or Company stock. An
ESOP committee, appointed by the Board of Directors, administers the ESOP and
directs the trustees with respect to ESOP investments. As of April 30, 1997, the
ESOP trustees were Mr. Allen, Mr. Thompson and Greg A. Dixon. The ESOP committee
generally directs the trustees with respect to the voting of Company stock held
by the ESOP, except that each participant has the right to direct the voting of
the stock with respect to the approval or disapproval of a merger or
consolidation, recapitalization, liquidation, dissolution, asset sale or similar
transaction. Once the Company's stock is publicly traded, the right to direct
the vote with respect to shares allocated to participant accounts must be passed
through to participants with respect to all corporate matters. As of April 30,
1997, the ESOP owned 8,706,040 shares of the Company's Common Stock.
51
<PAGE> 55
Company contributions and forfeitures for a plan year are allocated among
the accounts of eligible employees. Allocations are made in the proportion that
each participant's annual base salary (not to exceed $150,000) bears to the
aggregate base salary of all participants. After three years of employment, each
participating employee's interest in the ESOP begins to vest at a rate of 20%
per year of additional employment.
The Company anticipates continuing to make contributions to the ESOP
through the end of fiscal 1997 and that such contributions will be in the form
of the Company's Common Stock. The Company also anticipates merging the ESOP
into the 401(k) Plan during fiscal 1998 and thereafter may continue to make
contributions of Company Common Stock to the 401(k).
1992 Incentive Stock Option Plan
The Company's 1992 Incentive Stock Option Plan (the "1992 ISO Plan")
provides for the granting of incentive stock options to key employees. An
aggregate of 35,000,000 shares of Common Stock has been reserved for issuance
under the 1992 ISO Plan and the 1992 NSO Plan described below. As of April 30,
1997, there were options to purchase 13,267,730 shares of Common Stock
outstanding under the 1992 ISO Plan. The Company does not anticipate granting
additional options under the 1992 ISO Plan after this offering.
1992 Nonqualified Stock Option Plan
The Company's 1992 Nonqualified Stock Option Plan (the "1992 NSO Plan")
provides for the granting of nonqualified stock options to key employees,
consultants and nonemployee directors. An aggregate of 35,000,000 shares of
Common Stock has been reserved for issuance under the 1992 ISO Plan and the 1992
NSO Plan. As of April 30, 1997, there were options to purchase 8,932,700 shares
of Common Stock outstanding under the 1992 NSO Plan. The Company does not
anticipate granting additional options under the 1992 NSO Plan after this
offering.
Restricted Stock Grant Plan
The Company's 1990 Restricted Stock Grant Plan (the "1990 Plan") provides
for the issuance of a maximum of 3,141,110 shares of Common Stock to certain
employees of the Company. As of April 30, 1997, there were 2,135,000 shares of
Common Stock outstanding under the 1990 Plan. The Company has not issued any
shares under this plan since 1992 and does not anticipate issuing additional
shares under this plan.
Stock Plan for Employees
The Company's Stock Plan for Employees (the "Employee Stock Plan") provides
for the issuance of a maximum of 6,997,200 shares of Common Stock to certain
employees of the Company. As of April 30, 1997, there were 1,715,000 shares of
Common Stock outstanding under the Employee Stock Plan. The Company has not
issued any shares under this plan since 1986 and does not anticipate issuing
additional shares under this plan.
Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") is
expected to be adopted by the Board of Directors and the stockholders in August
1997, to take effect upon the date of the offering. The Company has reserved a
total of 2,000,000 shares of Common Stock for issuance under the Purchase Plan.
Employees are eligible to participate if they are customarily employed by the
Company or any designated subsidiary for at least 20 hours per week and for more
than five months in any calendar year. The Purchase Plan will be administered by
the Compensation Committee of the Board of Directors.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, permits eligible employees of the Company to purchase Common Stock through
payroll deductions of up to ten percent of their compensation (including
commissions, overtime, shift premium and bonuses), up to a maximum of $21,250
for all purchase periods ending within any calendar year. The price of Common
Stock purchased
52
<PAGE> 56
under the Purchase Plan will be 85% of the lower of the fair market value of the
Common Stock on the first or last day of each six month purchase period.
Employees may end their participation in the Purchase Plan at any time during an
offering period, and they will be refunded their payroll deductions to date.
Participation ends automatically upon termination of employment with the
Company. Rights granted under the Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the plan.
The Purchase Plan will be implemented by an initial offering period of
approximately nine months commencing on the first trading day on or after the
date of this offering and ending on the last trading day in the period ending
June 30, 1998. Subsequent offering periods will last six months and will
commence on the first trading day on or after July 1 and January 1 of each year
during which the Purchase Plan is in effect, and will terminate on the last
trading day in the periods ending six months later.
1997 Equity Incentive Plan
The Company's 1997 Equity Incentive Plan (the "1997 Plan") is expected to
be approved by the Board of Directors and by the stockholders in August 1997.
The 1997 Plan provides for the granting of incentive stock options to employees
(including officers and employee directors) and of nonqualified stock options,
stock purchase rights ("SPRs") and long-term performance awards to employees
(including officers and employee directors), consultants and nonemployee
directors. A total of 10,000,000 shares of Common Stock has been reserved for
issuance under the 1997 Plan, which number will automatically increase on the
first day of each new fiscal year of the Company, beginning in 1999, by a number
of shares equal to 5% percent of the Company's outstanding Common Stock as of
the last business day of the immediate preceding fiscal year. As of April 30,
1997, there were no options outstanding under the 1997 Plan.
The 1997 Plan will be administered by the Compensation Committee of the
Board of Directors. Options, SPRs, and long-term performance awards granted
under the 1997 Plan are not generally transferable by the optionee except by
will or by the laws of descent and distribution, and are exercisable during the
lifetime of the optionee only by such optionee. Options granted under the 1997
Plan must be exercised within three months of the end of optionee's status as an
employee or consultant of the Company, or within twelve months after such
optionee's termination by death or disability, but in no event later than the
expiration of the option term. The exercise price of all incentive and
nonstatutory stock options granted under the 1997 Plan shall be determined by
the Compensation Committee. With respect to any participant who owns stock
possessing more than ten percent of the voting power of all classes of the
Company's outstanding capital stock (a "10% Stockholder"), the exercise price of
any incentive stock option granted must equal at least 110% of the fair market
value of the Company's Common Stock on the grant date. The exercise price of
incentive stock options for all other employees may be no less than 100% of the
fair market value of the Company's Common Stock on the date of the grant. The
maximum term of an option granted under the 1997 Plan may not exceed ten years
from the date of grant (five years in the case of an incentive stock option
granted to a 10% Stockholder). In the case of SPRs, unless the Compensation
Committee determines otherwise, the Company will have a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). Such
repurchase option lapses at a rate determined by the Compensation Committee. The
purchase price for shares repurchased by the Company shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. Long-term performance awards are cash or stock bonus
awards, and may be granted alone or in conjunction with other awards under the
1997 Plan.
53
<PAGE> 57
CERTAIN TRANSACTIONS
In March 1997, C. Edward McVaney, Chairman, President and Chief Executive
Officer, sold a total of 46,200 shares of Common Stock of the Company from his
personal holdings to an employee of the Company and to Trygve E. Myhren, Harry
T. Lewis, Jr., Michael J. Maples and Gerald Harrison, each a director of the
Company, for an aggregate purchase price of approximately $500,000. Each of the
individuals purchased 9,240 shares. Additionally, in April 1997, Mr. McVaney
sold 9,240 shares to Delwin D. Hock, a director of the Company, for a purchase
price of approximately $100,000.
In January 1996, the Company was notified of a contractual arrangement
whereby two founders, Robert C. Newman and Jack L. Thompson, directors of the
Company, proposed to sell 3,500,000 shares of their Company stock holdings to
certain identified third parties. Under the terms of an Old Shareholder
Agreement, described below, such stock was required to be offered to the Company
at the pending sales price prior to the sale to third parties. The Company
assigned its right to purchase these shares to the ESOP, which purchased the
3,500,000 shares of Common Stock from Messrs. Newman and Thompson for $10.4
million. Mr. Newman sold 875,000 shares, and Mr. Thompson sold 2,625,000 shares.
In December 1995, the Company loaned $120,000 to Jack D. Schneider, an
executive officer of the Company. The loan bore no interest and was paid in full
in June 1996.
In May 1995, the Company loaned $150,000 to Mr. McVaney. The loan bore
interest at 2% over the prime lending rate and was collateralized by shares of
the Company's Common Stock owned by Mr. McVaney. The loan plus accrued interest
was paid in full in August 1995.
In November 1994, Mr. Thompson exercised his right under the Old
Shareholder Agreement, described below, to require the Company to purchase
176,260 shares of Common Stock. Such shares were purchased by the ESOP for a
purchase price of $200,000.
In November 1994, Mr. McVaney sold 1,112,020 shares of Common Stock to the
Company for a purchase price of $2,838,828, Mr. Thompson sold 487,760 shares of
Common Stock to the Company for a purchase price of $1,245,181, and Mr. Newman
sold 358,820 shares of Common Stock to the Company for a purchase price of
$916,016.
In July 1994, the Company loaned $195,000 to Mr. Thompson who was also an
executive officer and director of the Company at the time of the loan and
currently a director of the Company. The loan bore interest at a rate of 2% over
the prime lending rate and was collateralized by shares of the Company's Common
Stock owned by Mr. Thompson. The loan plus accrued interest was paid in full in
November 1994.
In November 1993, the Company loaned $350,000 to Mr. McVaney. The loan bore
interest at 2% over the prime lending rate and was collateralized by shares of
the Company's Common Stock owned by Mr. McVaney. The loan plus accrued interest
was paid in full in December 1993.
In February 1993, the Founders (Messrs. McVaney, Thompson and Newman) and
the Company entered into a Shareholder Agreement, which was amended in January
1996 (the "Old Shareholder Agreement"). The Old Shareholder Agreement sets
forth, among other things, certain voting covenants and transfer restrictions on
the shares beneficially owned by the Founders. The Founders and the Company are
expected to amend and restate the Old Shareholder Agreement (the "Amended and
Restated Shareholder Agreement"), which will provide, among other things, that
the Founders must vote their shares in accordance with the provisions of such
agreement.
In the past, the Company has granted options to certain of its executive
officers. The Company intends to continue to grant options to its officers in
the future. See "Management -- Option Grants in Last Fiscal Year" and "Principal
and Selling Stockholders."
The Company believes that each of the transactions involving the Company
described above were on terms no less favorable to the Company than could have
been obtained from unaffiliated third parties. All future transactions between
the Company and any director or executive officer will be subject to approval by
a majority of the disinterested members of the Board.
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the
54
<PAGE> 58
General Corporation Law of Delaware. Such limitation of liability does not
affect the availability of equitable remedies such as injunctive relief or
rescission. The Company's Bylaws provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by Delaware law,
including in circumstances in which indemnification is otherwise discretionary
under Delaware law. The Company intends to enter into indemnification agreements
with each of its officers and directors containing provisions that requires the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to cover its
directors and officers under any Company liability insurance policies applicable
to its directors and officers.
55
<PAGE> 59
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Company's Common Stock as of April 30, 1997, and as adjusted to
reflect the sale of shares offered by this Prospectus, for the following: (i)
each person or entity who is known by the Company to own beneficially more than
five percent of the outstanding shares of the Company's Common Stock, (ii) each
of the Company's current directors, (iii) each of the Named Officers, (iv) all
directors and executive officers as a group, and (v) each Selling Stockholder.
Unless otherwise indicated, the J.D. Edwards & Company ESOP, officers and
directors can be reached at the principal offices of the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES OFFERING(1)
--------------------- BEING -------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- ----------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
DIRECTORS, NAMED OFFICERS AND 5%
STOCKHOLDERS:
C. Edward McVaney(2)....................... 36,890,840 46.6%
Jack L. Thompson(3)........................ 12,924,520 16.3
Robert C. Newman(4)........................ 10,988,530 13.9
Douglas S. Massingill(5)................... 545,160 *
Richard E. Allen(6)........................ 744,030 *
Paul C. Covelo(7).......................... 625,030 *
David E. Girard(8)......................... 257,600 *
David M. Neal(9)........................... 50,400 *
Pamela L. Saxton(10)....................... 82,600 *
Jack D. Schneider(11)...................... 293,160 *
Richard G. Snow, Jr.(12)................... 54,810 *
Daniel B. Snyder(13)....................... 438,480 *
Gerald Harrison............................ 9,240 *
Delwin D. Hock............................. 9,240 *
Harry T. Lewis, Jr.(14).................... 16,240 *
Michael J. Maples.......................... 9,240 *
Trygve E. Myhren........................... 9,240 *
J.D. Edwards & Company ESOP(15)............ 8,706,040 11.0
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A
GROUP (17 PERSONS)(16)..................... 63,948,360 78.0%
</TABLE>
OTHER SELLING STOCKHOLDERS:
William J. Bovaird III(17)................. 799,330 1.0
Mary E. Collison(18)....................... 842,730 1.1
Rod N. McDonald(19)........................ 933,030 1.2
Other Selling Stockholders(15 persons),
each holding less than 1% of the Common
Stock prior to this offering(20)........ 3,558,800 4.4
- ---------------
* Less than 1% of the Company's outstanding Common Stock.
(1) Assumes no exercise of the Underwriters' over-allotment option. The number
and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Exchange Act, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any shares as to which the individual or
entity has voting power or investment power and any shares which the
individual has the right to acquire within 60 days of April 30, 1997
through the exercise of any stock option or other right. Unless otherwise
indicated in the footnotes, each person or entity has sole voting and
investment power (or shares such powers with his or her spouse) with
respect to the shares shown as beneficially owned.
56
<PAGE> 60
(2) Includes 8,118,950 shares held by the C. Edward McVaney Trust, 14,000,000
shares held by the C. Edward McVaney R.A.T., 466,690 shares held of record
by Mr. McVaney's wife, Carole L. McVaney, 14,000,000 held of record by the
Carole L. McVaney, R.A.T. and 305,200 held of record by the McVaney Family
Foundation.
(3) Excludes 8,706,040 shares owned by the ESOP. Mr. Thompson is a co-trustee
of the ESOP, and shares voting and dispositive power of the shares owned by
the ESOP, but has no pecuniary interest therein.
(4) Includes 157,500 shares held of record by the Jennifer A. Newman Trust.
(5) Includes 545,160 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(6) Includes 499,030 shares subject to stock options exercisable within 60 days
of April 30, 1997 and 14,000 shares held of record by Mr. Allen's children.
Excludes 8,706,040 shares owned by the ESOP. Mr. Allen is a co-trustee of
the ESOP, and shares voting and dispositive power of the shares owned by
the ESOP, but has no pecuniary interest therein.
(7) Includes 625,030 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(8) Includes 257,600 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(9) Includes 50,400 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(10) Includes 82,600 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(11) Includes 293,160 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(12) Includes 54,810 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(13) Includes 438,480 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(14) Includes 7,000 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(15) Excludes shares owned by Messrs. Allen, Dixon and Thompson, the trustees of
the ESOP.
(16) Includes 2,853,270 shares subject to stock options exercisable within 60
days of April 30, 1997.
(17) Includes 361,830 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(18) Includes 499,030 shares subject to stock options exercisable within 60 days
of April 30, 1997, 64,750 shares held of record by the Stephanie Ann Moore
Irrevocable Trust, 64,750 shares held of record by the Donavan Vincent
Rossi Irrevocable Trust and 4,200 shares held of record by James Collison.
(19) Includes 499,030 shares subject to stock options exercisable within 60 days
of April 30, 1997.
(20) Includes 1,509,760 shares subject to stock options exercisable within 60
days of April 30, 1997.
57
<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 300,000,000 shares of Common Stock, $0.001 par value,
and 5,000,000 shares of Preferred Stock, $0.001 par value.
COMMON STOCK
As of April 30, 1997, there were 79,128,420 shares of Common Stock
outstanding, held of record by 107 stockholders. The holders of Common Stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board out of funds legally available
therefor, subject to any preferences that may be applicable to any outstanding
Preferred Stock. See "Dividend Policy." In the event of liquidation, dissolution
or winding up of the Company, holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to any
prior liquidation rights of any outstanding Preferred Stock. The Common Stock
has no preemptive, subscription or conversion rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All the outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby will
be, when issued, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, 5,000,000 shares of Preferred Stock will
be authorized and no shares will be outstanding. The Board has the authority,
without any further vote or action by the stockholders, to issue 5,000,000
shares of Preferred Stock in one or more series and to fix the price, powers,
designations, preferences and relative, participating, optional or other rights
thereof, including dividend rights, conversion rights, voting rights, redemption
terms, liquidation preferences and the number of shares constituting any series
and the designations of such series. The issuance of Preferred Stock in certain
circumstances may have the effect of delaying, deferring or preventing a change
of control of the Company without further action by the stockholders, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock and may adversely affect the market price of, and the
voting and other rights of, the holders of Common Stock. The Company has no
present plans to issue any shares of Preferred Stock.
ANTITAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S
BYLAWS
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested
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stockholder; or (v) the receipt by the interested stockholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits provided by
or through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person.
The Company's Bylaws will not permit stockholders of the Company to call a
special meeting of stockholders. Only the Company's Board of Directors, Chairman
of the Board or President may call a special meeting of stockholders.
These and other provisions could have the effect of making it more
difficult to acquire the Company by means of a tender offer, proxy contest or
otherwise or to remove the incumbent officers and directors of the Company.
These provisions may discourage certain types of coercive takeover practices and
encourage persons seeking to acquire control of the Company to first negotiate
with the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Harris
Trust Company of California.
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<PAGE> 63
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, the shares sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act,
unless such shares are purchased by an existing "affiliate" of the Company as
that term is defined in Rule 144 under the Securities Act (an "Affiliate"). The
remaining shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act ("Restricted Shares"). Restricted Shares may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the contractual restrictions described below
and the provisions of Rules 144, 144(k) and 701, additional shares will be
available for sale in the public market as follows: (i) shares will be
eligible for immediate sale on the date of this Prospectus, (ii)
shares will be eligible for sale 90 days after the date of this Prospectus,
(iii) shares will be eligible for sale upon expiration of the lock-up
agreements 180 days after the date of this Prospectus and (iv) shares
will be eligible for sale upon expiration of their respective one-year holding
periods.
All officers and directors and certain stockholders and option holders of
the Company have agreed not to offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer, lend or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Common Stock for a period
of 180 days after the date of this Prospectus, without the prior written consent
of Morgan Stanley & Co. Incorporated, subject to certain limited exceptions.
Morgan Stanley & Co. Incorporated currently has no plans to release any portion
of the securities subject to lock-up agreements. When determining whether or not
to release shares from the lock-up agreements, Morgan Stanley & Co. Incorporated
will consider, among other factors, the stockholder's reasons for requesting the
release, the number of shares for which the release is being requested and
market conditions at the time.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately shares immediately after this
offering); or (ii) the average weekly trading volume of the Common Stock on the
Nasdaq National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an Affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of any
prior owner except an Affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Accordingly, unless otherwise restricted, "144(k)
shares" may therefore be sold immediately upon the completion of this offering.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by
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its employees, directors, officers, consultants or advisors prior to the date
the issuer becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to written
compensatory benefit plans or written contracts relating to the compensation of
such persons. In addition, the SEC has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Exchange Act, along with the shares acquired upon
exercise of such options (including exercises after the date of this offering).
Securities issued in reliance on Rule 701 are restricted securities and, subject
to the contractual restrictions described above, beginning 90 days after the
date of this Prospectus, may be sold (i) by persons other than Affiliates,
subject only to the manner of sale provisions of Rule 144 and (ii) by
Affiliates, under Rule 144 without compliance with its one-year minimum holding
period requirements.
The Company has agreed not to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer, lend or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or enter into
any swap or similar agreement that transfers, in whole or in part, the economic
risk of ownership of the Common Stock, for a period of 180 days after the date
of this Prospectus, without the prior written consent of Morgan Stanley & Co.
Incorporated, subject to certain limited exceptions.
Following the offering, the Company intends to file registration statements
under the Securities Act covering approximately shares of Common Stock
issued and outstanding, subject to outstanding options or reserved for issuance
under the Company's stock plans. See "Management -- Employee Benefit Plans."
Accordingly, shares registered under such registration statement will, subject
to Rule 144 volume limitations applicable to Affiliates, be available for sale
in the open market, except to the extent that such shares are subject to vesting
restrictions with the Company or the contractual restrictions described above.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following discussion concerns the material United States federal income
tax consequences of the ownership and disposition of shares of Common Stock
applicable to Non-U.S. Holders of such shares of Common Stock. In general, a
"Non-U.S. Holder" is any holder other than (i) a citizen or an individual
considered under the United States tax laws to be a resident of the United
States, (ii) a corporation or partnership created or organized in the United
States or under the laws of the United States or any State, (iii) an estate
whose income is includible in gross income for United States federal income tax
purposes regardless of its source or (iv) a trust for which a court within the
United States is able to exercise primary supervision over the administration of
the trust, and for which one or more United States fiduciaries has the authority
to control all substantial decisions of the trust. The discussion is based on
current law, which is subject to change retroactively or prospectively, and is
for general information only. The discussion does not address all aspects of
federal income taxation and does not address any aspects of federal estate
taxation or of state, local or foreign tax laws. The discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder (including the fact that in the case of a Non-U.S. Holder that
is a partnership, the United States tax consequences of holding and disposing of
shares of Common Stock may be affected by certain determinations made at the
partner level). Accordingly, prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S.
income, estate and other tax consequences of holding and disposing of shares of
Common Stock.
Dividends. Dividends, if any (see "Dividend Policy"), paid to a Non-U.S.
Holder generally will be subject to United States withholding tax at a 30% rate
(or a lower rate as may be prescribed by an applicable tax treaty) unless the
dividends are effectively connected with a trade or business of the Non-U.S.
Holder within the United States. Dividends effectively connected with a trade or
business will generally not be subject to withholding (if the Non-U.S. Holder
complies with applicable United States Internal Revenue Service ("IRS")
reporting requirements) and generally will be subject to United States federal
income tax on a net income basis at regular graduated rates. In the case of a
Non-U.S. Holder which is a corporation, such effectively connected income also
may be subject to the branch profits tax (which is generally imposed on a
foreign corporation on the repatriation from the United States of effectively
connected earnings and profits) at a 30% rate or, if available, a lower treaty
rate. Under current U.S. Treasury regulations, dividends paid to an address
outside the United States in a foreign country are presumed to be paid to a
resident of such country for purposes of the withholding tax. Under current
interpretations of U.S. Treasury regulations, the same presumption applies to
determine the applicability of a reduced rate of withholding under a tax treaty.
Thus, non-U.S. holders receiving dividends at addresses outside the United
States are not currently required to file tax forms to obtain the benefit of an
applicable treaty rate. Under U.S. Treasury regulations that are proposed to be
effective for distributions after 1997 (the "Proposed Regulations"), to claim
the benefits of a tax treaty a non-U.S. holder of Common Stock would be required
to satisfy applicable certification requirements. In addition, under the
Proposed Regulations, in the case of Common Stock held by a foreign partnership,
(x) the certification requirement would generally be applied to the partners of
the partnership and (y) the partnership would be required to provide certain
information. The Proposed Regulations also provide look-through rules for tiered
partnerships as well as rules for payments to so-called "hybrid entities." It is
not certain whether, or in what form, the Proposed Regulations will be adopted
as final regulations.
Sale of Common Stock. Generally, a Non-U.S. Holder will not be subject to
United States federal income tax on any gain realized upon the disposition of
such holder's shares of Common Stock unless (i) the gain is effectively
connected with a trade or business carried on by the Non-U.S. Holder with the
United States (in which case the branch profits tax may also apply); (ii) the
Non-U.S. Holder is an individual who holds the shares of Common Stock as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition and to whom such gain is United States source;
(iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain former United States citizens or residents; or
(iv) the Company is or has been a "U.S. real property holding corporation" for
federal income tax purposes (which the Company does not believe that it is or is
likely to become) at any time during the five year period ending on the date of
disposition (or such shorter period that such shares were held).
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<PAGE> 66
BACKUP WITHHOLDING AND INFORMATION REPORTING
Dividends. The Company must report annually to the IRS and to each Non-U.S.
Holder the amount of dividends paid to and the tax withheld, if any, with
respect to such holder. These information reporting requirements apply
regardless of whether withholding was reduced by an applicable tax treaty.
Copies of these information returns may also be available under the provisions
of a specific treaty or agreement with the tax authorities in the country in
which the Non-U.S. Holder resides. Dividends that are subject to United States
withholding tax at the 30% statutory rate or at a reduced tax treaty rate and
dividends that are effectively connected with the conduct of a trade or business
in the United States (if certain certification and disclosure requirements are
met) are exempt from backup withholding of U.S. federal income tax. In general,
backup withholding at a rate of 31% and information reporting will apply to
other dividends paid on shares of Common Stock to holders that are not "exempt
recipients" and fail to provide in the manner required certain identifying
information (such as the holder's name, address and taxpayer identification
number). Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients.
Disposition of Common Stock. The payment of the proceeds from the
disposition of shares of Common Stock through the United States office of a
broker will be subject to information reporting and backup withholding unless
the holder, under penalties of perjury, certifies, among other things, its
status as a Non-U.S. Holder, or otherwise establishes an exemption. Generally,
the payment of the proceeds from the disposition of shares of Common Stock to or
through a non-U.S. office of a broker will not be subject to backup withholding
and will not be subject to information reporting. In the case of the payment of
proceeds from the disposition of shares of Common Stock through a non-U.S.
office of a broker that is a U.S. person or a "U.S.-related person," existing
regulations require information reporting (but not backup withholding) on the
payment unless the broker receives a statement from the owner, signed under
penalties of perjury, certifying, among other things, its status as a Non-U.S.
Holder, or the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder, the broker has no actual knowledge to the contrary and certain
other requirements are satisfied. For tax purpose, a "U.S.-related person" is
(i) a "controlled foreign corporation" for United States federal income tax
purposes or (ii) a foreign person 50% or more of whose gross income from all
sources for the three year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived form activities that are effectively connected with the
conduct of a United States trade or business.
Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS. Non-U.S. Holders
should consult their tax advisors regarding the application of these rules to
their particular situations, the availability of an exemption therefrom and the
procedures for obtaining such an exemption, if available.
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UNDERWRITERS
Under the terms and subject to the conditions in an Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, Deutsche Morgan Grenfell
Inc. and Robertson, Stephens & Company LLC are acting as U.S. Representatives,
and the International Underwriters named below for whom Morgan Stanley & Co.
International Limited, Morgan Grenfell & Co. Limited and Robertson, Stephens &
Company LLC are acting as International Representatives, have severally agreed
to purchase, and the Company has agreed to sell to them, severally, the
respective number of shares of Common Stock set forth opposite the names of such
Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Deutsche Morgan Grenfell Inc..............................
Robertson, Stephens & Company LLC.........................
---------
Subtotal...............................................
---------
International Underwriters:
Morgan Stanley & Co. International Limited................
Morgan Grenfell & Co. Limited.............................
Robertson, Stephens & Company LLC.........................
---------
Subtotal...............................................
---------
Total.............................................
=========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in
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its capacity as an International Underwriter apply only to it in its capacity as
an International Underwriter. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person), and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
Underwriters under the Underwriting Agreement are referred to herein as the
"Shares."
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
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exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other Underwriters or to certain dealers. After the
initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.
The Company and certain Selling Shareholders have granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of additional shares
of Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of shares of Common Stock set forth next to the names of all U.S.
Underwriters in the preceding table.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
The Common Stock has been approved for quotation, subject to official
notice of issuance, on the Nasdaq National Market under the symbol "JDEC."
Each of the Company and the directors, executive officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not
during the period ending 180 days after the date of this Prospectus (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer, lend or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise, except under certain limited
circumstances.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time. The Underwriters and dealers may engage
in passive market making transactions in the Common Stock in accordance with
Rule 103 of Regulation M promulgated by the SEC. In general, a passive market
maker may not bid for, or purchase, the Common Stock at a price that exceeds the
highest independent bid. In addition, the net daily purchases made by any
passive market maker generally may not exceed 30% of its average daily trading
volume in the Common Stock during a specified two month prior period, or 200
shares, whichever is greater. A passive market maker must identify passive
market making bids as such on the Nasdaq electronic inter-dealer
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reporting system. Passive market making may stabilize or maintain the market
price of the Common Stock above independent market levels. Underwriters and
dealers are not required to engage in passive market making and may end passive
market making activities at any time.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the U.S. Representatives. Among the factors to be
considered in determining the initial public offering price will be the future
prospects of the Company and its industry in general, sales, earnings and
certain other financial operating information of the Company in recent periods,
and the price-earnings ratios, price-sales ratios, market prices of securities
and certain financial and operating information of companies engaged in
activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this Preliminary Prospectus
is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain matters will be passed
upon for the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP, Menlo Park, California.
EXPERTS
The consolidated financial statements and financial statement schedule of
J.D. Edwards & Company as of October 31, 1995 and 1996 and for the years ended
October 31, 1994, 1995 and 1996, included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
CHANGE IN ACCOUNTANTS
Effective May 1995, Price Waterhouse LLP was engaged as the Company's
independent accountants and replaced Arthur Andersen LLP who were dismissed as
the Company's independent accountants. The decision to change independent
accountants was approved by the Company's Board of Directors. In the period from
November 1, 1991 to May 1995, Arthur Andersen LLP issued no audit report which
was qualified or modified as to uncertainty, audit scope or accounting
principles, no adverse opinions or disclaimers of opinion on any of the
Company's financial statements, and there were no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures. Arthur Andersen LLP has
not audited or reported on any of the financial statements or information
included in this Prospectus. Prior to May 1995, the Company had not consulted
with Price Waterhouse LLP on items which involved the Company's accounting
principles or the form of audit opinion to be issued on the Company's financial
statements.
67
<PAGE> 71
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement (of which this
Prospectus is a part and which term shall encompass any amendments thereto) on
Form S-1 pursuant to the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which are omitted as permitted by the rules and regulations of the SEC.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to any
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference.
Upon completion of this offering, the Company will be subject to the
information requirements of the Exchange Act, and, in accordance therewith, will
file reports and other information with the SEC. The Registration Statement, the
exhibits and schedules forming a part thereof and the report and other
information filed by the Company with the SEC in accordance with the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549; 7 World Trade Center, 13th Floor, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can also be obtained at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the SEC's home page on the Internet at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and to make available quarterly reports
containing unaudited summary financial information for the first three fiscal
quarters of each fiscal year.
68
<PAGE> 72
J.D. EDWARDS & COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit)................................................. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
J. D. Edwards & Company
The stock split and reincorporation described in Note 1 to the consolidated
financial statements has not been consummated at July 2, 1997. When they have
been consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in stockholders'
equity (deficit) and of cash flows present fairly, in all material
respects, the financial position of J.D. Edwards & Company at October 31,
1995 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended October 31, 1996, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
PRICE WATERHOUSE LLP
Boulder, Colorado
November 22, 1996
F-2
<PAGE> 74
J.D. EDWARDS & COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
OCTOBER 31, EQUITY
------------------- APRIL 30, APRIL 30,
1995 1996 1997 1997
-------- -------- ----------- --------------
(UNAUDITED) (NOTE 1)
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 34,897 $ 25,554 $ 29,907
Accounts receivable, net of allowance for
doubtful accounts of $5,700, $5,600 and
$6,700 at October 31, 1995 and 1996 and April
30, 1997 (unaudited), respectively........... 85,136 120,736 157,669
Prepaid and other current assets................ 4,192 13,172 5,302
Current portion of deferred income taxes........ 7,729 7,122 7,061
-------- -------- --------
Total current assets.................... 131,954 166,584 199,939
Property and equipment, net....................... 28,507 51,355 50,635
Software development costs, net................... 10,905 15,657 15,439
Non-current portion of deferred income taxes...... 1,819 4,282 4,911
Deposits and other assets......................... 2,006 5,908 5,497
-------- -------- --------
$175,191 $243,786 $276,421
======== ======== ========
LIABILITIES, MANDATORILY REDEEMABLE SHARES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 20,386 $ 32,321 $ 27,852
Unearned revenue and customer deposits.......... 35,206 44,327 75,040
Accrued liabilities............................. 54,629 69,367 68,300
-------- -------- --------
Total current liabilities............... 110,221 146,015 171,192
Unearned revenue, net of current portion, and
other noncurrent liabilities.................... 22,025 27,845 28,683
-------- -------- --------
Total liabilities....................... 132,246 173,860 199,875
-------- -------- --------
Commitments and contingencies (Notes 5 and 8)..... -- -- --
Mandatorily redeemable shares, at redemption
value........................................... 19,973 47,024 99,076 $ 5,500
-------- -------- -------- -------
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 5,000,000
shares authorized; none outstanding.......... -- -- -- --
Common stock, $.001 par value; 300,000,000
shares authorized and 88,581,500 shares
issued; 79,038,820 and 79,093,070 outstanding
as of October 31, 1995 and 1996,
respectively, and 79,128,420 (unaudited)
outstanding as of April 30, 1997 and pro
forma........................................ 89 89 89 89
Additional paid-in capital...................... 10,100 10,273 11,175 23,591
Retained earnings............................... 39,302 65,628 72,806 72,806
Treasury stock, at cost; 9,542,680, and
9,488,430, at October 31, 1995 and 1996,
respectively, and 9,453,080 (unaudited) at
April 30, 1997 and pro forma................. (6,517) (6,614) (6,590) (6,590)
Cumulative translation adjustments and other,
net.......................................... (29) 550 (934) (934)
Adjustment for mandatorily redeemable shares.... (19,973) (47,024) (99,076) (5,500)
-------- -------- -------- -------
Total stockholders' equity (deficit).... 22,972 22,902 (22,530) $83,462
-------- -------- -------- -------
$175,191 $243,786 $276,421
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 75
J.D. EDWARDS & COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees.............................. $107,561 $134,138 $180,366 $ 72,278 $ 92,063
Services.................................. 133,026 206,628 297,682 135,864 176,612
-------- -------- -------- -------- --------
Total revenue..................... 240,587 340,766 478,048 208,142 268,675
-------- -------- -------- -------- --------
Costs and expenses:
Cost of license fees...................... 12,832 18,461 27,443 12,855 17,084
Cost of services.......................... 87,826 128,144 184,846 84,989 109,306
Sales and marketing....................... 76,169 102,310 128,759 57,601 73,735
General and administrative................ 27,377 38,677 53,052 24,712 31,087
Research and development.................. 18,936 24,296 40,321 18,193 24,533
-------- -------- -------- -------- --------
Total costs and expenses.......... 223,140 311,888 434,421 198,350 255,745
-------- -------- -------- -------- --------
Operating income............................ 17,447 28,878 43,627 9,792 12,930
Other income (expense):
Interest income........................... 483 1,697 629 266 163
Interest expense.......................... (101) (576) (899) (347) (500)
Foreign currency losses and other, net.... (486) (411) (1,403) (134) (1,154)
-------- -------- -------- -------- --------
Income before income taxes.................. 17,343 29,588 41,954 9,577 11,439
Provision for income taxes................ 5,280 11,379 15,628 3,636 4,261
-------- -------- -------- -------- --------
Net income.................................. $ 12,063 $ 18,209 $ 26,326 $ 5,941 $ 7,178
======== ======== ======== ======== ========
Earnings per common share................... $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
======== ======== ======== ======== ========
Weighted average common shares
outstanding............................... 81,755 82,006 87,169 86,489 93,416
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 76
J.D. EDWARDS & COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
(INCLUDING ADJUSTMENT
MANDATORILY FOR
REDEEMABLE SHARES) ADDITIONAL TREASURY STOCK MANDATORILY
------------------- PAID-IN RETAINED ------------------- REDEEMABLE
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT OTHER SHARES
---------- ------ ---------- -------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1993.......... 88,581,500 $89 $ 6,713 $ 9,030 7,528,360 $ (276) $(1,301) $(12,441)
Purchase of common stock........... -- -- -- 568,610 (255) -- --
Shares issued to ESOP.............. -- 1,600 -- (608,230) 40 -- (1,640)
Increase in share redemption value
of mandatorily redeemable ESOP
shares........................... -- -- -- -- -- -- -- (209)
Net income......................... -- -- -- 12,063 -- -- -- --
Change in cumulative translation
adjustment and other, net........ -- -- -- -- -- -- 199 --
---------- --- ------- ------- --------- ------- ------- --------
Balance, October 31, 1994.......... 88,581,500 89 8,313 21,093 7,488,740 (491) (1,102) (14,290)
Purchase of common stock........... -- -- -- -- 2,706,690 (6,453) -- --
Shares issued to ESOP.............. -- -- 1,777 -- (647,570) 424 -- (2,201)
Increase in share redemption value
of mandatorily redeemable ESOP
shares........................... -- -- -- -- -- -- -- (3,682)
Purchase of founders' stock by
ESOP............................. -- -- -- -- -- -- -- 200
Net income......................... -- -- -- 18,209 -- -- -- --
Change in cumulative translation
adjustment and other, net........ -- -- 10 -- (5,180) 3 1,073 --
---------- --- ------- ------- --------- ------- ------- --------
Balance, October 31, 1995.......... 88,581,500 89 10,100 39,302 9,542,680 (6,517) (29) (19,973)
Purchase of common stock........... -- -- -- -- 25,200 (152) -- 152
Increase in share redemption value
of mandatorily redeemable ESOP
shares........................... -- -- -- -- -- -- -- (23,903)
Increase in founders' stock
purchase obligation.............. -- -- -- -- -- -- -- (3,300)
Stock option exercises............. -- -- 173 -- (79,450) 55 -- --
Net income......................... -- -- -- 26,326 -- -- -- --
Change in cumulative translation
adjustment and other, net........ -- -- -- -- -- -- 579 --
---------- --- ------- ------- --------- ------- ------- --------
Balance, October 31, 1996.......... 88,581,500 89 10,273 65,628 9,488,430 (6,614) 550 (47,024)
Increase in share redemption value
of mandatorily redeemable ESOP
shares (unaudited)............... -- -- -- -- -- -- -- (52,052)
Stock option exercises
(unaudited)...................... -- -- 97 -- (35,350) 24 -- --
Net income (unaudited)............. -- -- -- 7,178 -- -- -- --
Change in cumulative translation
adjustment and other, net
(unaudited)...................... -- -- 805 -- -- -- (1,484) --
---------- --- ------- ------- --------- ------- ------- --------
Balance, April 30, 1997
(unaudited)...................... 88,581,500 $89 $11,175 $72,806 9,453,080 $(6,590) $ (934) $(99,076)
========== === ======= ======= ========= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 77
J.D. EDWARDS & COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................. $ 12,063 $ 18,209 $ 26,326 $ 5,941 $ 7,178
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................. 6,143 7,978 13,166 6,355 7,378
Amortization of software development
costs.................................. 2,139 2,193 2,568 1,266 2,617
Provision for deferred income taxes....... (4,840) (3,588) (1,854) 888 568
Other..................................... 38 1,195 2,216 673 (37)
Changes in operating assets and liabilities:
Accounts receivable, net.................. (15,228) (21,365) (35,975) (21,042) (38,814)
Prepaid and other current assets.......... (1,307) 2,886 (2,065) (6,304) 599
Accounts payable.......................... 3,917 5,480 12,138 2,923 (3,983)
Unearned revenue and customer deposits.... 11,142 13,313 13,655 33,320 32,874
Accrued liabilities....................... 13,170 15,039 12,185 (2,022) (903)
-------- -------- -------- -------- --------
Net cash from operating
activities...................... 27,237 41,340 42,360 21,998 7,477
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Purchase of property and equipment.......... (8,837) (19,454) (41,135) (29,026) (8,863)
Proceeds from sale of assets................ -- -- -- -- 8,557
Capitalized software development costs...... (2,103) (9,763) (7,320) (3,795) (2,399)
Other....................................... -- -- (2,695) (2,695) --
-------- -------- -------- -------- --------
Net cash used for investing
activities...................... (10,940) (29,217) (51,150) (35,516) (2,705)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from bank line of credit........... 3,000 -- 85,100 45,950 81,950
Repayment of bank line of credit............ (3,000) -- (85,100) (43,450) (81,950)
Purchase of common stock.................... (136) (6,452) (152) -- --
Other....................................... (205) 514 83 (136) 120
-------- -------- -------- -------- --------
Net cash provided by (used for)
financing activities............ (341) (5,938) (69) 2,364 120
-------- -------- -------- -------- --------
Effect of exchange rate changes on cash..... 23 97 (484) (754) (539)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................... 15,979 6,282 (9,343) (11,908) 4,353
Cash and cash equivalents at beginning of
period.................................... 12,636 28,615 34,897 34,897 25,554
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period.................................... $ 28,615 $ 34,897 $ 25,554 $ 22,989 $ 29,907
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF OTHER CASH AND
NON-CASH INVESTING AND FINANCING
TRANSACTIONS
Interest paid............................. $ 94 $ 576 $ 899 $ 347 $ 500
Income taxes paid......................... 5,532 13,452 8,061 1,924 10,151
ESOP contribution funded with common
stock.................................. 1,640 2,201 -- -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 78
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operation
J. D. Edwards & Company and Subsidiaries (the "Company") develops, markets
and supports highly functional Enterprise Resource Planning ("ERP") software
solutions that operate on multiple computing platforms and are designed to
accelerate customers' time to benefit, lower customers' cost of ownership and
reduce information systems risks arising from changes in technology and business
practices. The Company's integrated software application suites support
manufacturing, finance, distribution/logistics and human resources operations
for multi-site and multinational organizations. The Company provides
implementation, training and support services designed to enable customers to
rapidly achieve the benefits of the Company's ERP solutions. The Company has
developed and marketed ERP solutions for over 20 years, principally for
operation on AS/400 and other IBM mid-range systems and, more recently, on
leading UNIX and Windows NT servers through Windows- and Internet
browser-enabled desktop clients. The Company operates primarily in the United
States, Canada, Europe, Asia, Latin America and Africa.
Principles of Consolidation and Basis of Presentation
The accounts of the Company have been consolidated. All intercompany
accounts and transactions have been eliminated. The consolidated financial
statements are stated in United States dollars and are prepared under United
States generally accepted accounting principles.
Reincorporation and Stock Split
The Company intends to reincorporate in Delaware prior to completion of its
initial public offering. In connection therewith, the Company intends to effect
a 70-for-one stock split with 300.0 million authorized shares of $.001 par value
common stock and 5.0 million authorized shares of $.001 par value preferred
stock. All references in the consolidated financial statements to shares, share
prices, and per share amounts have been adjusted retroactively for all periods
presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position 91-1, "Software Revenue Recognition." The Company licenses
software under non-cancelable license agreements and provides related services,
including support, training, consulting and implementation. Training, consulting
and implementation services are not essential to the functionality of the
Company's software products, are separately priced and are available from a
number of suppliers. Accordingly, revenue from these services is recorded
separately from the license fee. License fee revenue is recognized when a
non-cancelable license agreement has been signed, the product has been
delivered, collection is probable and all significant contractual obligations
relating to this license have been satisfied. Revenue on all software license
transactions in which there are significant outstanding obligations is deferred
and recognized once such obligations are fulfilled. Typically, the Company's
software licenses do not include significant post-delivery obligations to be
fulfilled by the Company and payments are due within a twelve-month period from
date of delivery. Where software license contracts call for payment terms in
excess of twelve months from date
F-7
<PAGE> 79
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of delivery, revenue is recognized as payments become due and all other
conditions for revenue recognition have been satisfied. Revenue from training,
consulting and implementation services is recognized as services are performed.
Revenue from agreements for supporting and providing periodic upgrades to the
licensed software is recorded as deferred revenue and is recognized ratably over
the support service period, and includes a portion of the related license fee
equal to the fair value of any bundled support services. The Company does not
require collateral for its receivables and reserves are maintained for potential
losses.
Software Research and Development Costs
The Company capitalizes internally developed software costs in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed."
Capitalization of development costs of software products begins once the
technological feasibility of the product is established. Based on the Company's
product development process, technological feasibility is established upon
completion of a detailed program design. Capitalization ceases when such
software is ready for general release, at which time amortization of the
capitalized costs begins.
Amortization of capitalized internally developed software costs is computed
as the greater of: (a) the amount determined by ratio of the product's current
revenue to its total expected future revenue or (b) the straight-line method
over the product's estimated useful life of three years. During all periods
presented herein, the Company has used the straight-line method to amortize such
capitalized costs.
Research and development costs relating principally to the design and
development of products (exclusive of costs capitalized under SFAS No. 86) are
expensed as incurred. The cost of developing routine enhancements are expensed
as research and development costs as incurred because of the short time between
the determination of technological feasibility and the date of general release
of related products.
Foreign Currency Translation
The functional currency of each subsidiary is the local currency.
Translation of balance sheet amounts to U.S. dollars is based on exchange rates
as of each balance sheet date. Income statement and cash flow statement amounts
are translated at the average exchange rates for the period. Cumulative currency
translation adjustments, net of related deferred taxes, are presented in a
separate component of stockholders' equity (deficit). Transaction gains and
losses and unrealized gains and losses on short-term intercompany receivables
and payables are included in income as incurred.
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. All cash equivalents are
carried at cost, which approximates fair value.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash investments and trade
receivables. The Company has cash investment policies that limit investments to
investment grade securities. The Company believes the risk with respect to trade
receivables is mitigated, to some extent, by the fact that the Company's
customer base is widespread geographically and is highly diversified. No single
customer accounted for ten percent or more of revenue for fiscal 1994, 1995 or
1996 or for the six-month period ended April 30, 1997, or of accounts receivable
at October 31, 1995 or 1996 or at April 30, 1997.
F-8
<PAGE> 80
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash
and accounts receivable and payable, approximate their fair values.
Property and Equipment
Property and equipment are stated at cost and are depreciated over their
estimated useful lives using the straight-line method. The estimated useful
lives are as follows:
<TABLE>
<S> <C>
Furniture and fixtures................................... 5-7 years
Computer equipment....................................... 3 years
</TABLE>
Stock-based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in
October 1995. This accounting standard permits the use of either a fair value
based method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") to account for
stock-based compensation arrangements. Companies that elect to use the method
provided in APB No. 25 are required to disclose the pro forma net income and
earnings per share that would have resulted from the use of the fair value based
method. The Company has elected to continue to determine the value of
stock-based compensation arrangements under the provisions of APB No. 25, and
accordingly, it has included the pro forma disclosures required under SFAS No.
123 in Note 7.
Income Taxes
Deferred tax assets and liabilities are recorded for the estimated future
tax effects of temporary differences between the tax bases of assets and
liabilities and amounts reported in the accompanying consolidated balance
sheets, as well as operating loss and tax credit carryforwards. Deferred tax
assets may be reduced by a valuation allowance if current evidence indicates
that it is considered likely that these benefits will not be realized.
Earnings Per Common Share
Earnings per common share ("EPS") are computed using the weighted average
number of common and common equivalent shares outstanding during the period.
Common equivalent shares consist of stock options, and the weighted average
shares outstanding for each period have been adjusted to include all common
shares issuable under stock options using the treasury stock method. Pursuant to
the Securities and Exchange Commission Staff Accounting Bulletin No. 83, such
computations include all common and common equivalent shares issued within the
twelve months preceding the initial filing date of the Company's Registration
Statement as if they were outstanding for all periods presented, using the
treasury stock method and an assumed initial public offering price. All shares
owned by the J.D. Edwards & Company Employee Stock Ownership Plan (the "ESOP")
are included in the weighted average common shares outstanding.
F-9
<PAGE> 81
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS No. 128, "Earnings per Share," was issued in February of 1997. The
Company will be required to apply this statement in its consolidated financial
statements for fiscal 1998. This pronouncement establishes new standards for
computing and presenting EPS on a basis that is more comparable to international
standards and provides for the presentation of basic and diluted EPS, replacing
the currently required primary and fully-diluted EPS. The basic EPS will be
computed by dividing net income by the weighted average number of shares
outstanding during the period. Diluted EPS will be computed in a manner similar
to the current method for calculating fully-diluted EPS. Prior period EPS will
be restated to conform with the new statement. The pro forma effect of applying
SFAS No. 128 on the Company's historical consolidated financial statements is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
EPS AS REPORTED
Primary EPS..................................... $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
Weighted average common shares outstanding...... 81,755 82,006 87,169 86,489 93,416
PRO FORMA EPS
Basic EPS Computation:
Basic EPS.................................... $ 0.15 $ 0.23 $ 0.33 $ 0.08 $ 0.09
Weighted average common shares outstanding... 80,872 79,139 79,044 79,039 79,102
Diluted EPS Computation:
Diluted EPS.................................. $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
Weighted average common shares outstanding
assuming dilution.......................... 81,755 82,006 87,169 86,489 93,416
</TABLE>
Unaudited Pro Forma Stockholders' Equity
The Board of Directors has authorized management of the Company to file a
registration statement with the Securities and Exchange Commission ("SEC")
permitting the Company to sell shares of its common stock to the public. If the
Company's initial public offering ("IPO") is consummated under the terms
presently anticipated, the mandatory redemption feature of the Mandatorily
Redeemable ESOP Shares will be removed and restrictions on certain of the
Company's outstanding Common Stock will lapse, resulting in income tax benefits
to the Company. Such benefits will arise from tax deductions available to the
Company upon the lapse of the stock restrictions. Because these tax deductions
did not result from any corresponding charges to income for financial statement
purposes, the tax benefit will be credited to additional paid-in capital in
accordance with SFAS No. 109, "Accounting for Income Taxes." Unaudited pro forma
stockholders' equity as of April 30, 1997, as set forth on the accompanying
consolidated balance sheets, is adjusted for the aforementioned events based on
an assumed public offering price.
Interim Financial Statements
The accompanying interim consolidated financial statements as of April 30,
1997 and for the six-month periods ended April 30, 1996 and 1997 are unaudited.
In the opinion of the Company, the interim consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements and reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial position of the Company
as of April 30, 1997, and the results of its operations and its cash flows for
the six-month periods ended April 30, 1996 and 1997.
F-10
<PAGE> 82
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------- APRIL 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT:
Furniture and fixtures.......................... $ 24,739 $ 34,519 $ 33,400
Computer equipment.............................. 22,589 30,469 36,978
Land............................................ -- 16,321 16,418
-------- -------- --------
47,328 81,309 86,796
Less: accumulated depreciation.................. (18,821) (29,954) (36,161)
-------- -------- --------
$ 28,507 $ 51,355 $ 50,635
======== ======== ========
SOFTWARE DEVELOPMENT COSTS:
Software development costs...................... $ 17,072 $ 24,392 $ 26,791
Less: accumulated amortization.................. (6,167) (8,735) (11,352)
-------- -------- --------
$ 10,905 $ 15,657 $ 15,439
======== ======== ========
ACCRUED LIABILITIES:
Accrued compensation and related expenses....... $ 34,893 $ 36,462 $ 41,992
Income taxes payable............................ 5,044 13,869 7,108
Other accrued expenses.......................... 14,692 19,036 19,200
-------- -------- --------
$ 54,629 $ 69,367 $ 68,300
======== ======== ========
</TABLE>
(3) BANK LINE OF CREDIT
The Company has a $50 million, unsecured, revolving line of credit (the
"Revolver") with a syndication of banks. The Revolver expires on July 31, 1999.
Borrowings under the Revolver are for working capital requirements and other
general corporate purposes and bear interest up to the bank's prime rate plus
.50% or LIBOR plus 1.75% at the option of the Company. The credit agreement
associated with the Revolver requires that the Company remain in compliance with
certain affirmative and negative covenants and representations and warranties.
The financial covenants include liquidity, leverage, and coverage ratios,
capital expenditure limitations and profitability requirements. Non-financial
covenants include, but are not limited to, certain restrictions on additional
indebtedness, contingent liabilities, dividends, mergers and acquisitions and
investments. At October 31, 1995 and 1996 and April 30, 1997 (unaudited), the
Company was in full compliance with all covenants under the credit agreement in
place at the time. There were no borrowings outstanding under any credit
agreement at October 31, 1995 and 1996 and April 30, 1997 (unaudited).
(4) ESOP AND ESOP MANDATORILY REDEEMABLE SHARES
Effective January 1, 1989, the Company established the ESOP, subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). The
Company makes discretionary contributions of cash and/or shares of common stock
of the Company to the ESOP trust fund. The trust fund is maintained in the form
of individual participant accounts that vest over a seven-year period.
Allocations to these accounts are made on the basis of each participant's
proportionate share of total compensation paid by the Company to all ESOP
participants. At the discretion of the Company, unvested shares forfeited by a
terminated participant may be used to offset future Company contributions to the
ESOP or may be reallocated to the remaining participants of the ESOP. With
certain limitations, Company employees in the United States who are at least 21
years old and have completed one year of service are eligible ESOP participants.
Upon termination of employment, a participant may elect to receive a
distribution of Company common stock for shares vested or require the Company to
purchase such vested shares. In the event the Company is
F-11
<PAGE> 83
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
required to purchase such shares from a terminating employee, the Company will
purchase the vested shares at the appraised value for the shares. The Company
engages an independent appraiser to perform an annual valuation of the Company's
common stock for this purpose.
The ESOP provides that once the Company's common stock is publicly traded,
a terminating employee will only be allowed to receive his or her vested shares
and will no longer be able to require the Company to purchase such vested
shares. In accordance with the requirements of the SEC, which provide that the
total redemption value of the ESOP shares be excluded from stockholders' equity,
the redemption value of shares held by the ESOP, based upon the last annual
valuation, has been reflected in the accompanying balance sheets as mandatorily
redeemable shares with the offsetting adjustments included as a reduction of
stockholders' equity. Upon completion of the IPO, the Company's obligation to
purchase the ESOP shares will terminate and the amount related to the
mandatorily redeemable shares will be reclassified to stockholders' equity.
Accordingly, the pro forma balance sheet presentation gives effect to the
removal of the option of terminating employees requiring the Company to purchase
such vested shares.
Compensation cost is measured as the estimated fair value of shares
contributed to or committed to be contributed to the ESOP plus the cash
contributed to or committed to be contributed to the ESOP. For the years ended
October 31, 1994, 1995 and 1996, the Company recognized as compensation cost
$3.0 million, $4.5 million and $5.9 million, respectively. For the six months
ended April 30, 1997, the Company recognized $3.5 million as compensation costs
(unaudited). The ESOP owned 5,231,450, 6,718,040, and 8,706,040 (unaudited) at
October 31, 1995 and 1996 and April 30, 1997, respectively. All shares owned by
the ESOP have been allocated to participants.
(5) FOUNDERS' STOCK
The founders of the Company currently own or control a majority of the
Company's issued and outstanding common stock. The Company and the founders have
a shareholder agreement (the "Shareholder Agreement") whereby the Company has
agreed to purchase a limited amount of the founders' stock in the event of their
deaths. This purchase obligation is limited to proceeds of life insurance
policies owned by the Company on the lives of the founders. Under the
Shareholder Agreement, a founder may also require the Company to purchase a
limited number of shares up to an aggregate amount of $2.2 million at October
31, 1995 and $5.5 million at October 31, 1996 and April 30, 1997 (unaudited).
This purchase obligation is at a price equal to 40% of fair value, as determined
by the Company's Board of Directors. Additionally, if a founder proposes to sell
any of his shares, he must first offer the shares to the Company and the
Company, at its option, may purchase such shares at the lesser of fair value or
the price offered by a third party. The Company may allow the ESOP to purchase
any shares sold pursuant to the Shareholder Agreement.
In accordance with the requirements of the SEC, the share redemption
obligations were reflected in the accompanying balance sheets as mandatorily
redeemable shares with the offsetting adjustment included as a reduction of
stockholders' equity. The Company and the founders intend to amend the current
Shareholder Agreement in July 1997. This amended agreement is expected to
eliminate any Company share repurchase obligations upon the completion of the
IPO. Upon the completion of both the amendment of the Shareholder Agreement and
the IPO, the Company's purchase obligation will be eliminated and the
mandatorily redeemable amount will be reclassified to stockholders' equity.
During the year ended October 31, 1995, the three founders sold 2.0 million
shares of common stock to the Company for $5.0 million under the terms of the
Shareholder Agreement. These shares have been retained by the Company as
treasury shares.
Additionally, during the year ended October 31, 1995 one of the founders
exercised his option under the Shareholder Agreement to require the Company to
purchase 176,260 shares of common stock. The Company allowed such shares to be
purchased by the ESOP for $200,000.
F-12
<PAGE> 84
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the year ended October 31, 1996, the Company was notified of a
contractual arrangement whereby two founders would sell 3.5 million shares of
stock to certain identified third parties. Under the terms of the Shareholder
Agreement, such stock was required to be offered to the Company at the pending
sales price prior to the sale to the third parties. The Company assigned its
right-to-purchase these shares to the ESOP, which purchased the 3.5 million
shares of common stock from the founders for $10.4 million.
During the six months ended April 30, 1997, one of the founders sold 55,440
shares of common stock to certain members of the Board of Directors and one
employee. The Company recognized as compensation expense $223,000 which
represented the difference between the sales price and the estimated fair value
of the Company's common stock on the date of the sale.
(6) INCOME TAXES
Income before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic.................................. $18,895 $27,852 $24,770 $1,971 $ 4,102
Foreign................................... (1,552) 1,736 17,184 7,606 7,337
------- ------- ------- ------ -------
$17,343 $29,588 $41,954 $9,577 $11,439
======= ======= ======= ====== =======
</TABLE>
Components of the provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED OCTOBER 31, ENDED APRIL 30,
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current provision:
U.S. Federal............................. $ 6,226 $ 7,829 $ 8,737 $ 346 $1,104
State.................................... 1,591 2,044 1,259 78 248
Foreign.................................. 2,303 5,094 7,486 2,324 2,341
------- ------- ------- ------ ------
10,120 14,967 17,482 2,748 3,693
------- ------- ------- ------ ------
Deferred provision (benefit):
U.S. Federal............................. (2,970) (1,134) (4,951) 837 696
State.................................... (608) (425) -- -- 48
Foreign.................................. (1,262) (2,029) 3,097 51 (176)
------- ------- ------- ------ ------
(4,840) (3,588) (1,854) 888 568
------- ------- ------- ------ ------
Total provision for income
taxes.......................... $ 5,280 $11,379 $15,628 $3,636 $4,261
======= ======= ======= ====== ======
</TABLE>
F-13
<PAGE> 85
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions for income taxes are different from the amounts computed by
applying the federal statutory rate to income before income taxes. The amounts
are reconciled as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory rate............................ $ 6,070 $10,356 $14,684 $3,352 $ 4,004
Reversal of valuation allowance for
foreign subsidiaries' loss
carryforwards........................... (2,352) -- -- -- --
Foreign income taxed at higher rates...... 1,646 1,887 3,018 (174) 3,284
Non-deductible expenses................... 662 1,007 1,676 385 433
State income taxes, net of federal
benefit................................. 612 1,052 818 51 192
Income tax credits........................ (1,593) (2,774) (3,844) -- (4,017)
Other..................................... 235 (149) (724) 22 365
------- ------- ------- ------ -------
Provision for income taxes................ $ 5,280 $11,379 $15,628 $3,636 $ 4,261
======= ======= ======= ====== =======
</TABLE>
Deferred tax assets and liabilities are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
------------------ APRIL 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Revenue deferred for book purposes................ $ 5,059 $ 6,743 $ 7,755
Foreign tax credit carryforwards.................. -- 4,639 3,843
Allowance for doubtful accounts................... 2,032 1,677 1,856
Vacation and other accruals....................... 1,796 2,412 3,002
Unrealized currency losses........................ 797 112 (17)
Foreign subsidiaries' loss carryforwards.......... 2,546 -- --
Foreign income currently subject to U.S. tax...... -- 1,986 1,986
Other............................................. 2,308 1,216 928
------- ------- -------
Total deferred tax assets................. 14,538 18,785 19,353
------- ------- -------
Deferred tax liabilities:
Capitalized software development costs............ (4,185) (5,503) (5,423)
Previously taxed revenue.......................... -- (1,546) (1,546)
Other............................................. (805) (332) (412)
------- ------- -------
Total deferred tax liabilities............ (4,990) (7,381) (7,381)
------- ------- -------
Net deferred tax asset.............................. $ 9,548 $11,404 $11,972
======= ======= =======
Current portion of deferred taxes................... $ 7,729 $ 7,122 $ 7,061
Non-current portion of deferred taxes............... 1,819 4,282 4,911
------- ------- -------
Net deferred tax asset.............................. $ 9,548 $11,404 $11,972
======= ======= =======
</TABLE>
The Company has available approximately $3.8 million of foreign tax credit
carryforwards generated by certain foreign subsidiaries, which will expire in
2001.
At October 31, 1996 and April 30, 1997, the unremitted earnings of the
foreign subsidiaries were $7.5 million and $3.8 million (unaudited),
respectively. The unrecognized deferred tax liability for such earnings is
immaterial.
F-14
<PAGE> 86
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) EMPLOYEE RETIREMENT SAVINGS PLAN AND STOCK OPTIONS
Employee Retirement Savings Plan
In 1988, the Company established the J.D. Edwards & Company Retirement
Savings Plan (the "401(k) Plan") subject to the provisions of ERISA. The 401(k)
Plan is an Internal Revenue Code Section 401(k) plan, commonly known as a salary
reduction retirement plan. Employees with a minimum of six months of service are
eligible to participate in the 401(k) Plan.
The Company generally matches 50% of an employee's eligible contributions
to the 401(k) Plan, up to a maximum match of 2% of eligible compensation. Both
matching and discretionary contributions are determined in connection with the
determination of contributions to the ESOP. The Company's matching contributions
are fully vested to all participants completing 1,000 hours of service and
employed by the Company on the last day of the calendar year. Discretionary
contributions are subject to a vesting schedule based on number of years of
service with the Company. The Company recognized expense for matching
contributions of $1.1 million, $1.8 million, $200,000 and $150,000 (unaudited)
for fiscal 1994, 1995 and 1996, and the six months ended April 30, 1997,
respectively. There have been no discretionary contributions made by the Company
since the inception of the 401(k) Plan.
Stock Options
In November 1992, the Company established an Incentive Stock Option Plan
and a Nonqualified Stock Option Plan (the "Option Plans"). A total of 35,000,000
shares of common stock are authorized for issuance under the Option Plans, of
which 14,980,490 shares and 12,679,590 (unaudited) shares are available for
grant as of October 31, 1996 and April 30, 1997, respectively. Options vest over
a period of time ranging from four to five years with a term of not more than
ten years.
The Company records compensation expense related to stock options using the
intrinsic value based method and includes a pro forma disclosure in the
footnotes for compensation value measured using the fair value accounting
treatment. Generally, stock options are granted with an exercise price equal to
the fair value at the date of grant, and accordingly no compensation expense was
recognized during fiscal 1994, 1995, or 1996. During the six months ended April
30, 1997, the Company recorded $581,000 (unaudited) as deferred compensation
representing the excess of the estimated fair value of the Company's common
stock over the exercise price of such options. Such deferred compensation cost
is being amortized over the five-year vesting period of the options. Of the
total amount, $60,000 (unaudited) was recognized during the six months ended
April 30, 1997.
For the fair value disclosure below, compensation value is estimated for
each option grant under the Option Plans on the date of grant using a minimum
value option pricing model with the following assumptions used for grants in
fiscal 1996 and the six months ended April 30, 1997, respectively: risk-free
rates ranging from 5.1% to 5.8% in fiscal 1996 and 5.8% to 6.1% in the six
months ended April 30, 1997 and corresponding to government securities with
original maturities similar to the expected option lives; expected dividend
yield of 0% for both periods; and expected lives of one year beyond vest dates
for both periods.
F-15
<PAGE> 87
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on calculations using the minimum value option-pricing model, the
weighted-average grant date fair value of options was $1.12 and $2.34
(unaudited), in fiscal 1996 and the six months ended April 30, 1997,
respectively. The pro forma impact on the Company's net income and net income
per share had compensation cost been recorded as determined under the fair value
method is shown below (in thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
OCTOBER 31, 1996 APRIL 30, 1997
---------------- ----------------
<S> <C> <C>
Net income:
As reported........................... $26,326 $7,178
Pro forma............................. 24,735 5,467
Net income per share:
As reported........................... 0.30 0.08
Pro forma............................. 0.28 0.06
</TABLE>
The status of total stock options outstanding and exercisable under the
Option Plans as of April 30, 1997 follows:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
- ------------------------------------------------------------------ ----------------------------
WEIGHTED AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OF SHARES LIFE (YEARS) EXERCISE PRICE OF SHARES EXERCISE PRICE
- --------------- ---------- ---------------- ---------------- --------- ----------------
<C> <C> <C> <C> <C> <C>
$2.66-2.84 10,870,720 6.51 $ 2.70 7,094,360 $ 2.70
3.44 3,761,660 7.79 3.44 1,474,900 3.44
6.24 5,144,300 8.76 6.24 1,016,400 6.24
10.71 2,423,750 9.58 10.71 -- 10.71
---------- ---------
2.66-10.71 22,200,430 7.59 4.52 9,585,660 3.19
========== =========
</TABLE>
F-16
<PAGE> 88
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Activity of the Option Plans is summarized in the following table:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE OPTIONS EXERCISE
SHARES PRICE EXERCISABLE PRICE
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
Options outstanding, October 31, 1993................. 3,675,210 $ 2.66 -- $--
Options granted..................................... 8,065,260 2.72
Less: options forfeited............................. (343,350) 2.66
----------
Options outstanding, October 31, 1994................. 11,397,120 2.70 728,910 2.66
Options granted..................................... 4,011,000 3.44
Less: options forfeited............................. (262,570) 2.86
Less: options exercised............................. (5,180) 2.69
----------
Options outstanding, October 31, 1995................. 15,140,370 2.89 3,046,750 2.70
Options granted..................................... 5,572,560 6.18
Less: options forfeited............................. (698,600) 4.01
Less: options exercised............................. (79,450) 2.87
----------
Options outstanding, October 31, 1996................. 19,934,880 3.77 5,895,960 2.79
Options granted (unaudited)......................... 2,439,500 10.71
Less: options forfeited (unaudited)................. (138,600) 5.95
Less: options exercised (unaudited)................. (35,350) 3.45
----------
Options outstanding, April 30, 1997 (unaudited)....... 22,200,430 4.52 9,585,660 3.19
==========
</TABLE>
(8) COMMITMENTS AND CONTINGENCIES
Leases
The Company leases equipment and office space under various long-term
non-cancelable operating leases. Rent expense on these leases for fiscal 1994,
1995 and 1996 and the six months ended April 30, 1997 was $13.3 million, $14.7
million and $21.6 million, and $12.8 million (unaudited), respectively.
Minimum future non-cancelable commitments under these leases as of April
30, 1997 (unaudited), are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL
YEAR AMOUNT
------ --------
<S> <C>
1997........................................................ $ 13,274
1998........................................................ 23,379
1999........................................................ 15,305
2000........................................................ 11,715
2001........................................................ 9,495
Thereafter.................................................. 41,738
--------
$114,906
========
</TABLE>
Legal Matters
The Company is involved in certain disputes and legal actions as a result
of its normal operations. In management's opinion, none of these disputes and
legal actions are expected to have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
F-17
<PAGE> 89
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) GEOGRAPHICAL INFORMATION
The following is an analysis of the Company's operations by geographical
region (in thousands):
<TABLE>
<CAPTION>
ASIA,
EUROPE, LATIN
MIDDLE EAST AMERICA
DOMESTIC AND AFRICA AND CANADA TOTAL
-------- ----------- ---------- --------
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1994
Total revenue...................................... $155,068 $51,442 $34,077 $240,587
Operating income................................... 5,670 1,744 10,033 17,447
Total assets....................................... 72,732 25,809 28,590 127,131
YEAR ENDED OCTOBER 31, 1995
Total revenue...................................... 215,201 77,853 47,712 340,766
Operating income................................... 24,916 1,004 2,958 28,878
Total assets....................................... 108,817 43,176 23,198 175,191
YEAR ENDED OCTOBER 31, 1996
Total revenue...................................... 311,238 99,021 67,789 478,048
Operating income................................... 22,307 14,123 7,197 43,627
Total assets....................................... 199,489 23,354 20,943 243,786
SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
Total revenue...................................... 168,750 52,906 47,019 268,675
Operating income................................... 5,249 4,575 3,106 12,930
Total assets....................................... 231,626 22,748 22,047 276,421
</TABLE>
Total revenue for each geographic region represents revenue from
unaffiliated customers only. Operating income includes intercompany royalty and
cost allocation arrangements that were in effect for each year. Total revenue
shown above for the Company's foreign regions includes software that was shipped
from the United States. The total amount of these export sales was $22.2
million, $30.5 million, $36.9 million and $16.8 million (unaudited) for Europe,
Middle East, and Africa and $24.4 million, $23.5 million, $27.2 million and
$23.2 million (unaudited) for Asia, Latin America, and Canada for fiscal 1994,
1995, 1996 and the six months ended April 30, 1997, respectively.
(10) SUBSEQUENT EVENTS (UNAUDITED)
The Board of Directors and stockholders are expected to approve the
Company's 1997 Equity Incentive Plan (the "1997 Plan") and 1997 Employee Stock
Purchase Plan (the "Purchase Plan") during the last quarter of fiscal 1997.
The 1997 Plan is expected to provide for the granting to employees,
including officers and directors, of incentive stock options, nonstatutory stock
options, stock purchase rights and long-term performance awards. A total of 10.0
million shares of common stock is expected to be reserved for issuance under the
1997 Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code is expected to permit eligible employees to purchase
common stock through payroll deductions. The price of common stock to be
purchased will be 85% of the lower of the fair market value of the common stock
on the first or last day of each six month purchase period. The Company is
expected to reserve a total of 2.0 million shares of common stock for issuance
under the Purchase Plan.
F-18
<PAGE> 90
J.D. EDWARDS & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The Company's quarterly financial information for fiscal 1995 and 1996, and
the first six months of fiscal 1997 is as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1995:
Total revenue........................... $ 64,577 $ 78,746 $ 90,501 $106,942
Less: costs and expenses.............. 63,386 74,166 83,001 91,335
-------- -------- -------- --------
Operating income........................ 1,191 4,580 7,500 15,607
-------- -------- -------- --------
Income before income taxes.............. 1,788 4,345 8,455 15,000
Net income.............................. 1,100 2,674 5,204 9,231
Earnings per common share............... $ 0.01 $ 0.03 $ 0.06 $ 0.11
YEAR ENDED OCTOBER 31, 1996:
Total revenue........................... $ 97,932 $110,210 $115,641 $154,265
Less: costs and expenses.............. 94,701 103,649 110,404 125,667
-------- -------- -------- --------
Operating income........................ 3,231 6,561 5,237 28,598
-------- -------- -------- --------
Income before income taxes.............. 3,645 5,932 4,410 27,967
Net income.............................. 2,275 3,666 2,731 17,654
Earnings per common share............... $ 0.03 $ 0.04 $ 0.03 $ 0.20
SIX MONTHS ENDED APRIL 30, 1997:
Total revenue........................... $122,821 $145,854
Less: costs and expenses.............. 118,811 136,934
-------- --------
Operating income........................ 4,010 8,920
-------- --------
Income before income taxes.............. 3,697 7,742
Net income.............................. 2,329 4,849
Earnings per common share............... $ 0.03 $ 0.05
</TABLE>
F-19
<PAGE> 91
[J.D. EDWARDS LOGO]
<PAGE> 92
Appendix A--Description of Graphics
Gatefold
The graphic heading starts with the J.D. Edwards logo, then reads
"Software and Service Solutions for a Changing World." In the center of the
gatefold there is a box with the following lead-in text: "The J.D. Edwards
corporate culture relies on three fundamental tenets -- Solutions,
Relationships, and Value -- to ensure the Company retains a customer-centric,
business oriented focus." Beneath the lead-in text are the following three
bullet points: (1) "Solutions -- J.D. Edwards provides customers with complete
enterprise solutions -- functionally rich software and the services needed to
realize benefits quickly and continuously."; (2) "Relationships -- An emphasis
on customer satisfaction combined with a program of continual product
enhancements provide the foundation for long-term relationships."; (3) "Value
- -- J.D. Edwards offers better value up front with a streamlined implementation
methodology and over time through flexible, adaptable technology." Four arrows
emanate from the corners of this box, directing the reader to four separate
text and graphic sub-sections.
The upper left hand subsection carries the graphic heading
"Comprehensive Family of ERP Software Solutions." Beneath this heading is a
graphic depicting three cresting waves, each progressively higher, beneath
which are two captions: "WorldSoftware" and "OneWorld". Above the lowest wave
is a sub-heading "Host-centric," and the following bullet points: (1) "high
reliability"; (2) "low cost of ownership"; and (3) "departmental applications."
Above the middle wave is a sub-heading "Client/Server," and the following
bullet points: (1) "easier access"; (2) "more user-friendly"; and (3)
"enterprise applications." Above the highest wave is the sub-heading
"Network-centric" and the following bullet points: (1) "mask complexity"; (2)
"reduce cost of change"; (3) "leverage network scalability"; (4) "reduce time
to benefit"; and (5) "inter-enterprise applications." Beneath the graphic is
the following text: "J.D. Edwards ERP solutions offer continuity through
successive waves of technology. WorldSoftware provides a highly functional,
host-centric solution with a smooth transition to client-server computing.
OneWorld offers the advantages of client/server while masking the complexity in
a network-centric environment."
The lower left hand subsection carries the graphic heading "Integrated
Applications Suite and Technology Architecture." Beneath this heading is a
multi-layered graphic depicting the interrelationship of the software
applications and the systems platforms, the left panel of which depicts "World
Software," while the right depicts "OneWorld." An overarching layer is labeled
"Application Suites," with four separate sub-headings: (1) "Manufacturing"; (2)
"Finance"; (3) "Distribution/Logistics"; and (4) "Human Resources." The left
panel shows a solid bar labeled "Toolset," beneath which are two interlocking
pieces, the upper labeled "Technology Layer" and the lower "AS/400." The right
panel shows a solid bar labeled "Toolset," beneath which are four interlocking
pieces, the topmost labeled "Technology Layer," and the bottom three labeled,
from left to right as (1) "AS/400"; (2) "UNIX"; and (3) "NT." Beneath this
graphic is the following text: "The Company's comprehensive family of
integrated ERP application suites address customer requirements for improving
productivity and effectiveness of their manufacturing, finance,
distribution/logistics and human resources organizations. J.D. Edwards'
advanced architecture allows different generations of technology --host-centric
WorldSoftware and network-centric OneWorld-- to coexist in a single
environment. The architecture also masks the complexities of a mixed platform
network-centric environment. The OneWorld toolset provides a single point of
change for all platforms on the network. Developers use one toolset and users
work in a consistent environment, regardless of the unique characteristics of
the underlying platform."
<PAGE> 93
The upper right hand subsection carries the graphic heading
"Structured Implementation Methodology and Services." To the right of this
heading is a graphic depicting a flow chart with nine boxes. The topmost box is
labeled "Agree on Expectations," beneath which are two boxes, the left labeled
"Train the Client Project Team" and the right "Analyze Client Requirements."
Below these boxes are another two, the left labeled "Conduct Conference Room
Pilot" and the right labeled "Develop Technical Solutions." Below these boxes
is a single box labeled "Tune the Environment, Train, and Test." Below this box
is another, labeled "Go Live." The final two boxes are beneath this one, the
left labeled "Upgrade to the Latest Version" and the right labeled "Perform
Periodic Systems Audit." Beneath the graphic heading and to the left of the
flow chart is the following text: "J.D. Edwards offers clients a complete suite
of software implementation, maintenance and support services either directly or
through third-party business partners. In particular, the Company believes its
nine-step Rapid, Economic and Predictable (REP) methodology contributes to the
ability to accelerate client time to benefit and lower lifetime total cost of
ownership."
The lower right subsection carries the graphic heading "Global
Presence, Local Support." Beneath this heading is a graphic depicting the
globe, upon which are superimposed the following three lines of text: (1) "Over
4,000 customers installed in 90 countries"; (2) "Software available in 18
languages"; and (3) "24 hour-per-day, 7 day-per-week support available
worldwide." Beneath this graphic is the following text: "J.D. Edwards' 3,167
employees are located in 46 offices throughout the world. The Company provides
customer support through these offices and through a network of 172 business
partners. The result is uniform implementations and consistent support
worldwide."
Graphic--Page 36
This graphic carries the heading "Integrated Applications Suite and
Technology Architecture." Beneath this heading is a multi-layered graphic
depicting the interrelationship of the software applications and the systems
platforms, the left panel of which depicts "World Software," while the right
depicts "OneWorld." An overarching layer is labeled "Application Suites," with
four separate sub-headings: (1) "Manufacturing"; (2) "Financials"; (3)
"Distribution/Logistics"; and (4) "Human Resources." The left panel shows a
solid bar labeled "Toolset," beneath which are two interlocking pieces, the
upper labeled "Technology Layer" and the lower "AS/400". The right panel shows
a solid bar labeled "Toolset," beneath which are four interlocking pieces, the
topmost labeled "Technology Layer," and the bottom three labeled, from left to
right as (1) "AS/400"; (2) "UNIX"; and (3) "NT". Beneath this graphic is the
following text: "The Company's comprehensive family of integrated ERP
application suites address customer requirements for improving productivity and
effectiveness of their manufacturing, finance, distribution/logistics and human
resources organizations. J.D. Edwards' advanced architecture allows different
generations of technology --host-centric WorldSoftware and network-centric
OneWorld-- to coexist in a single environment. The architecture also masks the
complexities of a mixed platform network-centric environment. The OneWorld
toolset provides a single point of change for all platforms on the network.
Developers use one toolset and users work in a consistent environment,
regardless of the unique characteristics of the underlying platform."
Graphic--Page 38
This graphic consists of a flow chart with nine boxes. The leftmost
box is labeled "Agree on Expectations," to the right of which are two boxes,
the top labeled "Train the Client Project Team" and the bottom "Analyze Client
Requirements." To the right of these boxes are another two, the top labeled
"Conduct Conference Room Pilot" and the bottom labeled "Develop Technical
Solutions." To the right of these boxes is a single box labeled "Tune the
Environment, Train, and Test." To the right of this box is another, labeled
<PAGE> 94
"Go Live." The final two boxes are to the right of this one, the top labeled
"Upgrade to the Latest Version" and the bottom labeled "Perform Periodic
Systems Audit."
<PAGE> 95
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
[Alternative Page for International Prospectus]
PROSPECTUS (Subject to Completion)
Issued July 3, 1997
Shares
LOGO
COMMON STOCK
---------------------
Of the Shares of Common Stock being offered hereby, Shares are
being offered initially outside of the United States and Canada by the
International Underwriters, and Shares are being offered initially in
the United States and Canada by the U.S. Underwriters. See "Underwriters." Of
the Shares of Common Stock being offered hereby, Shares are
being sold by the Company and Shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any proceeds from the sale of Shares by the Selling Stockholders. Prior
to this offering, there has been no public market for the Common Stock of the
Company. It is currently estimated that the initial public offering price will
be between $ and $ per share. See "Underwriters" for a discussion of the
factors considered in determining the initial public offering price. Application
has been made for the Common Stock to be listed on the Nasdaq National Market
under the symbol "JDEC."
---------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 HEREOF.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
PRICE $ A SHARE
---------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
Total(3)........................ $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and certain of the Selling Stockholders have granted to the
U.S. Underwriters an option, exercisable within 30 days from the date
hereof, to purchase up to an aggregate of additional Shares at the
price to public less underwriting discounts and commissions, for the
purpose of covering over-allotments, if any. If the U.S. Underwriters
exercise such option in full, the total price to public, underwriting
discounts and commissions, proceeds to Company and proceeds to Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriters."
---------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel for
the Underwriters. It is expected that delivery of the Shares will be made on or
about , 1997, at the office of Morgan Stanley & Co. Incorporated, New
York, N.Y., against payment therefor in immediately available funds.
---------------------
MORGAN STANLEY DEAN WITTER
DEUTSCHE MORGAN GRENFELL
ROBERTSON, STEPHENS & COMPANY
, 1997
<PAGE> 96
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the costs and expenses, other
than underwriting discounts and commissions, incurred and to be incurred by the
Registrant in connection with the issuance and distribution of the securities
registered hereby. All amounts are estimates except the Securities and Exchange
Commission ("SEC") registration fee and the National Association of Securities
Dealers, Inc. ("NASD") filing fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY
REGISTRANT
------------
<S> <C>
SEC registration fee........................................ $90,910
NASD filing fee............................................. 30,500
Nasdaq National Market listing fee.......................... *
Printing.................................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Director and officer liability insurance.................... *
Blue sky fees and expenses.................................. *
Custodial fees.............................................. *
Transfer agent and registrar fees........................... *
Miscellaneous............................................... *
-------
Total............................................. $ *
=======
</TABLE>
- ---------------
* To be disclosed by amendment
The Registrant intends to pay all expenses of registration, issuance and
distribution with respect to the securities being offered for the account of the
Selling Stockholders, except for underwriter's discounts and commissions and
stock transfer taxes.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware (the "DGCL")
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation) by
reason of the fact that any such person is or was a director, officer, employee
or agent of such corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided that such officer or director acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A Delaware corporation may indemnify officers and
directors against expenses (including attorneys' fees) in connection with the
defense or settlement of an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses (including attorneys' fees) which such
officer or director actually and reasonably incurred. The foregoing description
is qualified in its entirety by reference to the more detailed provisions of
Section 145 of the DGCL.
II-1
<PAGE> 97
Section 102 of the DGCL allows a Delaware corporation to eliminate or limit
the personal liability of a director to the corporation or to any of its
stockholders for monetary damage for a breach of fiduciary duty as a director,
except in the case where the director (i) breaches such person's duty of loyalty
to the corporation or its stockholders, (ii) fails to act in good faith, engages
in intentional misconduct or knowingly violates a law, (iii) authorizes the
payment of a dividend or approves a stock purchase or redemption in violation of
Section 174 of the DGCL or (iv) obtains an improper personal benefit.
In accordance with the DGCL, the Registrant's Certificate of Incorporation
contains a provision to limit the personal liability of its directors for
monetary damages for breach of their fiduciary duty to the fullest extent
permitted by the DGCL now, or as it may hereafter be amended.
In addition, as permitted by the DGCL, the Registrant's Bylaws provide that
(i) the Registrant is required to indemnify its directors and officers and
persons serving in such capacities in other business enterprises at the
Registrant's request, to the fullest extent permitted by Delaware law; (ii) the
Registrant may indemnify its employees and agents to the maximum extent
permitted by Delaware law; (iii) the Registrant is required to advance expenses
incurred by its directors and officers in connection with defending a proceeding
(except that a director or officer must undertake to repay any advances if it
should ultimately be determined that the director or officer is not entitled to
indemnification); (iv) the rights conferred in the Bylaws are not exclusive; and
(v) the Registrant may not retroactively amend the Bylaw provisions in a way
that adversely affects any director or officer.
The Registrant maintains insurance covering its directors and officers
against certain liabilities incurred by them in their capacities as such,
including among other things, certain liabilities under the Securities Act of
1933, as amended (the "Securities Act"). The Registrant also intends to enter
into indemnification agreements with its directors and officers prior to the
closing of this offering that provide the maximum indemnity allowed to directors
and officers by the DGCL and the Registrant's Bylaws.
The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant and its directors and officers who sign this Registration
Statement against certain liabilities, including liabilities under the
Securities Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT NUMBER
-------- -------
<S> <C>
Form of Underwriting Agreement.............................. 1.1
Certificate of Incorporation of Registrant.................. 3.1 (i)
Bylaws of Registrant........................................ 3.1 (ii)
Form of Indemnification Agreement to be entered into by the
Registrant with each of its directors and officers........ 10.13
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since July 3, 1994, the Registrant has issued and sold 133,350 shares of
its Common Stock to employees for an aggregate amount of $409,102 pursuant to
the exercise of options under its 1992 Incentive Stock Option Plan.
The share amounts set forth above take into account the 70-for-1 stock
split that will be effective prior to the closing of the offering contemplated
by the Registration Statement.
The sales of such securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under such Rule 701.
The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and
II-2
<PAGE> 98
appropriate legends were affixed to the share certificates issued in such
transactions. All recipients had adequate access, through their relationships
with the Company, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1(i) Certificate of Incorporation of Registrant.
Bylaws of Registrant.
*5.1(ii) Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Original Software Vendor Marketing and License Agreement
between Seagull Business Software and J.D. Edwards &
Company dated August 19, 1994.
10.2 Credit Agreement by and Between Wells Fargo Bank (Colorado),
N.A., as Lender and as Agent Bank, Harris Trust and
Savings Bank, as a Lender, Key Bank of Colorado, as
Lender, and J.D. Edwards & Company, as a Borrower, J.D.
Edwards World Solutions Company, as a Borrower, J.D.
Edwards World Source Company, as a Borrower dated as of
August 1, 1996.
10.3 Sublease Agreement dated September 13, 1990 between Green
Holdings, Inc., Sublessor, and J.D. Edwards & Company,
Sublessee for an office suite located on the 6th Floor of
Stanford Place I Building.
10.4 Lease Agreement dated September 20, 1990 between Phillips
Petroleum Company, Lessor, and J.D. Edwards & Company,
Lessee, for office suite on the 6th Floor of the Stanford
Place I Building, as amended.
10.5 Lease Agreement dated December 20, 1991 between Samuel Zell,
Lessor, and J.D. Edwards & Company, Lessee, for office
Floors 3, 4, 6 and 7 and office space on Floor 1 for the
Denver Corporate Center III located at 7900 East Union
Avenue, as amended.
10.6 Sublease Agreement dated July 15, 1993 between Green
Holdings, Inc., Sublessor, and J.D. Edwards & Company,
Sublessee, for office suite located on the 8th Floor of
Stanford Place I Building.
10.7 Lease Agreement dated August 23, 1993 between Phillips
Petroleum Company, Lessor, and J.D. Edwards & Company,
Lessee for office suite on the 8th Floor of Stanford
Place I Building.
10.8 Sublease Agreement dated October 25, 1993 between Green
Holdings, Inc., as sublessor and J.D. Edwards & Company,
Sublessee for an office suite located on the 7th Floor of
the Stanford Place I Building.
10.9 Sublease Agreement dated June 12, 1995 between
Microsolutions Tech Inc., Sublessor and J.D. Edwards &
Company, Sublessee, for office suite located on the 8th
Floor of Stanford Place I Building.
10.10 Agreement of Purchase and Sale between J.D. Edwards &
Company and CarrAmerica Realty, L.P. dated as of December
11, 1996.
10.11 Supplement to Lease Agreement between CarrAmerica Realty,
L.P. and J.D. Edwards & Company dated as of December 30,
1996.
10.12 Build-to-Suit Lease Agreement between CarrAmerica Realty,
L.P. and J.D. Edwards & Company dated as of December 30,
1996.
*10.13 Form of Indemnification Agreement to be entered into between
the Registrant and each of its officers and directors.
</TABLE>
II-3
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.14 Corporate Plan for Retirement, The Profit Sharing/401(k)
Plan.
10.15 Employee Stock Ownership Plan and Trust Agreement of J.D.
Edwards & Company, as amended and restated effective
January 1, 1996.
10.16 1992 Incentive Stock Option Plan.
10.17 1992 Nonqualified Stock Option Plan.
10.18 Restricted Stock Grant Plan for Employees of J.D. Edwards &
Company.
10.19 Stock Plan for Employees of J.D. Edwards & Company.
*10.20 Employee Stock Purchase Plan.
*10.21 1997 Equity Incentive Plan.
*10.22 Amended and Restated Shareholder Agreement between C. Edward
McVaney, Jack L. Thompson, Robert C. Newman and the
Registrant dated as of 1997.
11.1 Statement regarding computation of earnings per share.
16.1 Letter regarding change in certifying accountant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Wilson Sonsini Goodrich & Rosati (included in
Exhibit 5.1).
24.1 Power of Attorney (filed herewith on the signature page of
this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts and Reserves
All other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related
instructions or are inapplicable or the information is contained in the
consolidated financial statements and related notes and therefore have been
omitted.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing, as specified in the Underwriting Agreement, certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE> 100
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of the prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado, on this day of July 1997.
J.D. EDWARDS & COMPANY
By: /s/ RICHARD E. ALLEN
----------------------------------
Name: Richard E. Allen
Title: Chief Financial Officer and
Vice President, Finance and
Administration
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of C. Edward McVaney, Richard E. Allen and Richard G. Snow, Jr. or any of
them, each acting alone, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for such person and in his
or her name, place and stead, in any and all capacities, in connection with this
Registration Statement, including to sign and file in the name and on behalf of
the undersigned as director or officer of the Registrant (i) any and all
amendments or supplements (including any and all stickers and post-effective
amendments) to this Registration Statement, with all exhibits thereto, and other
documents in connection therewith, and (ii) any and all additional registration
statements, and any and all amendments thereto, relating to the same offering of
securities as those that are covered by this Registration Statement that are
filed pursuant to Rule 462(b) under the Securities Act of 1933, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON ,
1997 IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ C. EDWARD MCVANEY Chairman of the Board of Directors, President
- ----------------------------------------------------- and Chief Executive Officer (principal
C. Edward McVaney executive officer)
/s/ RICHARD E. ALLEN Chief Financial Officer, Vice President,
- ----------------------------------------------------- Finance and Administration and Director
Richard E. Allen (principal financial officer)
/s/ PAMELA L. SAXTON Vice President of Finance, Controller and
- ----------------------------------------------------- Chief Accounting Officer (principal
Pamela L. Saxton accounting officer)
/s/ ROBERT C. NEWMAN Director
- -----------------------------------------------------
Robert C. Newman
/s/ JACK L. THOMPSON Director
- -----------------------------------------------------
Jack L. Thompson
/s/ GERALD HARRISON Director
- -----------------------------------------------------
Gerald Harrison
/s/ DELWIN D. HOCK Director
- -----------------------------------------------------
Delwin D. Hock
/s/ HARRY T. LEWIS, JR. Director
- -----------------------------------------------------
Harry T. Lewis, Jr.
/s/ MICHAEL J. MAPLES Director
- -----------------------------------------------------
Michael J. Maples
/s/ TRYGVE E. MYHREN Director
- -----------------------------------------------------
Trygve E. Myhren
</TABLE>
II-6
<PAGE> 102
SCHEDULE II
J.D. EDWARDS & COMPANY
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO TRANSLATION END
CLASSIFICATION OF PERIOD OPERATIONS WRITE-OFFS ADJUSTMENTS OF PERIOD
-------------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year Ended:
October 31, 1994........................... $2,675 $3,699 $(1,284) $ 10 $5,100
------ ------ ------- ----- ------
October 31, 1995........................... $5,100 $2,305 $(1,713) $ 8 $5,700
------ ------ ------- ----- ------
October 31, 1996........................... $5,700 $1,387 $(1,496) $ 9 $5,600
------ ------ ------- ----- ------
Six Months Ended:
April 30, 1997 (unaudited)................. $5,600 $1,984 $ (726) $(158) $6,700
------ ------ ------- ----- ------
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT RELEASE OF BALANCE AT
BEGINNING VALUATION END
CLASSIFICATION OF PERIOD ALLOWANCE OF PERIOD
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended:
October 31, 1994........................... $2,352 $(2,352) $ --
====== ======= ======
</TABLE>
S-1
<PAGE> 103
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1(i) Certificate of Incorporation of Registrant.
Bylaws of Registrant.
*5.1(ii) Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Original Software Vendor Marketing and License Agreement
between Seagull Business Software and J.D. Edwards &
Company dated August 19, 1994.
10.2 Credit Agreement by and Between Wells Fargo Bank (Colorado),
N.A., as Lender and as Agent Bank, Harris Trust and
Savings Bank, as a Lender, Key Bank of Colorado, as
Lender, and J.D. Edwards & Company, as a Borrower, J.D.
Edwards World Solutions Company, as a Borrower, J.D.
Edwards World Source Company, as a Borrower dated as of
August 1, 1996.
10.3 Sublease Agreement dated September 13, 1990 between Green
Holdings, Inc., Sublessor, and J.D. Edwards & Company,
Sublessee for an office suite located on the 6th Floor of
Stanford Place I Building.
10.4 Lease Agreement dated September 20, 1990 between Phillips
Petroleum Company, Lessor, and J.D. Edwards & Company,
Lessee, for office suite on the 6th Floor of the Stanford
Place I Building, as amended.
10.5 Lease Agreement dated December 20, 1991 between Samuel Zell,
Lessor, and J.D. Edwards & Company, Lessee, for office
Floors 3, 4, 6 and 7 and office space on Floor 1 for the
Denver Corporate Center III located at 7900 East Union
Avenue, as amended.
10.6 Sublease Agreement dated July 15, 1993 between Green
Holdings, Inc., Sublessor, and J.D. Edwards & Company,
Sublessee, for office suite located on the 8th Floor of
Stanford Place I Building.
10.7 Lease Agreement dated August 23, 1993 between Phillips
Petroleum Company, Lessor, and J.D. Edwards & Company,
Lessee for office suite on the 8th Floor of Stanford
Place I Building.
10.8 Sublease Agreement dated October 25, 1993 between Green
Holdings, Inc., as sublessor and J.D. Edwards & Company,
Sublessee for an office suite located on the 7th Floor of
the Stanford Place I Building.
10.9 Sublease Agreement dated June 12, 1995 between
Microsolutions Tech Inc., Sublessor and J.D. Edwards &
Company, Sublessee, for office suite located on the 8th
Floor of Stanford Place I Building.
10.10 Agreement of Purchase and Sale between J.D. Edwards &
Company and CarrAmerica Realty, L.P. dated as of December
11, 1996.
10.11 Supplement to Lease Agreement between CarrAmerica Realty,
L.P. and J.D. Edwards & Company dated as of December 30,
1996.
10.12 Build-to-Suit Lease Agreement between CarrAmerica Realty,
L.P. and J.D. Edwards & Company dated as of December 30,
1996.
*10.13 Form of Indemnification Agreement to be entered into between
the Registrant and each of its officers and directors.
10.14 Corporate Plan for Retirement, The Profit Sharing/401(k)
Plan.
10.15 Employee Stock Ownership Plan and Trust Agreement of J.D.
Edwards & Company, as amended and restated effective
January 1, 1996.
10.16 1992 Incentive Stock Option Plan.
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.17 1992 Nonqualified Stock Option Plan.
10.18 Restricted Stock Grant Plan for Employees of J.D. Edwards &
Company.
10.19 Stock Plan for Employees of J.D. Edwards & Company.
*10.20 Employee Stock Purchase Plan.
*10.21 1997 Equity Incentive Plan.
*10.22 Amended and Restated Shareholder Agreement between C. Edward
McVaney, Jack L. Thompson, Robert C. Newman and the
Registrant dated as of 1997.
11.1 Statement regarding computation of earnings per share.
16.1 Letter regarding change in certifying accountant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Wilson Sonsini Goodrich & Rosati (included in
Exhibit 5.1).
24.1 Power of Attorney (filed herewith on the signature page of
this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 10.1
ORIGINAL SOFTWARE VENDOR MARKETING AND LICENSE AGREEMENT
Licensor SEAGULL BUSINESS SOFTWARE
Laan der Verenigde Naties 60
3314 DA Dordrecht. P.0. Box 828
Dordrecht 3300 AV, The Netherlands
This Original Software Vendor Marketing and License Agreement
('Agreement") is by and between J.D. Edwards & Company, a Colorado corporation,
having a principal place of business at 8055 E. Tufts Avenue, Denver, Colorado
80237 ("JDE") and Licensor, a __________________ corporation.
WHEREAS, Licensor develops, markets, and maintains certain software
products; and
WHEREAS, JDE desires to market Licensor's software products to JDE's
present and prospective customers, to sublicense those products and support the
products;
NOW, THEREFORE, the parties hereto have executed this Agreement by the
duly authorized representative on the date first written above and agree to be
bound by the terms and conditions hereof.
THIS AGREEMENT, INCLUDING ITS TERMS AND CONDITIONS, IS A COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL PRIOR OR
CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND ALL OTHER
COMMUNICATIONS BETWEEN THE PARTIES RELATING TO ITS SUBJECT MATTER.
THIS AGREEMENT SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY LICENSOR AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D.Edwards & Company and By execution, signer certifies that
effective as of: 19 August 1994 signer is authorized to execute
this Agreement on behalf of Licensor
J. D. EDWARDS & COMPANY LICENSOR
By /s/ By /s/
(Authorized Signature) Authorized Signature)
- ------------------------- -------------------------
(Print or Type Name) (Print or Type Name)
- ------------------------- -------------------------
(Title) (Title)
Page 1
<PAGE> 2
ORIGINAL SOFTWARE VENDOR MARKETING AND LICENSE AGREEMENT
TERMS AND CONDITIONS
1. License to Market the Systems.
-----------------------------
1.1 Licensor hereby grants to JDE and JDE accepts during the term of this
Agreement a world-wide, non exclusive right and license to use, market, sell,
license, and sublicense the Programs (as such programs are set forth on Exhibit
I hereto) solely with the use, marketing, selling, licensing, and sublicensing
of JDE's Programs, to JDE Licensees, as well as any enhancements to the Programs
made by Licensor pursuant to Section 6 below.
1.2 Upon the expiration or earlier termination of this Agreement, JDE
shall have no further right to market or grant rights with respect to the use of
the Programs, except that JDE may continue to grant rights, in accordance with
the provisions of this Agreement, for a period of one hundred twenty (120) days
following the expiration or earlier termination of this Agreement in order to
complete quotations or orders made prior to the date of such expiration or
earlier termination. Also, upon the expiration or earlier termination of this
Agreement, the rights granted by JDE to the JDE Licensees to use the Programs
shall continue in full force and effect in accordance with the terms of the JDE
standard Software License Agreement. This paragraph shall survive the expiration
or earlier termination of this Agreement.
1.3 JDE and Licensor shall use their mutual best efforts consistent with
reasonable commercial standards to advertise, promote and market the Programs to
customers.
1.4 Included in the license grant by Licensor to JDE of the Programs, is
the grant of the following rights: 1. The right to copy the Programs and a
non-exclusive right to sublicense the Programs for use by JDE's customers. 2.
The non-exclusive right to use the name "GUI/400" or any other name for the
Programs as JDE may decide. 3. The unlimited right to use the run-time portion
of the Licensor's Program by JDE and its Business Partners for Licensors Program
product demonstration, development, training and internal production use.
2. Marketing.
---------
2.1 Licensor shall deliver to JDE without charge two (2) copies of all
appropriate sales, marketing and technical information ("Documentation") on
electronic readable media specified from time to time by JDE to enable JDE to
effectively market, license and service the Programs. In the event that
additional copies are required by JDE, Licensor will supply such copies at a
charge equal to such party's then current reproduction and shipping costs.
Licensor grants to JDE the unlimited right to copy, modify, revise and
distribute the Documentation to JDE's Customers as JDE may decide without any
royalty obligation or otherwise to Licensor; provided, however, that no such
distribution of the Documentation will be made without the prior execution of a
sublicense or nondisclosure agreement with such JDE Customers. Licensor from
time to time in no less than once each calendar quarter shall issue new releases
of the Documentation to JDE and JDE's Customers. In addition, Licensor shall
provide to JDE such marketing assistance and personnel JDE may reasonably
request to effectively market, license and service the Programs. tc" 2.1
Licensor shall deliver to JDE without charge two (2) copies of all appropriate
sales, marketing and technical information to enable JDE to effectively market,
license and service the Programs. In the event that additional copies are
required by JDE, Licensor will supply such copies at a charge equal to such
party's then current reproduction and shipping costs. In addition, Licensor
shall provide to JDE such marketing assistance and personnel JDE may reasonably
request to effectively market, license and service the Programs."
2.2 JDE shall be entitled to no charge use of demonstration copies of the
Program at qualified demonstration sites and for demonstration purposes only. On
Licensor's written approval demonstration copies may be provided to JDE Business
Partners and/or prospects subject to any terms and conditions specified by
Licensor.
2.3 The Programs will be sub-licensed by JDE to its Customers under the
same terms and conditions respecting the use and protection of the Programs as
those covering the JDE products licensed to such Customers. Maintenance services
will be offered by JDE according to the terms and conditions contained in the
Software Update Agreement. Copies of JDE's standard form license and maintenance
(Updates) agreements are attached hereto as Exhibit A.
3. Training and Technical Support.
------------------------------
3.1 Licensor will make available to JDE a maximum of one full week of
training for the number of personnel as JDE designates consisting of the
operation, theory and maintenance of the Programs, at no charge to JDE, except
reasonable and customary travel and living expenses incurred.
3.2 Licensor and JDE acknowledge that the support for the Programs will
consist of two levels: Level I and Level II (the "Customer Support"). Level I
includes providing (i) basic information regarding the use and operation of the
Programs and (ii) assistance in detecting and diagnosing programming errors.
Level II includes providing (i) temporary fixes and (ii) updates. The Customer
Support will be provided by mail, regularly-staffed telephone access and other
appropriate means. JDE will provide support at Level I to JDE Customers for the
Program. Licensor shall provide support at Level II to JDE Customers for the
Programs at a fee to be determined by the parties upon mutual agreement, but in
any event to be not less than Four Dollars ($4.00) per work station seat per
annum. Notwithstanding termination of this Agreement, for any reason, Licensor
shall continue to provide Level II Customer Support to JDE for all JDE Customers
for the Licensor's Programs or as long as such JDE Customers continue to license
such Licensor's Programs. Any support required beyond Level II, will be provided
by Licensor and paid at Licensor's then time and material rates. Copies of all
fixes by Licensor will be delivered to JDE and JDE may copy the same for
delivery to JDE Customers or its own use of the Programs.
3.3 During a period of six (6) months from the date of this Agreement,
Licensor agrees to make available to JDE Mr. Andre den Haan to provide services
on the
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<PAGE> 3
Licensor's Products to JDE upon its request, and during said six (6) month
period to not provide similar services to any of the entities named in Exhibit
B. The foregoing services provided by Mr. den Haan shall be at no charge to JDE,
except for reasonable travel and living expenses incurred by Mr. den Haan in
providing such services to JDE.
4. Payments.
--------
4.1 In consideration for the rights and privileges granted under this
Agreement, JDE shall pay to Licensor a fee equal to Sixty-Five Dollars ($65.00)
per work station seat accessing the Programs sublicensed and delivered to JDE's
Customers. Upon execution of this Agreement, JDE agrees to license five thousand
(5,000) run-time modules of Licensor's Programs for a payment of Three Hundred
Twenty-Five Thousand Dollars ($325,000) to be paid upon execution of this
Agreement by JDE. For each new version of Licensor's Programs delivered to JDE's
Customers an additional fee not to exceed ten percent (10%) of the then current
fee charged per work station seat shall be paid to Licensor. For the purposes of
this Agreement "version" of Licensors Program shall be identified an integer on
the left side of the decimal point (e.g., version 1.x). For each new release" of
Licensors Programs delivered to JDE's Customers no additional fee per work
station shall be paid to Licensor. For purposes of this Agreement, a "release"
of Licensor's Programs shall be identified an integer or series of integers to
the right of the decimal (e.g., x.1). For example, should Licensor make
available version 2.0 of Licensor's Programs as replacement for version 1.0,
Licensor could increase the per work station seat fee by up to ten percent
(10%), but should Licensor make available a new release of 1.2 replacing release
1.1, no additional fee would apply.
Other than as set forth in the preceding paragraph regarding Licensor
providing new versions of Licensors Programs, the per work station seat fee
shall remain unchanged for a period of three (3) years from the date of this
Agreement. At the end of such three (3) years period, the parties shall enter
into good faith negotiation regarding the per work station seat fee to be
effective at the end of such three (3) year period.
4.2 JDE will provide Licensor with a report showing the following
information related to new software licenses by the twentieth (20th) day of the
following month:
1. Licensee
2. Sale date
3. Model and Serial number
4. State/Country
5. Number of Users
4.3 JDE shall pay to Licensor all royalties on
software licenses within 60 days following revenue determination based on JDE's
revenue recognition policy (signed contract, no contract contingencies, software
shipped and a minimum ten percent (10%) deposit). If a customer desires and JDE
allows return/exchange of a product, JDE may recover any royalties paid to
Licensor.
4.4 Notwithstanding the pricing set forth in Section 4.1 above, Licensor
shall provide its Development Kits to JDE at a price of $5,000 for the ADKxx
product version and $2,500 for the ADKyy product version for JDE's internal use
only. In addition, on a one-time basis, Licensor will make available to JDE
Business Partners copies of Licensor's Development Kits at the prices set forth
in the previous sentence.
5. Warranties.
----------
5.1 Licensor hereby warrants and represents that their Programs are valid
and existing and that Licensor is the true and lawful owner of such programs
with full power and right to enter into this Agreement, and there are no
conflicting claims relating to the rights granted herein. Licensor warrants that
to the best of its knowledge, at the time of shipment from Licensor the Programs
are free of any and all viruses, trojan horses, trap doors, or any other devices
or mechanisms which are intended to cause the Licensed Products to perform any
material functions other than those specified or intended by the Licensor's
published product specifications and that are intended to halt, disrupt, or
sabotage the operation of the Programs, excluding, however the disabling
procedures permitted under this Agreement. The use of Licensor's programs as
described herein shall not infringe the rights of any third party. Licensor
agrees to indemnify and hold JDE and JDE's customers harmless from all loss,
expense and damage arising out of any legal action or suit based upon any claim
that Licensor's programs infringe on a copyright or otherwise violate the
existing right of any third party, including trade secret, or unfair competition
claims, but excluding, however, any claim of such party or consequential damages
for losses, profits or otherwise. Licensor will defend, at its own expense, any
action brought against JDE or JDE's customers to the extent that it is based on
such claim, and will pay all costs and damages finally awarded in any such suit,
including, without limitation, attorney's fees incurred by JDE or JDE customers,
on the conditions: (i) that Licensor be notified promptly in writing by JDE or
JDE's customers of any notice of any such claim; and (ii) that Licensor shall
have sole control of the defense of any actions against such claim in
negotiations toward a settlement or a compromise.
5.2 Licensor further warrants that for a period of six (6) months
following the date of installation of the Programs at a JDE Customer site
pursuant to a license granted by JDE for the Programs, the Programs will perform
substantially in accordance with the Licensor published product specifications
in effect the date of said installation. Licensor further warrants that the
Licensor's published product specifications are accurate and all material
respects; however, the Programs are subject to continued revision and may, at
times, be at variance with such published product specifications and may contain
minor defects or errors. During the warranty period, Licensor agrees to correct
all substantive errors in the unmodified Programs as reported in writing by JDE
or by JDE's Customer and JDE's Customer will be entitled to all corrections
and/or enhancements to the unmodified Programs, at no charge. Such corrections
and/or enhancements shall be part of the Programs.
5.3 LICENSOR MAKES NO REPRESENTATION NOR WARRANTIES, EXPRESSED NOR
IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE
WITH RESPECT TO PROGRAMS. Neither Licensor or JDE shall be liable for any loss
of earnings, profit or good will suffered by any person including the other
party's customers or for any incidental or consequential damages of any other
person whatsoever or howsoever caused even if either party had been advised of
the possibility of such damages caused either directly or indirectly by the
furnishing of the programs pursuant to this Agreement, or for any other loss of
Page 3
<PAGE> 4
business or damage to the other party or the other party's customers except
where such loss or damage is caused by the gross negligence or willful
misconduct on the part of such party, its agents, employees, independent
contractors or persons acting under its direction or control.
6. Enhancements.
------------
Licensor will use its best efforts to continue to develop its programs and
keep its programs competitive with similar software programs currently on the
market and those added to the market during the term of this Agreement.
7. Other Systems.
-------------
Each party acknowledges and understands that the other party may currently
or in the future develop or acquire products similar to the JDE Programs and the
Licensor Programs and/or enhancements thereto respectively. Nothing in this
Agreement shall be construed as representation or inference that either party
will not enter into such acts or otherwise compete with other Programs and/or
enhancements. One party's designation of its programs as trade secret and
proprietary does not preclude the other from using ideas, concepts, know-how and
techniques related to information handling and retained in the minds of the
other party's personnel as a result of exposure to the other party's programs by
their activities hereunder. Each party acknowledges that often similar design
requirements may coincidentally result in similar solutions being developed
independently by two or more sources; therefore the mere similarity between
JDE's and Licensors software does not raise a presumption of infringement.
Nothing in this Agreement shall prohibit or restrict either party's right to
develop, use or market products or materials similar to or competitive with the
other party's Programs, so long as the terms of this Agreement are not otherwise
breached.
8. Non Solicitation of Employees.
-----------------------------
The parties hereto agree that neither party shall solicit for employment,
or employ, an employee of the other party during the term of this Agreement, or
for a period of one hundred eighty (180) days after termination of this
Agreement, without the prior written consent of the other party
9. Term.
----
This Agreement shall commence on the date first written above for a period
of three (3) years and shall be automatically renewed for additional two (2) one
(1) year periods thereafter unless the parties mutually agree to terminate this
Agreement at least ninety (90) days prior to the end of the initial three (3)
year term or prior to the end of any renewal term thereafter, or unless
terminated in accordance with Section 11, Termination, below.
10. Confidential Information: Protection of Proprietary Rights.
-----------------------------------------------------------
10.1 It is agreed and understood that during the term of this Agreement,
it may be necessary for each party to disclose to the other certain information
relating to their respective programs, their business activities, or other
technical information which the parties consider to be confidential or
proprietary and which the parties have reduced to writing and clearly marked as
"Confidential" or "Proprietary". Such proprietary information shall remain the
sole property of that party and shall be held in confidence and safe keeping for
safe use of such parties and shall not, without the prior written consent of the
other party, disclose this proprietary information to any person except to those
of its employees who need to know such information to fulfill those employee's
obligations under this Agreement, except where such confidential information
becomes publicly available through no act of the disclosing party, is released
by the owner of the information in writing with no restrictions, is lawfully
obtained without breach of this Agreement from third parties without obligation
of confidentiality, is previously known by that party or is independently
developed by that party.
It is agreed that the parties respective programs and all related
documents and materials are considered by such parties to be valuable trade
secrets and confidential and proprietary information, whether or not marked or
designated as such, and the other party will not, and will use its best efforts
to insure that its employees and agents do not, disclose the same to any persons
except those of its employees who need to know such information to fulfill such
party's obligations under this Agreement.
10.2 The parties acknowledge that their respective programs are of a
characteristic which is or may be protectable by copyright and/or trade secret
under the laws of the United States and other countries. Each party agrees to
use its best efforts to obtain and maintain the maximum degree of proprietary
protection consistent with its ability to market the respective programs. Each
party agrees not to remove any copyright notices of the other party on any copy
of the other party's programs marketed, distributed or sublicensed by such party
in unmodified form as received from the first party.
11. Termination
-----------
11.1 Either party may terminate this Agreement by written notice to the
other party pursuant to Section 15 below, if the other party shall file petition
of bankruptcy, shall be adjudicated bankrupt, shall take advantage of the
insolvency laws as a debtor of any jurisdiction to which it is subject, shall
take assignment for benefit of creditors, shall be voluntarily or involuntarily
dissolved, admit in writing its inability to pay debts as they come due, or
shall have a receiver, trustee or any other officer appointed for its property
and such receiver, trustee or other court officer not dismissed within ninety
(90) days of his/her appointment.
11.2 Should JDE or Licensor fail to fulfill any of its material
obligations hereunder and shall have failed or have been unable to remedy said
default within thirty (30) days after JDE or Licensor sends the other written
notice with respect to such default, JDE or Licensor, whichever is the non
defaulting party, may, at its option, terminate this Agreement or any part
thereof by giving written notice of termination to the defaulting party,
effective immediately.
11.3 JDE may terminate this Agreement by written notice to Licensor
pursuant to Section 15 below, if there occurs (i) a change in ownership of fifty
percent (50%) or more of the ownership of the stock or partnership interest
outstanding of Licensor without the prior notification of and consent by JDE
such consent not to be unreasonably withheld or (ii) there occurs a material
change in the management of Licensor, without the prior notification of and
consent by JDE, such consent not to be unreasonably withheld. In the event of
termination of this Agreement
Page 4
<PAGE> 5
pursuant to this Section 11.3, immediately upon such termination Licensor shall
provide to JDE full right, title and interest to the source code for Licensor's
Programs and JDE shall be free at its discretion to modify, enhance, market,
license, maintain and use such source code solely in conjunction with JDE
software products. JDE shall pay to Licensor for the source code for Licensor's
Programs the sum of 50,000 times the then current work station seat fee minus
the total work station seats installed by JDE times the then current work
station seat fee.
12. Source Code Access.
------------------
12.1 Licensor agrees to maintain current versions of all source code, not
otherwise provided to JDE under this Agreement, in deposit with Data Securities
International, Inc. ("DSI" or such code escrow service mutually agreeable to the
parties), and to register, and maintain as registered, JDE as a party that may
have access to all such source code under certain "release conditions" as set
forth below. The parties agree to execute such agreements and registration as
reasonably required by DSI Licensor shall bear the fees charged by DSI for such
registration, without markup. Licensor, will or will cause DSI to, promptly
notify JDE upon such deposit of code under such agreements.
12.2 The term "release conditions" is defined and used to mean: (1)
failure of Licensor to provide maintenance on the Programs in accordance with
Sections 3.2, or (2) termination of this Agreement by JDE pursuant to Sections
11.1 or 11.2.
13. Books and Records.
-----------------
At its cost, Licensor shall be entitled to inspect ME's books and records
pertaining to the subject matter of this Agreement upon reasonable notice to ME
and during normal business hours.
14. Arbitration.
-----------
All disputes involving this Agreement, except actions arising under the
copyright provision of Title 17 of the U.S. Code, shall be submitted to an
arbitrator appointed by, and operating under, the rules of the American
Arbitration Association. The location of the arbitration hearing shall be
determined by the party not initiating the request for arbitration. The written
decision of the arbitrator shall be final and binding upon the parties and shall
be convertible to a Court judgment in any appropriate jurisdiction.
15. Notices.
-------
Notices and other communications hereunder shall be in writing or by
facsimile transmission subsequently confirmed in writing, and shall be deemed to
be given when transmitted or disposed in the United States mail, postage
pre-paid, addressed to the parties as listed above or as such addresses may be
changed by written notice.
16. General.
-------
16.1 Assignment. This Agreement shall be binding upon and shall
automatically inure to the benefits of the successors and assigns of the parties
hereto but shall not be assignable by either party in whole or in part without
the prior written consent of the other; notwithstanding the foregoing, however,
either party may assign this Agreement and its rights and obligations hereunder
to any subsidiary, affiliate corporation of parent corporation without consent
of the other
16.2 Governing Law. This Agreement shall be construed and interpreted by
the laws of the State of Colorado.
16.3 Independent Contractors. The relationship between JDE and Licensor is
that of independent contractors and under no circumstances shall any of the
employees of one party be deemed to be the employees of the other for any
purpose. This Agreement shall not be construed as authority for either party to
act for the other in any agency or other capacity, or to make commitments at any
time for the account of or on the behalf of the other.
16.4 Severability. If any portion of this Agreement is held illegal,
invalid or unenforceable, the legality, validity or endorseability of the
remainder shall be unaffected.
16.5 Entire Agreement. This Agreement and any attachments, exhibits or
riders hereto contained in the entire Agreement and understanding between the
parties hereto with respect to the subject matter hereof and merges and
supersedes all prior agreements, understandings and representations relating to
such relationship.
Page 5
<PAGE> 6
Exhibit A
(JDE Software License Agreement and JDE Software Update Agreement)
Page 6
<PAGE> 7
EXHIBIT A
JDEdwards SOFTWARE LICENSE AGREEMENT
8055 E. Tufts Avenue
Denver, Colorado 80237
Customer
Address
License Grant - J.D. Edwards & Company ("JDE") grants to Customer, and Customer
accepts, subject to the terms and conditions set out in this Software License
Agreement ("Agreement"), a non-exclusive and non-transferable perpetual limited
license to use the Licensed Products indicated below:
Designated Processor: IBM AS/400TM Model:
Licensed Products(1) (Please mark Software Applications selected):
<TABLE>
<CAPTION>
Software
license
Software Applications Prerequisites(2) Fee
<S> <C> <C>
1. WorldCASE/Foundation _____
Environment(3)
2. Accounts Receivable 1 _____
3. Accounts Payable 1,4 _____
4. General Ledger & 1 _____
Basic Financials
5. Financial Modeling, 1,4 _____
Budgeting & Allocations
6. Cash Basis Accounting 1,4 _____
7. Currency Conversion 1,4 _____
8. Financial Reporting 1,4 _____
(FASTR)
9. Payroll(4) 1,10 _____
10. Payroll Time Billing 1 _____
11. Human Resources 1,10 _____
Management
12. Fixed Assets 1,4 _____
13. Equipment Management(5) 1,4 _____
14. Inventory Management 1 _____
15. Sales Order Processing/ 1,14 _____
Sales Analysis
16. Distribution Resource 1,4,14,15,17 _____
Planning
17. Purchase Order Processing 1,4 _____
18. Job Cost Accounting 1,4 _____
19. Project Change 1,4 _____
Management
20. Contract Billing 1,4 _____
21. Contract Management 1,4,18 _____
22. Property Management 1,2,4 _____
23. Work Orders 1,4 _____
24. Service Billing 1,2,4,23 _____
25. Product Data Management 1,4 _____
26. Shop Floor Control 1,4,14,25 _____
27. Master Production 1,4,14,15,17,25,26 _____
Scheduling
28. Capacity Requirements 1,4,14,15,17, _____
Planning 25,26,27
29. WorldCASE/Development 1 _____
Environment
30. _____________________ ___________ ______
31. _____________________ ___________ ______
32. _____________________ ___________ ______
Total Software license Fee $__________
(Plus taxes where applicable)
</TABLE>
(1) The "Licensed Products" include the selected Software Applications, the
media in which the Software Applications are delivered, and the associated
documentation.
(2) For each Software Application selected, each listed prerequisite Software
Application must also be selected. FAILURE TO LICENSE AND INSTALL PREREQUISITE
SOFTWARE APPLICATIONS WILL VOID ANY AND ALL WARRANTIES.
(3) WorldCASE/Foundation Environment includes JDE's Address Book, Electronic
Mail, Menu Manager, DREAM Writer, Security Officer, Documentation System, Next
Number, User Defined Category Codes, Data Directory, World Writer, and
Unattended Night Operations.
(4) Payroll requires PAYROLLTAXTM to be licensed directly from Vertex Systems,
Inc. for an additional fee.
(5) Equipment Management includes Fixed Assets and Work Orders; these products
should not be ordered concurrently.
This Agreement, including the terms and conditions on the reverse side, is the
complete and entire understanding of the parties unless otherwise stated hereon.
THIS AGREEMENT SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is duly authorized to execute
______________________, 19____ this Agreement on behalf of Customer
J.D. EDWARDS & COMPANY CUSTOMER
By_______________________________ By__________________________________
(Authorized Signature) (Authorized Signature)
- --------------------------------- ---------------------------------
(Print or Type Name) (Print or Type Name)
- --------------------------------- ---------------------------------
(Title) (Title)
<PAGE> 8
SOFTWARE LICENSE AGREEMENT
1. LICENSE USE The Licensed Products are to be used by Customer on a single
serial- numbered computer processing unit. The Licensed Products are not to be
copied by Customer or used by others without the written permission of JDE
except for Customer's production, backup, archival, and disaster recovery
purposes. The Licensed Products may be used only by Customer and entities under
common control and ownership with Customer but not for commercial timesharing or
service bureau or other rental or sharing arrangements. The Licensed Products
may be used only in the country in which they are first installed and may only
be moved to another country with the prior written permission of JDE.
2. LIMITED WARRANTY (A) JDE warrants to Customer that it has full power and
authority to grant this License. JDE further warrants that for a period of six
(6) months following the date of this License, the Licensed Products will
perform substantially in accordance with the JDE published product
specifications in effect at the date of this Agreement. JDE further warrants
that the JDE published product specifications are accurate in all material
respects; however, the Licensed Products are subject to continued revision and
may, at times, be at variance with such published product specifications and may
contain minor defects or errors, (B) JDE warrants that its products are in use
by its customers with apparent satisfaction, however, Customer is ultimately
responsible for the adequacy of the Licensed Products in Customer's intended
application and use. (C) During the warranty period, JDE agrees to correct all
substantive errors in the unmodified Licensed Products as reported in writing by
Customer and Customer will be entitled to all corrections and/or enhancements to
the unmodified Licensed Products, at no charge. Such corrections and/or
enhancements shall be part of the Licensed Products. (D) JDE shall have no
responsibility for problems in the Licensed Products caused by alterations or
modifications thereto, arising out of the malfunction of Customer's equipment or
other software products not supplied by JDE, or for delays or interruptions in
the delivery, installation or operation of the Licensed Products caused by
events beyond the reasonable control of JDE. (E) Customer shall have ninety (90)
days following delivery of the Licensed Products to Customer's first designated
site to verify that the Licensed Products substantially conform with JDE
published product specifications. Upon receipt of Customer's written notice of
any material nonconformance, JDE shall correct such nonconformance or provide a
mutually acceptable plan for correction by the later of: ninety (90) days
following delivery; or thirty (30) days following the receipt of Customer's
notice by JDE, Should JDE fail to provide such correction or plan by such date,
Customer's sole and exclusive remedy shall be to terminate this Agreement by
written notice, and notwithstanding the payment provisions hereof, receive a
refund of the Software License Fees paid. Such notice of termination must be
received by JDE within ten (10) days following tile date for correction or plan
provision and shall be in accord with the termination provisions hereof. (F)
THIS AGREEMENT IS A LICENSE AND IS NOT A SALE OF GOODS AND EXCEPT AS EXPRESSLY
SET FORTH HEREIN, THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT
NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. (G) JDE makes no warranties regarding any third party
products licensed hereunder; however, JDE shall assign to Customer any
warranties received by JDE from such third party.
3. MANAGEMENT, CONTROL AND IMPLEMENTATION JDE will provide assistance to
Customer for implementation and installation in accord with the terms of this
Agreement; however, Customer shall be responsible for the management, internal
control, and implementation of the Licensed Products, including acquiring
adequate computer hardware, insuring proper machine configuration and program
installation. JDE recommends as part of the implementation of the Licensed
Products that Customer operate the Licensed Products in parallel with existing
systems and procedures until Customer has completed the implementation.
4. PROPRIETARY RIGHTS (A) Customer recognizes that the Licensed Products
provided under this Agreement have substantial monetary value and are considered
TRADE SECRET, PROPRIETARY and/or CONFIDENTIAL material of JDE, and that JDE
retains ownership of all rights, title and interest to its Licensed products.
All enhancements and modifications made by JDE will remain proprietary to JDE;
however, JDE grants to Customer a non-exclusive license to use such enhancements
and modifications without additional payment. Customer acknowledges that the
Licensed Products bear a copyright legend which in no way reduces the trade
secret, proprietary, and/or confidential nature of the Licensed Products. Each
Licensed Product consists of source and object code for application programs and
control language procedures but source code for operations control and utility
programs, including report writers, and for any third party provided Licensed
Products will be withheld for security reasons. Customer agrees to exercise due
care to prevent disclosure of the Licensed Products, and the terms and
conditions of this Agreement, utilizing the same safeguards afforded its own
confidential information. Confidential information shall not include information
in the public domain, information already in the possession of Customer,
information obtained from other sources without obligations of confidentiality,
information independently developed, or information required by court or
government order. Further, Customer agrees: not to reverse engineer or
distribute the Licensed Products or any part thereof; to take all reasonable
steps to insure that the Licensed Products, and the trade secret, confidential
and proprietary information contained therein are not disclosed to any person
other than Customer's employees, consultants or agents who have a need for
access in order to use them; and not to remove the copyright, trade secret or
other proprietary protection legends or notices which appear on or in the
Licensed Products. (B) CUSTOMER ACKNOWLEDGES THAT JDE HAS INSTALLED DISABLING
PROCEDURES IN THE LICENSED PRODUCTS. IF THERE OCCURS ANY UNAUTHORIZED USE OF THE
LICENSED PRODUCTS, SUCH DISABLING PROCEDURES WOULD RENDER THE LICENSED PRODUCTS
INOPERABLE. (C) Customer agrees to notify JDE immediately of any unauthorized
possession, use or knowledge of any Licensed Products. Customer shall promptly
furnish JDE with full details of such situation and assist in preventing any
recurrence thereof and cooperate at JDE's expense in any litigation or other
proceedings reasonably necessary to protect JDE's rights.
5. RIGHT TO MODIFY Customer has the right to modify the Licensed Products
without the consent of JDE; however, CUSTOMER UNDERSTANDS THAT JDE MAKES NO
WARRANTY, EXPRESSED OR IMPLIED, REGARDING ANY MODIFIED PORTIONS OF THE LICENSED
PRODUCTS and that no modifications shall reduce JDE's ownership of the Licensed
Products.
6. PAYMENT (A) In consideration for the License granted hereunder, Customer will
pay to JDE on a non-refundable basis, except as provided in Limited Warranty,
the Software License Fee for the Licensed Products. Customer agrees to pay
seventy-five percent (75%) of the Software License Fees upon the execution of
this Agreement, and the remaining twenty-five percent (25%) within thirty (30)
days after delivery of the Licensed Products. (B) After the expiration of the
warranty period, warranty extensions and maintenance services are provided for a
time and materials billing or by separate agreement at JDE's then current price,
terms, and conditions and shall be in addition to any other charges provided for
herein. (C) Training, installation assistance, consulting, custom design, and
computer programming services are provided for a time and materials billing or
by separate agreement at JDE's then current standard hourly rates and shall be
in addition to any other charges provided for herein. (D) In addition to the
charges due under this Agreement, and even if Customer shall provide a tax
exemption number or affidavit of exemption, Customer shall be responsible for
all taxes including sales, use, property, excise, value added and gross receipts
levied on this Agreement or the Licensed Products, except taxes based on JDE's
net income. (E) Customer agrees to notify IDE of any model change to a processor
and that any such model change may result in a change to the Software License
Fees equal to the difference in the respective model fee amounts, due upon the
date of the change, but no refunds shall be paid upon Software License Fees
already due or paid. (F) Customer agrees to pay for all uncontested amounts due
under this Agreement within thirty (30) days after the date of invoice. Customer
shall have thirty (30) days after the invoice date to contest in good faith the
amounts and items charged. Past due uncontested amounts will bear interest of
one and one-half percent (1 1/2%) per month from the due date or the highest
rate permitted by law if less.
7. EMPLOYEE RECRUITING Customer acknowledges that JDE's employees are critical
to the servicing of JDE's customers. Customer agrees not to employ or otherwise
engage JDE's employees for a period of six (6) months following any employee's
service to Customer. Should Customer violate this provision, Customer will pay
JDE fifty percent (50%) of the former employee's annual salary.
8. ARBITRATION All disputes involving this Agreement, except actions arising
under the copyright provision of Title 17 of the U.S. Code, shall be determined
under the law of the State of Colorado and shall be submitted to an arbitrator
appointed and operating under the Uniform Arbitration Act and the procedural
rules of the American Arbitration Association. The location of the arbitration
hearing will be chosen by the party not initiating the arbitration or action.
The written decision of the arbitrator shall be final, binding and convertible
to a Court judgement in any appropriate jurisdiction.
9. TERMINATION If either party breaches this Agreement, the other party may give
written notice of its desire to terminate and the specific grounds for
termination and, if the party in default fails to cure the default within thirty
(30) days of the notice, the other party may terminate this Agreement. Upon
termination, the License to use the Licensed Products shall be immediately
revoked and all Licensed Products and supporting materials will be returned to
JDE or destroyed and an affidavit supplied to JDE certifying destruction.
Confidentiality obligations shall survive this Agreement.
10. LIMITED LIABILITY (A) JDE will indemnify Customer from any claim (including
reasonable legal fees) of other persons or entities of infringement of United
States patents, copyrights, trade secrets or proprietary rights by use of the
Licensed Products, so long as Customer promptly notifies JDE of and permits JDE
to defend such claims. (B) Customer and JDE each agree to indemnify the other
from and against all costs and liabilities including reasonable attorney's fees
which each may be required to pay arising out of injuries to persons or damage
to property (including data) pertaining to the furnishings of services or the
Licensed Products, whatsoever and howsoever caused, except where the same shall
be caused by tile negligence or willful misconduct of the other party, its
agents, or employees; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO ANY PERSON (EXCEPT FOR THE FAILURE TO COMPLY WITH THE PROPRIETARY
RIGHTS PROVISION OF SECTION 4(A) HEREOF) FOR ANY LOSS OR INJURY TO EARNINGS,
PROFITS OR GOODWILL, OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
PERSON, WHATSOEVER AND HOWSOEVER CAUSED EVEN IF ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
11. GENERAL (A) The waiver of one breach hereunder shall not constitute the
waiver of any other or subsequent breach. (B) All notices shall be in writing
and sent by certified mail, postage prepaid, return receipt requested to the
address written above or such other address as notified to the other party and
such notice shall be deemed to be made on the fifth day after such mailing. (C)
No amendments, modifications or supplements to this Agreement shall be binding
unless in writing and signed by both parties. (D) No action, regardless of form
arising out of this Agreement may be brought by either party more than one (1)
year after the cause of arbitration or action arose. (E) Customer understands
that JDE's Authorized Affiliate is not an employee of JDE and is an independent
entity and has no express or implied authority to bind JDE, nor is JDE liable
for any acts of Authorized Affiliate which are outside the scope of its agency.
(F) All future licenses of additional software by Customer shall come under the
terms and conditions herein subject to the then current prices and each party
shall have the same rights, duties and privileges with respect to such
subsequent transaction as is established by the terms of this Agreement. (G) If
any provision of this Agreement is held to be unenforceable, such decision shall
not affect the validity or enforceability of the remaining provisions. (H) This
Agreement may be executed in two or more identical copies, each of which shall
be an original. (1) All monetary amounts are in United States dollars, payable
in ready funds through a United States bank. (J) CUSTOMER AGREES THAT THIS
AGREEMENT, INCLUDING THE ATTACHMENTS AND AMENDMENTS, IF ANY, WHICH ARE A PART
HEREOF, IS A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE
PARTIES, WHICH SUPERSEDES ALL PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS,
WHETHER ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. (K) In the event Customer
issues a purchase order or other instrument covering the subject matter of this
Agreement, it is understood and agreed that such purchase order is for
Customer's internal use and shall not affect this Agreement.
<PAGE> 9
EXHIBIT A
JDEdwards SOFTWARE UPDATE AGREEMENT
8055 E. Tufts Avenue
Denver, Colorado 80237
Customer
Address
JD. Edwards && Company ("JDE") provides to Customer and Customer accepts,
subject to the terms and conditions of this Software Update Agreement
("Agreement"), the Response Line/Software Updates services indicated below:
Designated Processor: IBM AS/400TM Model:_____________
Software License Agreement dated:_____________________
Licensed Products: The Licensed Products shall be defined as all of and only be
Licensed Products under the Software License Agreement and its Attachments and
Addenda which are licensed for the Designated Processor and for which JDE has
expressly agreed to offer a warranty that the Licensed Products will perform
substantially in accordance with the JDE published specifications.
Start Date:_______________________________
Period of Coverage:______ (___) year(s) plus initial pro-rated partial year if
checked. The Period of Coverage is the time during which the Response
Line/Software Updates services shall be available under this Agreement. Unless
cancelled by either party by written notice no less than thirty (30) days prior
to the end of the Period of Coverage or extended by written agreement of both
parties effective no later than the end of the Period of Coverage, this
Agreement and the Period of Coverage shall automatically extend for one (1) year
at the then current prices.
Reinitiation Charge: $____________
Software Update Fee: $____________
Total: $____________
(Plus taxes where applicable)
This Agreement, including the terms and conditions on the reverse side, is the
complete and entire understanding of the parties unless otherwise stated hereon.
THIS AGREEMENT SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is duly authorized to execute
______________________, 19____ this Agreement on behalf of Customer
J.D. EDWARDS & COMPANY CUSTOMER
By_______________________________ By__________________________________
(Authorized Signature) (Authorized Signature)
- --------------------------------- ---------------------------------
(Print or Type Name) (Print or Type Name)
- --------------------------------- ---------------------------------
(Title) (Title)
<PAGE> 10
SOFTWARE UPDATE AGREEMENT
1. SOFTWARE UPDATES/RESPONSE LINE PROVISION (A) Software Update Services provide
program updates and new system versions after warranty expiration. These updates
include at no additional charge the time incurred to evaluate program problems,
correct program errors, copy the program from JDE's computer, and mail/delivery
charges. Perfect compatibility for blending of old and new versions cannot be
assured. (B) Response Line Services provide unlimited telephone support during
Response Line hours (7:00 AM - 6:00 PM Mountain Time Zone, Monday-Friday). This
support includes at no additional charge telephone and research time performed
by the Response Line staff, incoming WATTS line within the U.S. and outgoing
long distance charges. Note, however, that Response Line Services do NOT cover
training, set-up of hardware or software, and programming consultation.
Additional times of coverage may be available by written agreement of the
parties and at JDE's then current prices, terms, and conditions.
2. LIMITED WARRANTY (A) JDE warrants that during the period of Coverage, the
Licensed Products will perform substantially in accordance with the JDE
published product specifications in effect at the date of this Agreement and as
amended by JDE from time to time thereafter. JDE further warrants that the JDE
published product specifications are accurate in all material respects; however,
the Licensed Products are subject to continued revision and may, at times, be at
variance with such published product specifications and may contain minor
defects or errors. During the Period of Coverage, JDE agrees to correct all
substantive errors in the unmodified Licensed Products as reported in writing by
Customer and Customer will be entitled to all corrections and/or enhancements to
the unmodified Licensed Products, at no additional charge. Such corrections
and/or enhancements shall be part of the Licensed Products and subject to the
terms and conditions of the Software License Agreement. If Customer is not
subscribing to Software Updates or under the initial warranty coverage of the
Software License Agreement, as of the effective date, JDE will charge a fee for
reinitiating. (B) Provided Customer has installed the current version of the
Licensed Products within six (6) months after formal release and met the other
terms and conditions of this Agreement, including payment of the Software Update
fee, JDE will correct errors in the unmodified Licensed Products. (C) JDE shall
have no responsibility for problems in the Licensed Products caused by
alterations or modifications thereto, arising out of the malfunction of
Customer's equipment or other software products not supplied by JDE, or for
delays or interruptions in the delivery, installation or operation of the
Licensed Products caused by events beyond the control of JDE. (D) EXCEPT FOR
THIS LIMITED WARRANTY, JDE AND CUSTOMER ACKNOWLEDGE THERE ARE NO WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE (E) JDE makes no warranties
regarding any third party products licensed under the Software License Agreement
hereunder or any software supplied under the Software Services Agreement.
3. RIGHT TO MODIFY Customer has the right to modify the Licensed Products
without the consent of JDE; however, CUSTOMER UNDERSTANDS THAT JDE MAKES NO
WARRANTY, EXPRESSED OR IMPLIED, REGARDING ANY MODIFIED PORTIONS OF THE LICENSED
PRODUCTS and that no modifications shall reduce JDE's ownership of the Licensed
Products.
4. PAYMENT (A) JDE reserves the right to revise its fee schedules on January 1
and July 1 while not changing any prices hereunder which have been prepaid. (B)
Software Update Fees are payable by Customer as an annual charge with the first
payment due at the expiration of the warranty period of the Software License
Agreement and prorated to December 31. If Customer fails to remit Software
Update Fees, this Agreement will be void. (C) Training, installation assistance,
consulting custom design, and computer programming services are provided at time
and materials charges or by separate agreement at JDE's then current standard
hourly rates and shall be in addition to any other charges provided for herein.
(D) In addition to the charges due under this Agreement, and even if Customer
shall provide a tax exemption number or affidavit of exemption, Customer shall
be responsible for all taxes including sales, use, property, excise, value added
and gross receipts levied on this agreement or the Licensed Products, except
taxes based on JDE's net income. (E) Customer agrees to notify JDE of any model
change to a processor and that any such model change may result in a change to
the Software Update Fees equal to the difference in the respective model fee
amounts, due upon the date of the change, with the new processor fee amount at
the then current price, and any reduction in prepaid fees shall be paid as a
credit to Customer's account. (F) Customer agrees to pay for all uncontested
amounts due under this Agreement within thirty (30) days after the date of
invoice. Customer shall have thirty (30) days after the invoice date to contest
in good faith the amounts and items charged. Past due uncontested amounts will
bear interest of one and one-half percent (1 1/2%) per month from the due date
or the highest rate permitted by law if less.
5. EMPLOYEE RECRUITING Customer acknowledges that JDE's employees are critical
to the servicing of JDE's customers. Customer agrees not to employ or otherwise
engage JDE's employees for a period of six (6) months following any employee's
service to Customer. Should Customer violate this provision, Customer will pay
JDE fifty percent (50%) of the former employee's annual salary.
6. ARBITRATION All disputes involving this Agreement, except actions arising
under the copyright provisions of Title 17 of the U.S. Code, shall be determined
under the laws of the State of Colorado and shall be submitted to an arbitrator
appointed and operating under the Uniform Arbitration Act and the procedural
rules of the American Arbitration Association. The location of the arbitration
hearing will be chosen by the party not initiating the arbitration or action.
The written decision of the arbitrator shall be final, binding and convertible
to a Court judgement in any appropriate jurisdiction.
7. TERMINATION If either party breaches this Agreement, the other party may give
written notice of its desire to terminate and the specific grounds for
termination and, if the Party in default fails to cure the default within thirty
(30) days of the notice, the other party may terminate this Agreement. Upon
termination, all warranties hereunder shall be void and any services shall be
provided only on a time and materials basis. Removal of a Software Update
Agreement after a lapse of Period of Coverage is subject to JDE's acceptance and
reinitiation fee. Any prepaid Software Update Fees shall be refunded, prorated
to the date of termination. Confidentiality obligations shall survive this
Agreement.
8. LIMITED LIABILITY Customer and JDE each agree to indemnify the other from and
against all costs and liabilities including reasonable attorney's fees which
each may be required to pay arising out of injuries to persons or damage to
property (including data) pertaining to the furnishings of services or the
Licensed Products, whatsoever and howsoever caused, except where the same shall
be caused by the negligence or willful misconduct of the other party, its
agents, or employees: PROVIDED, HOWEVER, THAT IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO ANY PERSON FOR ANY LOSS OR INJURY TO EARNINGS, PROFITS OR GOODWILL, OR
FOR ANY INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY PERSON, WHATSOEVER AND
HOWSOEVER CAUSED EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
9. GENERAL (A) The waiver of one breach hereunder shall not constitute the
waiver of any other or subsequent breach. (B) All notices shall be in writing
and sent by certified mail, postage prepaid, return receipt requested to the
address written above or such other address as notified to the other party and
such notice shall be deemed to be made on the fifth day after such mailing. (C)
No amendments, modifications or supplements to this Agreement shall be binding
unless in writing and signed by both parties. (D) No action, regardless of form
arising out of this Agreement may be brought by either party more than one (1)
year after the cause of arbitration or action arose. (E) All future Software
Update services shall come under the terms and conditions herein subject to the
then current prices and each party shall have the same rights, duties and
privileges with respect to such subsequent transaction as is established by the
terms of this Agreement. (F) If any provision of this Agreement is held to be
unenforceable, such decision shall not affect the validity or enforceability of
the remaining provisions. (G) This Agreement may be executed in two or more
identical copies, each of which shall be an original. (H) All monetary amounts
are in United States dollars, payable in ready funds through a United States
bank. (I) CUSTOMER AGREES THAT THIS AGREEMENT, INCLUDING THE ATTACHMENTS AND
AMENDMENTS, IF ANY, WHICH ARE A PART HEREOF IS A COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL PRIOR OR
CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND ALL OTHER
COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT. (J) In the event Customer issues a purchase order or other instrument
covering the subject matter of this Agreement, it is understood and agreed that
such purchase order is for Customer's internal use and shall not affect this
Agreement. (K) In performing the services to be provided herein, JDE and
Customer are independent contractors and are not to be considered agents for
employees of the other party for any purpose.
<PAGE> 11
EXHIBIT B
(Competitors)
SSA
JBA
Marcam
American Software
Lawson
Page 7
<PAGE> 12
Exhibit I
(Programs)
GUI/400 Run Time System
Page 8
<PAGE> 13
ADDENDUM J. D. Edwards & Company
8055 East Tufts Avenue
Denver, Colorado 80237
Licensor_____________________________________________________________________
Address______________________________________________________________________
This Addendum is made by and between J.D. Edwards & Company, a Colorado
Corporation, ("JDE"), and Licensor in consideration of the mutual promises and
subject to the terms and conditions set forth herein. This Addendum amends the
Marketing and Software License Agreement ("Agreement"), by and between JDE and
Licensor.
=== ] (Insert any negotiated changes to the Agreement or its Attachments here)
THIS ADDENDUM, INCLUDING ITS TERMS AND CONDITIONS AND THE AGREEMENT OF WHICH IT
IS A PART, IS A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE
PARTIES, WHICH SUPERSEDES ALL PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS,
WHETHER ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES
RELATING TO THE SUBJECT MATTER OF THIS ADDENDUM AND THE AGREEMENT.
Notwithstanding anything to the contrary in the Agreement, in the event of a
conflict between the terms and conditions of this Addendum and those contained
within the Agreement, the terms and conditions of this Addendum shall prevail.
THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY LICENSOR AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is authorized to execute this
______________________, 19____ Agreement on behalf of Licensor
J.D. EDWARDS & COMPANY LICENSOR
By_______________________________ By__________________________________
(Authorized Signature) (Authorized Signature)
- --------------------------------- ---------------------------------
(Print or Type Name) (Print or Type Name)
- --------------------------------- ---------------------------------
(Title) (Title)
Page 9
<PAGE> 1
EXHIBIT 10.2
CREDIT AGREEMENT
By and Between
WELLS FARGO BANK (COLORADO), N.A.,
as a Lender and as Agent Bank
HARRIS TRUST AND SAVINGS BANK,
as a Lender,
KEY BANK OF COLORADO,
as a Lender,
and
J.D. EDWARDS & COMPANY,
as a Borrower,
J.D. EDWARDS WORLD SOLUTIONS COMPANY,
as a Borrower,
J.D. EDWARDS WORLD SOURCE COMPANY,
as a Borrower
August 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions 1
2. The Loan 1
2.1 Revolving Loan 1
2.2 Purpose 1
3. Letter of Credit Accommodations 2
3.1 Amount 2
3.2 Purpose 2
3.3 Draws Constitute Advances 2
3.4 Application for Issuance of Letters of Credit 2
3.5 Form of Letter of Credit 2
3.6 Expiration Date 2
3.7 Letter of Credit Fees 2
3.8 Indemnification for Acts of Beneficiary 3
3.9 Syndication Parties to Receive a Copy of All
Letters of Credit Issued by Agent 3
4. Interest and Fees 3
4.1 Variable Rate 3
4.2 Libor Rate 3
4.3 Matrix Spread 4
4.4 Default Interest Rate 4
4.5 Minimum Principal Amount of Variable Rate Loans
and Libor Loans 4
4.6 360-Day Year 5
4.7 Additional Provisions for Libor Loans 5
4.8 Agent Fee; Arrangement Fee 6
4.9 Unused Line Fee 6
5. Payments 7
5.1 Notes 7
5.2 Interest Payments 7
5.3 Principal Payments 7
5.4 Voluntary Prepayments 8
5.4.1 Voluntary Prepayment of Variable Rate Loan 8
5.4.2 Voluntary Prepayment of Libor Loans 8
5.4.3 Minimum Amount of Voluntary Prepayments 8
5.5 Mandatory Prepayment on Account of Commitment
Amount 8
5.6 Funding Losses 8
5.7 Prepaid Principal May Be Reborrowed 9
5.8 Reduction of Aggregate Commitment Amount by
Borrowers 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.9 Payments on Business Days; Date That Payments and
Prepayments Are Deemed Received 9
5.10 Payments Free and Clear of Taxes 9
5.11 Payments to be Made United States Dollars 10
6. Conditions Precedent 10
6.1 Conditions to Initial Advance 10
6.1.1 Representations and Warranties 10
6.1.2 No Event of Default 10
6.1.3 Receipt of Loan Documents 10
6.1.4 Advance Request 10
6.1.5 Legal Opinion 10
6.1.6 Organizational Documents 10
6.1.7 Evidence of Corporate Action 11
6.1.8 Authorized Representatives 11
6.1.9 Officer's Certificate 11
6.1.10 Evidence of Insurance 11
6.1.11 Evidence of Consents 11
6.1.12 Fees and Expenses 11
6.1.13 No Material Adverse Change 12
6.1.14 Other Documents 12
6.1.15 Appointment of The Corporation Company 12
6.2 Conditions to All Subsequent Advances 12
6.2.1 Representations and Warranties 12
6.2.2 No Event of Default 12
6.2.3 No Material Adverse Change 12
6.2.4 Advance Request 12
6.3 Conditions to Issuance of Letters of Credit 13
6.3.1 Application and Reimbursement Agreement 13
6.3.2 Fees 13
6.3.3 Agent 13
6.4 Additional Disbursement Conditions 13
6.4.1 Aggregate Commitment Amount; LC Commitment
Amount 13
6.4.2 Construction Commitment Amount 13
6.4.3 Disbursement Period 14
6.4.4 Illegality of Loan 14
6.5 Closing 14
7. Borrowers' Representations and Warranties 14
7.1 Organization and Existence 14
7.2 Corporate Authority, Due Authorization; Consents 14
7.3 Title to Properties 14
7.4 Litigation 14
7.5 No Violations 15
7.6 Binding Agreement 15
7.7 Compliance with Laws 15
7.8 Material Agreements 15
7.9 Financial Statements; No Material Adverse Change 15
7.10 Payment of Taxes 15
7.11 Licenses and Approvals 16
7.12 Employee Benefit Plans 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.12.1 Employee Benefit Plans; Multiemployer
Plans 16
7.12.2 Pension Benefits 16
7.12.3 Compliance by Administrator 16
7.12.4 Annual Reports 17
7.12.5 Prohibited Transactions 17
7.12.6 Bonding 17
7.12.7 Civil/Criminal Action 17
7.12.8 Funding 17
` 7.12.9 Compliance With Law 17
7.12.10 Multiple Employer Plan 18
7.12.11 Plan Termination Liability 18
7.12.12 Pension Plan Termination 18
7.12.13 Reportable Event 18
7.12.14 Payment of Contributions 18
7,12.15 Welfare Benefit Plans 18
7.12.16 ESOP 19
7.13 Capitalization of Borrower 19
7.14 Subsidiaries 19
7.15 Environmental Compliance 19
7.16 Intellectual Property 20
7.17 Regulations U and X 20
7.18 Fiscal Year 20
7.19 Disclosure 20
7.20 Continuing Nature 20
8. Borrowers' Affirmative Covenants and Agreements 21
8.1 Books and Records 21
8.2 Reports and Notices 21
8.2.1 Annual Financial Statements 21
8.2.2 Quarterly Financial Statements 21
8.2.3 Additional Information 21
8.2.4 Annual Projections 22
8.2.5 Notice of Default under Other Financing 22
8.2.6 Notice of Default 22
8.2.7 Notice of Actions 22
8.2.8 Notice of Material Change 22
8.2.9 Notification of Claims by Contractors and
Materialmen 22
8.2.10 ERISA 22
8.2.11 Change of Control 23
8.2.12 SEC Statements 23
8.2.13 Hazardous Materials 23
8.3 Maintenance of Existence 23
8.4 Compliance with Legal Requirements and Agreements 23
8.5 Compliance with Environmental Laws 23
8.6 Insurance 24
8.7 Taxes 24
8.8 Title to Assets and Maintenance 24
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.9 Payment of Liabilities 24
8.10 Inspection 25
8.11 Management 25
8.12 Licenses 25
8.13 Financial Covenants 25
8.13.1 Quick Ratio 25
8.13.2 Leverage Ratio 25
8.13.3 Coverage Ratio 25
8.14 ERISA 25
8.15 Additional Costs of Maintaining Loan 26
8.16 Reimbursement for Additional Capital
Requirements 27
8.17 Hazardous Substances Indemnifications 27
8.18 Indemnification 27
8.19 Further Assurances 28
9. Borrowers' Negative Covenants and Agreements 28
9.1 Change in Business 28
9.2 Change in Business Form 28
9.3 Acquisitions 28
9.4 Mergers 28
9.5 Recapitalization 29
9.6 Dividends and Distributions 29
9.7 Sale of Assets 29
9.8 Indebtedness 30
9.9 Encumbrances 30
9.10 Loans, Advances and Guarantees 31
9.11 Investment 31
9.12 Use of Proceeds 32
9.13 ERISA 32
9.14 Capital Expenditures 32
9.15 Profitability 32
10. Events of Default/Remedies 32
10.1 Failure to Pay 32
10.2 Failure to Perform Certain Covenants 33
10.3 Failure to Perform Other Covenants 33
10.4 Bankruptcy/Insolvency 33
10.5 False Representations or Warranties 33
10.6 Default Under Other Indebtedness 33
10.7 Judgment 33
10.8 Dissolution 34
10.9 Change of Control 34
10.10 Material Adverse Change 34
10.11 Remedies 34
11. Agency Agreement 34
11.1 Purchase and Sale of Syndication Interest 34
11.2 Syndication Parties' Obligations to Remit Funds 35
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.3 Notice and Timing of Initial Payment and Each
Advance Payment 35
11.4 Syndication Party's Failure to Remit Funds 36
11.5 Agency Appointment 37
11.6 Power and Authority of Agent 37
11.7 Duties of Agent 38
11.8 Agent's Resignation or Removal 38
11.9 Consent Required for Certain Actions 38
11.10 Distribution of Principal and Interest 39
11.11 Distribution of Certain Fees and Amounts 40
11.12 Loan Documents 40
11.13 Collateral Application 40
11.14 Amounts Required to be Returned 41
11.15 Reports and Information to Syndication Parties 41
11.16 Standard of Care 42
11.17 No Trust Relationship 42
11.18 Sharing of Costs and Expenses 42
11.19 Syndication Parties' Indemnification of Agent 42
11.20 Books and Records 43
11.21 Agent Fee 43
11.22 Representations and Warranties of All Parties 43
11.23 Representations and Warranties of Wells Fargo 44
11.24 Syndication Parties' Independent Credit
Analysis 44
11.25 No Joint Venture or Partnership 45
11.26 Purchase for Own Account/Restrictions on
Transfer 45
11.27 Method of Making Payments 46
11.28 Events of Syndication Default/Remedies 46
11.29 Further Assurances 47
12. Miscellaneous Provisions 47
12.1 Definitions 47
12.2 No Waiver 54
12.3 Notices 54
12.3.1 Borrowers 54
12.3.2 Syndication Parties 55
12.3.3 Agent 55
12.4 Entire Agreement 56
12.5 Colorado Law 56
12.6 Amendment 56
12.7 Severability/Titles 56
12.8 Counterparts 56
12.9 Waiver of Jurisdiction, Service of Process, and
Jury Trial 56
12-10 Arbitration 58
12.11 Successors and Assigns 60
12.12 Termination and Mutual Release 60
12-13 Costs and Expenses 60
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
12.14 Replacement Notes 61
12.15 Notice to Syndication Parties and Agent 61
12.16 Joint and Several Liability 61
</TABLE>
vi
<PAGE> 8
EXHIBITS
Exhibit 5.1 Form of Note
Exhibit 6.1.4 Form of Advance Request
Exhibit 7.3 Permitted Encumbrances and Condition of
Assets
Exhibit 7.4 Litigation
Exhibit 7.8 Material Agreements
Exhibit 7.12 Employee Benefit Plans
Exhibit 7.13 Capitalization of Borrowers
Exhibit 7.14 Subsidiaries
Exhibit 7.15 Environmental Matters
Exhibit 7.16 Intellectual Property
Exhibit 9.11.1 Investment Policy
Exhibit 9.11.2 Existing Investments
Exhibit 11.3.1 Form of Initial Payment Notice
Exhibit 11.3.2 Form of Loan Notice of Advance
Exhibit 11.3.3 Form of LC Notice of Advance
Exhibit 11.27 Wire Instructions
Exhibit 12.1 Form of Compliance Certificate
Exhibit 12.1(a) Legal Description
vii
<PAGE> 9
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is entered into as of the 1st day of
August, 1996, by and between WELLS FARGO BANK (COLORADO), N.A. ("Wells Fargo")
for its own benefit as a lender (in that capacity sometimes referred to as
"Wells Fargo") and, as Agent Bank for the benefit of the present and future
Syndication Parties (in that capacity "Agent"), HARRIS TRUST AND SAVINGS BANK
("Harris Bank") as a lender, KEY BANK OF COLORADO ("Key Bank") as a lender, and
J.D. EDWARDS & COMPANY ("Holding Company"), as a borrower, J.D. EDWARDS WORLD
SOLUTIONS COMPANY ("World Solutions"), as a borrower, and J.D. EDWARDS WORLD
SOURCE COMPANY ("World Source"), (Holding Company, World Solutions and World
Source shall be collectively referred to herein as "Borrowers").
A G R E E M E N T
For good and valuable consideration, including the mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. Definitions. Certain capitalized terms are used in this Agreement as
specifically defined herein. These definitions are set forth or referred to in
Section 12.1 hereof.
2. The Loan. The Syndication Parties agree to make, in accordance with
their respective Syndication Shares, the following loan ("Loan") to Borrowers:
2.1 Revolving Loan. A revolving line of credit loan ("Revolving Loan") on
the terms and conditions contained herein, with the maximum amount thereof
available to, or for the benefit of, Borrowers at any time being limited to (a)
$50,000,000.00 ("Aggregate Commitment Amount"), less (b) the undrawn face amount
of all Letters of Credit (as defined below) issued hereunder. All funds advanced
under the Revolving Loan may, to the extent repaid, be reborrowed at any time
prior to July 31, 1999 ("Termination Date"), subject to the terms and conditions
set forth herein,
2.2 Purpose. Borrowers agree to use the proceeds of the Loan only for (a)
working capital requirements and other general corporate purposes in connection
with its normal operations and (b) funding the construction of the Headquarters
Building ("Construction"); provided, however that the aggregate amount of Loan
proceeds used to fund the Construction shall not exceed $5,000,000.00
("Construction Commitment Amount") unless Borrowers have obtained, and the
Required Lenders have approved in their reasonable discretion, either a
commitment for the permanent financing of all Advances disbursed and to be
disbursed
<PAGE> 10
for the Construction or an agreement between Borrowers and a third party which
is not an affiliate of Borrowers for the purchase of the Headquarters Building
from Borrowers.
3. Letter of Credit Accommodations. The Syndication Parties agree to cause
Agent to issue standby letters of credit (each, a "Letter of Credit") for the
account of Borrowers, or any of them, as follows:
3.1 Amount. The face amount of each such Letter of Credit issued
hereunder: (a) when added to the principal then outstanding under the Notes
shall not exceed the Aggregate Commitment Amount less the undrawn face amount of
all other Letters of Credit outstanding; and (b) when added to the undrawn face
amount of all other outstanding Letters of Credit, shall not exceed
$10,000,000.00 ("LC Commitment Amount"),
3.2 Purpose. Letters of Credit may be requested for any purpose set forth
in Section 2.2 and for any other purpose approved by Agent in its sole
discretion.
3.3 Draws Constitute Advances. The amount of each draw paid under each
Letter of Credit (a) shall be deemed to be an Advance and shall be added to the
outstanding principal balance of the Notes on the date such draw is honored, and
(b) shall bear interest at the Variable Rate.
3.4 Application for Issuance of Letters of Credit. A Borrower shall be
required to complete Agent's standard application and reimbursement agreement
for each Letter of Credit to be issued hereunder. Each reimbursement agreement
shall be executed for the benefit of Agent and the Syndication Parties, and
Borrower shall be obligated to pay to Agent for the account of the Syndication
Parties according to their respective Syndication Shares, the amount payable
under the applicable reimbursement agreement for a draw under a Letter of
Credit, either as a payment on the Principal Amount or as a direct payment under
the reimbursement agreement.
3.5 Form of Letter of Credit. Each Letter of Credit shall be issued on
Agent's standard form of standby letter of credit.
3.6 Expiration Date. No Letter of Credit may have an expiration date which
is more than twelve (12) months from the date of issuance of such Letter of
Credit, and in no event shall the expiration date of any Letter of Credit be
later than July 31, 2000.
3.7 Letter of Credit Fees. Borrowers shall pay Agent a fee ("Letter of
Credit Fee"), for the account of the Syndication Parties according to their
respective Syndication
2
<PAGE> 11
Shares, with respect to each Letter of Credit issued or renewed pursuant to this
Credit Agreement equal to the greater of 80 basis points of the face amount of
each Letter of Credit or $250.00, each such Letter of Credit Fee to be paid upon
the issuance or renewal of each Letter of Credit. Borrowers shall pay Agent such
other fees with respect to each Letter of Credit, such as fees for amendment,
transfer or negotiation of a Letter of Credit, as are charged by Agent in
accordance with its then current fee policy in effect for letters of credit
("Letter of Credit Fee Policy").
3.8 Indemnification for Acts of Beneficiary. Borrowers assume all risks
with respect to, and indemnify and holds Agent harmless from and against any and
all losses, claims, damages, liabilities, costs and expenses which Agent may
suffer or incur on account of, the acts or omissions of the beneficiary of any
Letter of Credit, and for such purposes, the beneficiary shall be deemed
Borrowers' agent; provided, however, that nothing herein shall relieve Agent of
responsibility for its gross negligence or willful misconduct.
3.9 Syndication Parties to Receive a Copy of All Letters of Credit Issued
by Agent. Agent shall, promptly after issuance, send each Syndication Party a
copy of each Letter of Credit issued hereunder.
4. Interest and Fee.
----------------
4.1 Variable Rate. Except as provided in Section 4.2 of this Agreement and
subject to the requirements of Section 4.5 of this Agreement, the unpaid
principal balance owing on the Notes will bear interest from the Closing Date at
the Base Rate as it may change from time to time plus the applicable Base Rate
Margin as determined pursuant to Section 4.3 hereof ("Variable Rate"). The term
"Base Rate" shall mean the greater of (a) the Federal Funds Rate plus 50 basis
points or (b) the Prime Rate. Information on the Prime Rate currently in effect
is announced publicly by, and can be obtained by contacting, Wells Fargo, N.A.
at its principal office in San Francisco, California ("Wells Fargo California").
The Prime Rate is not necessarily the best rate which Wells Fargo California
charges to its customers, and Wells Fargo California and the Syndication Parties
may make loans at, above, or below the Prime Rate.
4.2 Libor Rate. From time to time, and so long as no Event of Default has
occurred and is continuing and subject to the requirements of Section 4.5 of
this Agreement, at the request of a Borrower ("Libor Rate Request"), all or a
portion of the outstanding principal balance under the Notes may bear interest
at the Base Libor Rate plus the applicable Libor Margin as determined pursuant
to Section 4.3 hereof ("Libor Rate"). A Libor Rate Request must be submitted
each time that a Borrower
3
<PAGE> 12
would like either (a) all or a portion of a Variable Rate Loan to be converted
to a Libor Loan, or (b) a current Libor Loan to bear interest at the Libor Rate
upon expiration of the Interest Period for such Libor Loan. The Libor Rate
Request may be made to Agent orally or in writing on any Business Day (provided
that if such request is made orally, Such Borrower must furnish written
confirmation of such request within one (1) Business Day) and is effective as of
the second Business Day after the Libor Rate Request is received if received by
Agent no later than 10:00 a.m. Pacific time or as of the third Business Day if
received later than 10:00 a.m. Pacific time. The Libor Rate Request must specify
(a) the principal amount of the requested Libor Loan, (b) the Interest Period
selected by such Borrower, and the date on which such Borrower requests that
such Interest Period commence ("Interest Period Commencement Date"). Following
the expiration of the Interest Period for any Libor Loan, interest shall
automatically accrue on the principal amount thereof at the Variable Rate until,
and except to the extent, a Borrower requests and receives another Libor Loan as
provided in this Section.
4.3 Matrix Spread. The applicable Base Rate Margin and Libor Margin will
be set at the Closing based on the Leverage Ratio calculated from Borrowers'
financial statements for its Fiscal Quarter ending April 30, 1996, and,
thereafter, will be re-set, effective on the first day of the month commencing
after the month in which Agent receives Borrowers' financial statements for
Borrowers' most recently completed Fiscal Quarter, based upon the Leverage Ratio
for such most recently completed Fiscal Quarter determined in accordance with
the following table:
<TABLE>
<CAPTION>
Leverage Ratio Libor Margin Base Rate Margin
-------------- ------------ ----------------
<S> <C> <C>
less than or equal to 1.25 100 basis points 0 basis points
less than or equal to 1.50 more than 1.25 125 basis points 0 basis points
less than or equal to 2.00 more than 1.50 150 basis points 25 basis points
more than 2.00 175 basis points 50 basis points
</TABLE>
4.4 Default Interest Rate. Upon the occurrence of the Maturity Date or an
Event of Default, the unpaid balance of principal and accrued interest on the
Notes shall bear interest at the Default Interest Rate from and after the due
date for the payment, or on the date of maturity or acceleration, as the case
may be.
4.5 Minimum Principal Amount of Variable Rate Loans and Libor Loans. Each
Variable Rate Loan shall be for a minimum principal amount of $100,000.00 and
shall be a multiple of $50,000.00. Each Libor Loan shall be for a minimum
principal amount of $500,000.00 and shall be a multiple of $100,000.00.
4
<PAGE> 13
4.6 360-Day Year, Interest on the Notes shall be converted from an annual
rate to a daily rate on the basis of a 360-day year and applied to the actual
number of days elapsed.
4.7 Additional Provisions for Libor Loans.
-------------------------------------
4.7.1 If (a) Agent at any time shall determine that for any reason
adequate and reasonable means do not exist for ascertaining the Base Libor Rate,
or (b) if any Syndication Party shall advise Agent that the Base Libor Rate does
not adequately and fairly reflect the cost to such Syndication Party of funding
its Syndication Share of any Libor Loan, then Agent shall promptly give notice
thereof to Borrowers. If such notice is given and until such notice has been
withdrawn by Agent, then (a) no new Libor Loan may be requested by any Borrower,
and (b) any portion of the outstanding principal balance hereof which bears
interest determined in relation to the Base Libor Rate, shall, subsequent to the
end of the Interest Period applicable thereto, bear interest at the Variable
Rate.
4.7.2 If any law, treaty, rule, regulation or determination of a
court or governmental authority or any change therein or in the interpretation
or application thereof (each, a "Change in Law") shall make it unlawful for any
of the Syndication Parties to (a) advance its Syndication Share of any Libor
Loan or (b) maintain its Syndication Share of all or any portion of the Libor
Loans, each such Syndication Party shall promptly, by telephone or facsimile,
notify Agent thereof, and of the reasons therefor and Agent shall promptly
notify Borrowers thereof and if the notice from such Syndication Party is in
writing, Agent shall provide a copy of such notice to Borrowers. In the former
event, any obligation of any such Syndication Party to make available its
Syndication Share of any future Libor Loan shall immediately be cancelled, and
in the latter event, any such unlawful Libor Loans or portions thereof then
outstanding shall be converted, at the option of such Syndication Party, to a
Variable Rate Loan; provided, however, that if any such Change in Law shall
permit the Libor Rate to remain in effect until the expiration of the Interest
Period applicable to any such unlawful Libor Loan, then such Libor Loan shall
continue in effect until the expiration of such Interest Period. Upon the
occurrence of any of the foregoing events, Borrowers shall pay to Agent
immediately upon demand such amounts as may be necessary to compensate any such
Syndication Party for any fines, fees, charges, penalties or other costs
incurred or payable by such Syndication Party as a result thereof and which are
attributable to any Libor Loan made available to Borrowers hereunder, and any
reasonable allocation made by any such Syndication Party among its operations
shall be conclusive and binding upon Borrowers absent manifest error.
5
<PAGE> 14
4.7.3 If any Change in Law or compliance by any Syndication Party
with any request or directive (whether or not having the force of law) from any
central bank or other governmental authority shall:
(a) subject such Syndication Party to any tax, duty or other charge
with respect to any Libor Loan, or change the basis of taxation of payments to
such Syndication Party of principal, interest, fees or any other amount payable
hereunder (except for changes in the rate of tax on the overall net income of
such Syndication Party); or
(b) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans by, or any other
acquisition of funds by any office of any Syndication Party; or
(c) impose on any Syndication Party any other condition;
and the result of any of the foregoing is to increase the cost to such
Syndication Party of making, renewing or maintaining its Syndication Share of
any Libor Loan hereunder and/or to reduce any amount receivable by such
Syndication Party in connection therewith, then in any such case, Borrowers
shall pay to Agent for the account of such Syndication Party, within five
Business Days after receipt of written notice from Agent, such amounts as may be
necessary to compensate such Syndication Party for any additional costs incurred
by such Syndication Party and/or reductions in amounts received by such
Syndication Party which are attributable to such Libor Loans. In determining
which costs incurred by such Syndication Party and/or reductions in amounts
received by such Syndication Party are attributable to the Libor Rate option
made available to Borrowers hereunder, any reasonable allocation made by such
Syndication Party among its operations shall be conclusive and binding upon
Borrowers absent manifest error.
4.8 Agent Fee; Arrangement Fee. Borrowers shall pay Agent the Arrangement
Fee and Agent's Fee set forth in the Fee Letter.
4.9 Unused Line Fee. Borrowers shall pay to Agent, for the account of the
Syndication Parties according to their respective Syndication Shares, for the
period from the Closing Date to the Termination Date ("Unused Line Fee") an
amount equal to the average of the difference, calculated daily during the
measurement Fiscal Quarter, between (a) the Aggregate Commitment Amount and (b)
the outstanding principal owed on the Notes plus the undrawn amount of all
Letters of Credit, multiplied by the rate per Fiscal Quarter determined to be
the Commitment Fee based
6
<PAGE> 15
on Borrowers' Leverage Ratio in accordance with the following table:
<TABLE>
<CAPTION>
Leverage Ratio Commitment Fee
-------------- --------------
<S> <C>
less than or equal to 1.25 22.5 basis points
less than or equal to 1.50 more than 1.25 27.5 basis points
less than or equal to 2.00 more than 1.50 32.5 basis points
more than 2.00 37.5 basis points
</TABLE>
The Commitment Fee will be set at the Closing based on the Leverage Ratio
calculated from Borrowers' financial statements for its Fiscal Quarter ending
April 30, 1996, and, thereafter, will be re-set, effective on the first day of
the month commencing after the month in which Agent receives Borrowers'
financial statements for Borrowers most recently completed Fiscal Quarter (each
an "Unused Commitment Fee Reset Date") based upon the Leverage Ratio for such
most recently completed Fiscal Quarter. The Unused Line Fee shall be calculated
on the basis of a 360 day year and the actual number of days elapsed, and shall
be payable in arrears on each of August 5, November 5. February 5, and May 5 for
the preceding Fiscal Quarter and on the Maturity Date.
5. Payments.
--------
5.1 Notes. Each Syndication Party's Syndication Interest in the Loan shall
be evidenced by a promissory note payable to the order of such Syndication Party
in the face amount equal to such Syndication Party's Maximum Syndication Amount
in the form attached hereto as Exhibit 5.1 (collectively, such promissory notes
shall be referred to as the "Notes").
5.2 Interest Payments. Interest on Variable Rate Loans shall be payable
quarterly in arrears on the last day of each Fiscal Quarter. Interest on Libor
Loans shall be payable in arrears upon the maturity of the applicable Interest
Period; provided, however, that with respect to each Libor Loan where the
Interest Period is equal to six months, interest shall also be payable on the
date which is three months after the Interest Period Commencement Date for such
Libor Loan (the "Three Month Anniversary Date"); provided, however, that if the
Three Month Anniversary Date would occur on a day which is not a Business Day,
then such Three Month Anniversary Date shall be deemed to be the next succeeding
Business Day so long as such Business Day does not extend into the next calendar
month in which case such Three Month Anniversary Date shall be deemed to be the
next preceding Business Day.
5.3 Principal Payments. Borrowers agree that the entire outstanding
principal balance on the Notes, together with accrued interest thereon, shall be
due and payable on the earlier of (a)
7
<PAGE> 16
the Termination Date, or (b) such earlier date on which the Loan becomes due and
payable as a result of acceleration of the payment of the Notes on account of
the occurrence of an Event of Default ("Maturity Date").
5.4 Voluntary Prepayments. Borrowers shall have the option to make the
following prepayments:
5.4.1 Voluntary Prepayment of Variable Rate Loans. Subject to the
requirements of Subsection 5.4,3, Borrowers shall have the right to prepay
without penalty at any time all or any part of the outstanding principal balance
under the Variable Rate Loans.
5.4.2 Voluntary Prepayment of Libor Loans. Subject to the requirements of
Subsection 5.4.3, Borrowers shall have the right to prepay all or any part of
the outstanding principal balance of any Libor Loan, provided that (a) Borrowers
shall, at least two (2) Business Days prior to making any such prepayment,
deliver to Agent a written notice which sets forth the amount of the prepayment,
the date on which the prepayment will be made, and the Libor Loan (or portion
thereof) being prepaid; (b) Borrowers shall pay all accrued and unpaid interest
relating to the amount prepaid to the date of prepayment; and (c) on the
prepayment date, Borrowers shall pay the Funding Losses, if any, resulting from
the prepayment. Any written notice by Borrowers of their election to prepay
under this Subsection 5.4.2 shall be irrevocable.
5.4.3 Minimum Amount of Voluntary Prepayments. All voluntary prepayments
(a) of Variable Rate Loans, must be in amounts no less than $50,000.00 ("Minimum
Variable Prepayment"), and (b) of Libor Loans, must be in amounts no less than
$1,000,000.00 and must be a multiple of $100,000.00 ("Minimum Libor
Prepayment"), (the Minimum Variable Prepayment and the Minimum Libor Prepayment
shall be collectively referred to as the "Minimum Prepayment Requirement");
provided, however, that the Minimum Prepayment Requirement shall not apply if
the Principal Amount is less than $1,000,000.00.
5.5 Mandatory Prepayment on Account of Commitment Amount. If at any time
the amount of principal owing on the Notes exceeds the Aggregate Commitment
Amount, Borrowers shall pay the amount of such excess within one (1) Business
Day.
5.6 Funding Losses. In the event of:
--------------
(a) payment or prepayment by Borrowers of all or any portion of any
Libor Loan on a date other than the last day of the Interest Period for such
Libor Loan for any reason;
8
<PAGE> 17
(b) conversion of all or any portion of any Libor Loan to a Variable
Rate Loan on a day other than the last day of the Interest Period applicable to
such Libor Loan for any reason; or
(c) any failure by Borrowers to borrow a Libor Loan on the date
specified in any Libor Rate Request;
Borrowers shall, upon Agent's request, pay directly to Agent for the account of
the Syndication Parties the amount of the Funding Losses resulting from the
occurrence of an event described above in (a), (b) or (c) of this Section.
"Funding Losses" shall be equal to the product of: (i) the excess, if any, of
the Libor Rate for the applicable Libor Loan over the then current interest rate
on a comparable principal amount of United States Treasury obligations which
have an unexpired term comparable to period of time between the date of
prepayment of, or failure to borrow, such Libor Loan and the expiration of the
Interest Period for the Libor Loan which is being prepaid or which Borrowers
fail to borrow, as applicable, (ii) the amount of such prepayment or the amount
which Borrowers fail to borrow, as applicable, and (iii) the number of years,
including any fractional portion of a year, constituting the remaining term of
the Interest Period for such Libor Loan.
5.7 Prepaid Principal May Be Reborrowed. Prepayments of principal may be
reborrowed in accordance with the provisions of this Agreement,
5.8 Reduction of Aggregate Commitment Amount by Borrowers. Borrowers shall
have the right, from time to time, to reduce the Aggregate Commitment Amount
upon five (5) Business Days prior written notice to Agent, provided that the
requested reduction in such Aggregate Commitment Amount (a) must be at least
$5,000,000.00 and (b) shall not cause the Aggregate Commitment Amount to be less
than the amount of outstanding principal under the Notes plus the aggregate
undrawn face amount of all Letters of Credit then outstanding. Any reduction of
the Aggregate Commitment Amount pursuant to this Section shall be irrevocable
and shall result in a ratable reduction of each Syndication Party's Maximum
Syndication Amount.
5.9 Payments on Business Days; Date That Payments and Prepayments Are
Deemed Received. In the event any payment of principal or interest is due on a
date other than a Business Day, such payment shall be due on the succeeding
Business Day. Payments or prepayments received after 11:00 a.m. Pacific time on
any Business Day will be deemed received on the next succeeding Business Day.
5.10 Payments Free and Clear of Taxes. All payments by Borrowers will be
made free and clear of present and future
9
<PAGE> 18
taxes, withholding or deductions (except for taxes imposed on the overall net
income of each Syndication Party).
5.11 Payments to be Made United States Dollars. Payments on the Principal
Amount shall be made in United States Dollars.
6. Conditions Precedent.
--------------------
6.1 Conditions to Initial Advance. The Syndication Parties' obligation to
make the initial Advance is subject to satisfaction, in Agent's sole discretion,
of each of the following conditions precedent:
6.1.1 Representations and Warranties. The representations and
warranties of Borrowers contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though made on and as of
such date.
6.1.2 No Event of Default. No Event of Default has occurred and no
event has occurred that with notice or lapse of time or both would constitute an
Event of Default ("Potential Default"), and no Event of Default or Potential
Default would result from the making of the Advance.
6.1.3 Receipt of Loan Documents. Agent shall have received duly
executed originals of this Agreement and the Notes (collectively, the "Loan
Documents").
6.1.4 Advance Request. Agent shall have received a written request
for an Advance in the form attached hereto as Exhibit 6.1.4 ("Advance Request")
signed by an Authorized Representative and containing the certification of an
Authorized Representative of each of Borrowers stating that, after giving effect
to the requested Advance, the amount of the Loan used to fund the Construction
does not exceed the Construction Commitment Amount ("Construction Commitment
Amount Certification").
6.1.5 Legal opinion. Agent shall have received the opinion of
counsel for Borrowers in form and content reasonably acceptable to Agent and
addressed to the Syndication Parties.
6.1.6 Organizational Documents. Agent shall have received: (a) a
certificate of good standing dated no more than thirty (30) days prior to the
Closing Date, for each of Borrowers, issued by the Secretary of State for the
state of such Borrower's incorporation and for each state where such Borrower's
operations require qualification or authorization to transact business; (b) a
copy of the articles of incorporation, and any amendments thereto, of each
Borrower certified by the Secretary of State of such Borrower's state of
incorporation; and (c) a copy of the bylaws, and any amendments thereto, of each
Borrower
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certified as true and complete by the Secretary of such Borrower.
6.1.7 Evidence of Corporate Action. Agent shall have received: a
copy of the documents evidencing all corporate action taken by each Borrower to
authorize the execution, delivery and performance of the Loan Documents and
naming the officer(s) of each Borrower who are authorized to execute the Loan
Documents on behalf of such Borrower, certified to be true and correct by the
Secretary of such Borrower.
6.1.8 Authorized Representatives. Each Borrower shall have furnished
Agent with a current list, and a specimen signature, of all officers or other
employees of such Borrower authorized to request an Advance or the issuance of a
Letter of Credit ("Authorized Representatives"), the names and signatures of
which shall be certified by the Secretary of such Borrower ("Certificate of
Authorized Representatives"). Agent and the Syndication Parties may conclusively
rely on such Certificate of Authorized Representatives until Agent shall have
received a further Certificate of Authorized Representatives from a Borrower
amending or canceling the previous Certificate of Authorized Representatives
from such Borrower.
6.1.9 Officer's Certificate. Agent shall have received a certificate
of the President, Chief Executive Officer or Chief Financial Officer of each
Borrower dated as of the Closing Date certifying that:
(a) the representations and warranties set forth in Section 7
are correct on and as of the Closing Date as though made on and as of such date;
and
(b) no Event of Default or Potential Default has occurred and
is continuing or would result from the making of the Loan.
6.1.10 Evidence of Insurance. Agent shall have received insurance
certificates and such other evidence, in form and substance satisfactory to
Agent, of all insurance required to be maintained by Borrowers under this
Agreement.
6.1.11 Evidence of Consents. Agent shall have received evidence that
all consents and approvals of governmental authorities and third parties which
are necessary for the execution, delivery and performance of the Loan Documents
and the transactions contemplated thereby have been obtained and are in full
force and effect.
6.1.12 Fees and Expenses. Agent shall have received payment from
Borrowers of the fees specified in this Agreement or the Fee Letter as being
payable on the Closing Date and all out-of-pocket costs and expenses incurred by
Agent (including,
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without limitation, the reasonable fees and expenses of counsel retained by
Agent) and the allocated costs of internal counsel for Agent in connection with
the preparation, negotiation, and execution of the Loan Documents and the
transactions contemplated thereby, which fees and expenses Borrowers hereby
authorize Agent to pay by disbursement from the Loan.
6.1.13 No Material Adverse Change. No material adverse change shall
have occurred in the condition, operations, or prospects of Borrowers since
April 30, 1996.
6.1.14 Other Documents. Borrowers shall have provided or caused to
be provided to Agent such other documents, instruments and agreements as Agent
may reasonably request.
6.1.15 Appointment of The Corporation Company. Agent shall have
received evidence that each of Borrowers either (a) has a registered agent for
service of process in Colorado, or (b) that The Corporation Company, located at
1675 Broadway, Denver, Colorado 80202, has accepted such party's appointment to
serve as its agent for service of process in accordance with Section 12.9.2 of
this Agreement.
6.2 Conditions to All Subsequent Advances. The Syndication Parties'
obligation to make all Advances after the initial Advance is subject to
satisfaction, in Agent's sole discretion, of each of the following conditions
precedent:
6.2.1 Representations and Warranties. The representations and
warranties of Borrowers contained in this Agreement shall be true and correct in
all material respects on and as of the date of such Advance as though made on
and as of such date.
6.2.2 No Event of Default. No Event of Default and no Potential
Default has occurred, and no Event of Default or Potential Default would result
from the making of the Advance.
6.2.3 No Material Adverse Change. No material adverse change shall
have occurred in the condition, operations, or prospects of Borrowers.
6.2.4 Advance Request. Agent shall have received (including by
facsimile transmission) a duly completed Advance Request signed by an Authorized
Representative and containing a Construction Commitment Amount Certification.
With respect to Variable Rate Loans, the Advance Request shall be effective on
the Business Day received if actually received by Agent before 10:00 a.m.
Pacific time, and as of the next Business Day if received by Agent after such
time. With respect to Libor Loans, the Advance Request shall be effective on
second Business Day after the Advance Request is received if actually received
by
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Agent before 10:00 am, Pacific time, and as of the third Business Day if
received by Agent after such time, If the Advance Request is submitted by
facsimile transmission, Borrower shall deliver to Agent, no later than the next
Business Day, the originally executed Advance Request, All Advance Requests
submitted by a Borrower shall be irrevocable.
6.3 Conditions to Issuance of Letters of Credit. The Syndication Parties'
obligation to cause Agent to issue the Letters of Credit and to fund and
maintain their respective Syndication Shares of all draws under the Letters of
Credit, and Agents obligation to issue any Letter of Credit, is conditioned upon
Borrowers' satisfaction of the following conditions in addition to the other
conditions set forth in Sections 6.1 and 6.2 hereof (except for the conditions
relating to the submission of Advance Requests set forth in Sections 6.1.4 and
6.2.4):
` 6.3.1 Application and Reimbursement Agreement. Borrowers must
deliver to Agent, not later than three (3) Business Days preceding the requested
issue date for each Letter of Credit, Agent's standard form of application and
reimbursement agreement for standby letters of credit which has been duly
completed and signed by an Authorized Representative,
6.3.2 Fees. Borrowers shall have paid the Letter of Credit Fee and
any other fees payable to Agent pursuant to its Letter of Credit Fee Policy.
6.3.3 Agent. Agent shall have approved in its sole discretion the
form of Letter of Credit.
6.4 Additional Disbursement Conditions. At no time and in no event shall
the Syndication Parties be obligated to make Advances or to cause Agent to issue
the Letters of Credit and to fund and maintain their respective Syndication
Shares of all draws under the Letters of Credit, as the case may be:
6.4.1 Aggregate Commitment Amount; LC Commitment Amount. In excess
of an amount, which: (a) when added to all prior Advances would exceed the
Aggregate Commitment Amount, or (b) when added to the undrawn face amount of all
other outstanding Letters of Credit, would exceed the LC Commitment Amount.
6.4.2 Construction Commitment Amount. If the Advance is to be used
for the purpose of funding the Construction, in excess of an amount which, when
added to all prior Advances made for the purpose of funding the Construction,
would exceed the Construction Commitment Amount, unless Borrowers have obtained,
and the Required Lenders have approved in their reasonable discretion, either a
commitment for the permanent financing of all Advances disbursed and to be
disbursed for the Construction
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or an agreement between Borrowers and a third party which is not an affiliate of
Borrowers for the purchase of the Headquarters Building from Borrowers,
6.4.3 Disbursement Period. After the Termination Date.
6.4.4 Illegality of Loan. After the enactment of any law by any
governmental authority having jurisdiction over any Syndication Party which
would make it unlawful in any respect for such Syndication Party to make the
Advance.
6.5 Closing. The execution and delivery of the Loan Documents shall take
place July 30, 1996 ("Signing Date") at 3:30 p.m. Mountain Time at the offices
of Holland & Hart LLP located at 555 17th Street, Suite 3200, Denver, Colorado
80202,
7. Borrowers' Representations and Warranties.
Borrowers, to induce the Syndication Parties to make the Loan, hereby
represent and warrant as follows:
7.1 Organization and Existence. Each Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and is duly qualified to do business and is in good standing
in each jurisdiction in which the transaction of its business makes such
qualification necessary.
7.2 Corporate Authority, Due Authorization; Consents. Each Borrower has
full power and authority to execute, deliver and perform the Loan Documents, all
of which have been duly authorized by all necessary corporate action of such
Borrower. All consents or approvals of any Person which are necessary for, or
are required as a condition of, the execution, delivery and performance of the
Loan Documents have been obtained.
7.3 Title to Properties. Each Borrower has good and marketable title to
all of its properties and assets, free and clear of all liens, pledges, security
interests, restrictions, encumbrances and defects in title, except as set forth
on Exhibit 7.3 hereto ("Permitted Encumbrances") and except as otherwise
permitted hereunder. Except as set forth on Exhibit 7.3, all of the material
properties and assets used in the conduct of the business of each Borrower are
in good repair, working order and condition (reasonable wear and tear excepted)
and suitable for use in the operation of the business of such Borrower.
7.4 Litigation. Except for those matters set forth on Exhibit 7.4. there
are no pending legal or governmental actions, proceedings or investigations to
which any Borrower is a party or to which any property of any Borrower is
subject and, to the best
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of the knowledge of each Borrower, no such actions or proceedings are threatened
or contemplated by governmental authorities or any other Person.
7.5 No Violations. The execution, delivery and performance of the Loan
Documents will not (a) violate any provision of the articles of incorporation or
bylaws of any Borrower, or any law, rule, regulation, judgment, order or ruling
of any court or governmental agency, or (b) violate, conflict with, result in a
breach of, constitute a default under, or with the giving of notice or the
expiration of time or both, constitute a default under, any existing mortgage,
indenture, lease, security agreement, contract, note, instrument or any other
agreements or documents binding on any Borrower or affecting the properties of
any Borrower.
7.6 Binding Agreement. Each of the Loan Documents is the legal, valid and
binding obligation of each Borrower, enforceable in accordance with its terms,
subject only to limitations on enforceability imposed by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally and by general principles of equity.
7.7 Compliance with Laws. Each Borrower is in compliance in all material
respects with all federal, state, and local laws, rules, regulations,
ordinances, codes and orders, including without limitation all laws relating to
environmental matters,
7.8 Material Agreements. Exhibit 7.8 hereto accurately and completely
lists all agreements to which any Borrower is a party, the breach or termination
of which would have a Material Adverse Effect ("Material Agreements"). All
Material Agreements are legally valid and binding on the parties thereto and are
in full force and effect and neither Borrowers, nor, to the knowledge of
Borrowers, any other party thereto, is in default thereunder, and no facts exist
which with the giving of notice or the passage of time, or both, would
constitute such a default.
7.9 Financial Statements; No Material Adverse Change. All consolidated
financial statements, schedules, and other written documents relating to the
financial condition and results of operations of Borrowers submitted by
Borrowers to Agent prior to the execution of this Agreement, including without
limitation those as of April 30, 1996, fairly presented, as of the date thereof,
the financial condition and results of operations of Borrowers for the period
indicated, and were prepared in accordance with GAAP. Since April 30, 1996,
there has been no material adverse change in the financial condition, results of
operations, business or prospects of Borrowers,
7.10 Payment of Taxes. Borrowers have filed all required federal, state
and local tax returns and have paid all taxes
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shown thereon to be due and no such tax returns are being audited as of the
Closing Date. Each Borrower has paid when due all other taxes, assessments or
impositions levied or assessed against such Borrower or the business or
properties of such Borrower,
7.11 Licenses and Approvals. Each Borrower has all material governmental
approvals, licenses and permits necessary or desirable to enable each of them to
conduct their respective business as presently being conducted, and all such
approvals, licenses and permits are in full force and effect.
7.12 Employee Benefit Plans.
7.12.1 Employee Benefit Plans; Multiemployer Plans. Exhibit 7.12 sets
forth: (a) a true and complete list of each "employee benefit plan," as such
term is defined in section 3(3) of the Employee Retirement Income-Security Act
of 1974, as amended, and the regulations thereunder ("ERISA"), that is or was
maintained or contributed to by any Borrower or any predecessor to any Borrower,
or in which any Borrower or any predecessor to any Borrower participates or
participated (each a "Borrower Benefit Plan"); and (b) a true and complete list
of each employee stock ownership plan ("ESOP") that is maintained by any
Borrower under ERISA and the Internal Revenue Code of 1986, as amended from time
to time (the "Code"). No Borrower, no predecessor to any Borrower and no member
of any Borrower's "controlled group" (as that term is defined in section 414 of
the Code) has, or at any time has had, an obligation to contribute to any
"multiemployer plans," as defined in Section 3(37) of ERISA (each a
"Multiemployer Plan") prior to the Closing Date.
7.12.2 Pension Benefit Plans. To the knowledge of Borrowers, each
Borrower Benefit Plan that is an employee pension benefit plan as defined in
Section 3(2) of ERISA, and not exempted under Section 4(b) or Section 201 of
ERISA (each a "Borrower Pension Plan"), and the trust, if any, forming a part
thereof, meets, and since its inception has met, the requirements for
qualification under Section 401(a) of the Code, and is, and since its inception
has been, exempt from taxation under Section 501(a) of the Code, Except as set
forth in Exhibit 7.12, the Internal Revenue Service (the "IRS") has issued a
favorable determination letter with respect to the qualification of each
Borrower Pension Plan and the trust, if any, relating thereto, and the IRS has
not taken any action to revoke any such letter.
7.12.3 Compliance by Administrator. To the knowledge of Borrowers,
the administrator of each Borrower Benefit Plan has complied in all material
respects with the disclosure and reporting requirements of Part I of Subtitle B
of Title I of ERISA.
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7.12.4 Annual Reports. To the knowledge of Borrowers, those sections
of all annual reports heretofore filed with the IRS, the Department of Labor or
the Pension Benefit Guaranty Corporation on behalf of each Borrower Benefit Plan
which were required to be certified were duly certified without qualification by
the accountants or actuaries of such plan.
7.12.5 Prohibited Transactions. To the knowledge of Borrowers', with
respect to each Borrower Benefit Plan, neither Borrowers nor any Borrower
Benefit Plan or a fiduciary thereof, is engaged or has engaged in any
transaction which is prohibited by Part 4 of Subtitle B of Title I of ERISA or
which might subject any such plan or related trust, or any trustee or
administrator thereof, to a tax or penalty imposed by Section 4975 of the Code
or Section 502(i) of ERISA or to liability under Section 409 of ERISA, any of
which would have a Material Adverse Effect.
7.12.6 Bonding. To the knowledge of Borrowers, every fiduciary and
every "plan official" (as defined in Section 412 of ERISA) of each Borrower
Benefit Plan is bonded to the extent required by Section 412 of ERISA.
7.12.7 Civil/Criminal Action. To the knowledge of Borrowers, no
civil or criminal action brought pursuant to Part V of Subtitle B of Title I of
ERISA is pending, or, to the knowledge of Borrowers, is threatened against
Borrowers, any Borrower Benefit Plan or any fiduciary thereof with respect to
any Borrower Benefit Plan.
7.12.8 Funding. (a) Each of the Borrower Pension Plans is in
compliance with the minimum funding standards of Section 412 of the Code and
Part 3 of Subtitle B of Title I of ERISA, to the extent applicable, and (b) for
each Borrower Pension Plan, no waivers of the minimum funding standards have
been requested, and no Borrower Pension Plan has any "accumulated funding
deficiency" within the meaning of Section 412 of the Code.
7.12.9 Compliance With Law. Borrowers are in compliance in all
material respects with, and each Borrower Benefit Plan has been operated in all
material respects in accordance with, the provisions of such plan and in
compliance in all material respects with, ERISA, the Code and all other
applicable law governing each such Borrower Benefit Plan, including but not
limited to rules and regulations promulgated by the Department of Labor, the
Pension Benefit Guaranty corporation, and the Department of the Treasury
pursuant to the provisions of ERISA and the Code, except to the extent any such
failure would not have a Material Adverse Effect.
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7.12.10 Multiple Employer Plan. Borrowers do not participate in any
"multiple employer plan" within the meaning of Section 413 of the Code.
7.12.11 Plan Termination Liability. Borrowers have not incurred any
liability under Title IV of ERISA arising in connection with the termination of,
or complete or partial withdrawal from, any Borrower Benefit Plan, covered or
previously covered by Title IV of ERISA, which liability, or any portion
thereof, could constitute a liability of Borrowers at or after the Closing Date.
7.12.12 Pension Plan Termination. No proceedings to terminate any
Borrower Pension Plan have been instituted under Subtitle C of Title IV of
ERISA.
7.12.13 Reportable Event. No "reportable event" within the meaning
of Section 4043 of ERISA and the regulations thereunder other than a reportable
event for which notice or penalty has been waived by regulation or otherwise has
occurred with respect to any Borrower Pension Plan that is a defined benefit
plan. With respect to any Multiemployer Pension Plan that is a defined benefit
plan, to the knowledge of Borrowers, no such "reportable event" has occurred
which would materially and adversely affect such plan, and no such plan is in
reorganization within the meaning of Part 3 of Subtitle E of Title IV of ERISA.
7.12.14 Payment of Contributions. In respect of each Borrower
Benefit Plan, each Borrower has paid or will have paid as of the Closing Date
all contributions or premiums required to be made by it for all plan years
ending on or prior to the Closing Date and, for the plan year which includes the
Closing Date, contributions or premiums for the pro rata portion of the plan
year ending on the Closing Date, Except as set forth in Exhibit 7.12, all
contributions paid or accrued by Borrowers on or prior to the Closing Date in
respect of any Borrower Pension Plan that is a defined benefit plan will be
based on the actuarial assumptions and methods used for the last plan year ended
on or before the Closing Date, or if there is no prior plan year for any such
plan, contributions shall be based upon reasonable actuarial assumptions and
methods.
7.12.15 Welfare Benefit Plans. Borrowers do not participate in a
"multiple employer welfare arrangement" within the meaning of Section 3(40) of
ERISA, Borrowers do not maintain or contribute to a "voluntary employees
beneficiary association" within the meaning of Section 501(a)(9) of the Code or
a "welfare benefit fund" within the meaning of Section 419 of the Code, nor do
Borrowers maintain or contribute to any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA for the benefit of retired or former employees
(other than as required by Section 4980B of the Code and Sections 601 through
608 of ERISA
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("COBRA")). Borrowers have complied in all material respects with the provisions
of COBRA.
7.12.16 ESOP. In respect of each ESOP, each Borrower has paid or
will have paid as of the Closing Date all contributions or premiums required to
be made by it on or prior to the Closing Date. Except as set forth on Exhibit
7.12, no ESOP has any indebtedness for borrowed money ("ESOP Indebtedness"). The
estimated repurchase liability of Holding Company, based on reasonable actuarial
assumptions and methods, under any ESOP during the Loan Period is set forth on
Exhibit 7.12. Assuming that each Borrower makes all required contributions in
accordance with the terms of each ESOP, each ESOP has or will have sufficient
funds to make all scheduled payments on its ESOP Indebtedness, Holding Company
has sufficient funds to meet its reasonably anticipated repurchase liability
during the Loan Period.
7.13 Capitalization of Borrowers. The capitalization of each Borrower
(expressed both in terms of total number of shares and percentage of each class
of stock) is set forth on Exhibit 7.13. All of the issued and outstanding shares
of capital stock of each Borrower have been duly authorized and validly issued
and are fully paid and nonassessable. No authorized but unissued shares and no
treasury shares of any Borrower are subject to any option, warrant, right to
call or commitment of any kind or character except those arising pursuant to the
Plans.
7.14 Subsidiaries. All of the Subsidiaries, the capitalization of each
Subsidiary, and any Borrower's stock ownership therein are set forth on Exhibit
7.14. All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable. No authorized but unissued shares and no treasury shares of any
Subsidiary are subject to any option, warrant, right to call or commitment of
any kind or character.
7.15 Environmental Compliance. Except as set forth on Exhibit 7.15 hereto:
7.15.1 no Hazardous Substances are now located on any real property
owned or leased by any Borrower ("Premises"), and neither Borrowers, nor, to the
best of the knowledge of Borrowers, any other Person has ever caused or
permitted any Hazardous Substances to be placed, held, located, or disposed of
on, under, or at the Premises or any part thereof except in compliance at all
times with the Environmental Laws and the Environmental Regulations;
7.15.2 no part of the Premises or any improvements located thereon
is being used nor, to the best of the knowledge of Borrowers after due inquiry,
has been used at any previous
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time for the disposal, storage, treatment, processing, or other handling of
Hazardous Substances except in compliance at all times with the Environmental
Laws and the Environmental Regulations, nor is any part of the Premises or any
improvements located thereon affected by any contamination from Hazardous
Substances;
7.15.3 to the best of the knowledge of Borrowers, no property
adjoining the Premises is being used, nor has ever been used at any previous
time, for the disposal, storage, treatment, processing, or other handling of
Hazardous Substances except in compliance at all times with all Environmental
Laws and Environmental Regulations, nor is any other property adjoining the
Premises affected by contamination from Hazardous Substances;
7.15.4 to the best of the knowledge of Borrowers, no investigation,
administrative order, consent order and agreement, litigation, or settlement
with respect to Hazardous Substances or contamination from Hazardous Substances
is proposed, threatened, anticipated or in existence with respect to the
Premises; and
7.15.5 to the best of the knowledge of Borrowers, the Premises are
not currently on and have never been on any federal or state "Superfund" or
"Superlien" list.
7.16 Intellectual Property. Except as set forth in Exhibit 7.16, each
Borrower owns or has licenses to use all the patents, trademarks, service marks,
trade names, copyrights and non-governmental licenses, and all rights with
respect to the foregoing, necessary for the conduct of their respective
businesses as now conducted.
7.17 Regulations U and X. No portion of any Advance will be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R, Parts 221 and 224.
7.18 Fiscal Year. Each fiscal year of each Borrower begins on November 1
of each calendar year and ends on October 31 of each calendar year.
7.19 Disclosure. None of Borrowers' representations or warranties set
forth in this Agreement or in any document or certificate furnished pursuant to
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
7.20 Continuing Nature. All warranties and representations of Borrowers
herein are now and will continue to be true and correct (except to the extent
that any such warranty or
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representation states that it relates to a particular date) until the Notes are
repaid in full, all covenants and agreements herein contained are observed and
performed by Borrowers, all Letters of Credit have expired, and the Syndication
Parties have no further obligation to make Advances or to cause Agent to issue
Letters of Credit.
8. Borrowers' Affirmative Covenants and Agreements.
Borrowers, to induce the Syndication Parties to make the Loan, hereby
covenant and agree as follows:
8.1 Books and Records. Borrowers shall at all times keep proper books of
record and account, in which correct and complete entries shall be made of all
its dealings, in accordance with GAAP.
8.2 Reports and Notices. Borrowers shall provide to Agent the following
reports, information and notices, and, upon receipt, Agent shall promptly send a
copy thereof to each Syndication Party:
8.2.1 Annual Financial Statements. As soon as available, but in no
event later than one hundred twenty (120) days after the end of any fiscal year
of Borrowers occurring during the term hereof, annual financial statements of
Borrowers on a consolidated basis, prepared in accordance with GAAP consistently
applied which shall: (a) be audited by independent certified public accountants
selected by Borrowers which are reasonably acceptable to Agent; (b) be
accompanied by a report of such accountants containing an unqualified opinion
reasonably acceptable to Agent; (c) be accompanied by a Compliance Certificate;
(d) be prepared in reasonable detail and in comparative form; and (e) include a
balance sheet, an income statement, a statement of cash flows, and all notes and
schedules relating thereto.
8.2.2 Quarterly Financial Statements. As soon as available but in no
event more than forty-five (45) days after the end of each of Borrowers first
three Fiscal Quarters in Borrowers' fiscal year, the following financial
statements of Borrowers, on a consolidated basis, prepared in accordance with
GAAP consistently applied: a balance sheet, an income statement, and a statement
of cash flows, which quarterly statements shall include any and all notes and
schedules thereto, Such quarterly financial statements shall be accompanied by a
Compliance Certificate.
8.2.3 Additional Information. With reasonable promptness, such
additional financial information or documentation as Agent or any Syndication
Party may reasonably request.
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8.2.4 Annual Projections. As soon as available, but in no event
later than sixty (60) days after the end of any fiscal year of Borrowers
occurring during the term hereof, written projections of Borrowers' consolidated
financial statements for the following fiscal year, setting forth all material
assumptions utilized (and the basis therefor).
8.2.5 Notice of Default under Other Financing. Notice in writing
promptly after Borrowers, or any of them, obtain knowledge thereof, of any
default under any indenture, agreement or instrument to which any Borrower is a
party or by which it may be bound (limited, with respect to agreements in
connection with borrowed money, to those in which the principal amount owing is
$5,000,000.00 or more) and of any acceleration of indebtedness caused thereby.
8.2.6 Notice of Default. As soon as the existence of any Event of
Default or Potential Default becomes known to any officer of any of Borrowers,
written notice of such Event of Default or Potential Default, the nature and
status thereof, and the action being taken or proposed to be taken with respect
thereto.
8.2.7 Notice of Actions. Notice in writing promptly after Borrowers,
or any of them, obtain knowledge thereof, of all actions, suits and proceedings
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, concerning Borrowers or any of them,
which either: (a) involves an amount of $100,000 or more, singly or in the
aggregate at any time, or (b) is material to the financial condition, results of
operation, business or prospects of Borrowers or any of them.
8.2.8 Notice of Material Change. Promptly after Borrowers, or any of
them, obtain knowledge thereof, notice of any matter which has resulted or would
result in a Material Adverse Effect.
8.2.9 Notification of Claims by Contractors and Materialmen.
Borrowers shall immediately advise Agent in writing of any notice received by
Borrowers or any of them from any laborer, contractor, subcontractor or
materialman to the effect that such laborer, contractor, subcontractor or
materialman has not been paid when due for any labor or materials furnished with
respect to the Premises.
8.2.10 ERISA. Each Borrower shall immediately provide Agent with a
copy of (a) any notice received by such Borrower relating to any violation of
the provisions of the Code or ERISA asserted by the Department of Labor, the
Pension Benefit Guaranty Corporation or the Department of the Treasury with
respect to any
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Borrower Benefit Plan or ESOP; and (b) a material amendment to any Plan.
8.2.11 Change of Control. Each Borrower shall immediately advise
Agent in writing of any planned or consummated Change of Control.
8.2.12 SEC Statements. Each Borrower shall promptly furnish to Agent
copies of all material which it sends or will send its shareholders and which it
files or will file with the Securities and Exchange Commission ("SEC") or any
national securities exchange, including but not limited to, all registration
statements, annual reports on Form 10Q. reports on Form 8K, proxy material and
annual reports to shareholders and any and all amendments thereof or supplements
thereto.
8.2.13 Hazardous Materials. Each Borrower shall immediately advise
Agent in writing of (a) any and all enforcement, cleanup, remedial, removal, or
other governmental or regulatory actions of which such Borrower has knowledge
which are instituted, completed, or threatened against any Borrower pursuant to
the Environmental Laws or Environmental Regulations; and (b) all claims made or,
to such Borrower's knowledge, threatened by any third party against any Borrower
relating to damage, contribution, cost recovery compensation, loss, or injury
resulting from any Hazardous Substances (the matters set forth in clauses (a)
and (b) above are hereinafter referred to as "Hazardous Substances Claims").
8.3 Maintenance of Existence. Borrowers shall preserve and maintain in
full force and effect their respective legal existence in the jurisdiction of
its organization and shall qualify or remain qualified as a foreign corporation
in each jurisdiction in which the transaction of their business makes such
qualification necessary.
8.4 Compliance with Legal Requirements and Agreement. Each Borrower shall
comply with: (a) all laws, rules, regulations and orders applicable to such
Borrower or their respective businesses; and (b) all agreements, indentures,
mortgages, and other instruments to which such Borrower is a party or by which
such Borrower or any of their respective property is bound; provided, however,
that the failure of any Borrower to comply with this Section in any instance
shall not be a default hereunder unless such failure would result in a Material
Adverse Effect,
8.5 Compliance with Environmental Laws. Without limiting the provisions of
Section 8.4 of this Agreement, Borrowers shall comply in all material respects
with, and cause all Persons occupying or present on the Premises to comply with,
all Environmental Laws and Environmental Regulations,
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8.6 Insurance. Borrowers shall keep their assets insured at all times by
an insurance carrier or carriers approved by Agent which have an A rating by the
current BEST Key Rating Guide, against all risks covered by a special form
policy (and including flood, earthquake and windstorm coverage) in the amount of
the full replacement cost (other than with respect to motor vehicles) of the
assets as well as liability, worker's compensation, business interruption,
boiler and machinery and such other insurance as Agent may reasonably require,
in amounts and with deductibles or maximum payouts customarily carried by
entities in similar lines of business. Borrowers shall also maintain fidelity
coverage (including employee dishonesty) on such officers and employees and in
such amounts as customarily carried by corporations engaged in comparable
businesses and comparably situated. Certificates of such insurance satisfactory
to Agent shall be delivered to and held by Agent. All such insurance policies
shall contain a provision requiring at least ten (10) days' notice to Agent
prior to any cancellation for nonpayment of premiums and at least forty-five
(45) days' notice to Agent of cancellation for any other reason or of
modification or non-renewal. Borrowers agree to pay all premiums on such
insurance as they become due, and will not permit any condition to exist on or
with respect to the insured assets which would wholly or partially invalidate
any insurance thereon. Borrowers shall provide Agent with such evidence as Agent
may request from time to time as to the maintenance of all insurance required
pursuant to this Section.
8.7 Taxes. Each Borrower shall cause to be paid when due all taxes,
assessments, and other governmental charges upon it, its income, its sales, its
properties, and federal and state taxes withheld from its employees' earnings,
unless such taxes, assessments, or other governmental charges shall be contested
in good faith by appropriate actions or legal proceedings and each Borrower
shall establish adequate reserves therefor in accordance with GAAP.
8.8 Title to Assets and Maintenance. Borrowers shall defend and maintain
title to all their respective material properties and assets, free and clear of
all liens, pledges, security interests, restrictions, encumbrances and defects
in title other than the Permitted Encumbrances and those allowed pursuant to the
terms of this Agreement. Borrowers shall keep their respective assets, both real
and personal, in good order and condition consistent with industry practice and
as required to maintain all equipment warranties in full force and effect and
shall make all necessary repairs, replacements and improvements.
8.9 Payment of Liabilities. Each Borrower shall pay all its liabilities as
they become due unless (with the exception of the Loan) they are contested in
good faith by appropriate actions
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or legal proceedings and such Borrower establishes reserves therefor in form and
amount satisfactory to Agent.
8.10 Inspection. Each Borrower shall permit Agent and the Syndication
Parties, and their respective agents, during normal business hours or at such
other times as the parties may agree, to examine such Borrowers properties,
books, and records, and to discuss such Borrowers affairs, finances, operations,
and accounts with its respective officers, directors, employees, and independent
certified public accountants.
8.11 Management. Each Borrower shall maintain its present management or
shall obtain management of comparable experience and expertise,
8.12 Licenses. Each Borrower shall preserve and maintain in full force and
effect all material rights, franchises, licenses, and governmental approvals
owned or possessed by it which are necessary or desirable in view of its
business and operations or the ownership of its properties.
8.13 Financial Covenants. Borrowers shall maintain the following financial
covenants, measured on a consolidated basis, until the Loan is indefeasible paid
in full, all Letters of Credit have expired, and the Syndication Parties have no
obligation to make Advances or to cause Agent to issue Letters of Credit:
8.13.1 Quick Ratio. Maintain at all times a Quick Ratio of not less
than 1.2 to 1.
8.13.2 Leverage Ratio. Maintain at all times a Leverage Ratio of not
more than 2.5 to 1.0.
8.13.3 Coverage Ratio. Maintain, for the twelve (12) month period
ending on the last day of each Fiscal Quarter, a Coverage Ratio of not less than
1.75 to 1.0.
8.14 ERISA. Each Borrower shall: (a) comply in all material respects with
the Code and ERISA; (b) cause any Borrower Pension Plan to initially qualify and
continue to qualify under ERISA and the Code, including, but not limited to
obtaining a favorable determination letter with respect to each Borrower Pension
Plan; (c) prepare and deliver each material report, statement or other document
required by ERISA and the Code within the period specified therein and
conforming in form and substance to the provisions thereof; (d) administer each
Borrower Benefit Plan in all material respects in accordance with the terms of
such plan and with ERISA, the Code, and any other applicable law; (e) make all
contributions or premiums required to be made by it in connection with any
Borrower Benefit Plan or ESOP during the Loan Period, and (f) upon Agents
request, promptly deliver to Agent a
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true, correct and complete copy of all documents and agreements relating to the
establishment of each Borrower Pension Plan, Borrower Benefit Plan and ESOP, as
well as the latest available custodian or trustee reports, annual reports and
the latest actuarial reports for each Borrower Pension Plan, Borrower Benefit
Plan and ESOP.
8.15 Additional Costs of Maintaining Loan. Borrowers shall pay to Agent
from time to time such amounts as Agent may determine to be necessary to
compensate any Syndication Party for any costs incurred by it which Agent
determines, based on information presented to it by such Syndication Party, are
attributable to such Syndication Party's making or maintaining any Advances
hereunder or its obligation to make any such Advances, or any reduction in any
amount receivable by such Syndication Party under this Agreement or the Note
payable to it in respect to any such Advances or such obligation (such increases
in costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any change after the date of this Agreement in United
States federal, state, municipal, or foreign laws or regulations (including
Regulation D), or the adoption or making after such date of any interpretations,
directives, or requirements applying to a class of banks including such
Syndication Party of or under any United States federal, state, municipal, or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof ("Regulatory Change"), which: (a) changes the basis of
taxation of any amounts payable to such Syndication Party under this Agreement
or the Note payable to such Syndication Party in respect of any of such Advances
(other than taxes imposed on the overall net income of such Syndication Party);
or (b) imposes or modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, such Syndication Party; or (c) imposes any other condition
affecting this Agreement or the Note payable to such Syndication Party (or any
of such extensions of credit or liabilities). Agent will notify Borrowers of any
event occurring after the date of this Agreement which will entitle such
Syndication Party to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Agent shall include with such notice, a certificate from such
Syndication Party setting forth in reasonable detail the calculation of the
amount of such compensation. Determinations by Agent for purposes of this
Section of the effect of any Regulatory Change on the costs of such Syndication
Party of making or maintaining Advances or on amounts receivable by such
Syndication Party in respect of Advances, and of the additional amounts required
to compensate such Syndication Party in respect of any Additional Costs, shall
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be conclusive absent manifest error, provided that such determinations are made
on a reasonable basis,
8.16 Reimbursement for Additional Capital Requirements. In the event that
the introduction of or any change in (a) any law or regulation, or (b) the
judicial, administrative, or other governmental interpretation of any law or
regulation, or (c) compliance by any Syndication Party or any corporation
controlling any such Syndication Party with any guideline or request from any
governmental authority (whether or not having the force of law) has the effect
of requiring an increase in the amount of capital required or expected to be
maintained by such Syndication Party or any corporation controlling such
Syndication Party, and such Syndication Party certifies that such increase is
based in any part upon such Syndication Party's obligations hereunder, and other
similar obligations, Borrowers shall pay to such Syndication Party such
additional amount as shall be certified by such Syndication Party to Agent and
to Borrowers to be the net present value (discounted at the Variable Rate) of
(a) the amount by which such increase in capital reduces the rate of return on
capital which such Syndication Party could have achieved over the period
remaining until the Maturity Date but for such introduction or change, (b)
multiplied by such Syndication Party's Syndication Share of the Aggregate
Commitment, Agent will notify Borrowers of any event occurring after the date of
this Agreement that will entitle any such Syndication Party to compensation
pursuant to this Section as promptly as practicable after it obtains knowledge
thereof and of such Syndication Party's determination to request such
compensation. Agent shall include with such notice, a certificate from such
Syndication Party setting forth in reasonable detail the calculation of the
amount of such compensation, Determinations by any Syndication Party for
purposes of this Section of the effect of any increase in the amount of capital
required to be maintained by any such Syndication Party and of the amount of
compensation owed to any such Syndication Party under this Section shall be
conclusive absent manifest error, provided that such determinations are made on
a reasonable basis.
8.17 Hazardous Substances Indemnifications. Borrowers shall be solely
responsible for and shall indemnify and hold harmless Agent and the Syndication
Parties, their respective directors, officers, employees, agents, successors,
and assigns, from and against any loss, damage, cost, expense, or liability
directly or indirectly arising out of or attributable to the subject of any
Hazardous Substances Claims.
8.18 Indemnification. Borrowers shall indemnify and hold Agent and each
Syndication Party and their respective directors, officers, employees, agents,
professional advisers and representatives, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on,
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incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Credit Document, or any undertaking
or proceeding related to any of the transactions contemplated hereby or any act,
omission, event or transaction related or attendant thereto, including without
limitation, amounts paid in settlement, court costs, and the fees and expenses
of counsel, The foregoing indemnity shall survive the repayment of the Loan and
the termination of this Agreement.
8.19 Further Assurances. Each Borrower shall execute and deliver such
other and further instruments and shall perform such other and further acts as
in the opinion of Agent may be necessary or desirable to carry out more
effectively the purposes of this Agreement.
9. Borrowers' Negative Covenants and Agreements. Until the Notes and all other
amounts owing to the Syndication Parties under the Loan Documents are
indefeasibly paid in full and all Letters of Credit have expired or been
terminated and the Syndication Parties have no further obligation to make
Advances or to cause Agent to issue any further Letters of Credit hereunder,
Borrowers shall not:
9.1 Change in Business. Make any material changes to their business as
presently conducted or in any other way materially disrupt the continuity of
their existing operations.
9.2 Change in Business Form. Change their business form from a corporation
organized under Subchapter C of the Internal Revenue Code.
9.3 Acquisitions. Acquire all or substantially all of the assets or stock
of any Person, except to the extent that: (a) the fair market value of all such
assets or stock acquired by Borrowers occurring (i) in any twelve (12) month
period does not exceed $4,000,000 as of the end of such twelve (12) month period
or (ii) during the Loan Period does not exceed $10,000,000, and (b) taking into
account each such acquisition, Borrowers remain in compliance with all of the
financial covenants set forth in Section 8.13 hereof,
9.4 Mergers. Enter into any merger, consolidation, joint venture, or other
combination, except for mergers or consolidations in which a Borrower is the
surviving corporation where the following tests are or would be met: (a) after
giving effect to such merger or consolidation, no Event of Default would exist,
(b) based on pro forma financial statements for the applicable Fiscal Quarter
assuming the prior consolidation during such period of Borrowers and the entity
with which the merger or
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consolidation is proposed, the financial covenants set forth in Section 8.13
hereof will all be met, and (c) the fair market value of the assets acquired as
a result of any such merger, consolidation, joint venture or other combination,
when viewed as an asset acquisition, and, when taken together with all
acquisitions by Borrowers pursuant to Section 9.3 of this Agreement occurring
(i) in any twelve (12) month period does not exceed $4,000,000 as of the end of
such twelve (12) month period or (ii) during the Loan Period does not exceed
$10,000,000 as of the end of the Loan Period.
9.5 Recapitalization. Redeem (and including any issuance of stock which
has the effect of a redemption), purchase, or retire any of its capital stock or
grant or issue any warrant, right, or option pertaining thereto, or other
security convertible into any of the foregoing, except that Borrowers may
redeem, purchase or retire their capital stock as required under the terms of
the Plans and may otherwise redeem, purchase or retire their capital stock up to
$5,000,000 in the aggregate of their capital stock during the Loan Period.
9.6 Dividends and Distributions. Declare or pay or set aside for payment
any dividends upon any shares of the capital stock of any Borrower (except
dividends payable in shares of such stock) or purchase, redeem or retire, or
make any other distribution on any shares of capital stock of any Borrower,
except pursuant to the Plans,
9.7 Sale of Assets. Dissolve or liquidate, sell, assign, lease or transfer
all or any material part of their assets or business; provided, however, this
prohibition shall not prevent each Borrower from taking the following action:
9.7.1 sales of inventory in the ordinary course of its business;
9.7.2 sales of surplus, damaged, worn out or obsolete equipment or
inventory for not less than fair market value;
9.7.3 sales or other dispositions of investments permitted hereunder
for not less than fair market value;
9.7.4 granting licenses of its patents, copyrights, trademarks,
trade names and service marks in the ordinary course of its business;
9.7.5 sales or other dispositions of office furnishings or office
equipment in the ordinary course of business; or
9.7.6 other sales, leases, transfers and disposals of assets,
provided that the aggregate value of all such assets
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(based upon the greater of the fair market or book value of such assets) so
sold, leased, transferred or otherwise disposed of in any twelve (12) month
period does not exceed five percent (5%) of such Borrower's assets measured
immediately prior to any such disposition.
9.8 Indebtedness. Incur additional indebtedness, except that Borrowers may
incur additional indebtedness (a) not to exceed $10,000,000.00 in the aggregate
during the Loan Period in the ordinary course of Borrowers' business ("Permitted
Indebtedness"), and (b) as a result of their stock repurchase obligations under
the Plans ("ESOP Repurchase Indebtedness").
9.9 Encumbrances. Create, incur, assume, or suffer to exist, any pledge,
mortgage, lien, charge, lien charge or other encumbrance on, or any security
interest in, any of their assets, except:
9.9.1 liens for taxes or other governmental charges which are not
due or remain payable without penalty, or are being contested in good faith by
appropriate actions or proceedings; provided that such reserves or other
appropriate provisions satisfactory to Agent in its sole discretion shall have
been made for such taxes or other governmental charges;
9.9.2 deposits or pledges to secure workmen's compensation,
unemployment insurance, old age benefits or other social security obligations or
in connection with or to secure the performance of bids, tenders, trade
contracts or leases or to secure statutory obligations or surety or appeal bonds
securing liabilities not in excess of $5,000,000 in the aggregate or other
pledges or deposits of like nature and all in the ordinary course of business;
9.9.3 mechanics, carriers, workmen's, repairmen's or other like
liens arising in the ordinary course of business in respect of obligations not
yet due or which are being contested in good faith and by appropriate
proceedings (except that no such liens are permitted with respect to
construction of the Headquarters Building in excess of $1,000,000.00 in the
aggregate outstanding at any one time);
9.9.4 easements, rights-of-way, restrictions and other similar
matters incidental to the ownership of property which do not in the aggregate
materially detract from the value of such property or assets or materially
impair their use in the operation of the business of any Borrower;
9.9.5 purchase money security interests in office furnishings and
office equipment acquired in the ordinary course of business, provided that such
security interests shall attach only to the furnishings and equipment so
purchased;
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9.9.6 liens securing the Permitted Indebtedness which are granted in
the ordinary course of business; and
9.9.7 liens on the treasury shares of the capital stock of Holding
Company securing the ESOP Repurchase Indebtedness.
9.10 Loans, Advances and Guarantees. Make any loans or advances to, or
guarantee, endorse, or become a surety or otherwise become liable, directly or
contingently, upon the obligation of, any other Person except for:
9.10.1 the endorsement of checks and other instruments in the
ordinary course of business;
9.10.2 extensions of trade credit made in the ordinary course of
business consistent with past customs and practice;
9.10.3 loans to any Person in the ordinary course of business of the
lending Borrower, provided that the aggregate of all such loans outstanding at
any time during the Loan Period may not exceed $2,000,000;
9.10.4 guarantee by any Borrower of the obligations of any other
Borrower or of the wholly-owned Subsidiary of any Borrower which guarantee is
entered into in the ordinary course of business of the guaranteeing Borrower;
and
9.10.5 guarantees by any Borrower of the obligations of any Person
other than a Borrower or a wholly-owned Subsidiary of any Borrower which
guarantee is entered into in the ordinary course of business of the guaranteeing
Borrower, provided that the aggregate of all such amounts guaranteed at any time
during the Loan Period may not exceed $2,000,000,
9.11 Investment. Own, purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, except that Borrowers may own, purchase or acquire:
9.11.1 Investments described in the Investment Policy set forth on
Exhibit 9.11.1;
9.11.2 Investments existing on the date hereof which are described
on Exhibit 9,11.2;
9.11.3 investments by any Borrower in an aggregate amount not to
exceed $1,000,000 at any time during the Loan Period in entities engaged in
similar lines of business as Borrowers.
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9.12 Use of Proceeds. Use the proceeds of the Loan for any purpose other
than those authorized in Section 2.2 hereof.
9.13 ERISA. (a) Engage in or permit any transaction which could result in
a "prohibited transaction" (as such term is defined in Section 406 or Section
2003(a) of ERISA) or in the imposition of an excise tax pursuant to Section 4975
of the Code; (b) engage in or permit any transaction or other event which could
result in a "reportable event" as such term is defined in Section 4043 of ERISA
for any Borrower Pension Plan; (c) fail to make full payment when due of all
amounts which, under the provisions of any Borrower Benefit Plan or ESOP, a
Borrower is required to pay as contributions thereto; (d) permit to exist any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA), whether or not waived, with respect to any Borrower Pension Plan; (e)
fail to make any payments to any "multiemployer plan" that a Borrower may be
required to make under any agreement relating to such "multiemployer plan" or
any law pertaining thereto; or Q) terminate any Borrower Pension Plan or
Borrower Benefit Plan in a manner which could result in the imposition of a lien
on any property of any Borrower pursuant to Section 4068 of ERISA. Borrowers
shall not permit the "present value" of vested and nonvested "accrued benefits"
under any Borrower Pension Plan to exceed the "current value" of the assets of
such Borrower Pension Plan allocable to such "accrued benefits". All actuarial
assumptions and methods used to make each determination required by the
preceding sentence shall be reasonable and shall comply with all requirements of
law. Borrowers shall not terminate any Borrower Pension Plan so as to result in
any liability to the Pension Benefit Guaranty Corporation, As used in this
Section, all terms enclosed in quotation marks shall have the meanings set forth
in ERISA.
9.14 Capital Expenditures. Incur Capital Expenditures, for the period
consisting of the most recently completed four Fiscal Quarters, in excess of 70%
of Free Cash Flow,
9.15 Profitability. on a consol idated basis for Borrowers and the
Subsidiaries, sustain (a) a net loss (as determined in accordance with GAAP) for
any two consecutive Fiscal Quarters, or (b) a net loss (as determined in
accordance with GAAP) for any fiscal year.
10. Events of Default/Remedies. The occurrence of any of the followings events
shall be deemed to constitute an "Event of Default" under this Agreement:
10.1 Failure to Pay. Borrowers' failure to pay in full when due, any
payment or other amount required under the Notes, this Agreement or any
reimbursement agreement executed in connection with the issuance of a Letter of
Credit under this
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Agreement (collectively, the "Credit Documents") when the same is due and
payable,
10.2 Failure to Perform Certain Covenants. The failure of Borrowers to
fully perform any and all covenants and agreements set forth in Sections 8.3,
8.13 - 9.1 - 9.15 of this Agreement.
10.3 Failure to Perform Other Covenants. The failure of Borrowers to fully
perform any and all covenants and agreements contained in this Agreement or in
any of the other Credit Documents, other than a covenant or agreement referred
to referred to in any other subsection of this Section 10, and such failure
continues unremedied for five (5) Business Days after the occurrence thereof.
10.4 Bankruptcy/Insolvency. Borrowers or any of them becomes insolvent or
bankrupt, or files for bankruptcy, or shall makes an assignment for the benefit
of or a composition with creditors, or is unable, or admits in writing its
inability, to pay its debts as they mature; or a bankruptcy, reorganization,
arrangement, insolvency or similar proceeding for relief of financially
distressed debtors is instituted against any Borrower, and is not dismissed on
appeal, within sixty (60) days of such institution, or an order for relief is
entered in any such involuntary proceeding; or any Borrower petitions for, or
there is appointed for a substantial part of the assets or properties of any
Borrower, a trustee, receiver or liquidator, or any Borrower takes any action
for the purposes of effecting any of the foregoing.
10.5 False Representations or Warranties. If any representation or
warranty of Borrower or any of them contained herein, or in any of the other
Credit Documents, or in any financial statement or other document provided to
Agent or any Syndication Party in connection with the Loan or pursuant to terms
of any Credit Document, proves to have been false or misleading in any material
respect when made or furnished.
10.6 Default Under Other Indebtedness. Any Borrower is in default with
respect to any indebtedness for borrowed money, other than the indebtedness of
such Borrower under the Credit Documents, in the principal amount of
$5,000,000,00 or more incurred, assumed or guaranteed by it which results in the
acceleration of such indebtedness or which permits, or with the giving of notice
and/or the passage of time would permit, any holder or holders of such
indebtedness to accelerate the stated maturity thereof.
10.7 Judgment. The entry of one or more judgments in an aggregate amount
of $5,000,000,00 or greater against Borrowers which is not stayed, discharged or
paid within thirty (30) days after entry,
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10.8 Dissolution. The dissolution, liquidation or termination of existence
of any Borrower.
10.9 Change of Control. (a) C, Edward McVaney, Jack L. Thompson and Robert
C. Newman shall cease to beneficially own and control the majority of the shares
of common stock of Holding Company, or (b) Holding Company shall cease to
beneficially own and control the majority of the shares of common stock of World
Solutions and World Source (each of the events set forth in (a) and (b) above, a
"Change of Control"),
10.10 Material Adverse Change. The occurrence of a Material Adverse Effect
with respect to any Borrower.
10.11 Remedies. Upon the occurrence of any Event of Default as defined
herein, Agent shall be entitled to exercise (and must exercise if the Required
Lenders so direct) the following remedies and all such remedies are deemed to be
cumulative and may be exercised individually or in combination as appropriate:
(a) to declare all amounts owing under the Notes and any other Credit Documents
to be immediately due and payable in full (provided such declaration shall be
deemed to have occurred automatically with respect to any Event of Default under
Subsection 10.4 hereof); (b) to pursue all rights and remedies provided for in
the Credit Documents, or by any applicable law; (c) whether or not it exercises
its rights under clause (a) or (b) in this Subsection 10.11, to cease making
Advances or issuing Letters of Credit; and (d) to have a receiver appointed by a
court of competent jurisdiction, in order to manage, protect, and preserve the
business of Borrowers and to continue the operations of Borrowers. The exercise
of any one or more rights or remedies shall not be deemed a waiver of any other
rights or remedies.
11. Agency Agreement
11.1 Purchase and Sale of Syndication Interest. (a) Each Syndication
Party, severally but not jointly, hereby irrevocably agrees to fund its
Syndication Share of all Advances from time to time up to the Maturity Date
pursuant to the terms and conditions contained herein; provided that no
Syndication Party shall be required to fund an Advance in an amount such that
the aggregate principal balance owing to such Syndication Party after such
funding would be in excess of such Syndication Party's Maximum Syndication
Amount. Each Syndication Party's interest in the Advances ("Syndication
Interest") hereunder shall be without recourse to Agent or any other Syndication
Party and shall not be construed as a loan from any Syndication Party to Agent
or any other Syndication Party. Each Syndication Party acknowledges that the
Loan is a revolving credit until the Maturity Date, and that, as a result, the
amount of its Syndication Interest will fluctuate as Borrowers repay and
reborrow amounts under the Loan.
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11.2 Syndication Parties' Obligations to Remit Funds. Each Syndication
Party agrees to remit the following amounts at the time and in the manner
provided in Section 11.3 hereof:
11.2.1 The amount of the Advance to be made by Agent to Borrower on
the Closing Date multiplied by its Syndication Share ("Initial Payment").
11.2.2 The Advance Amount as set forth in each Notice of Advance
multiplied by its Syndication Share ("Advance Payment") as such Notices of
Advance may be sent, in the manner provided in Section 11.3 hereof, from time to
time for Advances to be made under the Loan on or prior to the Termination Date,
or draws made or to be made on a Letter of Credit on or prior to July 31, 2000,
Provided however, the amount of any Advance Payment which a Syndication Party
would otherwise be required to tender hereunder shall be reduced as necessary so
that the aggregate principal owing to such Syndication Party at such time
(including such Advance Payment) does not exceed that Syndication Party's
Maximum Syndication Amount.
11.3 Notice and Timing of Initial Payment and Each Advance Payment.
11.3.1 On the date on which Borrowers submit the Advance Request
required pursuant to Section 6.1.4 hereof, Agent shall provide each Syndication
Party with a notice in substantially the form attached hereto as Exhibit 11.3.1
("Initial Payment Notice") indicating, among other things, the amount of the
Advance to be made by Agent to Borrower on the Closing Date, and the amount of
the Syndication Party's Initial Payment. The amount of its Initial Payment shall
be remitted by each Syndication Party directly to Agent on the Closing Date,
11.3.2 Prior to making an Advance to Borrower under the Loan, Agent
shall provide each Syndication Party with a notice in substantially the form
attached hereto as Exhibit 11.3.2 ("Loan Notice of Advance"), indicating, among
other things, the amount ("Loan Advance Amount") and Advance Date of the Advance
and the amount of the Syndication Party's Advance Payment, Each Loan Notice of
Advance shall be provided to the Syndication Parties on the same Business Day
that Agent receives an Advance Request from a Borrower, Each Syndication Party
shall remit its Advance Payment directly to Borrower, or, at Agents sole
discretion, directly to Agent, on the date specified in the Loan Notice of
Advance which shall not be later than the Advance Date ("Syndication Party Loan
Payment Date").
11.3.3 Prior to, or promptly after, honoring a draw under any Letter
of Credit, Agent shall provide each Syndication
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Party with a notice in substantially the form attached hereto as Exhibit 11.3.3
("LC Notice of Advance"), indicating, among other things, the amount of the
draw, the Letter of Credit number under which the draw is being made, and the
amount of the Syndication Party's Advance Payment. (The Loan Notice of Advance
and the LC Notice of Advance shall be referred to collectively as "Notice of
Advance," and the Loan Advance Amount and the LC Advance Amount shall be
referred to collectively as the "Advance Amount".) Each Syndication Party shall
remit such payment directly to Agent, on the date specified in the LC Notice of
Advance ("Syndication Party LC Payment Date") (the Syndication Party Loan
Payment Date and the Syndication Party LC Payment Date shall be referred to
collectively as the "Syndication Party Payment Date").
11.4 Syndication Party's Failure to Remit Funds. If a Syndication Party
("Delinquent Syndication Party") fails to remit its Initial Payment as required
in Sections 11.2 and 11.3 hereof, or fails to remit any Advance Payment in full
by 11:00 a.m. Pacific time on the Syndication Party Payment Date (the unpaid
amount of any such payment being hereinafter referred to as the "Delinquent
Amount"), in addition to any other remedies available hereunder, any other
Syndication Party or Syndication Parties may, but shall not be obligated to, pay
the Delinquent Amount (the Syndication Party or Syndication Parties which
advance such Delinquent Amount are referred to as the "Contributing Syndication
Parties"), in which case (a) the Delinquent Amount which any Contributing
Syndication Party pays shall not count as an Advance Payment against the Maximum
Syndication Amount of the Contributing Syndication Party, and (b) the Delinquent
Syndication Party shall be obligated to pay to Agent, for the account of the
Contributing Syndication Parties, interest on the Delinquent Amount at a rate of
interest equal to the rate of interest which Borrowers are obligated to pay on
the Delinquent Amount ("Delinquency Interest") until the Delinquent Syndication
Party remits the full Delinquent Amount and remits all Delinquency Interest to
Agent, which will distribute such payments to the Contributing Syndication
Parties (pro rata based on the amount of the Delinquent Amount which each of
them (if more than one) paid) on the same Business Day as such payments are
received by Agent if received no later than 11:00 a.m. Pacific time or the next
Business Day if received by Agent thereafter. In addition, the Contributing
Syndication Parties shall be entitled to share, on the same pro rata basis, and
Agent shall pay over to them, for application against Delinquency Interest and
the Delinquent Amount, the Delinquent Syndication Party's Payment Distribution
and any fee distributions made under Section 11.11 hereof until the Delinquent
Amount and all Delinquency Interest have been paid in full. In the event no
Syndication Party elects to pay the Delinquent Amount with respect to any
Advance Amount but Borrowers elect to receive such Advance Amount (less the
Delinquent Amount), the proportionate share of Payment Distributions to which
the Delinquent
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Syndication Party is entitled shall be adjusted to reflect its failure to pay
the Delinquent Amount. As between the Delinquent Syndication Party and the
Contributing Syndication Parties, the Delinquent Syndication Party's interest in
its Note shall be deemed to have been partially assigned to the Contributing
Syndication Parties in the amount of the Delinquent Amount and Delinquency
Interest owing from time to time.
11.5 Agency Appointment. Each of the Syndication Parties hereby designates
and appoints Wells Fargo to act as Agent to service and collect the Loan and its
respective Note and to take such action on behalf of such Syndication Party with
respect to the Loan and such Note, and to execute such powers and to perform
such duties, as specifically delegated or required herein, as well as to
exercise such powers and to perform such duties as are reasonably incident
thereto, and to receive and benefit from such fees and indemnifications as are
provided for or set forth herein, until such time as a successor is appointed
and qualified to act as Agent.
11.6 Power and Authority of Agent. Without limiting the generality of the
power and authority vested in Agent pursuant to Section 11.5 hereof, the power
and authority vested in Agent includes, but is not limited to, the following:
11.6.1 To solicit the advice and assistance of each of the
Syndication Parties concerning the administration of the Loan and the exercise
by Agent of its various rights, remedies, powers, and discretions with respect
thereto.
11.6.2 To execute, seal, acknowledge, and deliver as Agent, all such
instruments as may be appropriate in connection with the administration of the
Loan and the exercise by Agent of its various rights with respect thereto.
11.6.3 To initiate, prosecute, defend, and to participate in,
actions and proceedings in its name as Agent for the ratable benefit of the
Syndication Parties.
11.6.4 To retain attorneys, accountants, and other professionals to
provide advice and professional services to Agent, with their fees and expenses
reimbursable to Agent by Syndication Parties pursuant to Section 11.18 hereof.
11.6.5 To exercise powers reasonably incident to Agent's discharge
of its duties enumerated in Section 11.7 hereof.
11.6.6 To determine the purposes other than those set forth in
Section 2.2 of this Agreement for which a Letter of Credit may be issued.
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11.7 Duties of Agent. The duties of Agent hereunder shall consist of the
following:
11.7.1 To safekeep one original of each of the Loan Documents other
than the Notes (which will be in the possession of the Syndication Party named
as payee therein).
11.7.2 To receive and distribute to the Syndication Parties payments
made by Borrowers pursuant to the Loan Documents.
11.7.3 Subject to the provisions of Section 11.9 hereof, to, on
behalf of and for the ratable benefit of all Syndication Parties, in accordance
with customary banking practices, exercise all rights, remedies, powers,
privileges, and discretion to which Agent is entitled to collect amounts owing
under the Loan and the Notes.
11.8 Agent's Resignation or Removal. Agent may resign at any time by
giving at least sixty (60) days' prior written notice of its intention to do so
to each of the Syndication Parties. After the receipt of such notice, the
Syndication Parties holding in the aggregate at least 66 2/3% of the Syndication
Shares of the Loan ("Required Lenders") shall appoint a Successor Agent. If no
Successor Agent shall have been so appointed and shall have accepted such
appointment within forty-five (45) days after the retiring Agent's giving of
such notice of resignation, then the retiring Agent may appoint a successor
Agent which shall be a bank or a trust company organized under the laws of the
United States of America or any state thereof and having a combined capital,
surplus and undivided profit of at least $250,000,000. Any Agent may be removed
upon the written demand of the Required Lenders, which demand shall also appoint
a Successor Agent. Upon the appointment of a new Agent hereunder, the term
"Agent" shall for all purposes of this Agreement thereafter mean such successor.
After any retiring Agent's resignation hereunder as Agent, or the removal
hereunder of any Agent, the provisions of this Agreement shall continue to inure
to the benefit of such Agent as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
11.9 Consent Required for Certain Actions. Agent may not take any of the
following actions (nor may the Syndication Parties take the action described in
Subsection 11.9.1(c)) without the prior written consent, given after
notification by Agent of its intention to take any such action (or notification
by such Syndication Parties as are proposing the action described in Subsection
11.9.1(c) of their intention to do so), of Syndication Parties holding in the
aggregate, at the time of such notification:
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11.9.1 One hundred percent (100%) of the Syndication Shares before:
(a) Agreeing to an increase in the Aggregate Commitment
Amount, the Construction Commitment Amount, the LC Commitment Amount or an
extension of the Termination Date;
(b) Agreeing to a reduction in the amount, or to a delay in
the due date, of any payment by Borrowers of interest, principal, or fees;
provided, however, this restriction shall not apply to a delay in payment
granted by Agent in the ordinary course of administration of the Loan and the
exercise of reasonable judgment (so long as such payment delay does not exceed
five (5) days); or
(c) Reducing the voting rights percentage set forth in this
Subsection 11.9.1; or
11.9.2 Sixty-six and two thirds percent (66 2/3%) before:
(a) Agreeing to any action, amendment, or waiver not covered
in Subsection 11.9.1;
(b) Agreeing to amend Section 11 of this Agreement; or
(c) Determining the purposes other than those set forth in
Section 2.2 of this Agreement for which a Letter of Credit may be issued.
If no written consent or denial is received from a Syndication Party within five
(5) Business Days after written notice of any proposed action as described in
this Section is delivered to such Syndication Party by Agent, such Syndication
Party shall be conclusively deemed to have consented thereto for the purposes of
this Section.
11.10 Distribution of Principal and Interest. Agent will receive and
accept all payments (including prepayments) of principal and interest made by
Borrowers on the Loan and the Notes and will hold all such payments in trust for
the benefit of all present and future Syndication Parties, in an account
segregated from Agent's other funds and accounts ("Payment Account"). After the
receipt by Agent of any payment representing interest or principal on the Loan,
Agent shall remit to each Syndication Party an amount equal to such payment,
multiplied by the Syndication Party's Syndication Share ("Payment Distribution")
no later than the same Business Day as such payment is received by Agent if
received no later than 11:00 a.m. Pacific time or the next Business Day if
received by Agent thereafter. Any Syndication Party's rights to its Payment
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Distribution shall be subject to the rights of any Contributing Syndication
Parties to such amounts as set forth in Section 11.4 hereof.
11.11 Distribution of Certain Fees and Amounts. Agent shall (a) receive
and hold in trust for the benefit of all present and future Syndication Parties,
in the Payment Account and segregated from Agent's other funds and accounts and
(b) shall remit to the Syndication Parties, as indicated, the fees and other
amounts described below:
11.11.1 The quarterly Unused Line Fee paid by Borrowers to Agent in
connection with the Loan shall be distributed to Syndication Parties in
accordance with their respective Syndication Shares no later than the same
Business Day that payment of such fee is received by Agent, if received no later
than 11:00 a.m. Pacific time, or the next Business Day if received by Agent
thereafter.
11.11.2 The amount of any Funding Losses paid by Borrowers to Agent
in connection with a prepayment of any portion of a Libor Loan shall be
distributed to the Syndication Parties in accordance with their respective
Syndication Shares no later than the same Business Day that payment of such
Funding Losses is received by Agent, if received no later than 11:00 Pacific
time, or the next Business Day if received by Agent thereafter.
11.12 Loan Documents. The Loan Documents (other than the Notes) shall be
held by Agent in its name, for the ratable benefit of itself and the other
Syndication Parties without preference or priority.
11.13 Collateral Application. Syndication Parties shall have no interest
in any other loans made to Borrowers, or any of them, by any other Syndication
Party other than the Loan, or in any property taken as security for any other
loan or loans made to Borrowers, or any of them, by any other Syndication Party,
or in any property now or hereinafter in the possession or control of any other
Syndication Party, which may be or become security for the Loan solely by reason
of the provisions of a security instrument that would cause such security
instrument and the property covered thereby to secure generally all indebtedness
owing to such other Syndication Party. Notwithstanding the foregoing, to the
extent such other Syndication Party applies such funds or the proceeds of such
property to reduction of the Loan, such other Syndication Party shall share such
funds or proceeds with all Syndication Parties according to their respective
syndication Shares. In the event that any Syndication Party shall obtain
payment, whether partial or full, from any source in respect of the Loan,
including without limitation payment by reason of the exercise of a right of
offset, banker's lien, general lien, or counterclaim, reducing such Syndication
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Party's outstanding balance in the Loan to below its Syndication Share, such
Syndication Party will promptly make such adjustments (which may include payment
in cash or the purchase of further syndications or participations in the Loan)
to the end that such excess payment shall be shared with all other Syndication
Parties in accordance with their respective Syndication Shares.
11.14 Amounts Required to be Returned. If Agent makes any payment to a
Syndication Party in anticipation of the receipt of final funds from Borrowers,
and such funds are not received from Borrowers, or if excess funds are paid by
Agent to any Syndication Party as the result of a miscalculation by Agent, then
Syndication Party shall, on demand of Agent, forthwith return to Agent any such
amounts, plus interest thereon (from the day such amounts were transferred by
Agent to the Syndication Party to, but not including, the day such amounts are
returned by Syndication Party) at a rate per annum equal to the Federal Funds
Rate in effect on the date of such demand. If Agent is required at any time to
return to Borrowers, or any of them, or a trustee, receiver, liquidator,
custodian, or similar official any portion of the payments made by Borrowers, or
any of them, to Agent, whether pursuant to any bankruptcy or insolvency law or
otherwise, then Syndication Party shall, on demand of Agent, forthwith return to
Agent any such payments transferred to Syndication Party by Agent but without
interest or penalty (unless Agent is required to pay interest or penalty on such
amounts to the person recovering such payments).
11.15 Reports and Information to Syndication Parties. Agent shall use
reasonable efforts to provide to Syndication Parties, as soon as practicable
after actual knowledge thereof is acquired by an officer thereof primarily
responsible for Agent's duties as such with respect to the Loan or primarily
responsible for the credit relationship between Wells Fargo and Borrowers: (a)
notice of the existence of any Event of Default or Potential Default under the
Loan Documents, and (b) any material factual information which has a material
adverse effect on the creditworthiness of Borrowers, or any of them and
Borrowers hereby authorize such disclosure by Agent to the Syndication Parties.
Failure of Agent to provide the information referred to in this Section shall
not result in any liability upon, or right to make a claim against, Agent except
where a court of competent jurisdiction renders a final non-appealable
determination that such failure is a result of the willful misconduct or gross
negligence of Agent. Syndication Parties acknowledge and agree that all
information and reports received pursuant to this Agreement will be received in
confidence in connection with their Syndication Interest, and that such
information and reports constitute confidential information and shall not be
disclosed to any third party, except pursuant to appropriate legal or regulatory
process, (or used by the Syndication Party except in
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connection with the Loan and its Syndication Interest) without the prior written
consent of Agent or Borrowers, as applicable.
11.16 Standard of Care. Agent shall not be liable to Syndication Parties
for any error in judgment or for any action taken or not taken by Agent or its
agents, except for its gross negligence or willful misconduct. Subject to the
preceding sentence, Agent will exercise the same care in administering the Loan
and the Loan Documents as it exercises for similar loans which it holds for its
own account and risk, and Agent shall not have any further responsibility to the
Syndication Parties. Without limiting the foregoing, Agent may rely on the
advice of counsel concerning legal matters and on any written document it
believes to be genuine and correct and to have been signed or sent by the proper
Person or Persons.
11.17 No Trust Relationship. Neither the execution of this Agreement, nor
the sharing in the Loan, nor the holding of the Loan Documents in its name by
Agent, nor the management and administration of the Loan and Loan Documents by
Agent (including the obligation to hold certain payments and proceeds in the
Payment Account in trust for the Syndication Parties), nor any other right, duty
or obligation of Agent under or pursuant to this Agreement is intended to be or
create, and none of the foregoing shall be construed to be or create, any
express, implied or constructive trust relationship between Agent and any
Syndication Party. Each Syndication Party hereby agrees and stipulates that
Agent is not acting as trustee for such Syndication Party with respect to the
Loan, this Agreement, or any aspect of either, or in any other respect.
11.18 Sharing of Costs and Expenses. To the extent not paid by Borrowers,
each Syndication Party will promptly upon demand reimburse Agent, ratably
according to their respective Syndication Shares, for all reasonable costs,
disbursements, and expenses incurred by Agent on or after the date of this
Agreement for legal, accounting, consulting, and other services rendered to
Agent in its role as Agent in the administration of the Loan, interpreting the
Credit Documents, and protecting, enforcing, or otherwise exercising any rights,
both before and after default by Borrowers, or any of them, under the Credit
Documents; provided, however, that the costs and expenses to be shared in
accordance with this Section shall not include any costs or expenses incurred by
Wells Fargo solely as a Syndication Party in connection with the Loan, nor to
Agent's internal costs and expenses.
11.19 Syndication Parties Indemnification of Agent. Each of the
Syndication Parties agree to indemnify Agent, including any Successor Agent, and
its directors, officers, employees, agents, professional advisers and
representatives ("Indemnified Parties"), (to the extent not reimbursed by
Borrowers, and
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without in any way limiting the obligation of Borrowers to do so), ratably
according to their respective Syndication Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loan
and/or the expiration or termination of the Syndication Interests or this
Agreement) be imposed on, incurred by or asserted against Agent (or any of the
Indemnified Parties while acting for Agent or for any Successor Agent) in any
way relating to or arising out of this Agreement or the Loan Documents, or the
performance of the duties of Agent hereunder or thereunder or any action taken
or omitted while acting in the capacity of Agent under or in connection with any
of the foregoing; provided that the Syndication Parties shall not be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of an
Indemnified Party to the extent that any of the forgoing result from the gross
negligence or willful misconduct of that Indemnified Party as determined by a
court of competent jurisdiction. The agreements and obligations in this Section
shall survive the payment of the Loan, the Syndication Interests, and the
expiration or termination of this Agreement.
11.20 Books and Records. Agent shall maintain such books of account and
records relating to the Loan as it maintains with respect to other loans of
similar type and amount, and which shall clearly and accurately reflect the
Syndication Interest of each Syndication Party. Syndication Parties, or their
agents, may inspect such books of account and records at all reasonable times
during Agent's regular business hours,
11.21 Agent Fee. Wells Fargo shall not be entitled to any fee or
compensation other than as expressly provided in the Fee Letter for acting as
Agent ("Agent Fee"). In the event the Successor Agent is contractually entitled
to an additional fee, each Syndication Party will be responsible for the amount
thereof multiplied by their Syndication Share.
11.22 Representations and Warranties of All Parties. Agent and each
Syndication Party represents and warrants that (a) the making and performance of
this Agreement is within its power and has been duly authorized by all necessary
corporate and other action by it, (b) this Agreement is in compliance with all
applicable laws and regulations promulgated under such laws and does not
conflict with nor constitute a breach of its charter or by-laws nor any
agreements by which it is bound, and does not violate any judgment, decree or
governmental or administrative order, rule or regulation applicable to it, (c)
no approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other
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Person is required to be obtained or made by it in connection with the
execution, delivery and performance of its duties under this Agreement, and (d)
this Agreement has been duly executed by it, and constitutes the legal, valid,
and binding obligation of such Person, enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and general equitable principles (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
Each Syndication Party that is a state or national bank represents and warrants
that the act of entering into and performing its obligations under this
Agreement has been approved by its board of directors or its loan committee and
such action was duly noted in the written minutes of the meeting of such board
or committee, and that it will furnish Agent with a certified copy of such
minutes or an excerpt therefrom reflecting such approval.
11.23 Representations and Warranties of Wells Fargo. Wells Fargo, in its
role as Syndication Party and as Agent, makes no express or implied
representation or warranty and assumes no responsibilities with respect to the
due authorization, execution, or delivery of the Loan Documents; the accuracy of
any information, statements, or certificates provided by Borrowers, or any of
them; the legality, validity, or enforceability of the Loan Documents; the
filing or recording of any document; the collectibility of the Loan; the
performance by any Borrower of any of its obligations under the Loan Documents;
or the financial condition or solvency of any Borrower or any other party
obligated with respect to the Loan.
11.24 Syndication Parties' Independent Credit Analysis. Each Syndication
Party acknowledges receipt of true and correct copies of all Loan Documents
(other than any Note payable to another Syndication Party) from Agent. Each
Syndication Party agrees and represents that it has relied upon its independent
review (a) of the Loan Documents, and (b) any information independently acquired
by such Syndication Party from Borrowers or otherwise in making its decision to
acquire an interest in the Loan independently and without reliance on Wells
Fargo or Agent. Each Syndication Party represents and warrants that it has
obtained such information as it deems necessary (including any information such
Syndication Party independently obtained from Borrowers or others) prior to
making its decision to acquire an interest in the Loan. Each Syndication Party
further agrees and represents that it has made its own independent analysis and
appraisal of and investigation into each Borrower's authority, business,
operations, financial and other condition, creditworthiness, and ability to
perform its obligations under the Loan Documents and has relied on such review
in making its decision to acquire an interest in the Loan. Each Syndication
Party agrees that it will continue to rely solely upon its
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independent review of the facts and circumstances related to Borrowers, and
without reliance upon Wells Fargo or Agent, in making future decisions with
respect to all matters under or in connection with the Loan Documents and its
participation in the Loan. Wells Fargo and Agent assume no responsibility for
the financial condition of Borrowers or for the performance of each Borrower's
obligations under the Loan Documents. Except as otherwise expressly provided
herein, neither Wells Fargo nor any other Syndication Party shall have any duty
or responsibility to furnish to any other Syndication Parties any credit or
other information concerning Borrowers which may come into its possession.
11.25 No Joint Venture or Partnership. Neither the execution of this
Agreement, the sharing in the Loan, nor any agreement to share in payments or
losses arising as a result of this transaction is intended to be or to create,
and the foregoing shall not be construed to be, any partnership, joint venture
or other joint enterprise between Agent and any Syndication Party, nor between
any of the Syndication Parties.
11.26 Purchase for Own Account/Restrictions on Transfer. Each Syndication
Party represents that it has acquired and is retaining its Syndication Interest
in the Loan for its own account in the ordinary course of its banking or
financing business and not with a view toward the sale, distribution, further
participation, or transfer thereof. Each Syndication Party agrees that it will
not sell, assign, convey or otherwise dispose of ("Transfer"), other than to a
commonly-owned affiliate bank, or create or permit to exist any lien or security
interest on all or any part of its Syndication Interest in the Loan without the
prior written consent of the Required Lenders (which consent will not be
unreasonably withheld); provided that (a) any such Transfer (except a Transfer
to another Syndication Party) must be in a minimum amount of the lesser of (i)
$5,000,000,00 or (ii)the full amount of the Syndication Interest, (b) the
transferee must assume all of the transferor's obligations hereunder and execute
such documents as Agent may reasonably require, and (c) the Syndication Party
making such Transfer must pay Agent an assignment fee of $2,500.00. Any
Syndication Party may participate any part of its Syndication Interest in the
Loan to any Person, and each Syndication Party understands and agrees that in
the event of any such participation, (y) its Syndication Share and Maximum
Syndication Amount will not change on account of such participation, (y) the
participant will have no rights under this Agreement, including, without
limitation, voting rights or the right to receive payments or distributions, and
(z) Agent shall continue to deal directly with the Syndication Party with
respect to the Loan and the Syndication Party's Syndication Interest as though
no participation had been granted and will not be obligated to deal directly
with any participant. Notwithstanding any provision contained herein to the
contrary,
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any Syndication Party may at any time pledge or assign all or any portion of its
Syndication Interest to any Federal Reserve Bank in accordance with applicable
law.
11.27 Method of Making Payments. Payment and transfer of all amounts owing
or to be paid or remitted hereunder, including, without limitation, payment of
the Initial Payment and each Advance Payment by Syndication Parties, and
distribution of principal or interest payments or fees or other amounts by
Agent, shall be by wire transfer in accordance with the instructions contained
on Exhibit 11.27 hereto ("Wire Instructions").
11.28 Events of Syndication Default/Remedies.
11.28.1 Any of the following occurrences, failures or acts, with
respect to any of the Syndication Parties shall constitute an Event of
Syndication Default hereunder by such party: (a) if any representation or
warranty made by such party in this Agreement shall be found to have been untrue
in any material respect, (b) if such party fails to make any distributions or
payments required under this Agreement within five (5) days of the date
required, (c) if such party breaches any other covenant, agreement, or provision
of this Agreement which breach shall have continued uncured for a period of
thirty (30) consecutive days after such breach first occurs, unless a shorter
period is required to avoid prejudicing the rights and position of the other
Syndication Parties, (d) if any agency having supervisory authority over such
party, or any creditors thereof, shall file a petition to reorganize or
liquidate such party pursuant to any applicable federal or state law or
regulation and such petition shall not be discharged or denied within fifteen
(15) days after the date on which it is filed, (e) if by the order of a court of
competent jurisdiction or by any appropriate supervisory agency, a receiver,
trustee or liquidator shall be appointed for such party or for all or any
material part of its property or if such party shall be declared insolvent, or
(f) if such party shall be dissolved, or shall make an assignment for the
benefit of its creditors, or shall file a petition seeking to take advantage of
any debtors' act, including the bankruptcy act, or shall admit in writing its
inability to pay its debts generally as they become due, or shall consent to the
appointment of a receiver or liquidator of all or any material part of its
property.
11.28.2 Upon the occurrence of an Event of Syndication Default, the
non-defaulting parties, acting by, or through the direction of, a majority of
the non-defaulting parties, may, in addition to any other remedy specifically
set forth in this Agreement, have and exercise any and all remedies available
generally at law or equity, including the right to damages and to specific
performance.
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11.29 Further Assurances. Agent and each Syndication Party agree to take
whatever steps and execute such documents may be reasonable and necessary to
implement this Section 11 and to carry out fully the intent thereof.
12. Miscellaneous Provisions.
12.1 Definitions. The following terms shall have the definitions set forth
below: "Advance" shall mean (a) an advance of funds pursuant to an Advance
Request to or for the account of Borrowers or any of them, or (b) payment by
Agent of a draw under a Letter of Credit.
"Advance Date" shall mean the requested disbursement date of the Advance
set forth in the applicable Advance Request.
"Base Libor Rate" shall mean the rate per annum for United States dollar
deposits quoted by Wells Fargo California as the Inter-Bank Market Offered Rate
determined as of 11:00 a.m. London time 2 Business Days prior to the requested
Interest Period Commencement Date set forth in the applicable Libor Rate
Request, with the understanding that such rate is quoted by Wells Fargo
California for the purpose of calculating effective rates of interest for loans
making reference thereto, on the first day of an Interest Period for delivery of
funds on such date for a period of time approximately equal to the number of
days in such Interest Period and in an amount approximately equal to the
principal amount of the Libor Loan to which such Interest Period applies.
Borrowers understand and agree that Wells Fargo California may base its
quotation of the Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Wells Fargo California in its discretion
deems appropriate including, but not limited to, the rated offered for United
States dollar deposits on the London Inter-Bank Market.
"Business Day" shall mean any day (a) other than a Saturday or Sunday and
other than a day which is a Federal legal holiday or a legal holiday for banks
in the State of Colorado, the State of California or the State of Illinois, or
(b) if such day relates to a borrowing of, a payment or prepayment of principal
of or interest on, a continuation of or conversion into, or an Interest Period
for, a Libor Loan or a notice by a Borrower with respect to any such borrowing,
payment, prepayment, continuation, conversion, or Interest Period, on which
dealings in U.S. Dollar deposits are carried out in the London interbank market.
"Capital Expenditures" shall mean all expenditures paid or incurred, on a
consolidated basis for Borrowers and the Subsidiaries, in respect of (a) the
acquisition, construction, improvement or replacement of land, buildings,
machinery,
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equipment, any other fixed assets or leaseholds and (b) to the extent related to
and not included in (a) above, materials, contract labor and direct labor, which
expenditures have been or should be, in accordance with GAAP, capitalized on the
books of any such Borrower, except for (i) the expenditure by Borrowers not to
exceed $20,000,000 to purchase the Headquarters Land, and (ii) the expenditure
by Borrowers not to exceed $27,000,000 in connection with the construction of
the Headquarters Building.
"Closing Date" shall mean the date on which the initial Advance is made to
or on behalf of Borrowers hereunder.
"Compliance Certificate" shall mean a certificate of the chief financial
officer of each Borrower in the form attached hereto as Exhibit 12.1. setting
forth in reasonable detail the data and calculations showing compliance with the
financial covenants set forth in Section 8.13 hereof.
"Coverage Ratio" shall mean for any measurement period: (a) for the four
most recently completed Fiscal Quarters, the aggregate of the consolidated net
income of Borrowers and the Subsidiaries (as determined in accordance with
GAAP), plus, on a consolidated basis for Borrowers and the Subsidiaries,
depreciation and amortization, plus interest expense; divided by (b) on a
consolidated basis for Borrowers and the Subsidiaries, the aggregate of
scheduled principal reductions in the following twelve (12) month period, plus
interest expense paid in the four most recently completed Fiscal Quarters, plus
the current portion of payments on capitalized leases.
"Current Liabilities" shall mean all of the current liabilities of
Borrowers as determined in accordance with GAAP.
"Default Interest Rate" shall mean a rate of interest equal to 200 basis
points plus the greater of (a) the Variable Rate, or (b) the highest Libor Rate
being charged on any Libor Loan.
"Environmental Laws" shall mean the provisions of C,R.S, 25-15-101f C.R.S.
Section 25-5- 502, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended, 42 U.S.C. 9601-9657 ("CERCLA") and the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901-6987 ("RCRA"),
the Hazardous Materials Transportation Act of 1975 ("HMTA"), 49 U.S,C.
1801-1821.
"Environmental Regulations" shall mean any federal, state or local code,
ordinance, regulation, requirement or rule relating to the Environmental Laws or
the subject of the Environmental Laws.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%)
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equal to the weighted average of the ask rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day. If the day for which the Federal
Funds Rate is to be determined is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day and, if such rate is not
so published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate quoted to Agent on such day on such transactions as
determined by Agent.
"Fee Letter" shall mean the letter dated July 2, 1996 signed by Agent and
Borrowers setting forth the amount and terms of payment of certain fees payable
by Borrower to Agent in connection with the Loan.
"Fiscal Quarter" shall mean the three month period commencing as of each
November 1, February 1, May 1, and August 1 and ending on the last day of each
October, January, April, and July, respectively.
"Free Cash Flow" shall mean for the four (4) most recent Fiscal Quarters:
the aggregate of the consolidated net income of Borrowers and the Subsidiaries
(as determined in accordance with GAAP), plus, on a consolidated basis for
Borrowers and the subsidiaries, depreciation and amortization, plus interest
expense.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, applied consistently, as in effect from time to time. .
"Hazardous Substances" shall mean dangerous, toxic or hazardous
pollutants, contaminants, chemicals, wastes, materials or substances, as defined
in or governed by the Environmental Laws or the Environmental Regulations, and
also including urea formaldehyde, polychlorinated biphenyls, asbestos,
asbestos-containing materials, nuclear fuel or waste, and petroleum products, or
any other waste, material, substances, pollutant or contaminant which would
subject an owner of property to any damages, penalties or liabilities under any
applicable Environmental Laws or Environmental Regulations.
"Headquarters Building" shall mean the office building and related
facilities to be constructed on the Headquarters Land.
"Headquarters Land" the real property described on Exhibit 12.1 (a)
hereto.
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"Interest Period" shall mean the period of time commencing on a Business
Day and continuing for one, two, three or six months, as, designated by
Borrowers in accordance with Section 4.2 of this Agreement; provided, however,
that no Interest Period shall extend beyond the Maturity Date, and, provided
further, that if any Interest Period would otherwise end on a day which is not a
Business Day, then such Interest Period shall be extended to the next succeeding
Business Day so long as such Business Day does not extend beyond the Maturity
Date (except that if such next succeeding Business Day would fall in the next
calendar month, such Interest Period shall end on the next preceding Business
Day), and provided further, that if there is no numerically corresponding day in
the month in which such an Interest Period is to end or if such an Interest
Period begins on the last Business Day of a calendar month, then such Interest
Period shall end on the last Business Day of the calendar month in which such
Interest Period is to end.
"Leverage Ratio" shall mean, on a consolidated basis for Borrowers and the
Subsidiaries, the ratio of Total Liabilities less unearned revenue and customer
deposits, as determined in accordance with GAAP, to Total Net Worth.
"Libor Loan" shall mean any portion of the Loan bearing interest at the
Libor Rate.
"Loan Period" the period commencing on the Closing Date and ending on the
Termination Date.
"Marketable Securities" shall mean securities that are traded on a public
stock exchange.
"Material Adverse Effect" shall mean (a) a material adverse effect on the
financial condition, results of operation, business or property of Borrowers, or
any of them, (b) an adverse effect on the ability of Borrowers, or any of them,
to perform its or their obligations under the Loan Documents.
"Maximum Syndication Amount" shall mean:
For Wells Fargo - $ 25,000,000.00
For Syndication Party #1 - $ 12,500,000.00
For Syndication Party #2 - $ 12,500,000.00
"Net Trade Receivables" shall mean the net trade receivables of Borrowers
as determined in accordance with GAAP.
"Person" shall mean any individual, corporation, association, partnership,
limited liability company, limited
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liability partnership, trust, organization, government, governmental agency, or
other entity.
"Plans" shall mean the following Borrower Benefit Plans set forth on
Exhibit 7.12: each ESOP, Borrowers' Restricted Stock Grant Plan, Borrowers Stock
Option Plans and Borrowers Employee Stock Purchase Plans.
"Principal Amount" shall mean the outstanding amount of principal under
the Notes.
"Prime Rate" shall mean the rate of interest most recently announced
within Well Fargo California as its Prime Rate, with the understanding that
Wells Fargo California's Prime Rate is one of its base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Wells Fargo
California may designate. Each change in the Prime Rate will be effective on the
day the change is announced within Wells Fargo California.
"Quick Ratio" shall mean, on a consolidated basis for Borrowers and the
Subsidiaries, the following ratio:
cash + Marketable Securities + Term Deposits + Net Trade Receivables
Current Liabilities - current portion of unearned revenues and customer
deposits Principal Amount
"Subsidiary" shall mean any corporation or entity other than a Borrower of
which more than 50% of the outstanding capital stock or voting-interests or
rights having ordinary voting power to elect a majority of the board of
directors or other managers of such entity is at the time directly or indirectly
owned by a Borrower or by a Borrower and/or one or more Subsidiaries or the
management of which corporation or entity is under control of a Borrower and/or
any other Subsidiary, directly or indirectly through one or more Persons and any
other Person which, under GAAP, should at any time for financial reporting
purposes be consolidated or combined with a Borrower and/or any other
Subsidiary.
"Successor Agent" shall mean such Person as may be appointed as successor
to the rights and duties of Agent as provided in Section 11.8 of this Agreement.
"Syndication Parties" shall mean: Wells Fargo in its role as such, but not
in its role as Agent hereunder.
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Syndication Party #1: Harris Bank
Syndication Party #2: Key Bank
"Syndication Share" shall mean
For Wells Fargo - 50%
(subject to adjustment
for sale of further
Syndication Interests)
For Syndication Party #1 - 25%
For Syndication Party #2 - 25%
subject to adjustment as provided in Section 11.4 hereof.
"Term Deposits" shall mean all cash on deposit in banks which cannot be
withdrawn on demand.
"Total Liabilities" shall mean all of the liabilities of Borrowers as
determined in accordance with GAAP.
"Total Net Worth" shall mean all of the assets of Borrowers as-determined
in accordance with GAAP, less Total Liabilities.
"Variable Rate Loan" shall mean any portion of the Loan bearing interest
at the Variable Rate.
The following terms are defined in the Sections of the Agreement
referenced below:
Term Section
---- -------
"Additional Costs" Section 8.15
"Administrator" Section 12.10.2
"Advance Amount" Section 11.3.3
"Advance Payment" Section 11.2.2
"Advance Request" Section 6.1.4
"Agent Fee" Section 11.21
"Aggregate Commitment Amount" Section 2.1
"Arbitration Panel" Section 12.10.4
"Authorized Representatives" Section 6.1.8
"Base Rate" Section 4.1
"Base Rate Margin" Section 4.3
"Borrower Benefit Plan" Section 7.12.1
"Borrower Pension Plan" Section 7.12.2
"Certificate of Authorized Representatives" Section 6.1.8
"Change in Law" Section 4.7.2
"Change of Control" Section 10.9
"Closing Date" Section 6.5
"COBRA" Section 7.12.15
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"Code" Section 7.12.1
"Construction" Section 2.2
"Construction Commitment Amount" Section 2.2
"Construction Commitment
Amount Certification" Section 6.1.4
"Contributing Syndication Parties" Section 11.4
"Credit Documents" Section 10.1
"Delinquency Interest" Section 11.4
"Delinquent Amount" Section 11.4
"Delinquent Syndication Party" Section 11.4
"Designating Party" Section 12.9.2
"Dispute" Section 12.10.1
"Documents" Section 12.10.1
"ERISA" Section 7.12.1
"ESOP" Section 7.12.1
"ESOP Indebtedness" Section 7.12.16
"ESOP Repurchase Indebtedness" Section 9.8
"Event of Default" Section 10
"Funding Losses" Section 5.6
"Hazardous Substances Claims" Section 8.2.13
"Indemnified Parties" Section 11.19
"Initial Payment" Section 11.2.1
"Initial Payment Notice" Section 11.3.1
"Interest Period Commencement Date" Section 4.2
"IRS" Section 7.12.2
"LC Advance Amount" Section 11.3.2
"LC Commitment Amount" Section 3.1
"LC Notice of Advance" Section 11.3.3
"Letter of Credit" Section 3
"Letter of Credit Fee" Section 3.7
"Letter of Credit Fee Policy" Section 3.7
"Libor Margin" Section 4.3
"Libor Rate" Section 4.2
"Libor Rate Request" Section 4.2
"Loan" Section 2
"Loan Advance Amount" Section 11.3.2
"Loan Documents" Section 6.1.3
"Loan Notice of Advance" Section 11.3.2
"Material Agreement" Section 7.8
"Maturity Date" Section 5.3
"Minimum Libor Prepayment" Section 5.4.3
"Minimum Prepayment Requirement" Section 5.4.3
"Minimum Variable Prepayment" Section 5.4.3
"Multiemployer Plan" Section 7.12.1
"Notes" Section 5.1
"Notice of Advance" Section 11.3.3
"Payment Account" Section 11.10
"Payment Distribution" Section 11.10
"Permitted Encumbrances" Section 7.3
"Permitted Indebtedness" Section 9.8
"Potential Default" Section 6.1.2
"Premises Section 7.15.1
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"Regulatory Change" Section 8.15
"Required Lenders" Section 11.8
"Revolving Loan" Section 2.1
"SEC" Section 8.2.12
"Signing Date" Section 6.5
"Syndication Interest" Section 11.1
"Syndication Party LC Payment Date" Section 11.3.3
"Syndication Party Loan Payment Date" Section 11.3.2
"Syndication Party Payment Date" Section 11.3.3
"Termination Date" Section 2.1
"Three Month Anniversary Date" Section 5.2
"Transfer" Section 11.26
"Unused Commitment Fee Reset Date" Section 4.9
"Unused Line Fee" Section 4.9
"Variable Rate" Section 4.1
"Wells Fargo California" Section 4.1
"Wire Instructions" Section 11.27
12.2 No Waiver. No waiver of any Event of Default shall be implied from
any omission by Agent or any Syndication Party to take action on account of such
default, and no express waiver shall affect any default other than the defaults
specified in the waiver and shall be operative only for the time and to the
extent therein stated.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to the address set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3.1 Borrowers:
J.D. EDWARDS & COMPANY
8055 East Tufts Avenue
Suite 1331
Denver, Colorado 80237
FAX: (303) 488-1077
Attention: Etta West
J.D. EDWARDS WORLD SOLUTIONS COMPANY
8055 East Tufts Avenue
Suite 1331
Denver, Colorado 80237
FAX: (303) 488-1077
Attention: Etta West
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J.D. EDWARDS WORLD SOURCE COMPANY
8055 East Tufts Avenue
Suite 1331
Denver, Colorado 80237
FAX: (303) 488-1077
Attention: Etta West
12.3.2 Syndication Parties:
Wells Fargo: WELLS FARGO BANK (COLORADO), N.A.
633 17th Street
Denver, Colorado 80270
FAX: (303) 293-5467
Attention: Jack Haye
with a copy to:
Wells Fargo Bank Corporate Banking Group
MAC0101-091
420 Montgomery Street
San Francisco, CA 94163
FAX: (415) 989-4319
Attention: Barbara Kattman
Harris: Harris Trust and Savings Bank
111 W. Monroe Street
Chicago, IL 60603
FAX: (312) 461-2591
Attention: Emerging Majors West James H. Colley
Key Bank: Key Bank of Colorado
600 Cherry Street.
Denver, Colorado 80222
FAX: (303) 741-3968
Attention: Brendan Lawlor
with a copy to:
Key Bank
Mail Code: WA-31-10-4812
700 Fifth Avenue, 48th Floor
P.O. Box 90
Seattle, WA 98111-0090
FAX: (206) 684-6035
Attention: Barry Booher
12.3.3 Agent:
Agent: WELLS FARGO BANK (COLORADO), N.A.,
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633 17th Street
Denver, Colorado 80270
FAX: (303) 293-5467
Attention: Jack Haye
Wells Fargo Bank Corporate Banking Group
MAC0101-091
420 Montgomery Street
San Francisco, CA 94163
FAX: (415) 989-4319
Attention: Barbara Kattman
12.4 Entire Agreement. This Agreement is the entire, final and complete
agreement regarding the subject matter hereof between the parties hereto and
supersedes and replaces all prior or existing oral or written agreements between
them or their representatives relating to the Loan and the Syndication
Interests.
12.5 Colorado Law. This Agreement is being executed in the state of
Colorado and is to be governed by and construed in accordance with the laws of
said state.
12.6 Amendment. No amendment to this Agreement shall be effective unless
in writing and signed by Borrower and the Required Lenders, except that (a) all
Syndication Parties must sign any amendment hereto that would change any
provision herein requiring the consent or approval of 100% of the Syndication
Parties, and (b) no Syndication Party's Syndication Share or Maximum Syndication
Amount may be changed without its written consent.
12.7 Severability/Titles. In case any one or more of the provisions of any
of the Loan Documents shall be held to be invalid, illegal or unenforceable in
any respect by any Court or other entity having the authority to do so, the
validity of the remaining provisions shall in no way be affected, prejudiced or
disturbed. Titles and headings herein are for reference purposes only and do not
constitute a part of this Agreement.
12.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one agreement.
12.9 Waiver of Jurisdiction, Service of Process, and Jury Trial. Agent,
Borrower, and each Syndication Party:
12.9.1 Irrevocably consents and submits to the nonexclusive
jurisdiction of the courts of the State of Colorado and the United States
District Court for the District of Colorado and waives any objection based on
venue or forum non convenient with
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respect to any action instituted therein arising under this Agreement or in any
way connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or the transactions related hereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agrees that any dispute with respect to any such
matters shall be heard only in the courts described above.
12.9.2 With respect to litigation concerning this Agreement within
the jurisdiction of the courts of the State of Colorado or the United States
District Court for the District of Colorado, Borrower, each Syndication Party,
and Agent, unless they have an office located in Colorado where service of
process may be made) ("Designating Party") hereby irrevocably appoints CT
Corporation Systems, 1600 Broadway, Denver, Colorado 80202, as its agent to
receive for and on its behalf, service of process, which service may be made by
mailing a copy of any summons or other legal process to such party in care of
such agent. Each Designating Party agrees that it shall maintain a duly
appointed agent for service of summons and other legal process as long as it
remains obligated under this Agreement and shall keep Agent advised in writing
of the identity and location of such agent. The receipt by such agent and/or by
such Designating Party of such summons or other legal process in any such
litigation shall be deemed personal service and acceptance by such Designating
Party for all purposes of such litigation, In the event any Designating Party
shall fail to maintain a duly appointed agent for service of summons as required
by this Subsection 12.9.2. such Designating Party hereby waives personal service
of any and all process upon it and consents that all such service or process may
be made by certified mail (return receipt requested) directed to its address set
forth in Section 12.3 hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at the option of the party making such service, by service in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, the party so served shall appear in answer to such process, failing
which such party shall be deemed in default and judgment may be entered against
it for the amount of the claim and other relief requested.
12.9.3 HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR (b) IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR THE TRANSACTIONS RELATED HERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE BORROWER, AGENT, AND EACH SYNDICATION PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER, AGENT, OR ANY
SYNDICATION PARTY
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MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
12.10 Arbitration.
12.10.1 Binding Arbitration. Upon the demand of Borrower, the Agent,
or the Required Lenders (collectively the "parties"), whether made before the
institution of any judicial proceeding or not more than 60 days after service of
a complaint, third party complaint, cross-claim or counterclaim or any answer
thereto or any amendment to any of the above, any Dispute (as defined below)
shall be resolved by binding arbitration in accordance with the terms of this
arbitration clause. A "Dispute" shall include any action, dispute, claim, or
controversy of any kind, whether founded in contract, tort, statutory or common
law, equity, or otherwise, not existing or hereafter occurring between the
parties arising out of, pertaining to or in connection with this Agreement, the
Notes, or any related agreements, documents, or instruments (the "Documents").
THE PARTIES UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED THAT THE
DISPUTES MAY BE SUBMITTED TO ARBITRATION RATHER THAN BEING DECIDED THROUGH
LITIGATION IN COURT AND THAT ONCE DECIDED BY AN ARBITRATOR THE CLAIMS INVOLVED
CANNOT LATER BE BROUGHT, FILED, OR PURSUED IN COURT.
12.10.2 Governing Rules. Arbitrations conducted pursuant to this
Agreement, including selection of arbitrators, shall be administered by the
American Arbitration Association ("Administrator") pursuant to the Commercial
Arbitration rules of the Administrator, Arbitrations conducted pursuant to the
terms hereof shall be governed by the laws of the State of Colorado, including
the provisions of CRS 13-22-201 et seq., and CRS 13-21-102(5), Judgment upon any
award rendered hereunder may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.SX,
Section 91 or similar governing state law, Any party who fails to submit to
binding arbitration following a lawful demand by the opposing party shall bear
all costs and expenses, including reasonable attorney's fees, incurred by the
opposing party in compelling arbitration of any Dispute.
12.10.3 No Waiver, Preservation of Remedies, Multiple Parties. No
provision of, nor the exercise of any rights under, this Section 12.10 shall
limit the right of any party to (1) foreclose against any real or personal
property collateral or other security, (2) exercise self-help remedies
(including repossession and setoff rights), or (3) obtain provisional or
ancillary remedies such as injunctive relief, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be
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exercised at any time except to the extent, and until, such action is contrary
to a final award or decision in any arbitration proceeding. The institution and
maintenance of an action as described above shall not constitute a waiver of the
right of any party, including the plaintiff, to submit the Dispute to
arbitration, nor render inapplicable the compulsory arbitration provisions
hereof. Any claim or dispute related to exercise of any self-help, auxiliary or
other exercise of rights under this Subsection 12.10.3 shall be a Dispute
hereunder.
12.10.4 Arbitration Powers and Qualifications; Awards. Arbitrator(s)
shall resolve all Disputes in accordance with the applicable substantive law.
The arbitrator(s) may make an award of attorneys' fees and expenses if permitted
by law or the agreement of the parties, All statutes of limitation applicable to
any Dispute shall apply to any proceeding in accordance with this arbitration
clause. Any arbitrator selected to act as the only arbitrator in a Dispute shall
be required to be a practicing attorney with not less than 10 years practice in
commercial law in the State of Colorado. With respect to a Dispute in which the
claim or amounts in controversy do not exceed five hundred thousand dollars
($500,000.00), a single arbitrator shall be chosen and shall resolve the
Dispute. In such case the arbitrator shall have authority to render an award up
to but not to exceed five hundred thousand dollars ($500,000,00) including all
damages of any kind whatsoever, costs, fees and expenses. Submission to a single
arbitrator shall be a waiver of the claims of each party to recover more than
five hundred thousand dollars ($500,000.00). A Dispute involving claims or
amounts in controversy exceeding five hundred thousand dollars ($500,000.00)
shall be decided by a majority vote of a panel of three arbitrators
("Arbitration Panel"), An Arbitration Panel shall be composed of one arbitrator
who would be qualified to sit as the single arbitrator in a Dispute decided by
one arbitrator, one who has at least ten years experience in commercial lending
and one who has at least ten years experience in the Borrowers' industry,
Arbitrator(s) may, in the exercise of their discretion, at the written request
of a party in any Dispute, (1) consolidate in a single proceeding any multiple
party claims that are substantially identical and all claims arising out of a
single loan or series of loans including claims by or against Borrowers,
guarantors, sureties and or owners of collateral if different from the Borrower,
and (2) administer multiple arbitration claims as class actions in accordance
with Rule 23 of the Federal Rules of Civil Procedure. The arbitrators) shall be
empowered to resolve any dispute regarding the terms of this Agreement or the
arbitrability of any dispute or any claim that all or any part (including this
provision) is void or voidable but shall have no power to change or alter the
terms of this Agreement. The award of the arbitrators) shall be in writing and
shall specify the factual and legal basis for the award.
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12.10.5 Miscellaneous. To the maximum extent practicable, the
Administrator, the arbitrator(s), and the parties shall take any action
necessary to require that an arbitration proceeding hereunder be concluded
within one-hundred eighty (180) days of the filing of the Dispute with the
Administrator. The arbitrators) shall be empowered to impose sanctions for any
party's failure to proceed within the times established herein. Arbitration
proceedings hereunder shall be conducted in Denver, Colorado, at a location
determined by the Administrator, In any such proceeding a party shall state as a
counterclaim any claim which arises out of the transaction or occurrence or is
in any way related to the Documents which does not require the presence of a
third party which could not be joined as a party in the proceeding, The
provisions of this arbitration clause shall survive any termination, amendment,
or expiration of the Documents and repayment in full of sums owed by Borrower
hereunder and under the Notes unless the parties otherwise expressly agree in
writing. Each party agrees to keep all disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business of the parties or as required by applicable law or
regulation.
12.11 Successors and Assigns. Without limiting any prohibition on
assignment contained herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
12.12 Termination and Mutual Release. Upon full payment and satisfaction
of the Notes and the obligations contained in this Agreement and the other Loan
Documents and after the expiration date of all Letters of Credit issued
hereunder, this Agreement, except for any obligations under Sections 3.8, 8.17,
8.18, 11.14 and 11.19, shall terminate and the parties shall, thereupon
automatically each be fully, finally, and forever released and discharged from
any further claim, liability, or obligation in connection with the Loan.
12.13 Costs and Expenses. To the extent permitted by law, Borrowers agree
to pay to Agent and the Syndication Parties, on demand, all out-of-pocket costs
and expenses (a) incurred by Agent in connection with the preparation,
negotiation, and execution of the Credit Documents and the transactions
contemplated thereby, and (b) incurred by Agent or any Syndication Party
(including, without limitation, the reasonable fees and expenses of counsel
retained by Agent and the Syndication Parties) in connection with the
enforcement or protection of the Syndication Parties' rights under the Credit
Documents upon the occurrence of an Event of Default or upon the commencement of
an action by any Borrower against Agent or any Syndication Party (except that if
the court or the arbitrators), as applicable, make a specific finding that such
Borrower(s) have
60
<PAGE> 69
prevailed on all or substantially all of their claims in such action brought by
such Borrower(s), such Borrower(s) shall not be obligated to pay the
out-of-pocket costs and expenses of Agent and the Syndication Parties in
connection with such action), including without limitation collection of the
Loan (regardless of whether such enforcement or collection is by court action or
otherwise).
12.14 Replacement Notes. Upon receipt by Borrower of evidence satisfactory
to it of (a) the loss, theft, destruction or mutilation of any Note, and (in
case of loss, theft or destruction) of such Syndication Party's agreement to
indemnify Borrower, and upon surrender and cancellation of such Note, if
mutilated, or (b) the assignment of any Syndication Interest or any portion
thereof pursuant to this Agreement, then Borrower will pay any unpaid principal
and interest (and Funding Losses, if applicable) then or previously due and
payable on such Note and will deliver in lieu of such Note a new Note or, in the
case of an assignment of a portion of a Syndication Interest, Notes for any
remaining balance.
12.15 Notice to Syndication Parties and Agent. No action shall be
commenced by Borrower for any claim against Agent or any Syndication Party on
account of any act or failure to act by such Person unless a notice specifically
setting forth the claim of Borrower shall have been given to such Person within
sixty (60) calendar days after Borrower has knowledge or should reasonably have
acquired knowledge of the act or omission which Borrower alleges gave rise to
such claim, and failure to give such notice shall constitute a waiver of any
such claim.
12.16 Joint and Several Liability. The liability of the Borrowers
hereunder and under the Notes shall be joint and several.
61
<PAGE> 70
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
as of the date set forth above.
BORROWERS:
J.D. EDWARDS & COMPANY, a Colorado
corporation
By: /s/ Richard E. Allen
Name: Richard E. Allen
Title: Chief Financial Officer
J.D. EDWARDS WORLD SOLUTIONS COMPANY, a
Colorado corporation
By: /s/ Richard E. Allen
Name: Richard E. Allen
Title: Chief Financial Officer
J.D. EDWARDS WORLD SOURCE COMPANY, a
Colorado corporation
By: /s/ Richard E. Allen
Name: Richard E. Allen
Title: Chief Financial Officer
SYNDICATION PARTIES:
--------------------
WELLS FARGO (COLORADO), N.A.
By: _____________________________
Name: _____________________
Title: ____________________
HARRIS TRUST AND SAVINGS BANK
By: _____________________________
Name: _____________________
Title: ____________________
62
<PAGE> 71
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
as of the date set forth above.
BORROWERS:
J.D. EDWARDS & COMPANY, a Colorado
corporation
By: _____________________________
Name:
Title:
J.D. EDWARDS WORLD SOLUTIONS COMPANY, a
Colorado corporation
By: _____________________________
Name:
Title:
J.D. EDWARDS WORLD SOURCE COMPANY, a
Colorado corporation
By: _____________________________
Name:
Title:
SYNDICATION PARTIES:
--------------------
WELLS FARGO (COLORADO), N.A.
By: /s/ Jack Haye
Name: Jack Haye
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: _____________________________
Name: _____________________
Title: ____________________
62
<PAGE> 72
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
as of the date set forth above.
BORROWERS:
J.D. EDWARDS & COMPANY, a Colorado
corporation
By: _____________________________
Name:
Title:
J.D. EDWARDS WORLD SOLUTIONS COMPANY, a
Colorado corporation
By: _____________________________
Name:
Title:
J.D. EDWARDS WORLD SOURCE COMPANY, a
Colorado corporation
By: _____________________________
Name:
Title:
SYNDICATION PARTIES:
--------------------
WELLS FARGO (COLORADO), N.A.
By: _____________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
By: /s/ James H. Colby
Name: James H. Colby
Title: Vice President
62
<PAGE> 73
KEY BANK OF COLORADO
By: /s/ Todd F. Clossin
Name: Todd F. Closin
Title: Executive Vice President
AGENT:
-----
WELLS FARGO BANK (COLORADO), N.A.
By: _____________________________
Name: _____________________
Title: ____________________
63
<PAGE> 74
KEY BANK OF COLORADO
By: _____________________________
Name: _____________________
Title: ____________________
AGENT:
-----
WELLS FARGO BANK (COLORADO), N.A.
By: /s/ Jack Haye
Name: Jack Haye
Title: Vice President
63
<PAGE> 75
Exhibit 5. 1
to Credit Agreement
FORM OF PROMISSORY NOTE
$XXX,000,000 Date: August 1, 1996
Wells Fargo Bank (Colorado), N.A. ("Wells Fargo"), as a Syndication Party
and as Agent, the other Syndication Parties and Makers entered into that certain
Credit Agreement dated as of August 1, 1996 ("Credit Agreement") pursuant to the
terms of which Makers agreed to deliver a series of promissory notes in the
aggregate principal amount of $50,000,000.00 payable individually to Wells Fargo
and the other Syndication Parties named therein (collectively the "Notes"),
Capitalized terms used but not defined herein shall have the meaning set forth
in the Credit Agreement if defined therein.
TERMS OF NOTE
--------------
FOR VALUE RECEIVED, J.D., EDWARDS & COMPANY, a Colorado corporation, J.D.,
EDWARDS WORLD SOLUTIONS COMPANY, a Colorado corporation, and J.D. EDWARDS WORLD
SOURCE COMPANY, a Colorado corporation (collectively, "Makers"), jointly and
severally promise to pay to the order of [WELLS FARGO] OR
[_____________________________]("Payee") at the office of Wells Fargo at 633
17th Street, Denver, Colorado 80270, or such other place as the Agent shall
direct in writing, the principal sum of______________________________Dollars
($XXX,000,000.00) or, if less, the amount outstanding under this Note for
Advances pursuant to the Credit Agreement, together with such interest thereon
and such fees as are provided for in the Credit Agreement. This Note is issued
and delivered to Payee pursuant to the Credit Agreement.
The unpaid balance of this Note from time to time outstanding shall bear
interest at the Variable Rate or the Libor Rate ("Interest Rate"), determined as
provided in the Credit Agreement. The Interest Rate shall be converted from an
annual rate to a daily rate based on a 360-day year and applied to the actual
days elapsed. At maturity, including acceleration of maturity upon Makers,
default, the entire amount of unpaid principal and accrued interest shall bear
interest at a rate equal to two hundred (200) basis points in excess of the
highest applicable Interest Rate then applicable to any of the principal
outstanding hereunder, as such Interest Rate may change from time to time
("Default Interest Rate"). Interest on Variable Rate
<PAGE> 76
Loans shall be payable quarterly in arrears no later than the last day of each
Fiscal Quarter during the term of this Note, and interest on Libor Loans shall
be payable in arrears upon the maturity of the applicable Interest Period;
provided, however, that with respect to each Libor Loan where the Interest
Period is equal to six months, interest shall also be payable on the Three Month
Anniversary Date for such Libor Loan; provided, however that if the Three Month
Anniversary Date for such Libor Loan would occur on a day which is not a
Business Day, then such Three Month Anniversary Date shall be deemed to be the
next succeeding Business Day so long as such Business Day does not extend into
the next calendar month, in which case such Three Month Anniversary Date shall
be deemed to be the next preceding Business Day. If there shall occur an Event
of Default or a Potential Default, at the option of Agent, interest shall be
payable upon Agents demand. Payment in full of the entire outstanding principal
balance on this Note, together with accrued interest thereon, shall be due and
payable on the earlier of (a) July 31, 1999 ("Termination Date"), or (b) such
earlier date on which the Loan becomes due and payable as a result of
acceleration of the payment of the Note on account of the occurrence of an Event
of Default ("Maturity Date"). If the due date for any payment of principal or
interest under this Note shall fall on other than a Business Day, such payment
shall be due on the next day which is a Business Day, Payments received after
11:00 a.m. Pacific time on any Business Day will be deemed received on the next
succeeding Business Day.
This Note has been issued by Makers to Payee pursuant to the Credit
Agreement and reference is made thereto for specific terms and conditions under
which this Note is made and to which this Note is subject.
The indebtedness evidenced by this Note may be repaid and reborrowed prior
to the Termination Date in accordance with, and subject to the limitations of,
Section 2.1 of the Credit Agreement. This Note is subject to voluntary and
mandatory prepayments ("Prepayments") as set forth in Sections 5.4 and 5.5 of
the Credit Agreement; provided that Makers shall be required to pay any Funding
Losses owing on account of any such Prepayment, Principal may be reborrowed up
to the Termination Date subject to the conditions set forth in the Credit
Agreement. Upon the occurrence of an Event of Default, Makers agree that Agent
shall have all rights and remedies set forth in the Credit Agreement, including
without limitation the rights of acceleration set forth in Section 10.11 of the
Credit Agreement, In addition, Agent shall have the right to recover all costs
of collection and enforcement of this Note as provided in Section 12.13 of the
Credit Agreement.
Makers and any endorser, guarantor, surety or assignor hereby waives
presentment for payment, demand, protest, notice of
-2-
<PAGE> 77
protest, and notice of dishonor and nonpayment of this Note, and all defenses on
the ground of delay, suretyship, impairment of collateral or of extension of
time at or after maturity for the payment of this Note.
This Note shall be governed in all respects by the law of the State of
Colorado.
Makers:
J.D. EDWARDS & COMPANY,
a Colorado corporation
By: _______________________
Name: Richard E. Allen
Title: Chief Financial Officer
J.D. EDWARDS WORLD SOLUTIONS
COMPANY, a Colorado corporation
By: __________________________
Name: Richard E, Allen
Title: Chief Financial Officer
J.D. EDWARDS WORLD SOURCE
COMPANY, a Colorado corporation
By: ___________________________
Name: Richard E. Allen
Title: Chief Financial Officer
-3-
<PAGE> 78
Exhibit 6.1.4
to Credit Agreement
FORM OF
ADVANCE REQUEST
---------------
WELLS FARGO BANK (COLORADO), N.A.
633 17th Street
Denver, Colorado 80270
Reference is made to that certain Credit Agreement dated as of August 1,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement") among J.D. Edwards & Company, J.D. Edwards World Solutions Company
and J.D. Edwards World Source Company (each, a "Borrower" and, collectively,
"Borrowers"), Wells Fargo Bank (Colorado), N.A. ("Wells Fargo"), Harris Trust
and Savings Bank ("Harris Bank"), and Key Bank of Colorado ("Key Bank") (Wells
Fargo, Harris Bank, Key Bank and any future Syndication Parties under the Credit
Agreement shall be collectively referred to herein as, the "Lenders"), and Wells
Fargo, as agent for the Lenders (in such capacity, "Agent"). Capitalized terms
used herein shall have the respective meanings assigned to them in the Credit
Agreement if defined therein.
1. Pursuant to the Credit Agreement, Borrower hereby requests an Advance
upon the following terms:
(a) The principal amount of the requested Advance is $___________.
(b) The date of the requested Advance is to be ______, 199___.
(c) The aggregate amount of the Advance for which a Variable Rate
interest selection is made is $_________.
(d) The aggregate amount of the Advance for which a Libor Rate
interest selection is made, and each requested Interest Period, are:
<TABLE>
<CAPTION>
Amount Interest Period
------ ---------------
<S> <C>
$_____________ _______ months
$_____________ _______ months
</TABLE>
2. Borrower hereby certifies to Agent and the Lenders that, on the date of
this Advance Request and after giving effect to the requested Advance (including
the use of the proceeds thereof):
<PAGE> 79
July 26, 1996
Page 2
(a) The representations and warranties set forth in the Credit
Agreement are true and correct in all material respects as if made on such date;
(b) No Event of Default or Potential Default has occurred;
(c) Each of the Loan Documents remains in full force and effect;
(d) No material adverse change has occurred in the condition,
operations, or prospects of any Borrower; and
(e) After giving effect to the Advance requested in this Advance
Request, the amount of the Loan used by any Borrower to fund the Construction
does not exceed the Construction Commitment Amount.
IN WITNESS WHEREOF, the undersigned is an Authorized Representative of the
Borrower executing this Advance Request and has caused this Advance Request to
be duly executed on behalf of such Borrower as of ________________, 199____.
-----------------------
By: ___________________
Title: ________________
<PAGE> 80
Exhibit 7.3
to Credit Agreement
PERMITTED ENCUMBRANCES AND CONDITIONS OF ASSETS
Each Borrower has good and marketable title to all of its properties and assets,
free and clear of all liens, pledges, security interests, restrictions,
encumbrances and defects in title, except (a) real property liens related to the
Headquarters Building which are attached hereto, and (b) as otherwise permitted
under the Credit Agreement.
<PAGE> 81
Attachment to Exhibit 7.3
to Credit Agreement
1. EASEMENT AND RIGHT OF WAY FOR COMMUNICATION FACILITIES AS GRANTED TO THE
MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY BY DENVER TECHNOLOGICAL
CENTER, INC., IN INSTRUMENT RECORDED JUNE 11, 1975 IN BOOK 1060 AT PAGE
183.
(AFFECTS PARCELS A-1 AND A-5-B)
2. RESERVATIONS MADE BY THE UNION PACIFIC RAILWAY COMPANY IN DEED RECORDED
APRIL 3, 1896 IN BOOK 1122 AT PAGE 78, OLD ARAPAHOE COUNTY RECORDS.
THE ABOVE MINERAL RESERVATION WAS LATER LIMITED BY THE UNION PACIFIC
RAILROAD COMPANY, SUCCESSOR TO THE UNION PACIFIC RAILWAY COMPANY IN WHICH
SAID DAMAGE THE SURFACE OF THE LAND SO RELINQUISHMENTS WERE EXECUTED: a)
AS EVIDENCED BY INSTRUMENT RECORDED JANUARY 5, 1960 IN BOOK 1169 AT PAGE
403 (ARAPAHOE COUNTY RECORDS):
b) AS EVIDENCED BY INSTRUMENT RECORDED JUNE 6, 1969 IN BOOK 1816 AT PAGE 4
(ARAPAHOE COUNTY RECORDS) :
c) AS EVIDENCED BY INSTRUMENT RECORDED DECEMBER 31, 1962 IN BOOK 9973 AT
PAGE 514.
(AFFECTS ALL THAT PORTION OF SUBJECT PROPERTY LYING IN SECTION 9)
3. RIGHT OF WAY FOR DITCHES OR CANALS CONSTRUCTED BY THE AUTHORITY OF THE
UNITED STATES, AS RESERVED IN UNITED STATES PATENT RECORDED JANUARY 26,
1891 IN BOOK 647 AT PAGE 632. (AFFECTS THAT PORTION OF PARCELS A-1, A-2
AND A-3 LYING IN SECTION 8)
4. RIGHT OF WAY TO AMERICAN TELEPHONE AND TELEGRAPH COMPANY AS CONTAINED IN
INSTRUMENT RECORDED JULY 19, 1950 IN BOOK 683 AT PAGE 502. (AFFECTS
PARCELS A-1, A-3 AND A-5-3)
5. UTILITY EASEMENT AS GRANTED TO AMERICAN TELEPHONE AND TELEGRAPH COMPANY IN
INSTRUMENT RECORDED JULY 19, 1950, IN BOOK 683 AT PAGE 496 (ARAPAHOE
COUNTY RECORDS) (AFFECTS PARCELS A-2 AND A-3).
6. EACH AND EVERY RIGHT OR RIGHTS OF ACCESS TO AND FROM ANY PART OF THE RIGHT
OF WAY, FROM AND TO ANY PART OF THE SUBJECT PROPERTY ABUTTING UPON
HIGHWAYS, AS GRANTED TO THE DEPARTMENT OF HIGHWAYS, STATE OF COLORADO, BY
THE FOLLOWING INSTRUMENTS: a) DEED RECORDED NOVEMBER 29, 1973 IN BOOK 801
AT PAGE 664 (RECORDED MARCH 23, 1971 IN BOOK 1915 AT PAGE 406 OF ARAPAHOE
COUNTY RECORDS); b) DEED RECORDED JULY l2,1974 IN BOOK 911 AT PAGE 622; c)
DEED RECORDED JANUARY 21, 1975 IN BOOK 1001 AT PAGE 252.
7. RESTRICTIONS WHICH DO NOT CONTAIN A FORFEITURE OR REVERTER CLAUSE, BUT
OMITTING RESTRICTIONS, IF ANY, BASED ON RACE, RELIGION, COLOR OR NATIONAL
ORIGIN AS CONTAINED IN INSTRUMENT RECORDED JULY 13, 1976 IN BOOK 1982 AT
PAGE 381 AS AMENDED AND RESTATED BY INSTRUMENT RECORDED MARCH 15, 1982 IN
BOOK 2550 AT PAGE 82.
8. EASEMENT AND RIGHT OF WAY FOR UTILITY LINES AS GRANTED TO PUBLIC SERVICE
COMPANY OF COLORADO BY D.T.C. ASSOCIATES IN THE INSTRUMENT RECORDED JUNE
8, 1982 IN BOOK 2597 AT PACE 676.
(AFFECTS PARCELS A-1 AND A-6)
<PAGE> 82
Attachment to Exhibit 7.3
to Credit Agreement
9. COVENANTS, CONDITIONS AND RESTRICTIONS, WHICH DO NOT CONTAIN A FORFEITURE
OR REVERTER CLAUSE, BUT OMITTING RESTRICTIONS, IF ANY, BASED ON RACE,
COLOR, RELIGION OR NATIONAL ORIGIN AS CONTAINED IN INSTRUMENT RECORDED
MARCH 30, 1978 IN BOOK 1529 AT PAGE 401 AND RE-RECORDED MAY 30, 1978 IN
BOOK 1573 AT PAGE 108.
THE TERM OF THIS RESTRICTION IS FOR THE PERIOD DESCRIBED IN LEASE AGREEMENT
SHORT FORM OF LEASE RECORDED MARCH 22, 1977 IN BOOK 1407 AT PAGE 253, SAID
DOCUMENT DISCLOSES A TERM OF 75 YEARS COMMENCING ON JANUARY 1, 1977,
(AFFECTS PARCELS A-2, A-5-3 AND A-6)
10. UTILITY EASEMENT OVER A PORTION OF SUBJECT PROPERTY AS GRANTED BY DTC
SHOPPING CENTER TO PUBLIC SERVICE COMPANY OF COLORADO BY INSTRUMENT
RECORDED FEBRUARY 1, 1982 IN BOOK 2527 A7 PAGE 513.
CORRECTION THERETO RECORDED JULY 20, 1989 UNDER RECEPTION NO. 065750.
(AFFECTS PARCEL A-1)
11. UTILITY EASEMENT GRANTED BY DTC SHOPPING CENTER, A COLORADO GENERAL
PARTNERSHIP TO PUBLIC SERVICE COMPANY OF COLORADO BY INSTRUMENT RECORDED
FEBRUARY 1, 1982 IN BOOK 3527 AT PAGE 516. (AFFECTS PARCELS A-1 AND A-4)
12. EASEMENT AND RIGHT OF WAY FOR PIPELINES PURPOSES GRANTED TO CITY AND COUNTY
OF DENVER, ACTING BY AND THROUGH ITS BOARD OF WATER COMMISSIONERS BY DTC
SHOPPING CENTER, A COLORADO GENERAL PARTNERSHIP BY INSTRUMENT RECORDED
APRIL 2, 1984 IN BOOK 3059 AT PAGE 423. (AFFECTS PARCEL A-1)
13. EASEMENT AND RIGHT OF WAY FOR ACCESS PURPOSES GRANTED TO DTC HOTEL LTD., A
TEXAS LIMITED PARTNERSHIP BY DTC SHOPPING CENTER, A COLORADO GENERAL
PARTNERSHIP AND DENVER TECH CENTER ASSOCIATES, A COLORADO GENERAL
PARTNERSHIP BY INSTRUMENT RECORDED JUNE 20, 1984 IN BOOK 3128 AT PAGE 98.
(AFFECTS PARCELS A-1 AND A-6)
14. EASEMENT AND RIGHT OF WAY FOR EMERGENCY FIRE AND PEDESTRIAN PURPOSES
GRANTED IN INSTRUMENT BY AND BETWEEN DTC SHOPPING CENTER, A COLORADO
GENERAL PARTNERSHIP AND DTC HOTEL, LTD., A TEXAS LIMITED PARTNERSHIP
RECORDED JUNE 20, 1984 IN BOOK 3128 AT PAGE 104. (AFFECTS PARCEL A-1)
15. TERMS, AGREEMENTS, PROVISIONS, CONDITIONS AND OBLIGATIONS AS CONTAINED IN
DETENTION POND EASEMENT AGREEMENT BY AND AMONG DTC SH0PPING CENTER, DENVER
TECH CENTER ASSOCIATES AND BILL L. WALTERS, RECORDED JULY 2, 1981 IN B00K
2404 AT PAGE 432 FOR THE BENEFIT OF SUBJECT PROPERTY.
AMENDMENT THERETO RECORDED FEBRUARY 3, 1988 UNDER RECEPTION NO. 232730.
(AFFECTS PARCELS A-1. A-2, A-3, A-5-3 AND A-6).
16. RIGHT OF WAY AS GRANTED TO THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH
COMPANY IN INSTRUMENT RECORDED APRIL 30, l985 UNDER RECEPTION NO. 008260
AND JUNE 11, 1985 UNDER RECEPTION NO. 025637. (AFFECTS PARCEL A-1)
17. UTILITY EASEMENT AS GRANTED TO PUBLIC SERVICE COMPANY OF COLORADO IN
INSTRUMENT RECORDED JUNE 17, 1985, UNDER RECEPTION NO. 027882.
(AFFECTS PARCEL A-1)
18. TERMS, CONDITIONS AND PROVISIONS OF EASEMENT AGREEMENT RECORDED DECEMBER
31, 1985 AT RECEPTION NO. 010768 (AFFECTS PARCEL A-1).
Attachment to Exhibit 7.3
to Credit Agreement
19 TERMS, CONDITIONS AND PROVISIONS OF EASEMENT AGREEMENT RECORDED DECEMBER
31, 1985 AT RECEPTION NO. 010769 (AFFECTS PARCEL A-1)
20. UTILITY EASEMENT AS GRANTED TO PUBLIC SERVICE COMPANY OF COLORADO IN
INSTRUMENT RECORDED JANUARY 27, 1986, UNDER RECEPTION NO. 021015 (AFFECTS
PARCEL A-3).
21. TERMS, CONDITIONS AND PROVISIONS OF EASEMENT AGREEMENT RECORDED March 17,
1987 AT RECEPTION NO. 105026 (AFFECTS PARCEL A-1).
22. COSTS AND ASSESSMENTS FOR THE BENEFIT OF SUBJECT PROPERTY AS SET FORTH IN
ORDINANCE NO. 239, SERIES OF 1990 CREATING A BUSINESS IMPROVEMENT DISTRICT
RECORDED MAY 7, 1990 UNDER RECEPTION NO. 039892. (AFFECTS ALL PARCELS)
23. TERMS, CONDITIONS AND PROVISIONS OF ACCESS EASEMENT RECORDED February 19,
1986 AT RECEPTION NO. 030288
SUBORDINATION THERETO RECORDED JULY 10, 1986 UNDER RECEPTION N0. 093334.
(AFFECTS PARCEL A-1).
24. UTILITY EASEMENT AS GRANTED TO PUBLIC SERVICE COMPANY OF COLORADO IN
INSTRUMENT RECORDED June 17, 1985, UNDER RECEPTION NO. 27877.
25. TERMS, CONDITIONS AND PROVISIONS OF ACCESS EASEMENT AGREEMENT RECORDED
December 15, 1992 AT RECEPTION NO. 0149017.
26. UTILITY EASEMENT AS GRANTED TO PUBLIC SERVICE COMPANY OF COLORADO IN
INSTRUMENT RECORDED June 23, 1994, UNDER RECEPTION NO. 9400101665.
27. UTILITY EASEMENT AS GRANTED TO PUBLIC SERVICE COMPANY OF COLORADO IN
INSTRUMENT RECORDED March 21, 1995, UNDER RECEPTION NO. 9500031922.
28. STORM SEWER, GAS AND ELECTRIC LINES, TELEPHONE LINES NOT WITHIN AN EASEMENT
AS EVIDENCED BY VARIOUS ENTRIES ON SURVEY BY CREIGHTON R. MOORE DATED
AUGUST 15, 1995, REVISED SEPTEMBER 13, 1995, NOVEMBER 8, 1995, NOVEMBER 12,
1995 AND NOVEMBER 14, 1995 JOB NO. 58-95
THE FOLLOWING LEASES AND TENANCIES:
LICENSE AGREEMENT EXECUTED FEBRUARY 12, 1986 BETWEEN DTC EAST LAND VENTURE
AND GOLDSMITH METROPOLITAN DISTRICT
PARKING LICENSE AGREEMENT DATED OCTOBER 3, 1988 BETWEEN DTC EAST LAND
VENTURE AND MOUNTAIN VIEW ASSOCIATES, LTD.
<PAGE> 83
Exhibit 7.4
to Credit Agreement
LITIGATION
J.D. EDWARDS & COMPANY V. RANDY PODANY AND MERCER MANAGEMENT CONSULTING, U.S.
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, CASE NO. 94-C-04865.
J.D. Edwards filed its Complaint in the referenced lawsuit in August 1994. J.D.
Edwards seeks recovery from Podany and Mercer for their interference with
contracts and prospective business advantage in connection with the failure of
SNE to make its payments due on license, service and maintenance agreements.
J.D. Edwards filed an action in arbitration against SNE under the rules of the
American Arbitration Association and successfully recovered approximately
$890,000 from SNE. Podany and Mercer were consultants hired by SNE who convinced
SNE not to pay J.D. Edwards monies owed pursuant to contract. J.D. Edwards will
pursue this case vigorously.
This matter has been scheduled for trial on January 15, 1997.
SSA (CHINA) LIMITED V. J.D. EDWARDS, ET AL, THE SECOND INTERMEDIATE COURT,
BEIJING, PEOPLES REPUBLIC OF CHINA.
SSA (China) Limited, a subsidiary of Systems Software Associates a Chicago based
competitor of J.D. Edwards, filed suit in Beijing, China against "J.D. Edwards"
(the correct name of the J. D. Edwards' Wholly-Owned Foreign Entity in China is
J.D. Edwards Shanghai Co., Ltd.) and three employees of J.D. Edwards China, who
were former employees of various SSA entities. SSA claims that the hiring of the
former SSA employees constitutes unfair competition causing it to "suffer in its
trade reputation and economic losses." SSA seeks recovery from J.D. Edwards and
the individual employee defendants of 1,500,000 RMB (approximately US $180,000),
the payment of the Plaintiff s solicitors' fees and court costs, and the
termination of the three individual defendant employees. Settlement discussions
are currently proceeding between the parties.
J.D. EDWARDS & COMPANY V. MODEL IMPERIAL SUPPLY CO., INC., AMERICAN ARBITRATION
ASSOCIATION, CASE NO. 77-117-0096-96.
J.D Edwards submitted its Demand For Arbitration on April 22, 1996. The dispute
arises out of Model Imperial failure to pay J-D. Edwards for software it
licensed and for related services and Updates. J D. Edwards claims that Model
Imperial breached the Software License Agreement, the Software Services
Agreement and the Software Updates Agreement. J.D. Edwards alleges Model
Imperial induced J.D. Edwards to enter into the three agreements by fraud and
misrepresentation. J.D. Edwards seeks $438,975.00 plus other damages to be
proven, costs, attorneys' fees and interest. J.D. Edwards has been informed that
Model Imperial has filed for protection under Chapter 11 of the Bankruptcy Act,
but has not yet received confirmation officially of that fact. The arbitrators
to hear the dispute has been selected, subject to the impact of the bankruptcy
filing, and the hearing is scheduled for September 4, 1996.
<PAGE> 84
Exhibit 7.8
To Credit Agreement
LIST OF MATERIAL AGREEMENTS
REAL ESTATE LEASES
<TABLE>
<CAPTION>
Location Owner/Lessor Expiration Remaining
- --------- ------------ ---------- ---------
Date Est.Rent as
---- ----------
of August
----------
1996
-----
<S> <C> <C> <C>
Stanford Place I Public Employees' September 30, 1998, $6,789,156
8055 E. Tufts Avenue Retirement Association with the exception
Denver, Colorado 80237 of Colorado of three floors that
will extend until 2001
Denver Corporate Center III Equity Office June 30, 1997 $1,425,495
7900 E. Union Avenue Properties, L.L.C.
Denver, Colorado 80237
Denver Corporate Center III Equity Office September 29, 2000 $2,631,524
7900 E. Union Avenue Properties, L.L.C.
Denver, Colorado 80237
(Sublease)
Comerica Bank Building Two Town Center December 6, 2000 $2,862,667
611 Anton Boulevard Associates
Suke 300
Costa Mesa, CA 92626
Oak Brook International American National Bank & December 31, 1999 $2,470,340
Center Trust Company of Chicago,
2907 Butterfield Road as Trustee
Oak Brook, IL 60521
Riverwood 100 Cheval Limited Partnership February 29, 2000 $2,520,758
3350 Cumberland Circle, NW
Suite 600
Atlanta, GA 30339
</TABLE>
<PAGE> 85
Exhibit 7. 8
To Credit Agreement
<TABLE>
<CAPTION>
Real Estate Owner/Lessor Expiration Remaining
- ----------- ------------ ---------- ---------
Location Date Est.Rent as
- --------- ---- -----------
of August
---------
1996
----
<S> <C> <C> <C>
Merritview Fairfield Merritt View October 31, 2005 $4,752,641
383 Main Avenue, 7th Floor Limited Partnership
Norwalk, CT 06851
Stokenchurch House Umberslade Securities June 1995/15 years $8,697,917
Oxford Road Limited
Stokenchurch,
Buckinghamshire
</TABLE>
Vendor Contracts
- ----------------
<TABLE>
<CAPTION>
Name Execution Date/Term Type of Service
- ---- ------------------- ---------------
<S> <C> <C>
ICG Access Services, Inc. July 19, 1995/5 years Telecommunications
MCI January 4, 1995/3 years Telecommunications/
Concert Virtual Network
Services
MCI August 11, 1993/6 years Telecommunications/
Interstate and
International
Services
US West Communications January 30, 1996/3 years Telecommunications/
Fiber Optics
IBM October 25, 1995 to Equipment and Program
April 30, 1997 Loan
IBM May 7, 1992 Developer Discount
IBM May 7, 1992 to Software Vendor Loan
April 30,1997
</TABLE>
<PAGE> 86
Exhibit 7.8
To Credit Agreement
VENDOR CONTRACTS
- -----------------
<TABLE>
<CAPTION>
Name Execution Date/Term Type of Service
- ---- ------------------ ----------------
<S> <C> <C>
Sun Microsystems Computer May 7, 1992/2 years Software
Corporation
IBM June 28, 1996/varying International Leasing and
term depending upon Financing the
Transaction Documents
IBM Credit Corporation August 4, 1988/ terminated Equipment Lease
upon one month's written
notice
</TABLE>
<PAGE> 87
Exhibit 7.12
to Credit Agreement
EMPLOYEE BENEFIT PLANS
Cafeteria Plan - Health, Dental, Vision, etc.
Retirement Savings Plan - 401 (k)
Employee Stock Ownership Plan - ESOP
Employee Stock Purchase Plan - 1983 Plan
Employee Stock Purchase Plan - 1984 Plan
Incentive Stock Option Plan - ISO
Nonqualified Stock Option Plan - NSO
Restricted Stock Grant Plan
<PAGE> 88
Exhibit 7.13
to Credit Agreement
CAPITALIZATION OF BORROWERS
J.D. Edwards & Company
Company Ownership
As of June 30, 1996
J.D. Edwards & Company's capitalization, expressed both in terms of total number
of shares and percentages, is provided herein as of June 30, 1996.
All issued and outstanding shares of capital stock of each Borrower are
classified Common shares of stock
J.D. EDWARDS & COMPANY
<TABLE>
<CAPTION>
Common Stock
Number of Shares Percentage
<S> <C> <C>
C. Edwards McVaney* 554,455 49%
Jack L. Thompson* 191,783 17%
Robert C. Newman* 161,129 14%
--------------------------------
Subtotal: 907,367 80%
ESOP 124,636 11%
Individual Employees / Others 97,140 9%
--------------------------------
TOTAL 1,129,143 100%
---------------------------------
</TABLE>
* Owned or Controlled
J.D. Edwards & Company, parent company, owns 100% of J.D. Edwards World
Solutions Company and J.D. Edwards World Source Company.
J.D. EDWARDS WORLD SOLUTIONS COMPANY 100 100%
J.D. EDWARDS WORLD SOURCE COMPANY 100 100%
<PAGE> 89
Exhibit 7.14
to Credit Agreement
J.D. EDWARDS & COMPANY SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary Name Shares % Owned
Owned
<S> <C> <C>
J.D. Edwards World Solutions Company 100 100%
J.D. Edwards World Source Company 100 100%
J.D. Edwards Brasil Limitada 17,971,201 100%*
</TABLE>
*1 SHARE OWNED BY J.D. EDWARDS EUROPE N.V./S.A.
J.D. EDWARDS WORLD SOLUTION SUBSIDIARIES
-----------------------------------------
<TABLE>
<CAPTION>
Subsidiary Name Shares Percentage
Owned of
Ownership
<S> <C> <C>
J.D. Edwards Europe N.V./S.A. 100 100%
J.D. Edwards Deutschland GmbH 100 100%
Nippon J.D. Edwards* 8 100%
J.D. Edwards (U.K.) Ltd. 2,000,000 100%
J.D. Edwards (Hong Kong) Limited** 100 100%
AD. Edwards & CM. Foreign Sales, Inc. 1,000 100%
J.D. Edwards Shanghai Co., Ltd. 1 100%
ID. Edwards Italia S.p.A. 2 100%
J.D. Edwards France SA 1,000 100%
</TABLE>
* Name changed from J.D. Edwards Japan, K.K.
** Formedy Laney Park Limited. Name change effective July 19, 1994.
Canada, Netherlands and Mexico are currently in the process of incorporation.
<PAGE> 90
Exhibit 7.15
to Credit Agreement
ENVIRONMENTAL MATTERS
None.
<PAGE> 91
Exhibit 7.16
to Credit Agreement
INTELLECTUAL PROPERTY
None.
<PAGE> 92
Exhibit 9.11.1
to Credit Agreement
INVESTMENT POLICY
For US Dollar Investments
--------------------------
1. Marketable securities issued by or directly and unconditionally guaranteed
by the United States Government or issued by any agency thereof and backed
by the full faith and credit of the United States of America;
2. Marketable direct obligations issued by any state of the United States of
America or by any political subdivision of any such state or by any public
instrumentality of such state provided such obligations have been rated "A"
or better by either Moody's Investor's Service, Inc. or Standard & Poor's
Corporation;
3. Marketable Preferred Shares issued by any US or foreign corporation
provided such shares have been rated "A" or better by either Moody's
Investor's Service, Inc. or Standard & Poor's Corporation;
4. Certificates of Deposit or Repurchase Agreements issued by any commercial
bank organized under the laws of the United States, any state thereof or
the District of Columbia provided the bank has unimpaired Capital and
surplus of not less than $250 million;
5. Eurodollar time deposits purchased directly from any commercial bank
organized under the laws of the United States, any state thereof or the
District of Columbia provided the bank has unimpaired Capital and surplus
of not less than $250 million;
and subject to both of the following limitations:
o The maximum permitted maturity for any investment shall be one year from
the date of acquisition of the investment;
o and, the Company's investment in any single issue shall not exceed 10% of
the total outstandings of that issue.
<PAGE> 93
For Non US Dollar Investments
-----------------------------
1. Marketable securities issued by the governments of the OECD countries
provided such securities have been rated as A-1/P-1.
2. Certificates of Deposit, time deposits or Bankers' Acceptances issued by
any commercial bank whose short-term debt shall have been rated A-1/P-1.
and subject to both of the following limitations:
o The maximum permitted maturity for any investment shall be six months from
the date of acquisition of the investment;
o and, the Company's investment in any single issue shall not exceed 10% of
the total outstandings of that issue.
2
<PAGE> 94
Exhibit 9.11.2
to Credit Agreement
EXISTING INVESTMENTS
J.D. Edwards New Zealand Limited - Investment value of $150,000
System Software Associates Inc. - One share of Common Stock
American Software, Inc. - One share of Common Stock
Tri-R Systems Corporation - 250 shares of Preferred Stock
<PAGE> 95
Exhibit 11.3.1
to Credit Agreement
Form of Initial Payment Notice
-------------------------------
WELLS FARGO BANK
201 THIRD STREET
SAN FRANCISCO, CA 94103
[DATE OF NOTICE]
WELLS FARGO BANK
201 THIRD STREET
EIGHTH FLOOR
SAN FRANCISCO, CA 94103
ATTENTION: [INSERT WELLS FARGO OPERATIONAL CONTACT]
RE: J.D. EDWARDS & COMPANY
J.D. EDWARDS WORLD SOLUTIONS COMPANY
J.D. EDWARDS WORLD SOURCE COMPANY
CREDIT AGREEMENT DATED 08/01/96
TRANSACTION: ADVANCE ON [VARIABLE RATE] [LIBOR] LOAN
A BORROWER HAS NOTIFIED US OF THE FOLLOWING ADVANCE
[VARIABLE RATE] [LIBOR] LOAN : $ [AMOUNT OF ADVANCE]
VALUE DATE : [ ]
YOUR SHARE : $ [ ]
PLEASE WIRE THE FUNDS TO
WELLS FARGO BANK, N.A.
BNF=SYNDIC=WFBCORP JD EDWARDS\AC 4518-151576
OBI=J.D.EDWARDS & COMPANY
NEXT INTEREST PAYMENT DATE : [DATE]
CURRENT APPLICABLE RATE : [RATE]
REGARDS,
AGENCY DEPARTMENT
WELLS FARGO BANK
<PAGE> 96
Exhibit 11.3.2
to Credit Agreement
Form of Loan Notice of Advance
-------------------------------
WELLS FARGO BANK
201 THIRD STREET
SAN FRANCISCO, CA 94103
[DATE OF NOTICE]
WELLS FARGO BANK
201 THIRD STREET
EIGHTH FLOOR
SAN FRANCISCO, CA 94103
ATTENTION: [INSERT WELLS FARGO OPERATIONAL CONTACT]
RE: J.D. EDWARDS & COMPANY
J.D. EDWARDS WORLD SOLUTIONS COMPANY
J.D. EDWARDS WORLD SOURCE COMPANY CREDIT AGREEMENT DATED 08/01/96
TRANSACTION: ADVANCE ON [VARIABLE RATE] [LIBOR] LOAN
A BORROWER HAS NOTIFIED US OF THE FOLLOWING ADVANCE
[VARIABLE RATE] [LIBOR] LOAN : $ [AMOUNT OF ADVANCE]
VALUE DATE : [ ]
YOUR SHARE : $ [ ]
PLEASE WIRE THE FUNDS TO
WELLS FARGO BANK, N.A.
BNF=SYNDIC=WFBCORP JD EDWARDS\AC 4518-151576
OBI=J.D.EDWARDS & COMPANY
NEXT INTEREST PAYMENT DATE : [DATE]
CURRENT APPLICABLE RATE : [RATE]
REGARDS,
AGENCY DEPARTMENT
WELLS FARGO BANK
<PAGE> 97
Exhibit 11.3.3
to Credit Agreement
Form of LC Notice of Advance
---------------------------
WELLS FARGO BANK
201 THIRD STREET
SAN FRANCISCO, CA 94103
[DATE OF NOTICE]
WELLS FARGO BANK
201 THIRD STREET
EIGHTH FLOOR
SAN FRANCISCO, CA 94103
ATTENTION: [INSERT WELLS FARGO OPERATIONAL CONTACT]
RE: J.D. EDWARDS & COMPANY
J.D. EDWARDS WORLD SOLUTIONS COMPANY
J.D. EDWARDS WORLD SOURCE COMPANY
CREDIT AGREEMENT DATED 08/01/96
TRANSACTION: ADVANCE ON [VARIABLE RATE] [LIBOR] LOAN
A BORROWER HAS NOTIFIED US OF THE FOLLOWING ADVANCE
[VARIABLE RATE] [LIBOR] LOAN $ [AMOUNT OF ADVANCE]
VALUE DATE [ ]
YOUR SHARE $ [ ]
PLEASE WIRE THE FUNDS TO
WELLS FARGO BANK, N.A.
BNF=SYNDIC=WFBCORP JD EDWARDS\AC 4518-151576
OBI=J.D.EDWARDS & COMPANY
NEXT INTEREST PAYMENT DATE : [DATE]
CURRENT APPLICABLE RATE : [RATE]
REGARDS,
AGENCY DEPARTMENT
WELLS FARGO BANK
<PAGE> 98
Exhibit 11.27
to Credit Agreement
Wire Transfer Instructions
-------------------------
1. For wire transfers to Agent:
WELLS FARGO BANK, N.A.
BNF=SYNDIC=WFBCORP JD EDWARDS\AC 4518-151576
OBI=J.D.EDWARDS & COMPANY
2. For wire transfers to Harris Bank:
Harris Trust and Savings Bank
Chicago, IL. 60690
ABA# 071-000-288
Attn: Loan Accounting A/C #109-215-4
FBO: J.D. Edwards & Company
3. For wire transfers to Key Bank:
Key Bank of Colorado
ABA#307070267
BNF:JD Edwards
Contact Susan Brekks at
(208) 332-6166 or Jo-Lynn
ACCTA 152000018 Cavener (208) 332-6006
Special Instructions: when wire is received.
<PAGE> 99
EXHIBIT 12.1
to Loan Agreement
COMPLIANCE CERTIFICATE
J.D. EDWARDS & COMPANY
8055 East Tufts Avenue, Suite 1331
Denver, CO 80237
WELLS FARGO BANK (COLORADO), N.A.
633 17th Street
Denver, Colorado 80270
ATTN:
As required by Section 8.2 of the Credit Agreement ("Credit Agreement")
dated as of August 1, 1996, by and between J.D. Edwards & Company ("Holding
Company"), J.D. Edwards World Solutions Company ("World Solutions") and J.D.
Edwards World Source Company ("World Source") (collectively, Holding Company,
World Solutions and World Source shall be referred to as "Borrowers"), Wells
Fargo Bank (Colorado), N.A., Harris Trust and Savings Bank, and Key Bank of
Colorado, a review of the activities of the Company for the [quarterly period
ending ________________, 199_] or [fiscal year ending October 31, 199_] (the
"Fiscal Period") has been made under my supervision with a view to determine
whether Borrowers have kept, observed, performed and fulfilled all of their
obligations under the Credit Agreement and all other agreements and undertakings
contemplated thereby, and to the best of my knowledge, and based upon such
review, no Event of Default or a Potential Default has occurred.
I further certify that the amounts set forth below, with abbreviated
descriptions, to the best of my knowledge accurately present amounts required to
be calculated by financial covenants of the Credit Agreement as of the last day
of the Fiscal Period (unless expressly specified herein) on a consolidated basis
for Borrowers. Capitalized terms used herein and in the attachment hereto and
not defined herein or in such attachment, but defined in the Credit Agreement,
shall have the definitions set forth in the Credit Agreement.
Very truly yours,
By: __________________________
Title: Chief Financial Officer
<PAGE> 100
- --------------------------------------------------------------------------------
SUBSECTION 8.13.1: QUICK RATIO
Test: The ratio of (a) cash plus Marketable Securities plus Term Deposits plus
Net Trade Receivables, to (b) Current Liabilities minus the current
portion of unearned revenues and customer deposits minus the Principal
Amount.
Target: At all times: Not less than 1.2 to 1.
Quick Ratio
for Fiscal Period ended ____/____/____ _____ to 1.0
- --------------------------------------------------------------------------------
SUBSECTION 8.13.2: LEVERAGE RATIO
Test: The ratio of Total Liabilities less unearned revenue and customer
deposits, as determined in accordance with GAAP, to Total Net Worth,
Target: At all times: Not more than 2.5 to 1.
------
Leverage Ratio
for Fiscal Period ended ____/____/____ _____ to 1.0
- --------------------------------------------------------------------------------
SUBSECTION 8.13.3: COVERAGE RATIO
Test: For any measurement period: (a) for the most recently completed four
Fiscal Quarters, the aggregate of the consolidated net income of
Borrowers and the Subsidiaries (as determined in accordance with GAAP),
plus depreciation and amortization (as each is determined in accordance
with GAAP), plus interest expense (as determined in accordance with
GAAP); divided by (b) the aggregate of scheduled principal reductions in
the following twelve (12) month period, plus interest expense paid (as
determined in accordance with GAAP) in the most recently completed four
Fiscal Quarters, plus the current portion of payments on capitalized
leases.
Target: For the 12 month period ending on the last day of each Fiscal
Quarter:
Not less than 1.75 to 1.0.
Coverage Ratio
For Fiscal Period ended ____/____/____ _____ to 1.0
2
<PAGE> 101
- --------------------------------------------------------------------------------
SUBSECTION 9.15: CAPITAL EXPENDITURES
Test: Capital Expenditures
Targets: for the period consisting of the most recently completed four
Fiscal
Quarters: Not more than 70% of Free Cash Flow.
Capital Expenditures
for the most recently completed
four Fiscal Quarters ended ____/____/____ $_________________
Free Cash Flow
for the most recently completed
four Fiscal Quarters ended ____/____/____ $_________________
Capital Expenditures as a percentage
of Free Cash Flow for the most recently
completed four
Fiscal Quarters ended ____/____/____ _______%
- --------------------------------------------------------------------------------
SUBSECTION 9.16: PROFITABILITY
Test: Net loss (as determined in accordance with GAAP)
Target: In any two consecutive Fiscal Quarters and for any fiscal year of
Borrower: $0.
in the most recently completed
Fiscal Quarter ended ____/____/____ $________________
in the Fiscal Quarter preceding
the most recently completed
Fiscal Quarter ended ____/____/____/ $________________
for Borrower's most recently completed
fiscal year ended ____/____/____ $_________________
3
<PAGE> 102
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
PARCEL A-1:
A PARCEL OF LAND LOCATED IN THE EAST 1/2 OF SECTION 8 AND IN THE WEST 1/2 OF
SECTION 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY
AND COUNTY OF DENVER, STATE OF COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2 OF SECTION 9:
THENCE NORTH 0 DEGREES 19 MINUTES 13 SECONDS EAST 1296.94 FEET TO A POINT OF
CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24 FEET AND A CENTRAL
ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF 566.36 FEET TO A
POINT OF TANGENCY; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST 60.00
FEET;
THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST 313.16 FEET TO A POINT OF
CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1577.02 FEET AND A CENTRAL
ANGLE OF 26 DEGREES 41 MINUTES 20 SECONDS
AN ARC DISTANCE OF 734.59 FEET TO THE TRUE POINT OF BEGINNING;
THENCE SOUTH 36 DEGREES 19 MINUTES 12 SECONDS WEST NON-
RADICALLY TO THE LAST MENTIONED COURSE 49.21 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 80.00 FEET AND A CENTRAL
ANGLE OF 85 DEGREES 30 MINUTES 24 SECONDS AN ARC DISTANCE OF 119.39 FEET TO A
POINT OF TANCENCY; THENCE SOUTH 49 DEGREES 11 MINUTES 12 SECONDS EAST AND ALONG
THE TANGENT TO THE AFORESAID CURVE 16.57 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 100.00 FEET AND A CENTRAL
ANGLE OF 59 DEGREES 00 MINUTES 42 SECONDS AN ARC DISTANCE OF 102.99 FEET TO A
POINT OF TANGENCY; THENCE SOUTH 9 DEGREES 49 MINUTES 30 SECONDS WEST AND ALONG
THE TANGENT TO THE AFORESAID CURVE 521.70 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 100.00 FEET AND A CENTRAL
ANGLE OF 55 DEGREES 00 MINUTES 00 SECONDS AN ARC DISTANCE OF 95.99 FEET TO A
POINT OF TANGENCY;
THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST AND ALONG THE TANGENT TO THE
AFORESAID CURVE 100.00 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 80.00 FEET AND A CENTRAL
ANGLE OF 90 DEGREES AN ARC DISTANCE OF 125.66 FEET TO A POINT OF TANGENCY;
THENCE SOUTH 25 DEGREES 10 MINUTES 30 SECONDS EAST AND ALONG THE TANGENT TO THE
AFORESAID CURVE 40.00 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 30.00 FEET AND A CENTRAL
ANGLE OF 90 DEGREES AN ARC DISTANCE OF 47.12 FEET TO A POINT OF TANGENCY; THENCE
REVERSING DIRECTION 180 DEGREES AND SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST
160.00 FEET TO A POINT OF CURVATURE; THENCE REVERSING DIRECTION 180 DEGREES AND
ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 30.00 FEET AND A CENTRAL ANGLE OF
90 DEGREES AN ARC DISTANCE OF 47.12 FEET TO A POINT OF TANGENCY; THENCE NORTH 25
DEGREES 10 MINUTES 30 SECONDS WEST AND ALONG THE TANGENT To THE AFORESAID CURVE
S4.26 FEET TO A POINT OF CURVATURE;
<PAGE> 103
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
THENCE ALONG A CURVE TO THE LEFT RAVING A RADIUS OF 80.00 FEET AND A CENTRAL
ANGLE OF 78 DEGREES 48 MINUTES 22 SECONDS AN ARC DISTANCE OF 110.03 FEET TO A
POINT OF TANGENCY; THENCE SOUTH 76 DEGREES 01 MINUTES 08 SECONDS WEST AND ALONG
THE TANGENT TO THE AFORESAID CURVE 940.40 FEET; THENCE NORTH 24 DEGREES 02
MINUTES 39 SECONDS WEST 1206.62 FEET; THENCE NORTH 20 DEGREES 41 MINUTES 26
SECONDS EAST 360.05 FEET; THENCE NORTH 99 DEGREES 18 MINUTES 34 SECONDS WEST
270.00 FEET TO A POINT ON TILE RIGHT-OF-WAY LINE OF INTERSTATE HIGHWAY 1-225;
THENCE THE FOLLOWING SIX COURSES ALONG SAID RIGHT-OF-WAY OF I-225;
1) NORTH 20 DEGREES 41 MINUTES 26 SECONDS EAST 133.00 FEET; 2) THENCE NORTH 29
DEGREES 32 MINUTES 18 SECONDS EAST 203.68 FEET; 3) THENCE NORTH 57 DEGREES 49
MINUTES 07 SECONDS EAST 366.03 FEET; 4) THENCE NORTH 84 DEGREES 52 MINUTES 22
SECONDS EAST 290.00 FEET; 5) THENCE SOUTH 39 DEGREES 39 MINUTES U2 SECONDS EAST
275.85 FEET; 6) THENCE NORTH 41 DEGREES 29 MINUTES 36 SECONDS EAST 14.51 FEET TO
A POINT OF CURVE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 810.00
FEET AND A CENTRAL ANGLE OF 21 DEGREES 19 MINUTES 11 SECONDS AN ARC DISTANCE OF
301.40 FEET TO A POINT OF TANGENCY, THE LONG CHORD OF WHICH REARS SOUTH 50
DEGREES 31 MINUTES 46 SECONDS EAST A DISTANCE OF 299.66 FEET; THENCE SOUTH 61
DEGREES 11 MINUTES 21 SECONDS EAST AND ALONG THE TANGENT TO THE AFORESAID CURVE
668-90 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A
RADIUS OF 1577.02 FEET AND A CENTRAL ANGLE OF 9 DECREES 19 MINUTES 31 SECONDS AN
ARC DISTANCE OF 256.67 FEET TO THE TRUE POINT OF BEGINNING.
EXCEPT THOSE PARCELS OF LAND DESCRIBED AS FOLLOWS:
(1)
A PARCEL OF LAND LOCATED IN THE NORTHWEST 1/4 OF SECTION 9. TOWNSHIP 5 SOUTH,
RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2 OF SAID
SECTION 9;
THENCE NORTH 0 DEGREES 19 MINUTES 13 SECONDS EAST ALONG THE NORTH-SOUTH
CENTERLINE OF SAID SECTION 9 AND THE CENTERLINE Or SOUTH ULSTER STREET, A
DISTANCE OF 1296.94 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE
LEFT HAVING A RADIUS OF 1273.24 FEET AND A CENTRAL ANGLE OF 25 DEGREES 29
MINUTES 43 SECONDS AN ARC DISTANCE OF 566.56 FEET TO A POINT OF TANGENCY; THENCE
NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST ALONG SAID CENTERLINE, A DISTANCE OF
313.16 FEET TO A POINT OF CURVATURE;
-2-
<PAGE> 104
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
THENCE ON A CURVE TO THE LEFT HAVING A RADIUS OF 1577.02 FEET AND A CENTRAL
ANGLE OF 36 DEGREES 00 MINUTES 51 SECONDS AN ARC DISTANCE OF 991.26 FEET TO A
POINT OF TANGENCY; THENCE NORTH 61 DEGREES 11 MINUTES 21 SECONDS WEST AND ALONG
SAID PREVIOUS TANGENCY A DISTANCE OF 668.90 FEET; THENCE SOUTH 28 DEGREES 48
MINUTES 39 SECONDS WEST, A DISTANCE OF 60.00 FEET TO A POINT ON THE
SOUTHWESTERLY R.O.W. OF SOUTH QUEBEC STREET; THENCE ON A CURVE TO THE RIGHT
WHOSE TANGENT BEARS NORTH 61 DEGREES 11 MINUTES 21 SECONDS WEST AND HAVING A
RADIUS OF 810.00 FEET AND A CENTRAL ANGLE OF 21 DEGREES 23 MINUTES 53 SECONDS AN
ARC DISTANCE OF 302.51 FEET TO A POINT ON THE SOUTHERLY R.O.W. OF COLORADO
HIGHWAY I-225 AS RECORDED IN BOOK 1001 ON PAGE 258 IN THE CITY AND COUNTY OF
DENVER CLERK AND RECORDER'S OFFICE; THENCE SOUTH 41 DEGREES 29 MINUTES 02
SECONDS WEST ALONG SAID SOUTHERLY R.O.W. A DISTANCE OF 19.68 FEET; THENCE NORTH
39 DECREES 39 MINUTES 43 SECONDS WEST ALONG SAID SOUTHERLY R.O.W. A DISTANCE OF
227.19 FEET TO THE TRUE POINT OF THE BEGINNING; THENCE CONTINUING ALONG SAID
SOUTHERLY R.O.W. NORTH 39 DEGREES 39 MINUTES 43 SECONDS WEST A DISTANCE THENCE
OF 44.11 FEET; SOUTH 84 DEGREES 51 MINUTES 47 SECONDS WEST ALONG SAID SOUTHERLY
R.O.W. A DISTANCE OF 290 FEET; THENCE SOUTH 05 DEGREES 08 MINUTES 13 SECONDS
EAST A DISTANCE OF 270.00 FEET; THENCE NORTH 64 DEGREES 51 MINUTES 47 SECONDS
EAST A DISTANCE OF 315.00 FEET; THENCE NORTH 05 DECREES 08 MINUTES 13 SECONDS
WEST A DISTANCE OF 233.66 FEET TO THE TRUE POINT OF BEGINNING. (PUBLIC SERVICE
COMPANY PARCEL,
(2)
A PARCEL OF LAND LOCATED IN THE WEST 1/2 OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE
67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2; THENCE NORTH 00 DEGREES 19
MINUTES 13 SECONDS EAST ALONG THE EAST LINE OF SAID WEST 1/2 A DISTANCE OF
1296.94 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A
RADIUS OF 1273.24 FEET AND A CENTRAL ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS
AN ARC DISTANCE OF 566.56 FEET TO A POINT OF TANGENCY; THENCE NORTH 25 DEGREES
10 MINUTES 30 SECONDS WEST AND ALONG THE TANGENT OF THE AFOREMENTIONED CURVE A
DISTANCE OF 101.95 FEET; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST A
DISTANCE OF 970.00 FEET; THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST A
DISTANCE OF 210.00 FEET; THENCE SOUTH 76 DEGREES 01 MINUTES 08 SECONDS WEST A
DISTANCE OF 903.11 FEET TO A POINT ON THE NORTHERLY BOUNDARY OF A PARCEL OF LAND
DESCRIBED IN BOOK 1690 AT PAGE 501 IN THE RECORDS OF THE CLERK AND RECORDER'S
OFFICE OF THE CITY AND COUNTY OF DENVER; THENCE CONTINUING SOUTH 76 DEGREES 01
MINUTES 08 SECONDS WEST ALONG SAID NORTHERLY BOUNDARY A DISTANCE OF 98.45 FEET
TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 76 DEGREES 01 MINUTES 08
SECONDS WEST ALONG SAID NORTHERLY BOUNDARY A DISTANCE OF 4.55 FEET; THENCE NORTH
24 DEGREES 02 MINUTES 39 SECONDS WEST A DISTANCE OF 2.00 FEET; THENCE SOUTH 82
DEGREES 05 MINUTES 06 SECONDS EAST A DISTANCE OF 5.29 FEET TO THE TRUE POINT OF
BEGINNING. (SHERATON DTC PARCEL)
<PAGE> 105
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
(3)
A PARCEL OF LAND LOCATED IN THE WEST 1/2 OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE
67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF THE SOUTHWEST 1/4 OF SAID SECTION 9;
THENCE NORTHERLY ALONG THE EAST LINE OF SAID SOUTHWEST 1/4
NORTH 00 DEGREES 19 MINUTES 13 SECONDS EAST, A DISTANCE OF
1296.94 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE
LEFT;
THENCE DEPARTING SAID EAST LINE ALONG THE ARC OF SAID CURVE HAVING A CENTRAL
ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AND A RADIUS OF 1273.24 FEET, A
DISTANCE OF 566.56 FEET TO A POINT OF TANGENCY; THENCE ALONG SAID TANGENT NORTH
25 DEGREES 10 MINUTES 30 SECONDS WEST A DISTANCE OF 101.95 FEET; THENCE SOUTH 64
DEGREES 49 MINUTES 30 SECONDS WEST A DISTANCE OF 1319.72 FEET;
THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST A DISTANCE
OF 60.00 FEET TO A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF DTC PARKWAY;
THENCE EASTERLY ALONG SAID NORTHERLY RIGHT-OF-WAY LINE NORTH
64 DEGREES 49 MINUTES 30 SECONDS EAST, A DISTANCE OF 88.82
FEET;
THENCE DEPARTING FROM SAID NORTHERLY RIGHT-OF-WAY LINE NORTH
00 DEGREES 14 MINUTES 25 SECONDS EAST, A DISTANCE OF 506.55
FEET
THENCE NORTH 89 DEGREES 45 MINUTES 35 SECONDS WEST A DISTANCE OF 173.33 FEET TO
THE TRUE POINT OF BEGINNING;
THENCE NORTH 00 DEGREES 14 MINUTES 25 SECONDS EAST A DISTANCE OF 488.00 FEET;
THENCE SOUTH 89 DEGREES 45 MINUTES 35 SECONDS EAST A DISTANCE OF 363.54 FEET TO
A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF
16 DECREES 09 MINUTES 17 SECONDS AND A RADIUS OF 244.00 FEET,
AN ARC LENGTH OF 68.80 FEET;
THENCE SOUTH 57 DEGREES 08 MINUTES 41 SECONDS EAST A DISTANCE OF 138.28 FEET TO
A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 130 DEGREES 55
MINUTES 29 SECONDS AND A RADIUS OF 244.00 FEET, AN ARC LENGTH OF 557.56 FEET TO
A POINT OF TANGENCY, THE CHORD OF SAID CURVE BEARS SOUTH 24 DEGREES 46 MINUTES
40 SECONDS WEST 443.93 FEET; THENCE NORTH 89 DECREES 45 MINUTES 35 SECONDS WEST
A DISTANCE OF 363.54 FEET, MORE OR LESS, TO THE TRUE POINT OF BEGINNING. (HYATT
REGENCY PARCEL)
(4)
A PARCEL OF LAND LOCATED IN THE WEST ONE-HALF OF SECTION 9, TOWNSHIP 5 SOUTH,
RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
-4-
<PAGE> 106
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
COMMENCING AT THE SOUTHEAST CORNER OF THE SOUTHWEST ONE-QUARTER OF SAID SECTION
9;
THENCE NORTHERLY ALONG THE EAST LINE OF SAID SOUTHWEST ONE-QUARTER NORTH 00
DEGREES 19 MINUTES 13 SECONDS EAST, A DISTANCE OF 1296.94 FEET TO THE BEGINNING
OF A TANGENT CURVE TO THE LEFT;
THENCE DEPARTING SAID EAST LINE ALONG THE ARC OF SAID CURVE HAVING A CENTRAL
ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS
AND A RADIUS OF 1273.24 FEET, A DISTANCE OF 566.56 FEET TO A POINT OF TANGENCY;
THENCE ALONG SAID TANGENT NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST, A
DISTANCE OF 101.95 FEET; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST, A
DISTANCE OF 1319.72 FEET;
THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST, A DISTANCE OF 60.00 FEET TO
A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF UNION AVENUE PARKWAY AS PLATTED BY
DENVER TECHNOLOGICAL CENTER, NORTH, FILING NO. ONE;
THENCE EASTERLY ALONG SAID NORTHERLY RIGHT-OF-WAY LINE NORTH 64 DEGREES 49
MINUTES 30 SECONDS EAST, A DISTANCE OF 88.82 FEET;
THENCE DEPARTING FROM SAID NORTHERLY RIGHT-OF-WAY LINE NORTH 00 DEGREES 14
MINUTES 25 SECONDS EAST, A DISTANCE OF 506.55 FEET; THENCE SOUTH 89 DEGREES 45
MINUTES 35 SECONDS EAST, A DISTANCE OF 190.21 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 84 DEGREES 17 MINUTES
55 SECONDS AND A RADIUS OF 244.00 FEET, AN ARC OF 343.98 FEET TO THE TRUE POINT
OF BEGINNING; THENCE CONTINUING ALONG THE AFOREMENTIONED CURVE TO THE LEFT
HAVING A CENTRAL ANGLE OF 46 DEGREES 37 MINUTES 34 SECONDS AND A RADIUS OF
244.00 FEET, AN ARC DISTANCE OF 198.56 FEET TO A NON-TANGENT POINT; THENCE NORTH
57 DEGREES 08 MINUTES 41 SECONDS WEST, A DISTANCE OF 19.14 FEET; THENCE NORTH 32
DEGREES 51 MINUTES 19 SECONDS EAST, A DISTANCE OF 222.71 FEET TO A POINT OF
CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 13
DEGREES 03 MINUTES 30 SECONDS AND A RADIUS OF l00.00 FEET, AN ARC DISTANCE OF
22.79 FEET TO A POINT ON A NON-TANGENT CURVE; THENCE ALONG A CURVE TO THE LEFT
WHOSE CHORD BEARS SOUTH 22 DEGREES l8 MINUTES 07 SECONDS EAST, HAVING A CENTRAL
ANGLE OF 53 DEGREES 46 MINUETS 10 SECONDS AND A RADIUS OF 80.00 FEET, AN ARC
DISTANCE OF 75.08 FEET TO A POINT OF TANGENCY; THENCE SOUTH 49 DEGREES 11
MINUTES 12 SECONDS EAST, A DISTANCE OF 16.57 FEET TO A POINT OF CURVATURE THENCE
ALONG A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 59 DEGREES 00 MINUTES 42
SECONDS AND A RADIUS OF 100.00 FEET, AND ARC DISTANCE OF 102.99 FEET TO A POINT
OF TANGENCY; THENCE SOUTH 09 DEGREES 49 MINUTES 30 SECONDS WEST A DISTANCE OF
242.11 FEET; THENCE NORTH 84 DEGREES 03 MINUTES 30 SECONDS WEST A DISTANCE OF
93.87 FEET TO THE TRUE POINT OF BEGINNING.
(PORTION OF REGENCY PLAZA PARCEL WITHIN PARCEL A-1)
(5)
EXCEPT THAT PORTION LYING WITHIN UNION AVENUE PARKWAY AS ESTABLISHED BY
ORDINANCE 560, SERIES OF 1992.
-5-
<PAGE> 107
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
PARCEL A-2:
A PARCEL OF LAND LOCATED IN THE EAST 1/2 OF SECTION 8 AND IN THE WEST 1/2 OF
SECTION 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY
AND COUNTY OF DENVER, STATE OF COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2 OF SECTION 9;
THENCE NORTH 0 DEGREES 19 MINUTES 13 SECONDS EAST 1296.94 FEET TO A POINT OF
CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24 FEET AND
A CENTRAL ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF 566.56
FEET TO A POINT OF TANGENCY; THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST
AND ALONG THE TANGENT TO THE AFORESAID CURVE 101.95 FEET; THENCE SOUTH 64
DEGREES 49 MINUTES 30 SECONDS WEST 970.00 FEET; THENCE NORTH 25 DEGREES 10
MINUTES 30 SECONDS WEST 210.00 FEET; THENCE SOUTH 76 DEGREES 01 MINUTES 08
SECONDS WEST 1006.12 FEET; THENCE NORTH 24 DEGREES 02 MINUTES 39 SECONDS WEST
1206.62 FEET TO THE TRUE POINT OP BEGINNING THENCE NORTH 20 DEGREES 41 MINUTES
26 SECONDS EAST 45.05 FEET; THENCE NORTH 69 DEGREES 18 MINUTES 34 SECONDS WEST
260.65 FEET TO A POINT ON THE RIGHT OF WAY LINE OF INTERSTATE HIGHWAY I-225;
THENCE SOUTH 0 DEGREES 11 MINUTES 03 SECONDS WEST AND ALONG SAID RIGHT-OF-WAY
LINE 340.91 FEET; THENCE NORTH 47 DEGREES 56 MINUTES 11 SECONDS EAST 308.48 FEET
TO THE TRUE POINT OF BEGINNING.
PARCEL A-3
A PARCEL OF LAND LOCATED IN THE EAST 1/2 OF SECTION 8 AND IN THE WEST 1/2 OF
SECTION 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN CITY
AND COUNTY OF DENVER, STATE OF COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2 OF
SECTION 9;
THENCE NORTH 0 DEGREES 19 MINUTES 13 SECONDS EAST 1296,94 FEET TO A POINT OF
CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24 FEET AND
A CENTRAL ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF 566.56
FEET TO A POINT OF TANGENCY, THENCE NORTH 25 DEGREES 10. MINUTES 30 SECONDS WEST
AND ALONG THE TANGENT TO THE AFORESAID CURVE 101.95 FEET; THENCE SOUTH 64
DEGREES 49 MINUTES 30 SECONDS WEST 970.00 FEET; THENCE NORTH 25 DEGREES 10
MINUTES 30 SECONDS WEST 210.00 FEET; THENCE SOUTH 76 DEGREES 01 MINUTES 08
SECONDS WEST 1006.12 FEET TO THE TRUE POINT OF BEGINNING; THENCE NORTH 24
DEGREES 02 MINUTES 39 SECONDS WEST 1206.62 FEET; THENCE SOUTH 47 DEGREES 56
MINUTES 11 SECONDS WEST 308.48 FEET TO A POINT ON THE EASTERLY RIGHT-OF-WAY LINE
OF HIGHWAY I-25:
<PAGE> 108
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
THENCE THE FOLLOWING 5 COURSES ALONG SAID RIGHT-OF-WAY LINE:
1) SOUTH 0 DEGREES 11 MINUTES 03 SECONDS WEST 220.00 FEET;
2) THENCE SOUTH 14 DEGREES 22 MINUTES 57 SECONDS EAST 189.10 FEET;
3) THENCE SOUTH 24 DEGREES 02 MINUTES 39 SECONDS EAST 247.98 FEET;
4) THENCE SOUTH 62 DEGREES 39 MINUTES 42 SECONDS EAST 67.46 FEET;
5) THENCE SOUTH 24 DEGREES 02 MINUTES 39 SECONDS EAST 430.83 FEET;
THENCE NORTH 64 DEGREES 49 MINUTES 30 SECONDS EAST 373.34 FEET TO THE TRUE POINT
OF BEGINNING.
EXCEPT THAT PORTION OF PARCEL A-3 DESCRIBED AS FOLLOWS
A PARCEL OF LAND LOCATED IN THE WEST 1/2 OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE
67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2; THENCE NORTH 00 DEGREES 19
MINUTES 13 SECONDS EAST ALONG THE EAST LINE OF SAID WEST 1/2 A DISTANCE OF
1296.94 FEET TO A POINT OF CURVATURE, THENCE ALONG A CURVE TO THE LEFT HAVING A
RADIUS OF 1273.24 FEET AND A CENTRAL ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS
AN ARC DISTANCE OF 566.56 FEET TO A POINT OF TANGENCY; THENCE NORTH 25 DEGREES
10 MINUTES 30 SECONDS WEST AND ALONG THE TANGENT OF THE AFOREMENTIONED CURVE A
DISTANCE OF 101.95 FEET; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST A
DISTANCE OF 970.00 FEET; THENCE NORTH 25 DEGREES 01 MINUTES 08 SECONDS WEST A
DISTANCE OF 210.00 FEET; THENCE SOUTH 76 DEGREES 01 MINUTES 08 SECONDS WEST A
DISTANCE OF 1006.12 FEET TO A POINT ON THE NORTHERLY BOUNDARY OF A PARCEL OF
LAND DESCRIBED IN BOOK 1690 AT PAGE 501 IN THE RECORDS OF THE CLERK AND
RECORDER'S OFFICE OF THE CITY AND COUNTY OF DENVER, SAID POINT BEING THE TRUE
POINT OF BEGINNING; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST ALONG
SAID NORTHERLY BOUNDARY A DISTANCE OF 373.16 FEET TO A POINT ON THE EASTERLY
RIGHT-OF-WAY LINE OF INTERSTATE HIGHWAY I-25; THENCE NORTH 24 DEGREES 01 MINUTES
59 SECONDS WEST ALONG SAID EASTERLY RIGHT-OF-WAY LINE A DISTANCE OF 228.87 FEET
TO A POINT ON A NON-TANGENT CURVE; THENCE ALONG A CURVE TO THE RIGHT HAVING A
RADIUS OF 2804.79 FEET AND A CENTRAL ANGLE OF 05 DEGREES 07 MINUTES 40 SECONDS
THE CHORD OF WHICH BEARS SOUTH 84 DEGREES 38 MINUTES 56 SECONDS EAST, AN ARC
DISTANCE OF 251.02 FEET TO A POINT OF TANGENCY;
THENCE SOUTH 82 DEGREES 05 MINUTES 06 SECONDS EAST ALONG THE TANGENT OF THE
AFOREMENTIONED CURVE A DISTANCE OF 182.00 FEET;
THENCE SOUTH 24 DEGREES 02 MINUTES 39 SECONDS EAST A DISTANCE OF 2.00 FEET TO
THE TRUE POINT OF BEGINNING.
(PARCEL 1 CONVEYANCE TO DTC SHERATON RE: UNION AVENUE REALIGNMENT)
EXCEPT THAT PORTION LYING WITHIN UNION AVENUE PARKWAY AS ESTABLISHED BY
ORDINANCE 560, SERIES OF 1992.
-7-
<PAGE> 109
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
PARCEL A-4:
A PARCEL OF LAND LOCATED PARTLY IN THE WEST 1/2 OF SECTION 9 AND PARTLY IN THE
EAST 1/2 OF SECTION 8 TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL
MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF COLORADO, MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2 OF SECTION 9;
THENCE NORTH 0 DEGREES 19 MINUTES 13 SECONDS EAST AND ALONG THE EAST LINE OF
SAID WEST 1/2 OF SECTION 9 A DISTANCE OF 1296.94 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24 FEET AND A CENTRAL
ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF 566.56 FEET TO A
POINT OF TANGENCY THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST AND ALONG
THE TANGENT TO THE AFORESAID CURVE 101.95 FEET; THENCE SOUTH 64 DEGREES 49
MINUTES 30 SECONDS WEST A DISTANCE OF 970.00 FEET;
THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST A DISTANCE OF 210.00 FEET;
THENCE SOUTH 76 DEGREES 01 MINUTES 08 SECONDS WEST A DISTANCE OF 1006.12 FEET;
THENCE NORTH 24 DEGREES 02 MINUTES 39 SECONDS WEST A DISTANCE OF 1206.62 FEET;
THENCE NORTH 20 DEGREES 41 MINUTES 26 SECONDS EAST A DISTANCE OF 45.05 FEET TO
THE TRUE POINT OF BEGINNING; THENCE CONTINUING AMONG THE LAST MENTIONED COURSE
AN ADDITIONAL DISTANCE OF 315.00 FEET; THENCE NORTH 69 DEGREES 18 MINUTES 34
SECONDS WEST A DISTANCE OF 270.00 FEET TO A POINT ON THE EASTERLY RIGHT-OF-WAY
LINE OF INTERSTATE HIGHWAY I-225; THENCE THE FOLLOWING 2 COURSES ALONG SAID
RIGHT-OP-WAY LINE; 1) SOUTH 20 DEGREES 41 MINUTES 26 SECONDS WEST A DISTANCE OF
290.00 FEET; 2) THENCE SOUTH 0 DEGREES 11 MINUTES 03 SECONDS WEST A DISTANCE OF
26.69 FEET; THENCE SOUTH 69 DEGREES 18 MINUTES 34 SECONDS EAST A DISTANCE OF
260.65 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL A-5-B:
A PARCEL OF AND IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE 67
WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID SOUTHWEST 1/4 OF SECTION 9; THENCE
NORTH ALONG THE EAST LINE OF SAID SOUTHWEST 1/4 A DISTANCE OF 1296.94 FEET TO A
POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24
FEET AND A CENTRAL ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF
566.56 FEET TO A POINT OF TANGENCY; THENCE ALONG THE TANGENT TO THE AFORESAID
CURVE 101.95 FEET; THENCE ON AN ANGLE TO THE LEFT OF 90 DEGREES A DISTANCE OF
1319.72 FEET;
<PAGE> 110
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
THENCE ON AN ANGLE TO THE RIGHT OF 90 DEGREES A DISTANCE OF 60.00 FEET TO THE
TRUE POINT OF BEGINNING;
THENCE ALONG A CURVE TO THE LEFT WHOSE TANGENT MAKES AN ANGLE TO THE LEFT OF 90
DEGREES FROM THE PRECEDING COURSE AND HAVING A RADIUS OF 378.31 FEET AND A
CENTRAL ANGLE OF 47 DEGREES 07 MINUTES 11 SECONDS AN ARC DISTANCE OF 311.12
FEET; THENCE ON AN ANGLE TO THE RIGHT OF 77 DEGREES 0 MINUTES 00 SECONDS FROM
THE TANGENT TO THE AFORESAID CURVE 278.75 FEET; THENCE ON AN ANGLE TO THE RIGHT
OF 45 DEGREES 36 MINUTES 48 SECONDS A DISTANCE OF 176.69 FEET; THENCE ON AN
ANGLE TO THE RIGHT OF 25 DEGREES 42 MINUTES 06 SECONDS A DISTANCE OF 138.89
FEET; THENCE ON AN ANGLE TO THE RIGHT OF 90 DEGREES A DISTANCE OF 837.40 FEET TO
A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 80.00
FEET AND A CENTRAL ANGLE OF 78 DEGREES 48 MINUTES 22 SECONDS AN ARC DISTANCE OF
110.03 FEET TO A POINT OF TANGENCY; THENCE ALONG A TANGENT TO THE AFORESAID
CURVE 54.26 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT
HAVING A RADIUS OF 30.00 FEET AND A CENTRAL ANGLE OF 90 DEGREES AN ARC DISTANCE
OF 47.12 FEET TO A POINT OF TANGENCY; THENCE ALONG THE TANGENT TO THE AFORESAID
CURVE 319.72 FEET TO THE TRUE POINT OF BEGINNING.
EXCEPT THAT PORTION OF PARCEL A-5-B DESCRIBED AS FOLLOWS:
A PARCEL OF LAND LOCATED IN THE WEST 1/2 OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE
67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2; THENCE NORTH 00 DEGREES 19
MINUTES 13 SECONDS EAST ALONG THE EAST LINE OF SAID WEST 1/2 A DISTANCE OF
1296.94 FEET TO A POINT
OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24 FEET AND A CENTRAL
ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF 566.56 FEET TO A
POINT OF TANGENCY; THENCE NORTH 2S DEGREES l0 MINUTES 30 SECONDS WEST AND ALONG
THE TANGENT OF THE AFOREMENTIONED CURVE A DISTANCE OF 101.95 FEET; THENCE SOUTH
64 DEGREES 49 MINUTES 30 SECONDS WEST A DISTANCE OF 970.00 FEET; THENCE NORTH 25
DEGREES 10 MINUTES 30 SECONDS WEST A DISTANCE OF 210.00 FEET; THENCE SOUTH 76
DEGREES 01 MINUTES 08 SECONDS WEST A DISTANCE OF 903.11 FEET TO A POINT ON THE
NORTHERLY AND EASTERLY BOUNDARY OF A PARCEL OF LAND DESCRIBED IN BOOK 1690 AT
PAGE 501 IN THE RECORDS OF THE CLERK AND RECORDER'S OFFICE OF THE CITY AND
COUNTY OF DENVER; THENCE ALONG SAID EASTERLY BOUNDARY OF SAID PARCEL THE
FOLLOWING 4 COURSES: 1) SOUTH 13 DEGREES 58 MINUTES 52 SECONDS EAST A DISTANCE
OF 39.57 FEET TO THE TRUE POINT OF BEGINNING; 2) THENCE CONTINUING SOUTH 13
DEGREES 58 MINUTES 52 SECONDS EAST A DISTANCE OF 99.32 FEET; 3) THENCE SOUTH 39
DEGREES 40 MINUTES 53 SECONDS EAST A DISTANCE OF 176.69 FEET; 4) THENCE SOUTH 85
DEGREES 17 MINUTES 41 SECONDS EAST A DISTANCE OF 278.75 FEET; THENCE NORTH 17
DEGREES 42 MINUTES 19 SECONDS EAST A DISTANCE OF 103.61 FEET TO A POINT OF
CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 80.00 FEET AND A
CENTRAL ANGLE OF 99 DEGREES 47 MINUTES 25 SECONDS AN ARC DISTANCE OF 139.33 FEET
TO A POINT OF TANGENCY; THENCE NORTH 82 DECREES 05 MINUTES 06 SECONDS WEST A
DISTANCE OF 384.61 FEET TO THE TRUE POINT OF BEGINNING.
<PAGE> 111
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
(PARCEL IV CONVEYANCE To DTC SHERATON RE: UNION AVENUE REALIGNMENT)
EXCEPT THAT PORTION LYING WITHIN UNION AVENUE PARKWAY AS ESTABLISHED BY
ORDINANCE 560, SERIES OF 1992.
PARCEL A-6:
A PARCEL OF LAND LOCATED IN THE WEST 1/2 OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE
67 WEST OF THE 6TH PRINCIPAL
MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF COLORADO, MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID WEST 1/2 OF
SECTION 9;
THENCE NORTH 0 DEGREES 19 MINUTES 13 SECONDS EAST 1296.94
FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1273.24 FEET AND A CENTRAL
ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AN ARC DISTANCE OF 566.56 FEET TO A
POINT OF TANGENCY; THENCE ALONG THE TANGENT TO THE AFOREMENTIONED CURVE NORTH 25
DEGREES 10 MINUTES 30 SECONDS WEST 263.45 FEET; THENCE SOUTH 64 DEGREES 49
MINUTES 30 SECONDS WEST 70.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE NORTH
25 DEGREES 10 MINUTES 30 SECONDS WEST 49.71 FEET
TO A POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 1567.02 FEET AND A CENTRAL
ANGLE OF 4 DEGREES 34 MINUTES 47 SECONDS AN ARC DISTANCE OP 125.25 FEET; THENCE
NORTH 60 DEGREES 14 MINUTES 43 SECONDS EAST AND CORADIALLY BETWEEN TWO
CONCENTRIC CURVES A DISTANCE OF 10.00 FEET;
THENCE ALONG A CURVE TO THE LEFT WHOSE TANGENT BEARS NORTH 29 DEGREES 45 MINUTES
17 SECONDS WEST AND HAVING A RADIUS OF 1577.02 FEET AND A CENTRAL ANGLE OF 22
DECREES 06 MINUTES 33 SECONDS AN ARC DISTANCE OF 608.54 FEET; THENCE SOUTH 36
DEGREES 19 MINUTES 12 SECONDS WEST 49.21 FEET TO A POINT OF CURVATURE; THENCE
ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 80.00 FEET AND A CENTRAL ANGLE OF
85 DECREES 30 MINUTES 24 SECONDS AN ARC DISTANCE OF 119.39 FEET TO A POINT OF
TANGENCY; THENCE SOUTH 49 DEGREES 11 MINUTES 12 SECONDS EAST AND ALONG THE
TANGENT TO THE AFORESAID CURVE A DISTANCE OF 16.57 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE, TO THE RIGHT HAVING A RADIUS OF 100.00 FEET AND A CENTRAL
ANGLE OF 59 DEGREES 00 MINUTES 42 SECONDS AN ARC DISTANCE OF 102.99 FEET TO A
POINT OF TANGENCY; THENCE SOUTH 9 DEGREES 49 MINUTES 30 SECONDS WEST AND ALONG
THE TANGENT TO THE AFORESAID CURVE A DISTANCE OF 521.70 FEET TO A POINT OF
CURVATURE;
THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 100.00 FEET AND A CENTRAL
ANGLE OF 55 DEGREES 00 MINUTES 00 SECONDS AN ARC DISTANCE OF 95.99 FEET TO A
POINT OF TANGENCY; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST ALONG THE
TANGENT TO THE AFORESAID CURVE A DISTANCE OF 100.00 FEET TO A POINT OF
CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 80.00 FEET AND A CENTRAL
ANGLE OF 90 DEGREES AN ARC DISTANCE OF 125.66 FEET TO A POINT OF TANGENCY;
THENCE SOUTH 25 DRGREES 10 MINUTES 30 SECONDS EAST AND ALONG THE TANGENT TO THE
AFORESAID CURVE A DISTANCE OF 40.00 FEET
TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF
30.00 FEET AND A CENTRAL ANGLE OF 90 DEGREES AN ARC DISTANCE OF
<PAGE> 112
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
THENCE NORTH 64 DEGREES 49 MINUTES 30 SECONDS EAST AND ALONG THE TANGENT TO THE
AFORESAID CURVE A DISTANCE OF 668.50 FEET TO A POINT OF CURVATURE; THENCE ALONG
A CURVE TO THE LEFT HAVING A RADIUS OF 101.50 FEET AND A CENTRAL ANGLE OF 90
DEGREES AN ARC DISTANCE OF 159.44 FEET TO THE TRUE POINT OF BEGINNING.
EXCEPT FOR:
A PARCEL OF LAND LOCATED IN THE WEST ONE-HALF OF SECTION 9, TOWNSHIP 5 SOUTH,
RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF THE SOUTHWEST ONE-QUARTER OF SAID SECTION
9; THENCE NORTHERLY ALONG THE EAST LINE OF SAID SOUTHWEST ONE-QUARTER NORTH 00
DEGREES 19 MINUTES 13 SECONDS EAST, A DISTANCE OF 1296.94 FEET TO THE BEGINNING
OF A TANGENT CURVE TO THE LEFT; THENCE DEPARTING SAID EAST LINE ALONG THE ARC OF
SAID CURVE HAVING A CENTRAL ANGLE OF 25 DEGREES 29 MINUTES 43 SECONDS AND A
RADIUS OF 1273.24 FEET, A DISTANCE OF 566.56 FEET TO A POINT OF TANGENCY; THENCE
ALONG SAID TANGENT NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST, A DISTANCE OF
101.95 FEET; THENCE SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST, A DISTANCE OF
1319.72 FEET; THENCE NORTH 25 DEGREES 10 MINUTES 30 SECONDS WEST, A DISTANCE OF
60.00 FEET TO A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF UNION AVENUE PARKWAY
AS PLATTED BY DENVER TECHNOLOGICAL CENTER, NORTH, FILING NO. ONE; THENCE
EASTERLY ALONG SAID NORTHERLY RIGHT-OF-WAY LINE NORTH 64 DEGREES 49 MINUTES 30
SECONDS EAST, A DISTANCE OF 88.82 FEET; THENCE DEPARTING FROM SAID NORTHERLY
RIGHT-OF-WAY LINE NORTH 00 DECREES 14 MINUTES 25 SECONDS EAST, A DISTANCE OF
506.55 FEET; THENCE SOUTH 89 DEGREES 49 MINUTES 35 SECONDS EAST A DISTANCE OF
190.21 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A
CENTRAL ANGLE OF 84 DEGREES 17 MINUTES 55 SECONDS AND A RADIUS OF 244.00 FEET,
AN ARC OF 343.98 FEET TO A POINT OF NON-TANGENCY THENCE SOUTH 84 DEGREES 03
MINUTES 30 SECONDS EAST, A DISTANCE OF 93.87 FEET TO THE TRUE POINT OF
BEGINNING; THENCE NORTH 09 DEGREES 49 MINUTES 30 SECONDS EAST, A DISTANCE OF
242.11 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A
CENTRAL ANGLE OF 59 DECREES 00 MINUTES 42 SECONDS AND A RADIUS OF 100.00 FEET,
AN ARC DISTANCE OF 102.99 FEET TO A POINT OF TANGENCY; THENCE NORTH 49 DEGREES
11 MINUTES 12 SECONDS WEST A DISTANCE OF 16.57 FEET TO A POINT OF CURVATURE;
THENCE ALONG A CURVE To THE RIGHT HAVING A CENTRAL ANGLE OF 53 DEGREES 46
MINUTES 10 SECONDS AND A RADIUS OF 80.00 FEET, AN ARC DISTANCE OF 75.08 FEET TO
A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT WHOSE CHORD BEARS NORTH
89 DEGREES 14 MINUTES 12 SECONDS EAST, HAVING A CENTRAL ANGLE OF 86 DEGREES 38
MINUTES 48 SECONDS AND A RADIUS OF 100.00 FEET, AN ARC DISTANCE OF 151.23 FEET
TO A POINT OF COMPOUND CURVATURE ON THE SOUTHWESTERLY RIGHT-OF-WAY OF SOUTH
ULSTER PARKWAY, AS PLATTED BY SAID DENVER TECHNOLOGICAL CENTER, NORTH, FILING
NO. ONE; THENCE SOUTHEASTERLY ALONG SAID RIGHT-OF-WAY OF SOUTH ULSTER PARKWAY
THE FOLLOWING 3 COURSES;
<PAGE> 113
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
(1) ALONG A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 17 DEGREES 41 MINUTES
07 SECONDS AIM A RADIUS OF 1577.02 FEET, AN ARC DISTANCE OF 486.77 FEET TO A
POINT OF NON-TANGENCY;
(2) THENCE SOUTH 60 DEGREES 14 MINUTES 43 SECONDS WEST, ALONG A RADIAL LINE FROM
THE AFOREMENTIONED CURVE, A DISTANCE OF 10.00 FEET TO A POINT ON A NON TANGENT
CURVE;
(3) THENCE ALONG A CURVE TO THE RIGHT WHOSE CHORD BEARS SOUTH 28 DEGREES 14
MINUTES 51 SECONDS EAST, HAVING A CENTRAL ANGLE OF 3 DEGREES 00 MINUTES 52
SECONDS AND A RADIUS OF 1567.02 FEET, AN ARC DISTANCE OF 82.44 FEET TO A POINT
OF NON-TANGENCY;
THENCE NORTH 84 DEGREES 03 MINUTES 30 SECONDS WEST, A DISTANCE OF 440.52 FEET TO
THE TRUE POINT OF BEGINNING.
(PORTION OF REGENCY PLAZA PARCEL WITHIN PARCEL A-6)
THOSE PARCELS ABOVE ARE THE SAME PROPERTY SHOWN ON SURVEY PREPARED BY CREIGHTON
R. MOORE, JOB NO. 58-95 DATED AUGUST 12, 1995, REVISED SEPTEMBER 13, 1995,
UPDATED NOVEMBER 8, 1995, AND REVISED NOVEMBER 12, 1995 AND NOVEMBER 14, 1995
DESCRIBED AS FOLLOWS:
A PARCEL OF LAND SITUATED IN THE EAST HALF OF SECTION 8 AND THE WEST HALF OF
SECTION 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY
AND COUNTY OF DENVER, STATE OF COLORADO, DESCRIBED AS FOLLOWS (THE DOCUMENT
REFERENCES IDENTIFIED BELOW ARE RECORDED IN THE CITY AND COUNTY OF DENVER CLERK
AND RECORDER'S OFFICE, UNLESS NOTED OTHERWISE, AND BEARINGS ARE BASED ON THE
ASSUMED BEARING OF NORTH 89 DEGREES 52 MINUTES 59 SECONDS EAST ALONG THE SOUTH
LINE OF THE SOUTHWEST QUARTER OF SECTION 9):
BEGINNING AT THE MOST EASTERLY CORNER OF "PARCEL 1" In AS DESCRIBED AT RECEPTION
NO. 92-0071136, SAID POINT OF BEGINNING BEING ON THE NORTHERLY RIGHT-OF-WAY LINE
OF UNION AVENUE PARKWAY AS PLATTED BY DENVER TECHNOLOGICAL CENTER NORTH, FILING
NO. ONE RECORDED IN PLAT BOOK 29 AT PAGE 56; THENCE WESTERLY ALONG THE NORTHERLY
LINE OF SAID "PARCEL
1" ALONG A CURVE TO THE RIGHT, SAID CURVE BEING TANGENT TO THE SOUTH 64 DEGREES
49 MINUTES 30 SECONDS WEST ALONG THE NORTHERLY RIGHT-OF-WAY OF UNION AVENUE
PARKWAY PLATTED BY SAID DENVER TECHNOLOGICAL CENTER NORTH, FILING NO. ONE,
HAVING A CENTRAL ANGLE OF 19 DEGREES 24 MINUTES 24 SECONDS AND A RADIUS OF
894.93 FEET, AN ARC LENGTH OF 303.12 FEET TO A POINT OF COMPOUND CURVATURE BEING
THE MOST EASTERLY CORNER OF "PARCEL 2": DESCRIBED AT RECEPTION NO. 92-0071136;
THENCE ALONG THE NORTHERLY LINES OF SAID "PARCEL 21" THE FOLLOWING THREE (3)
COURSES;
1. THENCE NORTHWESTERLY ALONG SAID COMPOUND CURVE TO THE RIGHT, HAVING A CENTRAL
ANGLE OF 61 DEGREES 58 MINUTES 06 SECONDS AND A RADIUS OF 90.00 FEET, AN ARC
LENGTH OF 97.34 FEET; 2. THENCE SOUTH 67 DEGREES 15 MINUTES 05 SECONDS WEST,
128.56 FEET TO A POINT OF NONTANGENT CURVATURE; 3. THENCE ALONG A CURVE TO THE
RIGHT, HAVING A CENTRAL ANGLE OF 54 DEGREES 18 MINUTES 59 SECONDS AND A RADIUS
OF 70.00 FEET, THE CHORD OF WHICH BEARS SOUTH 70 DEGREES 45 MINUTES 25 SECONDS
WEST AND MEASURES 63.90 FEET, AN ARC LENGTH OF 66.36 FEET TO A POINT OF TANGENCY
ON THE NORTHERLY LINE OF SAID "PARCEL 1";
<PAGE> 114
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
THENCE ALONG SAID NORTHERLY LINE NORTH 82 DEGREES 05 MINUTES 06 SECONDS WEST,
676.46 FEET TO A POINT OF CURVATURE; THENCE CONTINUING ALONG SAID NORTHERLY LINE
ALONG A CURVE TO THE LEFT, HAVING A CENTRAL ANGLE OF 06 DEGREES 18 MINUTES 36
SECONDS AND A RADIUS OF 2924.79 FEET AN ARC LENGTH OF 322.11 FEET TO A POINT ON
THE NORTHEASTERLY RIGHT-OF-WAY LINE OF INTERSTATE HIGHWAY I-25; THENCE ALONG THE
EASTERLY AND SOUTHERLY RIGHT-OF-WAY LINES OF INTERSTATE HIGHWAY I-25 AND I-225
AS RECORDED IN BOOK 289 AT PAGE 497, BOOK 1915 AT PAGE 403 (ARAPAHOE COUNTY),
AND BOOK 1001 AT PAGE 258, THE FOLLOWING EIGHT (8) COURSES:
1. NORTH 24 DEGREES 01 MINUTES 59 SECONDS WEST, 67.63 FEET; 2. NORTH 64 DEGREES
19 MINUTES 50 SECONDS WEST, 66.49 FEET; 3. NORTH 24 DEGREES 01 MINUTES 59
SECONDS WEST, 250.60 FEET; 4. NORTH 14 DEGREES 24 MINUTES 55 SECONDS WEST,
188.21 FEET; 5. NORTH 00 DEGREES 09 MINUTES 46 SECONDS EAST 587.51 FEET; 6.
NORTH 20 DEGREES 51 MINUTES 56 SECONDS EAST 423.00 FEET; 7. NORTH 30 DEGREES 01
MINUTES 48 SECONDS EAST, 200 54 FEET; 8. NORTH 57 DEGREES 51 MINUTES 41 SECONDS
EAST 363.79 FEET TO THE NORTHWEST CORNER OF A PARCEL OF LAND DESCRIBED IN BOOK
2527 AT PAGE 528;
THENCE ALONG THE BOUNDARY OF SAID PARCEL, THE FOLLOWING THREE (3) COURSES:
1 SOUTH 05 DEGREES 08 MINUTES 13 SECONDS EAST, 270.00 FEET;
2. NORTH 84 DEGREES 51 MINUTES 47 SECONDS EAST, 315.00 FEET;
3. NORTH 05 DEGREES 08 MINUTES 13 SECONDS WEST, 233.66 FEET
TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY LINE OF SAID INTERSTATE HIGHWAY I-225
RECORDED IN BOOK 1001 AT PAGE 258;
THENCE SOUTH 39 DEGREES 39 MINUTES 43 SECONDS EAST ALONG SAID SOUTHERLY
RIGHT-OF-WAY LINE, 227.19 FEET; THENCE NORTH 41 DEGREES 29 MINUTES 02 SECONDS
EAST AND CONTINUING ALONG SAID
SOUTHERLY RIGHT-OF-WAY LINES 19.68 FEET TO A POINT OF NONTANGENT CURVATURE ON
THE SOUTHWESTERLY RIGHT-OF-WAY
SOUTH ULSTER STREET PARKWAY AS PLATTED BY SAID DENVER TECHNOLOGICAL CENTER NORTH
FILING NO. ONE; THENCE ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINES THE FOLLOWING
THREE (3)
COURSES:
1. ALONG SAID NONTANGENT CURVE TO THE LEFT, THE CHORD OF
WHICH BEARS SOUTH 50 DEGREES 29 MINUTES 25 SECONDS EAST AND
MEASURES 300.75 FEET, HAVING A CENTRAL ANGLE OF 21 DEGREES 23
MINUTES 53 SECONDS AND A RADIUS OF 810.00 FEET, AN ARC LENGTH OF 302.51 FEET;
2. SOUTH 61 DEGREES 11 MINUTES 21 SECONDS EAST, 668.90 FEET TO A POINT OF
CURVATURE; 13 3. ALONG A CURVE TO THE RIGHT, HAVING A CENTRAL ANGLE OF 13
DEGREES 44 MINUTES 57 SECONDS AND A RADIUS OF 1577.02 FEET, AN ARC LENGTH OF
378.43 FEET TO A POINT OF CUSP WITH THE SOUTHEASTERLY RIGHT-OF-WAY LINE OF THE
100 FOOT WIDE ACCESS EASEMENT RECORDED AT BOOK 3128 AT PAGE 98;
THENCE ALONG SAID SOUTHEASTERLY RIGHT-OF-WAY LINE ALONG A CURVE TO THE LEFT, THE
CHORD OF WHICH BEARS SOUTH 82 DEGREES 42 MINUTES 28 SECONDS WEST AND MEASURES
152.88 FEET HAVING A CENTRAL ANGLE OF 99 DEGREES 42 MINUTES 17 SECONDS AND A
RADIUS OF 100.00 FEET, AN ARC LENGTH OF 174.02 FEET; THENCE SOUTH 32 DEGREES 51
MINUTES 19 SECONDS WEST AND CONTINUING ALONG SAID SOUTHEASTERLY RIGHT-OF-WAY
LINE, 222.71 FEET TO A POINT ON THE NORTHEASTERLY LINE OF THAT PARCEL OF LAND.
RECORDED AT RECEPTION NO. 086484; THENCE ALONG THE BOUNDARY OF SAID PARCEL, THE
FOLLOWING SIX (6) COURSES:
<PAGE> 115
EXHIBIT 12.1(A) TO
CREDIT AGREEMENT
Legal Description of
Headquarters Land
1. NORTH 57 DEGREES 08 MINUTES 41 SECONDS WEST, 119.14 FEET
TO A POINT OF NONTANGENT CURVATURE;
2. ALONG A CURVE TO THE LEFT, THE CHORD OF WHICH BEARS NORTH
81 DEGREES 40 MINUTES 56 SECONDS WEST AND MEASURES 68.57
FEET, HAVING A CENTRAL ANGLE OF 16 DEGREES 09 MINUTES 17 SECONDS AND A RADIUS OF
244.00 FEET, AN ARC LENGTH OF 68.80 FEET; 3. NORTH 89 DEGREES 45 MINUTES 35
SECONDS WEST, 363.54 FEET; 4. SOUTH 00 DEGREES 14 MINUTES 25 SECONDS WEST,
488.00 FEET; 5. SOUTH 89 DEGREES 45 MINUTES 35 SECONDS EAST, 363.54 FEET TO A
POINT OF CURVATURE; 6. THENCE ALONG A CURVE TO THE LEFT, HAVING A CENTRAL ANGLE
OF 84 DEGREES 17 MINUTES 55 SECONDS AND A RADIUS OF 244.00 FEET AN ARC LENGTH OF
358.99 FEET TO A POINT ON THE SOUTHERLY LINE OF THAT PARCEL OF LAND RECORDED AT
RECEPTION NO. 056318;
THENCE ALONG SAID SOUTHERLY LINE SOUTH 84 DEGREES 03 MINUTES 30 SECONDS EAST AND
RADIAL FROM THE PREVIOUS CURVE, 534.39 FEET TO A POINT OF NONTANGENT CURVATURE
ON THE SOUTHWESTERLY
RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY; THENCE ALONG SAID
SOUTHWESTERLY RIGHT-OF-WAY LINE OF UNION AVENUE PARKWAY, THE FOLLOWING FOUR (4)
COURSES:
1. ALONG SAID NONTANGENT CURVE TO THE RIGHT, THE CHORD OF WHICH BEARS SOUTH 25
DEGREES 57 MINUTES 28 SECONDS EAST AT A DISTANCE OF 42.81 FEET, HAVING A CENTRAL
ANGLE OF 01 DEGREES 33 MINUTES 56 SECONDS AND A RADIUS OF 1567.02, AN ARC LENGTH
OF 42.81 FEET; 2. SOUTH 25 DEGREES 10 MINUTES 30 SECONDS EAST 49.71 FEET TO A
POINT OF CURVATURE; 3. ALONG A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 90
DEGREES 00 MINUTES 00 SECONDS AND A RADIUS OF 101.50 FEET, AN ARC LENGTH OF
159.44 FEET; 4. SOUTH 64 DEGREES 49 MINUTES 30 SECONDS WEST, 766.82 FEET TO THE
POINT OF BEGINNING, CITY AND COUNTY OF DENVER, STATE OF COLORADO.
<PAGE> 1
EXHIBIT 10.3
SUBLEASE AGREEMENT
THIS Sublease Agreement, dated this 13th day of September, 1990, made and
entered into between GREEN HOLDINGS, INC., a corporation with an office at 8055
E. Tufts Avenue, Suite 700, Denver, Colorado 80237, as Sublessor and J.D.
EDWARDS & COMPANY, a Colorado corporation with an office at 4949 South Syracuse,
Denver, Colorado 80237, as Sublessee (whether one or more).
WITNESSETH:
1. Sublessor hereby demises, leases and lets unto Sublessee the following
described premises in Denver County, State of Colorado to wit:
An office suite located on the 6th floor of the Stanford Place I Building
consisting of 4,174 usable square feet and 4,717 rentable square feet, including
proportionate share of common areas, as more particularly described on Exhibit A
attached hereto and made a part hereof said premises being located at 8055 E.
Tufts Avenue in the city of Denver, Colorado, together with the buildings and
equipment, if any, located thereon and owned by Sublessor for the following
term:
Beginning on the 1st day of October, 1990, and ending on the 30th day of
September, 1992, and from month to month thereafter until terminated by either
party giving thirty (30) days written notice prior to the end of the primary
term or prior to the end of any month after the primary term, as the case may
be. Notwithstanding the foregoing, however, Sublessee may cancel this Sublease
at any time after the end of the eighth (8th) month upon four (4) months prior
written notice.
2. Sublessee agrees to pay to Sublessor, with rental checks payable to
Green Holdings, Inc., 8055 E. Tufts Avenue, Suite 700, Denver, Colorado 80237
(until notified to pay differently) the sum of Three Thousand Nine Hundred
Thirty and 83/100 Dollars ($3,930.83) per month payable monthly in advance.
Sublessor acknowledges receipt of the first and the last full month's rental
together with any portion due from date hereof until the first day of the
succeeding month. Without limiting any of Sublessor's other rights herein, it is
agreed that if rentals are delinquent for a period of thirty (30) days,
Sublessor may assess Sublessee a one percent (1%) per month delinquency charge
on the unpaid rentals. In the event the delinquency charge above is deemed
excessive by federal or state law, then the highest applicable charge shall be
assessed.
3. SUBLESSEE AGREES THAT IT HAS MADE A PERSONAL INSPECTION OF THE LEASED
PREMISES AND ANY BUILDINGS AND OTHER IMPROVEMENTS THEREON AND IS SATISFIED WITH
CONDITION AND FITNESS THEREOF AND
-1-
<PAGE> 2
ACCEPTS THE SAME "AS IS"; PROVIDED, HOWEVER, SUBLESSEE AGREES TO CORRECT AT ITS
OWN EXPENSE, ANY SIGNIFICANT OBVIOUS DAMAGE IT MAY HAVE DONE TO THE LEASED
PREMISES PRIOR TO SUBLESSEE'S OCCUPANCY. SUBLESSOR DOES NOT WARRANT EITHER
EXPRESSLY OR IMPLIEDLY THE CONDITION OR FITNESS OF THE PROPERTY LEASED
HEREUNDER, ANY SUCH WARRANTY BEING HEREBY EXPRESSLY NEGATIVED. Sublessee agrees
to finish the demised premises in accordance with the plan attached as Exhibit
A. Tenant finish shall be comparable to that found elsewhere on the first 11
floors of Stanford Place I.
4. Sublessee shall defend, indemnify and save Sublessor harmless for any
losses, costs or expenses resulting from suits, demands or other claims for
damages to persons or property, arising out of the use or existence of the
buildings, structures, improvements and other personal property located on the
leased premises except where such damages arise out of the gross negligence or
willful misconduct of Sublessor, its employees, agents or invitees; however,
Sublessor at his election may intervene or provide its own defense.
5. Upon termination of this Sublease, Sublessee agrees to peacefully quit
and surrender possession of the leased premises. If Sublessee fails to so quit
and surrender possession, Sublessor shall have the right to take possession by
any lawful means, using such force as may be necessary, without being deemed
guilty of any trespass, and without the necessity of first resorting to any
court process. If Sublessee shall remain in possession after the date of
expiration or termination of this Sublease and after the effective date of
notice by Sublessor to terminate this Sublease, the Sublessee will pay as rent
for the leased premises during such time a sum equal to one hundred twenty five
percent (125%) of the rent herein provided.
6. Should Sublessor's interest in the premises leased hereunder be that of
a lessee then this Sublease shall automatically terminate without notice upon
the termination, for any cause whatsoever including action or inaction of
Sublessor, of Sublessor's leasehold estate in the premises leased hereunder.
7. All notices required or which may be given hereunder shall be
considered as properly given if delivered in writing, personally or sent by
certified United States mail, postage prepaid with return receipt requested,
addressed as follows:
Sublessor: GREEN HOLDINGS, INC., 8055 E. Tufts Avenue, Suite 700,
Denver, Colorado 80237
Sublessee: J.D. EDWARDS & COMPANY, 4949 South Syracuse, Denver,
Colorado 80237
-2-
<PAGE> 3
8. This Sublease shall not be binding on Sublessor or Sublessee unless or
until executed on its behalf by an officer of the company or an employee having
actual authority to execute this Sublease.
9. This Sublease includes the General Conditions attached hereto which are
by reference incorporated herein. This instrument with the General Conditions so
incorporated and any Annex attached hereto constitute the complete agreement of
the parties hereunder and there are no oral agreements or understandings between
the parties concerning the property covered by this Sublease Agreement.
EXECUTED the day and year first above written.
WITNESS: GREEN HOLDINGS, INC.
- -------------------- By______________________________
Vice President and Treasurer
- -------------------- SUBLESSOR
WITNESS: J.D. EDWARDS & COMPANY
- -------------------- By______________________________
- -------------------- SUBLESSEE
CONSENT OF LESSOR
------------------
The undersigned; as the Lessor under the Lease Agreement referenced in Paragraph
M of the General Conditions attached hereto, hereby gives the consent of Lessor
to the foregoing Sublease and approves of the Sublessee therein as required by
the provisions of said Lease Agreement.
----------------------------------
PHILLIPS PETROLEUM COMPANY, LESSOR
By________________________________
Attorney-in-Fact
Date______________________________
-3-
<PAGE> 4
GENERAL CONDITIONS
A. Sublessee covenants and agrees that it will not permit any illegal or immoral
activity on the leased premises nor will it permit any nuisance to be created or
maintained thereon.
B. Upon failure of Sublessee to pay rentals or any part thereof when due or upon
Sublessee's failure to carry out any obligation placed on it under this Sublease
or upon the death of Sublessee or upon Sublessee's making an assignment for
benefit of creditors, filing a voluntary petition in bankruptcy or being
adjudicated bankrupt or insolvent, Sublessor may, without notice, declare this
Sublease at an end and void, and may re-enter and take possession of said
premises, and may recover rentals due in any appropriate action at law, or may
recover the possession of said premises and damages for the detention thereof
and/or for such failure by any appropriate remedy at law or in equity.
C. Sublessor shall pay all charges for utilities and other services supplied to
the premises as and when the same shall come due.
D. Sublessor shall render for taxation and pay all taxes and assessments,
general and special, on the leased premises and any buildings or other
improvements permanently affixed to the realty. Sublessee shall pay all taxes
and assessments on all property owned by Sublessee and located on the leased
premises.
E. Sublessee shall pay to Sublessor together with each rental payment the amount
of any sales and/or use tax due thereon.
F. At his own expense Sublessee shall keep the leased premises and all buildings
and other improvements located thereon in good repair. Sublessee will upon the
expiration or termination of this Sublease for any reason deliver up the
property leased hereunder to Sublessor in as good condition as when received by
Sublessee, depreciation due to a reasonable use thereof excepted.
G. Sublessee shall made no alterations in or upon the leased premises without
the prior written consent of the Sublessor, and all additions, fixtures or
improvements which may be made by Sublessee, except moveable furnishings, shall
become the property of Sublessor and remain upon the leased premises as a part
thereof, and be surrendered with the leased premises at the termination of this
Sublease.
-4-
<PAGE> 5
H. Sublessee agrees to obtain and maintain at its expense at all times during
the term hereof the following insurance:
1. Workmen's Compensation Insurance in compliance with the laws of the
state in which the leased premises are located and Employer Liability Insurance
with limit of not less than $100,000.
2. Comprehensive Public Liability Insurance covering Sublessee's use and
occupancy of the leased premises with bodily injury, including death, limit of
not less than $1,000,000 per occurrence and property damage limit of not less
than $300,000 per occurrence.
Sublessee shall upon request furnish Sublessor with certified copies of the
policies or certificates evidencing the above insurance.
I. Sublessee shall not sell, hypothecate or assign this Sublease or sublet the
premises without the prior written consent of Sublessor which consent shall not
be unreasonably withheld.
J. Should all or any part of the leased premises be taken by eminent domain
proceedings or purchased by any public or quasi-public body having the power of
eminent domain, all proceeds from such taking or purchase shall belong
exclusively to Sublessor, except that Sublessor shall have no claim to any award
for loss or damage to Sublessee's trade fixtures, removable personal property,
which Sublessee is entitled to remove upon expiration of the term of this
Sublease. In the event such taking or purchase shall materially interfere with
Sublessee's use of the leased premises, Sublessee may at its option terminate
this Sublease.
K. In the event any building on the leased premises shall be destroyed or
damaged by fire, explosion, the elements, or other causes so as to render the
same wholly or in part unfit for occupancy, and if the same cannot be repaired
within ninety (90) days from the date of such casualty, this Sublease shall
terminate on the date of such casualty. If such building can be repaired in such
ninety (90) day period then Sublessor shall notify Sublessee within ten (10)
days of such casualty if it elects to repair said building within such ninety
(90) day period. If Sublessor does not so elect, then Sublessee may terminate
this Sublease by giving notice in writing to Sublessor. If Sublessor elects to
repair said building but fails to do so, this Sublease shall terminate on the
expiration of said ninety (90) days. In the event of any such termination, the
Sublessee shall immediately surrender possession of the premises. If
-5-
<PAGE> 6
Sublessor repairs the said building within the ninety (90) day period, this
Sublease shall continue in full force and effect. Sublessee shall not be
required in any event to pay rent for any period in which the leased premises
are wholly unfit for the conduct of Sublessee's business and shall be required
during any period which a part of the premises are unfit for the conduct of
Sublessee's business to pay as rent the stipulated rent multiplied by a fraction
the numerator of which is the area of the leased premises which is fit for the
conduct of Sublessee's business and the denominator of which is the total area
of the leased premises.
L. Sublessor reserves the right to place or post "FOR LEASE" signs on the
property to signify the leased property is available for lease no earlier than
four (4) months prior to termination of this Sublease.
M. This Sublease is subject to all of the terms and conditions of that certain
Lease Agreement dated March 1, 1989 and Amendment dated November 8, 1989 between
Phillips Petroleum Company, as Lessor, and Green Holdings, Inc., as Lessee, a
copy of said Lease Agreement being attached hereto as Exhibit B and made a part
hereof.
N. Total lease rental for the primary term hereof amount to $47,170 payable in
monthly installments as provided hereinabove.
0. Sublessee shall pay its allocated and proportionate share of any increase in
operating costs as defined in Paragraph 2 of Exhibit B hereof in excess of such
costs incurred in Sublessee's base year which base year shall be defined as the
period 1/1/90-12/31/90. It is agreed that Sublessee's allocated percentage of
Sublessor's operating costs shall be 17.6% of the operating costs payable by
Sublessor to Lessor pursuant to the Lease Agreement referenced in Paragraph M
above. The method of billing Sublessee for any such increase shall be consistent
with the provisions of said Paragraph 2.
-6-
<PAGE> 7
JD EDWARDS
SOFTWARE THAT ENDURES
J D Edwards & Company 303-773-3732
4949 S Syracuse Street Telefax 303-773-3806
Denver Colorado 80237 USA Telex.9109312585
September 14, 1990
Mr. Ralph W. Shelburne
Phillips Petroleum Company
8055 E. Tufts Avenue Parkway
Denver, Colorado 80237
Re: Sublease Agreements
8055 E. Tufts Avenue
Stanford Place I, 6th Floor Suite (Green Holdings, Inc.)
Stanford Place I, 14th Floor Suite (Porter Memorial Hospital)
Denver, Colorado 80237
Dear Mr. Shelburne:
Enclosed are six originals, three for each of the referenced sublease agreements
for additional office space in the Stanford Place I building, executed on behalf
of J.D. Edwards & Company by Richard E. Allen in his capacity as Vice President,
Finance; on behalf of Green Holdings, Inc. by Perry J. Moore, Vice President and
Treasurer; and on behalf of Porter Memorial Hospital by Larry Pugh, Vice
President of Finance.
Once the Sublease Agreements have been consented to by Phillips Petroleum
Company, as Lessor to the above referenced subleases, please return two signed
copies to me so that I may send fully executed copies to each of the Sublessors,
while you retain one executed copy of each for your files. If you have any
questions, please do not hesitate to contact me. Very truly yours,
J.D. EDWARDS & COMPANY
Richard G. Snow, Jr.
Vice President, General Counsel
/rbk
Enclosures
cc: Fred Caron, w/attachments
Richard E. Allen
<PAGE> 8
JDEdwards
SOFTWARE THAT ENDURES
J D. Edwards & Company 303-773-3732
4949 S. Syracuse Street Telefax: 303-773-3806
Denver Colorado 80237 USA Telex: 9109312585
September 10, 1990
Mr. Perry J. Moore
Vice President
Green Holdings, Inc.
8055 E. Tufts Avenue
Suite 700
Denver, Colorado 80237
Re: Sublease Agreement
Dear Mr. Moore:
Enclosed are three copies of the referenced sublease agreement for your final
review and execution.
Could you please execute all three copies, including initialing the enclosed
space plans, and return them to me so that I may obtain signature by an officer
of J.D. Edwards. Also, could you include a copy of your lease with Phillips
Petroleum Company so that we may be aware of the terms and conditions J.D.
Edwards will be subject to as part of our sublease with you.
Should you have any questions regarding the sublease, please do not hesitate to
contact the.
Very truly yours,
J.D. EDWARDS & COMPANY
Richard G. Snow, Jr.
Vice President, General Counsel
/rbk
Enclosures 4
cc: Fred Caron
<PAGE> 1
EXHIBIT 10.4
LEASE AGREEMENT B-040408
THIS Lease Agreement, dated this 20th day of September, 1990, made and
entered into between PHILLIPS PETROLEUM COMPANY, a corporation with an office at
Bartlesville, Oklahoma, as Lessor and J. D. EDWARDS & COMPANY, whose address is
8055 E. Tufts Ave., Denver, CO 80237, as Lessee, (whether one or more).
WITNESSETH:
1. Lessor hereby demises, leases and lets unto Lessee the following
described premises in Denver County, State of Colorado to wit:
Office space located on the 6th floor of the Stanford Place I Building
consisting of a total of 468 usable square feet and 529 rentable square feet,
including proportionate share of common areas, as more particularly described on
Exhibit A attached hereto and made a part hereof said premises being located at
8055 E. Tufts Avenue in the City of Denver, Colorado, together with the
buildings and equipment, if any, located thereon and owned by Lessor for the
following term:
Beginning on the 1st day of October, 1990, and ending on the 30th day of
September, 1992, and from month to month thereafter until terminated by either
party giving thirty (30) days written notice prior to the end of the primary
term or prior to the end of any month after the primary term, as the case may
be. Notwithstanding the foregoing, however, Sublessee may cancel this Sublease
at any time after the end of the eight (8th) month upon four (4) months prior
written notice.
2. Lessee agrees to pay to Lessor, with rental checks payable to Phillips
Petroleum Company at P. O. Box 500553, St. Louis, MO 63150 (until notified to
pay differently) the sum of Four Hundred Forty-One Dollars ($441.00) per month
payable monthly in advance. Lessor acknowledges receipt of the first month's
rental together with any portion due from date hereof until the first day of the
succeeding month. Without limiting any of Lessor's other rights herein, it is
agreed that if rentals are delinquent for a period of thirty (30) days, Lessor
may assess Lessee a one percent (1%) per month delinquency charge on the unpaid
rentals. In the event the delinquency charge above is deemed excessive by
federal or state law, then the highest applicable charge shall be assessed.
3. LESSEE AGREES THAT HE HAS MADE A PERSONAL INSPECTION OF THE LEASED
PREMISES AND ANY BUILDINGS AND OTHER IMPROVEMENTS THEREON AND IS SATISFIED WITH
CONDITION AND FITNESS THEREOF AND ACCEPTS THE SAME "AS IS". LESSOR DOES NOT
WARRANT EITHER EXPRESSLY OR IMPLIEDLY THE CONDITION OR FITNESS OF THE PROPERTY
LEASED HEREUNDER, ANY SUCH WARRANTY BEING HEREBY EXPRESSLY NEGATIVED.
4. Lessee shall defend, indemnify and save Lessor harmless for any losses,
costs or expenses resulting from suits, demands or other claims for damages to
persons or property, arising out of the use or existence of the leased premises
and personal property located on the leased premises; however, Lessor at his
election may intervene or provide its own defense.
5. Upon termination of this Lease, Lessee agrees to peacefully quit and
surrender possession of the leased premises. If Lessee fails to so quit and
surrender possession, Lessor shall have the right to take possession by any
lawful means, using such force as may be necessary, without being deemed guilty
of any trespass, and without the necessity of first resorting to any court
process. If Lessee shall remain in possession after the date of expiration or
termination of this Lease and after the effective date of notice by Lessor to
terminate this Lease, the Lessee will pay as rent for the leased premises during
such time a sum equal to four (4) times the rent herein provided.
6. Should Lessor's interest in the premises leased hereunder be that of a
lessee then this Lease shall automatically terminate without notice upon the
termination, for any cause whatsoever including action or inaction of Lessor, of
Lessor's leasehold estate in the premises leased hereunder.
7. All notices required or which may be given hereunder shall be
considered as properly given if delivered in writing, personally or sent by
certified United States mail, postage prepaid with return receipt requested,
addressed as follows:
<TABLE>
<CAPTION>
Party Address
----- -------
<S> <C>
Lessor: PHILLIPS PETROLEUM COMPANY 8055 E. Tufts Avenue, Denver, CO 80237
Lessee: J. D. EDWARDS & COMPANY 8055 E. Tufts Avenue, Denver, CO 80237
</TABLE>
8. This Lease shall not be binding on Lessor unless or until executed on
its behalf by an officer of the company or an employee having actual authority
to execute this Lease.
9. This Lease includes the General Conditions printed on the reverse side
hereof which are by reference incorporated herein. This instrument with the
General Conditions so incorporated and any Annex attached hereto constitute the
complete agreement of the parties hereunder and there are no oral agreements or
understandings between the parties concerning the property covered by this Lease
Agreement.
EXECUTED the day and year first above written.
WITNESS: PHILLIPS PETROLEUM COMPANY
/s/ Betty J. Miller By /s/ Signature unreadable
Attorney-in-Fact
LESSOR
WITNESS: J. D. EDWARDS & COMPANY
/s/ Signature unreadable
By /s/ Signature unreadable
Vice President
LESSEE
<PAGE> 2
GENERAL CONDITIONS
A. Lessee covenants and agrees that it will not permit any illegal or immoral
activity on the leased premises nor will it permit any nuisance to be
created or maintained thereon.
B. Upon failure of Lessee to pay rentals or any part thereof when due or upon
Lessee's failure to carry out any obligation placed on it under this Lease
or upon the death of Lessee or upon Lessee's making an assignment for
benefit of creditors, filing a voluntary petition in bankruptcy or being
adjudicated bankrupt or insolvent, Lessor may, without notice, declare
this Lease at an end and void, and may re-enter and take possession of
said premises, and may recover rentals due in any appropriate action at
law, or may recover the possession of said premises and damages for the
detention thereof and/or for such failure by any appropriate remedy at law
or in equity.
C. Lessor shall pay all charges for utilities and other services supplied to
the premises as and when the same shall come due.
D. Lessor shall render for taxation and pay all taxes and assessments,
general and special, on the leased premises and any buildings or other
improvements permanently affixed to the realty. Lessee shall pay all taxes
and assessments on all property owned by Lessee and located on the leased
premises.
E. Lessee shall pay to Lessor together with each rental payment the amount of
any sales and/or use tax due thereon.
F. At his own expense Lessee shall keep the leased premises and all buildings
and other improvements located thereon in good repair. Lessee will upon
the expiration or termination of this Lease for any reason deliver up the
property leased hereunder to Lessor in as good condition as when received
by Lessee, depreciation due to a reasonable use thereof excepted.
G. Lessee shall make no alterations in or upon the leased premises without
the prior written consent of the Lessor, and all additions, fixtures or
improvements which may be made by Lessee, except moveable furnishings,
shall become the property of Lessor and remain upon the leased premises as
a part thereof, and be surrendered with the leased premises at the
termination of this Lease.
H. Lessee agrees to obtain and maintain at its expense at all times during
the term hereof the following insurance:
1. Workmen's Compensation Insurance in compliance with the laws of the
state in which the leased premises are located and Employer
Liability Insurance with limit of not less than $100,000.
2. Comprehensive Public Liability Insurance covering Lessee's use and
occupancy of the leased premises with bodily injury, including
death, limit of not less than $1,000,000 per occurrence and property
damage limit of not less than $300,000 per occurrence.
Lessee shall upon request furnish Lessor with certified copies of the
policies or certificates evidencing the above insurance.
I. Lessee shall not sell, hypothecate or assign this Lease or sublet the
premises without the prior written consent of Lessor.
J. Should all or any part of the leased premises be taken by eminent domain
proceedings or purchased by any public or quasi-public body having the
power of eminent domain, all proceeds from such taking or purchase shall
belong exclusively to Lessor. In the event such taking or purchase shall
materially interfere with Lessee's use of the leased premises, Lessee may
at its option terminate this lease.
K. In the event any building on the premises shall be destroyed or damaged by
fire, explosion, the elements or other causes so as to render the same
wholly or in part unfit for occupancy, and if the same cannot be repaired
within ninety (90) days from the date of such casualty, this Lease shall
terminate on the date of such casualty. If such building can be repaired
in such ninety (90) day period then Lessor shall notify Lessee within ten
(10) days of such casualty if it elects to repair said building within
such ninety (90) day period. If Lessor does not so elect, then Lessee may
terminate this Lease by giving notice in writing to Lessor. If Lessor
elects to repair said building but fails to do so, this Lease shall
terminate on the expiration of said ninety (90) days. In the event of any
such termination, the Lessee shall immediately surrender possession of the
premises. If Lessor repairs the said building within the ninety (90) day
period, this Lease shall continue in full force and effect. Lessee shall
not be required in any event to pay rent for any period in which the
leased premises are wholly unfit for occupancy and shall be required
during any period which a part of the premises are unfit for occupancy to
pay as rent the stipulated rent multiplied by a fraction the numerator of
which is the area of the leased premises which is fit for occupancy and
the denominator of which is the total area of the leased premises.
L. Lessor reserves the right to place or post "FOR LEASE" signs on the
property to signify the leased property is available for lease.
M. This lease is subject to all of the terms and conditions of that certain
Office Lease dated August 26, 1985 between PERA, as Landlord, and Phillips
Petroleum Company, as Tenant, a copy of said Office Lease being attached
hereto as Exhibit B and made a part hereof.
N. Total lease rental for the primary term hereof amounts to $10,584.00
payable in monthly installments as provided hereinabove.
O. Lessee shall pay its allocated and proportionate share of any increase in
operating costs as defined in Paragraph 2 of Exhibit B hereof in excess of
such costs incurred in Lessee's base year which base year shall be defined
as the period 1/1/90-12/31/90. It is agreed that Lessee's allocated
percentage of Lessor's operating costs shall be 2.44%. The method of
billing Lessee for any such increase shall be consistent with the
provisions of said Paragraph 2.
P. Quiet Enjoyment. Lessor shall and hereby does warrant and defend Lessee in
the quiet enjoyment and peaceful possession of the Premises during the
term of this Lease.
<PAGE> 3
(Image omitted)
6TH FLOOR
EXHIBIT A
<PAGE> 4
AMENDMENT TO LEASE AGREEMENT
WHEREAS, on the 20th day of September, 1990, PHILLIPS PETROLEUM COMPANY,
as Lessor, and J.D. EDWARDS & COMPANY, as Lessee, signed a Lease Agreement
covering the following described premises in Denver County, State of Colorado,
to-wit:
An office suite located on the 6th floor of the Stanford Place I
Building, consisting of 468 usable square feet and 529 rentable square feet; and
WHEREAS, the term of the lease was to run until September 30, 1992, and
from month to month thereafter until terminated; and
WHEREAS, the parties desire to establish a firm ending date for the lease.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00), and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree that the paragraph in the Lease
Agreement date September 20, 1990, which states:
Beginning on the 1st day of October, 1990, and ending on the 30th
day of September 1992, and from month to month thereafter until
terminated by either party giving thirty (30) days written notice
prior to the end of the primary term or prior to the end of any
month after the primary term as the case may be. Notwithstanding the
foregoing, however, Sublessee may cancel this sublease at any time
after the end of the eight (8th) month upon four (4) months prior
written notice.
is deleted from said Lease Agreement and the following paragraph is inserted in
its place.
Beginning on the 1st day of October, 1990, and ending on the 25th
day of August, 1995.
In all other respects said Lease Agreement remains unchanged.
Executed this 7th day of December 1992.
PHILLIPS PETROLEUM COMPANY
By: /s/ Signature Unreadable
Attorney-In-Fact
J.D. EDWARDS & COMPANY
BY: RE Allen
TITLE: VP FINANCE
<PAGE> 5
AMENDMENT TO LEASE AGREEMENT
---------------------------
THIS AMENDMENT, made this 17th day of July 1992, by and between PHILLIPS
PETROLEUM COMPANY, hereinafter referred to as Lessor, and J, D. EDWARDS &
COMPANY, hereinafter referred to as Lessee.
WITNESSETH:
WHEREAS, Lessor and Lessee entered into that certain Lease Agreement dated March
2, 1992, pertaining to office space located on the 6th floor of the Stanford
Place I Building located at 8055 East Tufts Avenue, Denver, Colorado;
NOW, THEREFORE, for and in consideration of these mutual covenants and
undertakings, Lessor and Lessee agree that said Lease Agreement shall be and
hereby is amended as follows:
1. The description of the demised premises which appears in Paragraph 1
of the Lease Agreement is deleted therefrom and the following
description is substituted therefor:
An office suite located on the 6th floor of the Stanford Place I
Building consisting of 6,395 usable sq. ft. and 7,226 rentable sq.
ft,, including proportionate share of common areas, as more
particularly described on Exhibit A attached hereto and made a part
hereof,
2. The drawing attached to said Lease Agreement as Exhibit A is deleted
therefrom and the drawing attached hereto as Exhibit A is
substituted therefor,
3. The amount of each monthly rental payment which appears in paragraph
2 of the Lease Agreement is changed to Eight Thousand Seven Hundred
Thirty-one and 42/100 Dollars ($8,731,42).
4. The amount of lease rental for the primary term appearing in General
Condition N of the Lease Agreement is changed to $321,372.59.
5. Lessee's allocated percentage of Lessor's operating costs as set
forth in General Condition 0 of the Lease Agreement is changed to
3.33%.
In all respects, except as modified by this Amendment, the said Lease Agreement
shall remain unaltered in full force and effect in accordance with the terms
thereof.
The effective date of this Amendment shall be August 1, 1992.
IN WITNESS WHEREOF, the parties hereto have executed this instrument for the
purposes herein expressed, the day and year first above written.
Witnesses: LESSOR: PHILLIPS PETROLEUM COMPANY
/s/ signature unreadable By: /s/ Signature Unreadable
____________________________ Attorney-In-Fact
LESSEE: J. D. EDWARDS & COMPANY
/s/ signature unreadable By: RE Allen
____________________________ Vice President
<PAGE> 6
EXHIBIT A
[IMAGE OMMITED]
<PAGE> 7
BUSINESS NEWS REPORT
Reporting Houston Business Expansions Since 1984
FOR SUBSCRIBER USE ONLY
FOR SUBSCRIPTION INFORMATION PLEASE CALL (713) 622-5838
July 29, 1992 Issue 71 Volume IX
$37 BILLION AND GROWING
COUNTRYWIDE MORTGAGE: 2425 Fountainview #150 77057 789-3909 sic code: 6162/6163
Key Map 491J ] This is a mortgage wholesale office for the Pasadena, California
based nationwide mortgage brokerage firm. Countrywide also has four retail
offices in the Houston area and three satellite offices. Ms. Nancy Dailey is the
Branch Manager of the wholesale operations in Houston. The division has eleven
employees and leases right at 2,000 sq. ft. of office space. This wholesale
office of Countrywide Mortgage is about to relocate to a 3,700 sq. ft space on a
different floor of the 2425 Fountainview building. Mr. Bob Bridges 667-1362 is
the Regional Vice President of the retail division of Countrywide Mortgage. The
retail offices in Houston are located on FM 1960, Bellaire Blvd., S. Dairy
Ashford and in Clearlake. There are satellite offices in Conroe, Kingwood and
Sugar Land. The firm has also just opened a retail office in Austin. Countrywide
Morgage has been in business since 1969. In 1974 the firm decided to do away
with loan officers and go directly to consumers and real estate professionals
via a direct mail campaign and by opening small loan processing and funding
offices in retail strip centers. The firm has also increased efficiency by
taking applications by phone and entering the, information directly into
computers, thereby eliminating over two thousand forms. The system seems to be
working very well. Countrywide was the largest originator of single family
mortgages in the first quarter of 1992. The firm is also the fifth largest
servicer of home loans with over thirty seven billion dollars worth of
mortgages. There are over one hundred and twenty five retail offices nationwide
and eight offices in Texas. Look for some of the retail offices in Houston to be
adding personnel and additional space in the not too distant future.
CONTEST
Some people at this large oil and gas firm would like to move out to the Energy
Corridor. Name this firm!
Could this large energy firm's E&P operations' space requirements have grown to
be in the 450,000 sq. ft. range? Name this firm!
Page 2
<PAGE> 8
HOME BUILDER TO RELOCATE
HAMMER-SMITH, INC.: 5847 San Felipe #950 77057 * 785-9393 * sic code: 1521 Key
Map 491N ] This two year old general home contracting firm works on quality
projects primarily in the Memorial, River Oaks and Tanglewood areas. Most of the
firm's work is in the $350,000 and the $3,000,000 range. Mr. Wally Cox is the
President of Hammer-Smith and has been building homes in the, area for over
nineteen years. Hammer Smith has three full time employees. Mr. Cox is looking
to relocate his firm within the Galleria area. The firm has a usable space
requirement of approximately 700 sq. ft. Look for Hammer-Smith to be in new
offices on or about September 1st.
INSURING FORCLOSED PROPERTIES FOR LENDERS
MCCLAUGHERTY INSURANCE AGENCY, INC.: 12603 Southwest Frwy. #520 Stafford 77477
240-3333 sic code: 6400 ] Mr. John McClaugherty started this independent
insurance agency in 1974. The firm is a commercial insurance agency that since
1985 has been specializing in insuring foreclosed properties that are owned by
financial institutions. The firm's program has been very well received and is
about to go nationwide. McClaugherty Insurance has thirteen employees at this
time. McClaugherty Insurance has a lease on 3,000 sq. ft. of office space that
will be expiring in the spring of next year. Mr. Allan Birdsong will be
assisting Mr. McClaugherty in evaluating the office space market and the firm's
future office space needs. Look for the firm to remain in the Sugar Land area
and expand the size of its office.
LARGE SOFTWARE FIRM TO RELOCATE TO GALLERIA
J.D. EDWARDS & COMPANY: 16945 Northchase #1670 77060 * 875-1700 sic code:
7371/7372 Key Map 372R ] This sixteen year old Denver, Colorado based software
manufacturing company works exclusively with companies that own IBM AS400
midrange computers. The firm's software is used a lot for accounting, inventory
and construction projects. In Houston J.D. Edwards & Company has two offices on
Northchase that are about to be consolidated in a new soon to be selected
location. The firm has between fifty and sixty employees between both offices in
Houston. Due to J.D. Edwards & Company's relationship with IBM, the firm will be
selecting a building near IBM's Riverway facility. Mr. Ed McVaney is the
President of J.D. Edwards. In Houston, Mr. Don Saari is the Branch Manager and
Ms. Gene Batchelor is the Office Manager. Mr. Fred Caron with the Oakbrook,
Illinois based real estate firm of Business Space, Inc. works with J.D. Edwards
& Company on its real estate needs throughout the country. Look for J.D. Edwards
to move into new offices near the end of the year. The firm's space requirement
will be between 15,000 and 20,000 sq. ft.
<PAGE> 1
EXHIBIT 10.5
LEASE AGREEMENT
STATE OF COLORADO
COUNTY OF DENVER
THIS LEASE AGREEMENT is made and entered into this 20 day of December, 1991 by
and between the Lessor and Lessee hereinafter named.
Definitions and Basic Provisions
- --------------------------------
The following Definitions and Basic Provisions shall be construed in conjunction
with and limited by the references thereto in other provisions of this Lease:
(a) "Lessor": Samuel Zell, not personally, but solely as Trustee under Trust
Agreement dated December 14, 1990 and known as Trust No. 7800.
(b) "Lessee": J.D. Edwards & Company, a Colorado corporation.
(c) "Premises": Approximately 60,000 square feet on floors 3, 4, 6 and 7 (the
"Primary Space") plus approximately 7,000 square feet on floor 1 (the
"Demonstration Space") in the Building known as Denver Corporate Center
III and located at 7900 East Union Avenue, Denver, Colorado 80237 in a
Project commonly known as Denver Corporate Center, Denver, Colorado such
premises to be shown and outlined on a plan to be attached hereto and
labeled as Exhibit A. The actual square footage will be determined and
certified by a registered architect reasonably acceptable to both Lessor
and Lessee. Upon execution of this Lease by Lessor and its delivery to
Lessee, and upon Lessee's delivery to Lessor of the requisite insurance
policy or policies described in paragraph 10 herein, Lessee shall have,
subject to the terms and conditions set forth in this Lease, the right to
commence promptly its alterations and improvements to both the
Demonstration and Primary Space.
(d) "Lease Term": For the Primary Space, a period of 60 months commencing on
or before June 1, 1992 (the "Commencement Date"); for the Demonstration
Space, a period of sixty three (63) months commencing on March 1, 1992.
The Commencement Date shall be designated and confirmed by Lessor in
writing to Lessee on or before June 1, 1992.
(e) "Base Monthly Rent": Beginning June 1, 1992, a sum equal to the total
number of rentable square feet depicted in a space plan to be attached
hereto as Exhibit A times $12.20 due and payable on or before the first
day of each calendar month at the office of Lessor during the initial
Lease Term without prior demand. Rent with respect to the Demonstration
Space shall be abated for the three (3) months beginning March 1, 1992 and
ending May 31, 1992.
(f) "Prepaid Rental": sum representing payment of the Base Monthly Rent for
the first month of the Lease Term.
(g) "Security Deposit": $ None
(h) "Permitted Use": General offices, customer and employee training, computer
rooms and software development and sales.
(i) An Addendum consisting of two (2) pages and exhibits consisting of ten
(10) pages with sections labeled consecutively A through D are attached
hereto, initialed by both parties, and made a part hereof.
(j) "Calendar Year": a twelve (12) month period commencing
<PAGE> 2
January 1 and ending December 31.
GRANTING CLAUSE
In consideration of the obligation of Lessee to pay rent as herein provided and
in consideration of the other terms, covenants and conditions hereof, Lessor
hereby demises and leases to Lessee, and Lessee hereby takes from Lessor, the
Premises for the Lease Term specified upon the terms, covenants, and conditions
set forth in this Lease. This lease is conditioned upon faithful performance by
Lessee of the following agreements, covenants, rules and regulations, herein set
out and agreed to by Lessee.
PAYMENTS
(a) Lessee shall pay to Lessor all rents and sums required to be paid under
this Lease without demand at the times and in the manner provided. The
obligation of Lessee to pay rent is an independent covenant, and no act or
circumstance, whether constituting breach of any covenant by Lessor or
not, shall release Lessee of this obligation.
(b) Within three (3) business days after receipt of notice from the Lessee,
Lessor shall replace or repair any lamps, starters, or ballasts that are
not functioning properly. Such repair or replacement shall be at Lessor's
cost and expense; however, to the extent such repair or replacement
constitutes operating expenses, Lessee acknowledges that it is responsible
for its proportionate share of such costs and expenses.
(c) Lessee shall pay to Lessor all charges for any miscellaneous services,
goods, or materials furnished by Lessor at Lessee's request which are not
required to be furnished by Lessor under this Lease. Lessor agrees to
provide Lessor a reasonable estimate of the price of services, goods or
materials prior to delivering same to Lessee. Nothing contained herein
shall act to prevent Lessee from contracting with another vendor
reasonably acceptable to Lessor to provide the needed services, goods, or
materials.
(d) Lessee shall pay to Lessor the "ADJUSTMENT TO BASE MONTHLY RENT" as
provided in attached Exhibit B, which is incorporated herein.
(e) Lessee shall pay to Lessor "ADDITIONAL RENT" as provided in attached
Exhibit B, which is incorporated herein.
(f) All payments shall be paid to the order of Denver Corporate Center.
In the event that any payment required to be paid under this Lease is not made
within fifteen (15) calendar days of when due, a service fee of two and one-half
percent (21/2) of the delinquent amount will be due and payable immediately to
Lessor.
SERVICES BY LESSOR
- ------------------
Lessor agrees to furnish to Lessee while occupying the Premises the following
services:
(a) Hot and cold water at those points of supply provided for the public and
private use of Lessee.
(b) Heated and refrigerated air conditioning in season from 8:00 a.m. until
6:00 p.m. each business day, and from 8:00 a.m. until 1:00 p.m. each
Saturday. Temperatures and amounts shall be comparable to similar class
office buildings located in the Denver Tech Center and consistent with the
Lessee's stated use of the Premises, Service for any nonstandard hours
shall be requested by Lessee by telephone with reasonable notice and
<PAGE> 3
shall be billed at the rate of $75.00 per hour. Building holidays (which
shall not constitute business days under this Lease Agreement) are as
follows:
New Year's Day
Memorial Day (federal)
July 4
Labor Day (federal)
Thanksgiving Day
Christmas Day
(c) Elevator service in common with other tenants for ingress to and egress
from the Premises.
(d) Janitorial cleaning services as detailed in the Janitorial Schedule which
is attached hereto as Exhibit C.
(e) Electric lighting for public areas and special service areas of the
Building in the manner and to the extent reasonably suitable for Lessee's
stated business use of the Premises and comparable to similar class office
buildings in the Denver Tech Center,
Except as provided herein, failure to furnish or any stoppage of these services
shall not render Lessor liable in any respect for damages to person, property or
business. In the event that there occurs a failure to provide these services or
there occurs an interruption of these services and said failure or interruption
continues for a period in excess of five (5) continuous business days after
delivery of written notice by Lessee to Lessor, the rent shall be
proportionately abated for each day of such failure or interruption commencing
retroactive to the day that Lessee delivers written notice to Lessor of such
failure or interruption. This proportional abatement shall continue until such
failed or interrupted service is restored. Should any equipment or machinery
break down or for any cause cease to function properly, Lessor shall use
reasonable diligence to repair the same promptly after receipt of written notice
from Lessee.
ASSIGNMENT OR SUBLETTING BY LESSEE
- ----------------------------------
1. a. Lessee shall not assign, sublease, transfer or encumber this Lease or
any interest therein or grant any license, concession or other right of
occupancy of the Premises or any portion thereof or otherwise permit the
use of the Premises or any portion thereof by any party other than Lessee
(any of which events is hereinafter called a "Transfer") without the prior
written consent of Lessor, which consent shall not be unreasonably
withheld or delayed. Consent by Lessor to one or more Transfers shall not
operate as a waiver of Lessor's rights as to any subsequent Transfers.
b. If Lessee requests Lessor's consent to a Transfer, Lessee shall notify
Lessor in writing at least 45 days prior to the effective date of the
proposed Transfer of the name of the proposed transferee and the nature of
the business of the proposed transferee, the term, use, rental rate and
all other material terms and conditions of the proposed Transfer,
including, without limitation, evidence satisfactory to lessor that the
proposed transferee is financially responsible. Notwithstanding the
provisions of Section 1(a) above, Lessor may, during said 45-day period,
(i) consent to or refuse to consent to such Transfer in writing; or (ii)
negotiate directly with the proposed transferee and (in the event Lessor
is able to reach agreement with such proposed transferee) upon execution
of a lease with such transferee, terminate this Lease (in whole or in
part, as appropriate) upon thirty (30) days' notice; or (iii) cancel and
terminate this Lease, in whole or in part, within 30 days of receipt of
such notice. If Lessor should fail to notify Lessee in writing of its
<PAGE> 4
decision within thirty (30) days after the date Lessor has received all
required information concerning the proposed transferee and Transfer,
Lessor shall be deemed to have consented to such Transfer upon the terms
Lessee provided Lessor according to this paragraph. In the event Lessor
elects to recapture the space, Lessee shall be released from the Lease. In
the event Lessor consents to any Transfer, the Transfer shall be in a form
approved by Lessor, and Lessee shall bear all costs and expenses incurred
by Lessor in connection with the review and approval of such
documentation, which costs and expenses shall not exceed $750.
c. All cash or other proceeds (the "Transfer Consideration" of any
Transfer of Lessee's interest in this Lease and/or the Premises, whether
consented to by Lessor or not, shall be paid to Lessee. Lessor agrees that
to the extent such proceeds exceed the rentals called for hereunder (the
"Excess Rental"), the Excess Rental shall be divided equally after
deduction of reasonable brokerage and attorney's fees and reasonable and
documented build-out and other direct costs, between Lessor and Lessee.
Lessee hereby assigns all rights it might have or ever acquire in Lessor's
equal portion of the Excess Rental any such proceeds to Lessor. In
addition to the Rent hereunder, Lessee hereby covenants and agrees to pay
to Lessor all rent and other consideration including Lessor's share of the
Excess Rent, which it receives which is in excess of the Rent payable
hereunder within ten (10) days following receipt thereof by Lessee. In
addition to any other rights to the Transfer shall be made directly to
Lessor.
d. If Lessee is a corporation and if at any time during the Lease Term the
person or persons who own the voting shares at the time of the execution
of this Lease cease for any reason, including but not limited to merger,
consolidation or other reorganization involving another corporation, to
own a majority of such shares, or if Lessee is a partnership and if any
time during the Lease Term the general partner or partners who own the
general partnership interests in the partnership at the time of the
execution of this Lease, cease for any reason to own a majority of such
interest (except as the result of transfer by gift, bequest or inheritance
to or for the benefit of members of the immediate family of such original
shareholder(s) or partner (s)), such an event shall be deemed to be a
Transfer. The preceding sentence shall not apply whenever Lessee is a
corporation the outstanding stock of which is listed or becomes listed on
a recognized security exchange, or if at least eighty percent (80%) of its
voting stock is owned by another corporation, the voting stock of which is
so listed.
TRANSFER OF LESSOR'S RIGHTS
- ---------------------------
2. Lessor shall have the right to transfer and assign, in whole or in part,
all and every feature of its interests, rights, and obligations hereunder
and in the Building, the Project, and the real estate associated
therewith. Such transfers or assignments, howsoever made, shall be
respected and recognized by Lessee. Any such transfer shall operate to
release Lessor from liability under this Lease from and after the
effective date thereof, except as it may relate to the period prior to
such effective date. Any such transfer shall operate to obligate the
successor of Lessor to assume and abide by all obligations and liabilities
of Lessor from and after the effective date hereof.
ASSIGNMENT BY LESSOR
- --------------------
3. This Lease shall inure to the benefit of the Lessor and its successors and
assigns; and with the written consent of Lessor first had, to the benefit
of the heirs, executors and/or
<PAGE> 5
administrators, successors and assigns of Lessee.
POSSESSION
- ----------
4. If for any reason the Premises are not ready for occupancy by Lessee at
the time of commencement of this Lease, this Lease shall not be affected
thereby, and Lessee shall have no claim against Lessor unless caused by
Lessor's unreasonable delay in giving necessary approvals. No rent shall
be payable for the period during which the Premises shall not be ready for
occupancy unless such delay is caused by Lessee. If delivery of possession
of the Premises is delayed beyond the commencement date specified in the
Lease, said commencement date shall be extended to the date that the
Premises are ready for occupancy by Lessee, in which event the termination
date of the Lease Term shall be correspondingly extended and shall always
end on the last day of a calendar month.
The Premises shall not be deemed incomplete or unavailable for Lessee's
possession or occupancy if: (a) only minor or insubstantial details of
construction, decoration, or mechanical adjustments remain to be
completed; or (b) if the Premises are untenantable for occupancy due to
special work, changes, or alterations required or made by lessee; or (c)
if the delay is otherwise caused by Lessee; or (d) if the delay is cause
by default of Lessee or any other reason set forth in this Lease.
By moving into the Premises or taking possession thereof (not including
the installation of equipment, wiring or furnishings), Lessee accepts the
Premises as is and suitable for the purposes for which the same are leased
and accepts the Building and each and every appurtenance thereof. Lessee
by said act waives any and all non-latent defects therein,
INDEMNITY, LIABILITY AND LOSS OR DAMAGE
- ---------------------------------------
5- Lessor shall not be liable to Lessee or Lessee-'s agents, employees,
invitees, or to any person claiming by, through or under Lessee for any
injury to person, loss or damage to property, or for loss or damage to
business, occasioned by or through the acts or omissions of Lessor or any
other person, or by any other cause whatsoever except for Lessor's gross
negligence or willful misconduct. To the extent Lessor is not prevented by
law from contracting against such liability, Lessee shall indemnify
Lessor, its principals, agents, beneficiaries, and employees and save them
harmless from all suits, actions, damages, liabilities, and expenses in
connection with the loss of life, bodily or personal injury, or property
damage arising from or out of any occurrence in, upon, at, or from the
Premises except in the case of Lessor's gross negligence or willful
misconduct. If Lessor shall, without fault on its part, be made a party to
any action commenced by or against Lessee, Lessee shall protect and hold
Lessor harmless and shall pay all reasonable costs, expenses, and
attorney's fees.
LEGAL USE
- ---------
6. Lessee will not occupy or use, nor permit any portion of the Premises to
be occupied or used for any purpose other than specified in the
Definitions and Basic Provisions portion of this Lease, nor for any
business or purpose which is unlawful in part or in whole or deemed to be
disreputable or hazardous in any manner. Lessee will conduct its business
and control its agents, employees, and invitees in such a manner so as not
to create any nuisance, interfere with, annoy, or disturb other tenants or
Lessor in the management of the Building. Lessee will maintain the
Premises in a clean and healthful condition and comply with all laws,
ordinances, orders, rules
<PAGE> 6
and regulations (state, federal, municipal, and other entities asserting
jurisdiction over the Premises) with reference to the use of and the
occupancy of the Premises.
Lessee shall not permit anything to be done which will in any way increase
the rate of insurance on the Building or its contents. In the event that,
by reason of any acts of Lessee or its conduct of business, there shall be
an increase in the rate of insurance on the Building or its contents,
Lessee hereby agrees to pay any and all such increase. Payment by Lessee
of any such rate increased shall not be a waiver of Lessee's duty to
comply herewith.
INSURANCE
- ---------
7. During the term of this Lease and any extension thereof, Lessee shall, at
its own cost and expense, maintain and provide Commercial General
Liability insurance coverage for the benefit and protection of Lessor and
Lessee, naming both as insureds in an amount not less that $1,000,000
Combined Single Limit per occurrence with an aggregate of $2,000,000.
Lessee shall also carry "all risk" physical loss insurance coverage for
the full replacement cost of all additions, improvements, and alterations
to the Premises, and all items of Lessee's personal property in, on, or
about the Premises. All insurance provided hereunder shall be secured from
responsible companies acceptable to Lessor and qualified to do business in
the state where the Premises are located. Prior to the Commencement Date
of the Term of this Lease, Lessee shall furnish Lessor with certificates
evidencing such coverage and shall state that such coverage may not be
changed or cancelled by the insurer or Lessee without at least thirty (30)
days prior written notice to Lessor.
WAIVER OF SUBROGATION
- ---------------------
8. The parties hereby intend that the risks of loss, damage, and injury in
connection with this Lease, Lessor's ownership and operation of the
Building and Project, and Lessee's leasing and occupancy of the Premises
are to be allocated as far as possible to insurance. Therefore, Lessor and
Lessee each hereby waive all claims, actions, and demands against each
other, and each hereby releases the other from all liability, to the
maximum extent permitted by law for any loss, damage or injury to
business, persons or property of any kind or nature, to the extent such
loss, damage, or injury is compensated by insurance. The foregoing waivers
shall not apply to the extent such waivers would operate to invalidate or
preclude recovery under any policies of insurance or where endorsements to
such insurance policies recognizing such waivers are not available at
reasonable cost,
FIRE DAMAGE
- -----------
9. (A1) If the Premises or the Building shall be damaged by any cause or
means whatsoever not caused or contributed to the negligence or fault of
Lessee, its employees, servants, agents, or invitees, and if said damage
can be repaired within a period of sixty (60) working days by using
standard working methods and procedures, Lessor shall, within a reasonable
time after the occurrence of said damage, enter and make repairs, and this
Lease shall not be affected and shall continue in full force and effect.
(A2) However, if said damage cannot be repaired within a period of sixty
(60) working days by using standard working methods and procedures, Lessor
and Lessee shall each have the option of either (a) terminating this Lease
as of the date of such occurrence and Lessee shall pay rent hereunder to
such date of occurrence and immediately surrender the Premises to
<PAGE> 7
Lessor or (b) keeping this Lease in full force and effect and restoring
the Premises to substantially the same condition as existed prior to the
date of such occurrence. Lessor or Lessee shall give written notice of the
option selected within the aforementioned sixty (60) day period.
(A3) If Lessor or Lessee so elects to continue this Lease and restore the
Premises, Lessor shall within a reasonable time after said notice enter
and make repairs. This Lease shall not be affected thereby, except that
rents hereunder shall be abated while such repairs are being made for the
period of time and in the proportion that the Premises are unsuitable for
Lessee's business purposes.
(B) However, if such damage is contributed to or results from the fault of
Lessee, Lessee's employees, servants, agents, or invitees, such damage
shall be repaired by and at the expense of Lessee under the control,
direction, and supervision of Lessor. In such event, all rents due to
Lessor shall continue without abatement or reduction regardless of the
length of time of repairs.
(C) The completion of repairs of all such damage is subject to reasonable
delays which may result from but not be limited to the following: the
survey of such damage, obtaining plans and drawings, negotiating contracts
for repair, adjustment for insurance loss, strikes, labor difficulties,
unavailability of material, or other causes beyond the control of the
party obligated to make such repairs.
ALTERATIONS, ADDITIONS, IMPROVEMENTS
- ------------------------------------
10. Lessee shall make alterations in or additions or improvements to the
Premises only with Lessor's prior written consent which consent shall not
be unreasonably withheld or delayed. All such work shall: a) be at
Lessee's expense; b) comply with all insurance requirements and with all
applicable ordinances, regulations, and statutes of the jurisdictions in
which the Premises are located; c) in Lessor's reasonably judgment, be
performed using new materials in a good and workmanlike manner, in
accordance with sound building practices; and d) not interfere with other
lessees' use of their premises within the Project. All required working
drawings and specifications shall be prepared at Lessee's expense by an
architect, space planner, or engineer approved by Lessor which approval
shall not be unreasonably withheld or delayed. Lessee shall pay its
proportionate share of any increase in taxes. Before undertaking any
alterations or construction, Lessee shall pay for and deliver to Lessor a
public liability policy insuring Lessor and Lessee against any liability
which may arise on account of such proposed alterations or construction
work in a form and amounts reasonably acceptable to Lessor. All trade
fixtures and equipment installed by Lessee on the Premises shall remain
the property of Lessee.
LIENS BY LESSEE
- ---------------
11. Lessee shall keep the Premises and the real estate of which the Premises
forms a part free from any liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee. In the event that
Lessee shall not, within fifteen (15) days following the imposition of any
such lien, cause the same to be released of record by payment or bonding
over said lien, Lessor shall have, in addition to all other remedies
provided herein and by law, the right but not the obligation to cause the
same to be released by such means as it shall deem proper. All sums paid
by Lessor and all expenses incurred by it in connection therewith shall
automatically, create an obligation of Lessee to pay, on demand, an
equivalent amount times two.
<PAGE> 8
No work which Lessor permits Lessee to perform shall be deemed to be for
the immediate use and benefit of Lessor, and no mechanic's or other lien
shall be allowed against the estate of Lessor by reason of its consent to
such work.
REENTRY BY LESSOR
- -----------------
12. Lessee shall at termination of this Lease, by lapse of time or otherwise,
deliver up the Premises to Lessor in as good condition as at date of
possession (ordinary wear and tear excepted).
SIGNAGE
- -------
13. Lessee will not place, suffer to be placed, or maintain on any exterior
door, wall, or window of the Premises or of the Building any sign, awning,
canopy, advertising matter, or any other thing of any kind. Lessee's
placement of any such item will not occur without first obtaining Lessor's
written approval which approval shall not be unreasonably withheld or
delayed. If such approval is granted by Lessor, Lessee shall maintain such
item(s) in good condition at all times. Lessor and Lessee agree that a new
monument sign shall be installed at the right side of the main entrance
stairs to Tower III solely for the purpose of displaying Lessee's name in
Lessee's font. Lessor shall be responsible for all costs of constructing
the monument sign including the cost of installing electrical service to
the monument sign. Lessee shall be responsible for all costs associated
with the design, manufacturer and installation of its signage to be placed
on the monument sign. Lessee understands and agrees that all signage is
subject to the approval of the Denver Tech Center architectural review
committee.
SUBORDINATION
- -------------
14. Lessee's rights under this Lease are and shall remain subject and
subordinate to the operation and effect of: (a) all present and future
ground or underlying leases involving all or any part of the Building,
Project, or real estate associated therewith; or (b) any mortgage, deed of
trust, or other security instrument now or hereafter affecting the
Building, Project, or real estate associated therewith; or (c) all
renewals modifications, replacements, consolidations, and extensions of or
participations in those documents referred to in (a) and (b) above,
whether the same shall be in existence on the date hereof or created
hereafter (any such lease, mortgage, deed of trust or other instrument
being referred to as a "Mortgage" and the person or persons having the
benefit of same referred to as a "Mortgagee"). Lessee's acknowledgment and
agreement of subordination provided for in this section is self-operative,
and no further instrument of subordination shall be required. However,
Lessee shall execute such further assurances thereof as may be requested,
from time to time, by Lessor.
This Lease and Lessee's rights hereunder shall be superior and prior in
right to its Mortgage, with the same force and effect as if this Lease had
been executed, delivered, and recorded prior to the execution, delivery,
and recording of such Mortgage.
If any person shall succeed to all or part of Lessor's interest in the
Building, Premises, or Project, whether by purchase, foreclosure, deed in
lieu of foreclosure, power of sale, termination of lease or otherwise, and
if and as so requested or required by such successor-in-interest, Lessee
shall, without charge, attorn to such successor-in-interest; provided,
however, that the foregoing shall not affect in any way Lessee's right to
quite and peaceful possession of the
<PAGE> 9
Premises during the term hereof.
Lessor covenants that Lessee, upon paying rent and performing all
covenants and agreements contained in this Lease, shall peaceably and
quietly have, hold, and enjoy the Premises during the Lease Term without
hindrance, ejection, or molestation by any person lawfully claiming by,
through, or under Lessor, subject to all Mortgages, encumbrances,
easements, and underlying leases to which this Lease may be or become
subject and subordinate, from time to time.
ABANDONMENT
- -----------
15. If the Premises is abandoned or vacated by Lessee and rental payments have
ceased (provided, however, that such abandonment or vacating of the space
does not continue for more than six consecutive months, regardless of
payment of rent), Lessor shall have the right, but not the obligation, to:
(a) provide for the storage of any personal property remaining in the
Premises without liability of any kind or nature for the cost of storage
or the return of the personal property to Lessee, and/or (b) relet the
same for the remainder of the period covered hereby. If the rent received
through such reletting is not at least equal to all rents provided
hereunder, Lessee shall pay and satisfy any and all deficiencies. Lessee
shall also be responsible for all expenses incurred by any such reletting,
including but not limited to, the cost of renovating, altering,
decorating, and marketing the Premises for a new occupant.
If during the last ninety (90) days of the Leased Term, Lessee removes a
substantial portion of Lessee's personal property and/or Lessee has been
in physical absence for ten (10) days and rental payments have ceased, an
abandonment shall be constituted. In any such event, Lessor may enter the
Premises for purposes of renovating, altering, and decorating the Premises
for occupancy at the end of the Lease Term by a new tenant without in any
way affecting Lessee's obligation to pay rent and to comply with all other
terms and conditions of this Lease. Nothing herein shall be construed in
any way as to deny Lessor the right, in case of abandonment, vacation,
accompanied by the cessation of rental payments, or any other breach of
the Lease by Lessee, to treat the same as an entire breach. Lessor shall
have the option to immediately sue for the entire breach of this Lease and
for any and all damages occasioned by Lessor thereby.
HOLDING OVER
- ------------
16. In case Lessee retains possession of the Premises after expiration or
early termination of -this Lease, Lessee will pay as liquidated damages
one and one-half (1 1/2) times the existing rents being paid by Lessee for
the Premises for the entire holdover period. Lessee shall be responsible
for all reasonable attorney's fees and direct expenses incurred by Lessor
in enforcing its rights hereunder. No holding over by Lessee after the
termination of the Lease Term, either with or without consent and
acquiescence of Lessor, shall operate to extend this Lease for a longer
period than one (1) month. Any holding over with Lessor's prior written
consent shall constitute a lease from month to month.
DEFAULT BY LESSEE
- -----------------
17. In the event (a) Lessee fails to comply with any material term, provision,
condition, or covenant of this Lease or any of the rules and regulations
now or hereafter established for the government of the Building; or (b)
Lessee deserts or vacates the Premises and rental payments have ceased and
such desertion or vacating of the Premises has continued for six
<PAGE> 10
consecutive months regardless of payments of rent; or (c) any petition is
filed by or against Lessee under any section or chapter of the United
States Bankruptcy Code, as amended, or under any similar law or statute of
the United States or of any state thereof and such petition is not
dismissed within sixty (60) days after filing; or (d) Lessee becomes
insolvent or makes a transfer in fraud of creditors; or (e) Lessee makes
an assignment for benefit of creditors; or (f) a receiver is appointed for
Lessee or any of the assets of Lessee, Lessor shall have the option to do
any one or more of the following without notice in addition to and not in
limitation of any other remedy permitted by law or by this Lease:
(A) Terminate this Lease, in which event Lessee shall immediately
surrender the Premises to Lessor. If Lessee shall fail to do so,
Lessor may, without notice or prejudice to any other remedy Lessor
may have for possession and/or for arrearages in rent, enter upon
and take possession of the Premises and expel or remove Lessee and
its effects. Lessee agrees to indemnify Lessor for all loss, damage,
and expense including any attorney's fees which Lessor may suffer by
reason of such termination.
(B) Declare the entire amount of all rents which would have become due
and payable during the remainder of the Lease Term, due and payable
immediately, in which event Lessee agrees to pay the same at once to
Lessor. Such payments shall not constitute a penalty, a forfeiture,
or liquidated damages, but shall merely constitute payment in
advance of the rent for the remainder of the Lease Term. The
acceptance of such payment by Lessor shall not constitute a waiver
of any failure of Lessee to comply with any term, provision,
condition, or covenant of this Lease.
(C) Enter upon and take possession of the Premises without being liable
for prosecution or any claim for damages. Lessor may relet the
Premises as the agent of the Lessee and receive the rent therefor.
In such event, Lessee shall pay Lessor cost of renovating,
repairing, and altering the Premises for a new tenant or tenants
plus any deficiency that may arise by reason of such reletting on
demand. The failure or refusal of Lessor to relet the Premises shall
not release or affect Lessee's liability for all rents or for any
and all such damages involved.
(D) Enforce Lessee's specific performance of each and every provision of
this Lease,
Lessor may, as agent of Lessee, do whatever Lessee is obligated to do by
the provisions of this Lease and may enter the Premises, in order to
accomplish this purpose. Lessee agrees to reimburse Lessor immediately
upon demand for any expenses and interests which Lessor may incur in
effecting compliance with this Lease on behalf of Lessee.
Failure by Lessor to declare any default immediately upon occurrence
hereof, or delay in taking any action in connection therewith, shall not
waive such default, but Lessor shall have the right to declare any such
default at any time and take action as might be lawful or authorized
hereunder, either in law or in equity. Pursuit of any of the foregoing
remedies shall not preclude pursuit of any of the other remedies.
ATTORNEY'S FEES
- ---------------
18. In case Lessee or Lessor makes default in the performance of any of the
terms, covenants, agreements, or conditions contained in this Lease, and
Lessee or Lessor places the
<PAGE> 11
enforcement of this Lease, or any part thereof, in the hands of any
attorney or files suit upon the same, the non-prevailing party agrees to
pay any and all reasonable attorney's fees, costs, and expenses.
REMEDIES
- --------
19. No act or thing done by Lessor or its agents during the term hereof shall
be deemed an acceptance of a surrender of the Premises. The acceptance of
rent by Lessor with knowledge of the breach of any covenant contained in
this Lease and/or the failure of Lessor to enforce any of the attached
rules and regulations (or ones hereafter adopted) against Lessee (or any
other lessee) shall not be deemed a waiver. Any agreement to accept a
surrender of the Demised Premises or accept a waiver of said rules and
regulations by Lessor shall not be valid unless made in writing and signed
by Lessor. The mention in this Lease or the pursuit of any particular
remedy shall not preclude Lessor from any other remedy Lessor might have,
either in law or in equity, In case it should be necessary or proper for
Lessor bring any action under this Lease to consultation or place said
Lease or any amount payable to Lessor by Lessee with an attorney for the
enforcement of any of Lessor's rights, then the non-prevailing party
agrees in any such case to pay all reasonable attorney's fees.
ENTRY FOR REPAIRS AND INSPECTION
- --------------------------------
20. Lessee will permit Lessor, its respective officers, agents, and
representatives to enter into and upon all parts or the Premises, at all
reasonable hours to inspect, clean, repair, make alterations and additions
as Lessor may deem necessary. Similarly, Lessor may enter the Premises at
any time for valid business reasons. Lessee shall not be entitled to any
abatement or reduction of rent by reason thereof. Nothing contained herein
however shall relieve Lessor and any successor-in-interest to Lessor from
Lessor's obligation to respect Lessee's right to quite enjoyment of the
Premises.
Lessee will, at Lessee's own cost and expense, keep the Premises in sound
condition and good repair, and shall repair or replace any damage or
injury done to the Building or any part thereof by, Lessee or Lessee's
employees, servants, agents, or invitees. If Lessee fails to make such
repairs or replacements promptly, or within fifteen (15) days of
occurrence, Lessor may at its option make such repairs or replacements,
and Lessee shall repay all costs thereof plus a fifteen percent (15%)
administrative fee to Lessor on demand. Lessee will not commit or allow
any waste or damage to be committed on any portion of the Premises.
CONDEMNATION AND FORCE MAJEURE
- -----------------------------
21. If the Building or any portion thereof materially affecting Lessee's use
and enjoyment of the Premises or any portion of the parking lot which
materially affects Lessee's use and enjoyment of the Premises shall be
taken or condemned, in whole or part, for any public purpose, the Lease
Term shall, at the option of Lessor or Lessee, forthwith cease and
terminate. Lessor shall receive such award from such taking and Lessee
shall have no claims thereto.
Lessor shall not be liable or responsible for any loss or damage to any
property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition or
order of governmental body or authority, or any other matter beyond the
control of Lessor. Nothing contained herein shall act to prevent Lessee
from pursuing a separate settlement.
<PAGE> 12
SEVERABILITY
- ------------
22. If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the Lease
Term, it is the intention of both parties that the remainder of this Lease
shall not be affected thereby. It is also the intention of the parties
that in lieu of each clause or provision that is illegal, invalid, or
unenforceable there be added as a part of this Lease a clause or provision
similar in terms which shall make such clause or provision legal, valid,
and enforceable. The caption of each paragraph is added as a matter of
convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
ENTIRE AGREEMENT
- ----------------
23. It is expressly agreed by Lessee, as a material consideration for the
execution of this Lease, that there are and were no verbal
representations, understandings, stipulations, agreements, or, promises
pertaining thereto not incorporated in writing herein. It is likewise
agreed that this Lease shall not be altered, waived, amended, extended, or
otherwise except via an addenda which must be in written form and signed
by both Lessor and Lessee. Any such addenda shall become a part of this
lease to the full extent as if incorporated herein.
EXECUTION
- ---------
24. The submission of this Lease by Lessor, its agent or representative, for
examination or execution by Lessee does not constitute an option or offer
to lease the Premises upon the terms and conditions contained herein or a
reservation of the Premises in favor of Lessee, It is intended hereby that
this Lease shall only become effective upon the execution hereof by Lessor
and delivery of a fully executed counterpart hereof to Lessee.
In case Lessee is a corporation, the person executing this Lease on behalf
of Lessee (a) represents and warrants, in his or her individual capacity,
that this Lease has been duly authorized, executed, and delivered by and
on behalf of Lessee and constitutes the valid and binding agreement of
Lessee in accordance with the terms hereof, and (b) if Lessor so requests,
Lessee shall deliver to Lessor, concurrently with the delivery of this
Lease, certified resolutions of the board of directors (and shareholders
if required) authorizing Lessee's execution and delivery of this Lease and
the performance of Lessee's obligations hereunder. In case Lessee is a
partnership, the person executing this Lease on behalf of Lessee
represents and warrants, in his or her individual capacity, that all of
the persons who are general or managing partners in said partnership have
executed this Lease on behalf of Lessee, or that this Lease has been
executed and delivered pursuant to and in conformity with a valid and
effective authorization therefor by all of the general or managing
partners of such partnership, and is and constitutes the valid and binding
agreement of the partnership and each and every partner therein in
accordance with its terms, to the extent permitted by law.
It is expressly understood and agreed by and between both parties, that
each and all of the representations, warranties, covenants, undertakings,
and agreements made on the part of Lessor have not been made with the
intention of binding Lessor personally, but rather for the purpose only of
subjecting such Lessor's interest in the Building and the Premises to the
terms of this lease and for no other purpose. Such exculpation of
liability shall be absolute and without exceptions whatsoever.
<PAGE> 13
NOTICES
- -------
25. Any notice required or permitted to be given hereunder by one party to the
other shall be deemed to be given when personally delivered or addressed
and mailed to the respective party to whom notice is intended to be given
at the following address of such party. Notice pertaining to Lease Term,
options, renewals, etc., must be delivered via certified or registered
mail (return receipt requested).
If to Lessee If to Lessor
Vice President, Finance First Office Management
J.D. Edwards & Company 7900 E. Union Avenue
8055 East Tufts Avenue Denver, Colorado 80237
Denver, Colorado 80237 Attention: Building Manager
BROKERS
- -------
26. Lessee represents and warrants to Lessor that neither it, its officers,
agents, nor anyone on its behalf has dealt with any real estate broker in
the negotiation or making of this Lease other than Business Space, Inc. or
its assignee. Lessee agrees to indemnify and hold Lessor harmless from the
claim or claims of any broker or brokers claiming to have interested
Lessee in the Building or Premises or claiming to have caused Lessee to
enter into this Lease or any renewal thereof. Lessee acknowledges,
understands and agrees that Lessor has agreed to pay Business Space, Inc.
and only Business Space, Inc., or its assignee, a previously agreed
commission in connection with any extension, expansion or renewal of this
Lease by Lessee as set forth herein. Lessor is not and shall not be liable
to any other broker, person or entity other than Business Space, Inc. or
its assignee, for any extension, expansion or renewal commission. Lessee
shall indemnify Lessor for any such claim.
ESTOPPEL CERTIFICATE
- --------------------
27. The Lessee agrees that from time to time upon not less than twenty (20)
days' prior request by Lessor, Lessee will deliver to Lessor a statement
in writing certifying: (a) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the Lease as
modified is in full force and effect); (b) the dates to which the rent and
other charges have been paid; and (c) that the Lessor is not in default
under any provision of this Lease, or if in default, the nature thereof in
detail.
RULES OF THE BUILDING
- ---------------------
28. Lessee, Lessee's agents, employees, and invitees will comply fully with
the rules and regulations of the Building, attached hereto. Lessor shall
at all times have the right to change such rules and regulations and/or
amend them in such reasonable manner as may be deemed advisable for the
safety, care, and cleanliness of the Building, its tenanted areas, and the
preservation of good order therein. All such changes and amendments to the
rules and regulations will be forwarded to Lessee in writing and shall be
carried out and observed by Lessee.
<PAGE> 14
IN WITNESS WHEREOF this Lease is entered into by the parties hereto on the date
and year first set forth above.
LESSEE: LESSOR:
J.D. Edwards & Company Equity Assets Management, Inc.,
an Illinois corporation, as
agent for Lessor
BY: /s/ RE Allen BY: /s/ signature unreadable
TITLE: VP FINANCE DATE 12/10/91 TITLE: S.V.P. DATE: 12/22/91
<PAGE> 15
ADDENDUM
This Addendum is attached to and forms a part of that certain Lease
Agreement dated December 12, 1991 by and between Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership, an Illinois limited partnership, as
Lessor, and J.D. Edwards & Company, a Colorado corporation, as Lessee (the
"Lease"); and constitutes additional covenants and agreements thereto as set
forth in the Lease, In the event there is any conflict between the terms and
conditions contained herein and those set forth in the Lease, the terms and
conditions contained herein shall prevail.
1. RIGHT TO TERMINATE.
-------------------
Provided that Lessee is not in breach or default of any material term or
condition of this Lease, and subject to the terms and conditions set forth
below, Lessee shall have the one-time right to terminate this Lease
effective on the last day of the forty-eighth (48th) month of this Lease
calculated from June 1, 1992 or such earlier Commencement Date designated
by Lessor in writing. Lessee may only exercise its one-time right to
terminate by providing Lessor not less than twelve (12) months prior
written notice and by delivering payment to the Lessor at the time of said
notice an amount equal to $6.70 for each rentable square foot then
constituting Lessee's Premises.
2. RENEWAL OPTION.
---------------
Provided Lessee is not in breach or default of any material term or
condition of the Lease, Lessee shall have a one-time option to renew the
Lease for an additional term of five years (the "Renewal Term"). In order
to exercise its one-time option to renew, Lessee must provide Lessor not
less than one-hundred eighty (180) days written notice prior to the
expiration of the Lease term. Lessor and Lessee agree that the Basic
Monthly Rental for each year of the Renewal Term shall be as follows:
Year 6 $15.00 per rentable square foot
Year 7 $16.00 per rentable square foot
Year 8 $17.00 per rentable square foot
Year 9 $18.00 per rentable square foot
Year 10 $19.00 per rentable square foot
3. RIGHT TO TERMINATE DURING RENEWAL TERM.
---------------------------------------
Provided that Lessee is not in breach or default of any material term or
condition of this Lease, and subject to the terms and conditions set forth
below, Lessee shall have the one-time right to cancel the Renewal Term and
terminate this Lease effective on the last day of the twelfth (12th) month
of the Renewal Term. Lessee may only exercise its one-time right to
terminate this Lease during the Renewal Term by providing Lessor not less
than twelve (12) months prior written notice. Lessee agrees that in the
event Lessee elects to exercise its one-time right to terminate during the
Renewal Term that the rate for calculating the Basic Monthly Rental for
the first year of the Renewal Term shall be increased from $15.00 to
$17.00, and further agrees to pay to Lessor any unamortized costs
associated with the renewal of this Lease, including without limitation,
tenant improvement or remodeling costs amortized into the renewal and
broker commissions on or before the effective date of the termination of
the Lease.
<PAGE> 16
4. PARKING.
--------
Landlord shall provide Lessee at no additional cost up to two hundred
fourteen (214) parking spaces, using a ratio of one (1) space for each 280
rentable square feet of office space. Fifty percent (50%) of Lessee's 214
parking space allotment (107) spaces) shall be in the parking garage
adjacent to the Building. The remaining 107 spaces shall be in the
adjacent surface lot.
5. TENANT IMPROVEMENTS/CONSTRUCTION ALLOWANCE.
-------------------------------------------
Lessor hereby agrees to provide Lessor with an amount equal to Fifteen
Dollars ($15.00) per usable square foot (the "Construction Allowance") to
be applied to the cost of the Tenant Improvements to be constructed by
Lessor. If the total cost incurred by Lessor in connection with the Tenant
Improvements is less than the Construction Allowance (the "Excess
Construction Allowance"), Lessor hereby agrees that, at Lessee's option,
an amount equal to the Excess Construction Allowance may be used as a
credit against the first installment of Base Monthly Rental falling due
during the Lease Term. If the total costs incurred by Lessee in connection
with the Tenant Improvements exceed the Construction Allowance, Lessee
hereby agrees to pay the excess costs to Lessor upon demand. To the extent
that such excess costs are known at any point during the construction
process, Lessor and Lessee shall each contribute to each construction draw
in proportion to their respective total obligations with respect to the
Tenant Improvements, and such contributions by Lessee shall offset,
dollar-for-dollar, its obligations to pay such excess costs upon demand.
Lessee understands and agrees that any and all costs incurred by lessor in
connection with space planning and construction drawings shall be deducted
from the Construction Allowance.
6. RIGHT OF FIRST OFFER.
---------------------
Provided Lessee is not in breach or default of any material term or
condition of the Lease and has not exercised its rights of cancellation as
set forth in Section 1 hereof, Lessee shall have a right during the Lease
term to Lease all or any space in the Building if and when such space is
available or becomes available to Lessor on the same terms, except for
Tenant Improvements/Construction Allowance, and at the same rates as are
then in effect with respect to the Premises. Lessee shall have a period
not to exceed thirty (30) days after receipt of written notice from Lessor
to notify Lessor in writing of its decision to exercise or not exercise
its right hereunder; provided, however, Lessee shall exercise its best
efforts to notify Lessor of its decision as soon as possible after receipt
of Lessor's notice. The Construction Allowance shall be offered on the
same terms as provided herein except that such allowance shall be reduced
in proportion to the term remaining under this Lease or any renewal
thereof. The term for any space leased by Lessee pursuant to this section
shall be coterminous with this Lease or any renewal thereof.
LESSEE: LESSOR:
J.D. Edwards & Company Equity Assets Management, Inc.,
an Illinois corporation, as
agent for Lessor
BY: /s/ RE Allen BY: /s/ signature unreadable
TITLE: VP FINANCE DATE: 12/13/91 TITLE: S.V.P DATE: 12/20/91
<PAGE> 17
NOVATION
This agreement for novation (the "Novation") made August 30, 1996 (the
"Effective Date"), is between J.D. Edwards & Company, a Colorado corporation
("Company"), and Samuel Zell, not personally, but solely as Trustee under Trust
Agreement dated December 14, 1990 and known as Trust No. 7800 ("Zell"), and J.
D. Edwards World Solutions Company, a Colorado corporation ("World Solutions").
The parties stipulate and recite that:
A. This Novation shall apply to that certain Lease Agreement between Zell,
Landlord, and Company, Tenant, dated December 20, 1991 and all the amendments
thereto (collectively the "Lease"), whereby Landlord leased to Company the
premises located at 7800 East Union Avenue, Denver, Colorado, as more
particularly described in the Lease.
B. By this Novation, Company desires to be discharged from the performance of
the obligations enumerated in the Lease and substitute World Solutions as the
party to the Lease. The parties intend that, upon the Effective Date, Company
will have no rights or duties whatsoever under or in any way relating to the
Lease, World Solutions having succeeded to all the same by virtue of this
Novation.
C. Zell desires to release Company from such obligations as described in the
Lease provided that World Solutions agrees to perform the obligations and to be
bound by the terms, conditions and limitations of the Lease.
For the reasons recited above, and in consideration of the mutual covenants
contained herein, the parties agree as follows:
1. World Solutions shall perform the obligations of Company that are enumerated
in the Lease, and World Solutions agrees to be bound by all the terms,
conditions and limitations of the Lease in every way as if an original party
thereto.
2. Zell releases Company from all claims for any liability that has arisen or
may have arisen in respect to the Lease. Zell accepts the liability of World
Solutions in lieu of the liability of Company. Zell shall be bound by the terms
of the Lease in every way as if World Solutions was named in the Lease in place
of Company as a party thereto.
3. Zell and Company, as of the date and time immediately prior to the execution
of this Novation, hereby confirm that they are the parties to the Lease, and
that the Lease is currently fully in force.
4. This Novation supersedes the Lease entered into by Zell and Company, and all
the rights and obligations under the Lease are completely extinguished. World
Solutions represents that it has a true and correct copy of the Lease and all of
its parts and represents that it has read,
<PAGE> 18
understands, accepts and agrees to each and every term of the Lease and all of
its parts, without qualification.
5. This Novation shall be effective upon the duly authorized execution hereof by
each of the three named parties to this Novation.
6. The parties will cooperate with one another and execute such other documents
as may be appropriate to achieve the objectives of this Novation, and will
afford one another reasonable cooperation and assistance in order to facilitate
an orderly transition contemplated by this Novation.
7. This Novation has been executed in triplicate, and all the parties to this
Novation have received a signed copy of it.
8. Zell , Company and World Solutions, consent to all the provisions of this
Novation.
In witness whereof, the parties have executed this Novation as of the date first
written above.
AGREED:
J.D. Edwards & Company
BY: /s/ signature unreadable
Title: VP, General Counsel
Samuel Zell, not personally, but solely as Trustee under Trust Agreement dated
December 14, 1990 and known as Trust No. 7800
By: Equity Office Holdings, L.L.C., a Delaware limited liability company, as
agent for the Beneficial Owner of Denver Corporate Center
By: /s/ signature unreadable
Title: SVP
J.D. Edwards World Solutions Company
By: /s/ signature unreadable
Title: VP, General Counsel
<PAGE> 19
FIRST AMENDMENT TO LEASE
------------------------
This amendment ("First Amendment"), made as of the 1st day of July, 1992
by and between EQUITY ASSETS MANAGEMENT, INC., an Illinois Corporations, as
Agent for Samuel Zell, as Trustee under Trust Agreement dated December 14, 1990
and known as Trust No.
7800 ("Lessor") and J.D. Edwards & Company ("Lessee").
RECITALS
--------
WHEREAS, Lessor and Lessee entered into a lease ("Lease") dated December
20, 1991 for approximately 67,000 square feet of space on the lst, 3rd, 4th, 6th
and 7th floors (the "Premises") of the building ("Building") located at 7900
East Union Avenue, Denver, Colorado; and
WHEREAS, Lessor and Lessee wish to amend the Lease as provided herein.
NOW, THEREFORE, in consideration of the above preambles which by this
reference are incorporated herein, the mutual covenants and conditions contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Lessor and Lessee agree as follows:
I. Retroactively effective December 20, 1991, the Definitions and Basic
Provisions section of the Lease is amended as follows:
(a) Paragraph (c) is stricken in its entirety and the following is
substituted therefor:
"Premises": sixty-eight thousand seven hundred sixty-four
(68,764) square feet on floors 1,3,4,6 and 7 in the Building
known as Denver Corporate Center III and located at 7900 East
Union Avenue, Denver, Colorado 80237 in a Project commonly
known as Denver Corporate Center, Denver, Colorado, such
Premises outlined on a plan attached hereto as Exhibit A. Upon
execution of this Lease by Lessor and its delivery to Lessee,
and upon Lessee's delivery to Lessor of the requisite
insurance policy or policies described in paragraph 10 herein,
Lessee shall have, subject to the terms and conditions set
forth in this Lease, the right to commence promptly its
alterations and improvements to the Premises.
(b) Paragraph (d) is stricken in its entirety and the following is
substituted therefor:
(d) "Lease Term": a period of sixty (60) months commencing on
July 1, 1992 the "Commencement Date") and ending June 30,
1997.
(c) Paragraph (e) is stricken in its entirety and the following is
substituted therefor:
(e) "Base Monthly Rent": $69,910.07 due and payable on or
before the first day of each calendar month at the office of Lessor during the
initial Lease Term without prior demand.
II. Effective as of the date hereof, Paragraph 25 of the Lease, "Notices",
is hereby amended by adding the following to the end of Lessor's notice
address:
with a copy to:
Equity Assets Management, Inc,
Two N. Riverside Plaza
Suite 700
Chicago, Il, 60606
Attn: Senior Vice President - Office Buildings
1
<PAGE> 20
III. Retroactively effective December 20,1991 , the Addendum to Lease is
amended as follows:
(a) Delete "June 1, 1992 or such earlier Commencement Date
designated by the Lessor in writing" in lines six and seven of
Paragraph 1 and substitute therefor "July 1, 1992."
(b) Paragraph 5 is amended by adding the following language at the
end of the first grammatical sentence of said Paragraph: "For the
purposes hereof, the parties hereto agree that the total
Construction Allowance shall equal $968,715.00".
IV Retroactively effective December 20, 1991, Exhibit B to the Lease is
amended by striking "to be determined in accordance with Lease
percent (__%)" in line 2 of paragraph 5 and inserting therefor
"thirty eight and thirty four hundredths percent (38.34%)."
V. Except as herein modified or amended, the provisions, conditions and
terms of the Lease shall remain unchanged and in full force and
effect. The capitalized terms used in this Amendment shall have the
same definitions as set forth in the Lease, to the extent that such
capitalized terms are defined therein and not redefined in this
First Amendment.
This First Amendment shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective successors, assigns and related entities.
IN WITNESS WHEREOF, Lessor and Lessee have executed this First Amendment
on the day and year first above written.
ATTEST: LESSOR:
EQUITY ASSETS MANAGEMENT
as Agent
/s/ signature unreadable By: /s/ Michael Sheinhop
Name: /s/ Michael Sheinhop
_________________________ Title: VICE PRESIDENT
ATTEST LESSEE:
J.D. EDWARDS & COMPANY
/s/ signature unreadable By: /s/ RE Allen
Name: RE ALLEN
Title: VP FINANCE
- ----------------------
2
<PAGE> 21
DENVER CORPORATE CENTER TOWER III, FIRST FLOOR
[IMAGE OMITTED]
<PAGE> 22
DENVER CORPORATE CENTER TOWER III, THIRD FLOOR
[IMAGE OMITTED]
<PAGE> 23
DENVER CORPORATE CENTER TOWER III, FOURTH FLOOR
[IMAGE OMITTED]
<PAGE> 24
DENVER CORPORATE CENTER TOWER III, SIXTH FLOOR
[IMAGE OMITTED]
<PAGE> 25
DENVER CORPORATE CENTER TOWER III, SEVENTH FLOOR
[IMAGE OMITTED]
<PAGE> 26
SECOND AMENDMENT
This Second Amendment (the "Amendment') is made and entered into as of the
25th day of December, 1995, by and between Samuel Zell, not personally, but
solely as Trustee dated December 14,T 1990 and known as Trust Agreement No. 7800
("Lessor") by its agent, Equity Office Properties, Inc., and J. D. Edwards &
Company ("Lessee").
WITNESSETH
A. WHEREAS, Lessor and Lessee are parties to that certain Lease dated the
twentieth day of December, 1991, currently containing approximately 68,764
rentable square feet of space locked on the 1st, 3rd, 4th, 6th and 7th floor(s)
of the building commonly known as Denver Corporate Center, Tower III and the
address of which is 7900 East Union Avenue, Denver, Colorado 80237 (the
"Building"), which lease has been previously amended or assigned by
instrument(s) dated July 1, 1992 (collectively, the "Lease"); and
B. WHEREAS, Lessee has requested that additional space consisting of
approximately 16,017 rentable square feet on the eighth (8th) floor of the
Building shown on Exhibit A hereto (the "Expansion Space be added to the
Premises and that the Lease be appropriately amended, and Lessee is willing to
do the same on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
I. EXPANSION AND EFFECTIVE DATE. Effective as of the Expansion Effective Date
(as hereinafter defined), the Premises is increased from 68,764 rentable square
feet on the 1 st, 3rd, 4th, 6th and 7th floors to 84,781 rentable square feet
with the addition of the eighth floor Expansion Space. The lease term for the
Expansion Space shall commence on the Expansion Effective Date and end on the
Termination Date. The Expansion Space is subject to all the terms and conditions
of the Lease except as expressly modified herein and except that Lessee shall
not be entitled to receive any allowances, abatement or other financial
concession granted with respect to the Premises unless such concessions are
expressly provided for herein with respect to the Expansion Space.
A. The Expansion Effective Date shall be no later than April 1, 1994.
B. Any delay in the Expansion Effective Date shall not subject Lessor to any
liability for any loss or damage resulting therefrom. If the Expansion Effective
Date is delayed. the Termination Date under the Lease shall not be similarly
extended.
II. MONTHLY BASE RENTAL.
Lessee shall pay Lessor the sum of Three Million Three Hundred Sixty One
Thousand Five Hundred Sixty Six Dollars and Sixty Five Cents ($3,361,566.65) as
Base Rental for the Premises in thirty nine (39) monthly installments commencing
April 1, 1994 and ending on the termination date as follows:
A. Thirty nine equal installments of Eighty Six Thousand One Hundred Ninety Four
Dollars and Two Cents ($86,194.02) each payable on or before the first day of
each month during the period beginning the earlier of April 1, 1994 or when
Lessee takes occupancy of the space and ending June 30, 1997.
All such Base Rental shall be payable by Lessee in accordance with the
terms of the "Payment" section of the Lease.
If the Expansion Effective Date is before April 1, 1994, the beginning
date set forth above with respect to the payment of any installments of Base
Rental shall be appropriately adjusted on a per diem basis and set forth in a
confirmation letter to be prepared by Lessor.
<PAGE> 27
III. ADDITIONAL SECURITY DEPOSIT. Upon Lessee's execution hereof, Lessee shall
pay $0.00 to Lessor which is added to and becomes part of the Security Deposit,
if any, held by Lessor as provided under the Lease as security for payment of
Rent and the performance of other terms and conditions of the Lease by Lessee.
IV. LESSEE'S PRO RATA-SHARE. For the period commencing with the Expansion
Effective Date and ending on the Termination Date, Lessee's Pro Rata Share for
the Premises is 47.2705 percent (47.2705%).
V. BASE YEAR, BASE AMOUNT, TAX BASE, AND EXPENSE BASE. For the period commencing
with the Expansion Effective Date and ending on the Termination Date,
A. the Base Year for the computation of Lessee's Pro Rata Share of
Basic Costsc applicable to the Expansion Space is 1992
VI. IMPROVEMENTS TO EXPANSION SPACE.
A. Lessee has inspected the Expansion Space and agrees to accept the same "as
is" without any agreements, representations, understandings or obligations on
the part of Lessor to perform any alterations, repairs or improvements, except
as may be expressly provided otherwise in this Amendment.
B. COST OF IMPROVEMENTS TO EXPANSION SPACE. Provided Lessee is not in default,
Lessee shall be entitled to receive an improvement allowance (the "Expansion
Improvement Allowance") in an amount of One Hundred Ninety Two Thousand Two
Hundred and Four Dollars and Zero Cents ($192,204.00) to be applied toward the
cost of performing initial construction, alteration or improvement of the
Expansion Space, including but not limited to the cost of space planning, design
and related architectural and engineering services, telephone and computer
cabling and furniture installation. In the event the total cost of the initial
improvements to the Expansion Space exceeds the Expansion Improvement Allowance,
Lessee shall pay for such excess upon demand. Lessor shall pay such Expansion
Improvement Allowance directly to the contractors retained to perform the
construction, design or related improvement work to the Expansion Space.
C. RESPONSIBILITY FOR IMPROVEMENTS TO EXPANSION SPACE.
(i) Work Performed By or On Behalf of Lessee Pursuant to Plans
Yet to be Prepared.
Lessee shall enter into a direct contract for the initial
improvement to the Expansion Space with a general contractor selected by Lessee
and approved by Lessor. Lessee shall submit engineered construction documents to
Lessor prior to the commencement of any work. All plans for the initial
improvements to the Expansion Space shall be subject to Lessors approval, which
approval shall not be unreasonably withheld. Lessee shall perform all
improvements to the Expansion Space in accordance with "Alterations, Additions,
Improvements" of the Lease dated December 20, 1991.
D. LESSOR'S OBLIGATIONS.
Lessor shall at its expense (except as included in Operating Expenses), keep and
maintain in good repair and working order and make all repairs to and perform
necessary maintenance upon: 1) all structural elements of the Building within
the Premises, unless the need to make structural alteration or repair results
from Tenant's particular manner of use of the Premises, Tenant's particular
design of the Premises, or any alterations additions or improvements performed
by or on behalf of Tenant in the Premises; 2) all mechanical systems within the
Premises, but only to the extent such have not been installed by Tenant or its
contractors; 3) all elements of the Building and the Premises necessary to
Provide the services described in the "Services By Lessor" section of the Lease,
but only to the extent such have not been installed by Tenant or its
contractors; 4) the Building facilities common to all tenants including, but not
limited to, the ceilings, lighting, HVAC, plumbing, walls and floors in the
common areas. Notwithstanding the foregoing Tenant shall be responsible for the
cost of any alterations, repairs, changes and additions necessitated by the acts
or omissions of Tenant's agent employees and contractors.
<PAGE> 28
VII. EARLY ACCESS TO EXPANSION SPACE. During any period that Lessee shall be
permitted to enter the Expansion Space prior to the Expansion Effective Date
(e.g., to perform alterations or improvements), Lessee shall comply with all
terms and provisions of the Lease, except those provisions requiring payment of
Base Rental or Additional Base Rental as to the Expansion Space. If Lessee takes
possession of the Expansion Space prior to the Expansion Effective Date for any
reason whatsoever (other than the performance of work in the Expansion Space
with Landlord's prior approval), such possession shall be subject to all the
terms and conditions of the Lease and this Amendment, and Lessee shall pay Base
Rental and Additional Base Rental as applicable to the Expansion Space to Lessor
on a per diem basis for each day of occupancy prior to the Expansion Effective
Date.
VII. PARKING, Paragraph 4. of the Addendum to the Lease dated December 20, 1991
is hereby deleted in its entirety and replaced with the following: Lessor shall
provide Lessee at no additional cost up to Two Hundred Seventy One (271) parking
spaces. One Hundred and Twenty Three (123) of the allotted spaces shall be
provided in the adjacent parking structure and the remaining One Hundred Forty
Eight (148) parking spaces shall be provided in the adjacent surface lot.
X. MISCELLANEOUS
A. This Amendment sets forth the entire agreement between the parties with
respect to the matters set forth herein. There have been no additional oral or
written representations or agreements.
B. Except as herein modified or amended, the provisions, conditions and terms of
the Lease shall remain unchanged and in full force and effect.
C. In the case of any inconsistency between the provisions of the Lease and this
Amendment, the provisions of this Amendment shall govern and control.
D. Submission of this Amendment by Lessor is not an offer to enter into this
Amendment but rather is a solicitation for such an offer by Lessee. Lessor shall
not be bound by this Amendment until Lessor has executed and delivered the same
to Lessee.
E. The capitalized terms used in this Amendment shall have the same definitions
as set forth in the Lease to the extent that such capitalized terms are defined
therein and not redefined in this Amendment
F. This Amendment shall be of no force and effect unless and until accepted by
any guarantors of the Lease, who by signing below shall agree that their
guarantee shall apply to the Lease as amended herein, unless such requirement is
waived by Lessor in writing.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Amendment as of
the day and year first above written.
WITNESSES; ATTESTATION LESSOR: Samuel Zell, not personally, but solely,
as Trustee under Trust Agreement dated
December 14, 1990 and known as Trust No. 7800
BY: EQUITY OFFICE PROPERTIES, INC.,
as Agent
By: /s/ signature unreadable
---------------------------------------
Name: Richard J. Berk
Title: Vice President
LESSEE: J. D. Edwards & Company
By: /s/ signature unreadable
----------------------------------------
Its: VP Finance
3
<PAGE> 29
EXHIBIT A
J.D, Edwards & Company
Suite 800
16,017 Square Feet
DENVER CORPORATE CENTER
TOWER Ill, EIGHTH FLOOR
(IMAGE OMITTED)
4
<PAGE> 30
THIRD AMENDMENT
This Third Amendment (the "Amendment") is made and entered into as of the
22 day of May, 1995, by and between Samuel Zell, not personally, but solely as
Trustee under Trust Agreement dated December 14, 1990 and known as Trust No.
7800 ("Lessor") by its agent, Equity Office Properties, Inc., and J.D. Edwards &
Company, a Colorado Corporation ("Lessee").
WITNESSETH
A. WHEREAS, Lessor and Lessee are parties to that certain lease dated December
20, 1991, that certain first amendment to lease dated July 1, 1992 and that
certain second amendment to lease dated December 25, 1993 (the lease and first
and second amendments thereto are collectively referred to as the "Lease"), with
respect to space on the 1st, 3rd, 4th, 6th, 7th and 8th floors of the building
commonly known as Denver Corporate Center Tower III and the address of which is
7900 East Union Avenue, Denver, Colorado (the "Building"); and
B. WHEREAS, Lessee has requested that additional space consisting of
approximately 3,164 rentable square feet on the 1st floor of the Building as
shown on Exhibit A hereto (the "First Expansion Space") be added to the Premises
and that the Lease be appropriately amended, and Lessor is willing to do the
same on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
I. FIRST EXPANSION SPACE.
A. Effective as of the day Lessor provides Lessee with possession of the
First Expansion Space (the "First Expansion Effective Date"), the Premises is
increased by 3,164 rentable square feet by the addition of the First Expansion
Space. Following the addition of the First Expansion Space, the total square
footage of the Premises shall be 87,945. The lease term for the First Expansion
Space shall commence on the First Expansion Effective Date and end on the
termination date (June 30, 1997). Lessee acknowledges that the First Expansion
Space is currently leased and occupied by Polk World Travel, Inc. ("Polk") and
that Lessor will provide Lessee with possession of the First Expansion Space
immediately after Polk vacates the First Expansion Space. The First Expansion
Space is subject to all the terms and conditions of the Lease except as
expressly modified herein and except that Lessee shall not be entitled to
receive any allowances, abatements or other financial concessions granted with
respect to the Premises unless such concessions are expressly provided for
herein with respect to the First Expansion Space.
B. In addition to the Base Monthly Rent payable with respect to the
Premises, Lessee, during the period beginning on the First Expansion Effective
Date and ending on the termination date, shall pay Lessor Base Monthly Rent for
the First Expansion Space at the rate of $3,216.73 per month. Such Base Monthly
Rent shall be paid by Lessee to Lessor in accordance with the terms and
conditions of the "Payments" section of the Lease. In the event that the First
Expansion Effective Date does not occur on the first day of a calendar month,
Lessee shall pay Lessor Base Monthly Rent with respect to the First Expansion
Space for such partial calendar month at the rate of $105.76 per day.
C. Effective as of the First Expansion Effective Date, Lessee's
Proportionate Share shall be increased by 1.7641%. Lessee shall pay for its
Proportionate Share of Operating Expenses and Real Estate Taxes with respect to
the First Expansion Space in accordance with the terms and conditions of Exhibit
B to the Lease, including, without limitation, a Base Year of 1992.
D. Lessee has inspected the First Expansion Space and agrees to accept the
same "as is" without any agreements, representations, understandings or
obligations on the part of Lessor to perform any alterations, repairs or
improvements.
II. CONTINGENCY. Lessee hereby acknowledges that the First Expansion Space
is currently leased to Polk under the terms and conditions of a lease (the "Polk
Lease") that is currently scheduled to expire on October 31, 1996. Accordingly,
this Amendment is contingent upon Lessor entering into a termination agreement
with Polk on or before May 31, 1995, pursuant to which the Polk Lease will be
terminated effective on or before May 31, 1995. In the event Lessor fails to
enter into such termination agreement with Polk on or before May 31,1995,
<PAGE> 31
either Lessor or Lessee shall thereafter have the right to terminate this
Amendment by giving written notice of termination to the other.
III. POLK TERMINATION FEE. In consideration for Landlord's termination of
the Polk Lease, Tenant, simultaneously with its execution of this Amendment,
agrees to pay Landlord the sum of Eight Thousand Nine Hundred Eighty-Five and
76/100 Dollars ($8,985.76) (the "Termination Fee"). In the event that either
party elects to terminate this Amendment in accordance with Section II above,
Landlord shall return the Termination Fee to Tenant within fifteen (15) days
after the date such notice is sent or received by Landlord, as the case may be.
IV. PARKING. In addition to the parking spaces to be provided to Lessee
under the Lease, effective as of the First Expansion Effective Date, Lessor
shall provide Lessee, at no additional cost, with nine (9) parking spaces in the
adjacent surface lot.
V. Miscellaneous.
A. This Amendment sets forth the entire agreement between the parties with
respect to the matters set forth herein. There have been no additional oral or
written representations or agreements.
B. Except as herein modified or amended, the provisions, conditions and
terms of the Lease shall remain unchanged and in full force and effect.
C. In the case of any inconsistency between the provisions of the Lease
and this Amendment, the provisions of this Amendment shall govern and control.
D. Submission of this Amendment by Lessor is not an offer to enter into
this Amendment but rather is a solicitation for such an offer by Lessee. Lessor
shall not be bound by this Amendment until Lessor has executed and delivered the
same to Lessee.
E. Tenant hereby represents that it has not dealt with any brokers in
connection with this Amendment other than Business Space, Inc.. Tenant agrees to
indemnify, defend and hold harmless Landlord from all claims of any brokers
(other than Business Space, Inc.) claiming to have represented Tenant in
connection with this Amendment.
F. The capitalized terms used in this Amendment shall have the same
definitions as set forth in the Lease to the extent that such capitalized terms
are defined therein and not redefined in this Amendment.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Amendment as
of the day and year first above written.
WITNESSES; ATTESTATION LESSOR: SAMUEL ZELL, NOT PERSONALLY, BUT
(Two for each signatory BUT SOLELY AS TRUSTEE UNDER TRUST
mandatory if Building AGREEMENT DATED DECEMBER 14,1990
is in Florida or Ohio) AND KNOW AS TRUST NO. 7800
BY: EQUITY OFFICE PROPERTIES, INC., an
Illinois Corporation as Agent
By: /s/ signature unreadable
/s/ signature unreadable Name: E. VALJEAN WHEELER
Title: VICE - CHAIRMAN
LESSEE: J.D. EDWARDS AND COMPANY
/s/ signature unreadable By: /s/ R E Allen
Name: Richard E. Allen
Title: Chief Financial Officer
<PAGE> 32
EXHIBIT A
THIS EXHIBIT IS ATTACHED TO AND MADE A PART OF THE LEASE DATED 5/24/90 BY AND
BETWEEN Samuel Zell, not personally but solely as Trustee under Trust Agreement
dated December 14, 1990 and known as Trust No. 7800 by its agent Equity
("LESSOR") Office Properties, Inc. AND J.D. Edwards & Company, a Colorado
Corporation ("LESSEE")
CONCERNING A PORTION OF THE BUILDING KNOWN AS THE
Denver Corporate Center, Tower III SUITE# 150
TOWER III, FIRST FLOOR
[IMAGE OMITTED]
LESSEE: J.D. Edwards & Company, LESSOR: Samuel Zell, not personally, but
Colorado Corporation solely as Trustee under Trust Agreement
______________________________ date December 14, 1990 and known as Trust
______________________________ No. 7800 by its agent Equity Office
Properties, Inc.
BY: RE Allen BY: /s/ E. VALJEAN Wheeler
--------------------------- ------------------------------------
Richard E. Allen E. VALJEAN WHEELER
TITLE: Chief Financial Officer DATE: 5/12/95 TITLE: VICE - CHAIRMAN
DATE: 5/24/95
<PAGE> 33
FOURTH AMENDMENT
This Fourth Amendment (the "Amendment") is made and entered into as of the
23 day of October, 1995, by and between Samuel Zell, not personally, but solely
as Trustee under Trust Agreement dated December 14, 1990 and known as Trust No.
7800 ("Lessor") by its agent, Equity Office Holdings, L.L.C., Delaware Limited
Liability Company and J.D.
Edwards & Company, a Colorado Corporation ("Lessee").
WITNESSETH
A. WHEREAS, Lessor and Lessee are parties to that certain lease dated December
20, 1991, that certain first amendment to lease dated July 1 , 1992, that
certain second amendment to lease dated December 25, 1993 and that certain third
amendment dated May 22, 1995 (the lease and first, second and third amendments
thereto are collectively referred to as the "Lease"), currently containing
approximately 87,945 rentable square feet of space on the 1st, 3rd, 4th, 6th,
7th and 8th floors (the "Existing Premises") of the building commonly known as
Denver Corporate Center Tower III and the address of which is 7900 East Union
Avenue, Denver, Colorado (the "Building"); and
B. WHEREAS, Lessee has requested that additional space consisting of
approximately 21,362 rentable square feet and comprised of the remainder of the
3rd floor of the Building not currently leased by Tenant as shown on Exhibit A-1
hereto (which remainder is deemed to equal 3,679 square feet, 16,017 rentable
square feet on the 5th floor of the Building as shown on Exhibit A-2 hereto and
1,666 rentable square feet of space on the basement level of the Building as
shown on Exhibit A-3 hereto (collectively the "Second Expansion Space") be added
to the Existing Premises and that the Lease be appropriately amended, and Lessor
is willing to do the same on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
Second Expansion Space.
A. Effective as of December 1, 1995 (the "Second Expansion Effective
Date"), the Existing Premises is increased from 87,945 rentable square feet to
109,307 rentable square feet by the addition of the Second Expansion Space. The
lease term for the Second Expansion Space shall commence on the Second Expansion
Effective Date and end on the termination date (June 30, 1997). The Second
Expansion Space is subject to all the terms and conditions of the Lease except
as expressly modified herein and except that Lessee shall not be entitled to
receive any allowances, abatements or other financial concessions granted with
respect to the Premises unless such concessions are expressly provided for
herein with respect to the Second Expansion Space.
B In addition to the Base Monthly Rent payable with respect to the
Existing Premises, Lessee, during the period beginning on the Second Expansion
Effective Date and ending on the termination date, shall pay Lessor Base Monthly
Rent for the Second Expansion Space at the rate of $21,718.03 per month. Such
Base Monthly Rent shall be paid by Lessee to Lessor in accordance with the terms
and conditions of the "Payments" section of the Lease.
C. Effective as of the Second Expansion Effective Date, Lessee's
Proportionate Share shall be increased by 11.9098%. Lessee shall pay for its
Proportionate Share of Operating Expenses and Real Estate Taxes with respect to
the Second Expansion Space in accordance with the terms and conditions of
Exhibit B to the Lease, including, without limitation, a Base Year of 1992.
D. Lessee has inspected the Second Expansion Space and agrees to accept
the same "as is" without any agreements, representations, understandings or
obligations on the part of Lessor to perform any alterations, repairs or
improvements. Notwithstanding the foregoing, Lessee shall be entitled to receive
a Construction Allowance with respect to the Second Expansion Space in
accordance with the terms and conditions of Article to of the Addendum to
(remainder incomplete)
<PAGE> 34
has commenced or completed its improvements to the Second Expansion Space and
regardless of whether Lessee has actually taken occupancy or possession of the
Second Expansion Space.
II. PARKING. In addition to the parking spaces to be provided to Lessee
under Section VIII of the Second Amendment to Lease, effective as of the Second
Expansion Effective Date, Lessor shall provide Lessee, at no additional cost,
with fifty-nine (59) parking spaces in the adjacent surface lot.
III. MISCELLANEOUS.
--------------------
A. This Amendment sets forth the entire agreement between the parties with
respect to the matters set forth herein. There have been no additional oral or
written representations or agreements.
B. Except as herein modified or amended, the provisions, conditions and
terms of the Lease shall remain unchanged and in full force and effect.
C. In the case of any inconsistency between the provisions of the Lease
and this Amendment, the provisions of this Amendment shall govern and control.
D. Submission of this Amendment by Lessor is not an offer to enter into
this Amendment but rather is a solicitation for such an offer by Lessee. Lessor
shall not be bound by this Amendment until Lessor has executed and delivered the
same to Lessee.
E. The capitalized terms used in this Amendment shall have the same
definitions as set forth in the Lease to the extent that such capitalized terms
are defined therein and not redefined in this Amendment.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Amendment as
of the day and year first above written.
WITNESSES; ATTESTATION LESSOR: SAMUEL ZELL, NOT PERSONALLY, BUT
(Two for each signatory BUT SOLELY AS TRUSTEE UNDER TRUST
mandatory if Building AGREEMENT DATED DECEMBER 14, 1990
is in Florida or Ohio) AND KNOW AS TRUST NO. 7800
BY: EQUITY OFFICE HOLDINGS, L.L.C., as Agent
By: /s/ Randy Bessolo
/s/ signature unreadable Name: Randy Bessolo
Title: Vice President - Asset Management
- ------------------------
LESSEE: J.D. EDWARDS AND COMPANY
By: /s/ RE Allen
______________________ Name: Richard E. Allen
______________________ Title: CHIEF FINANCIAL OFFICER
<PAGE> 35
FIFTH AMENDMENT
This Fifth Amendment (the "Amendment") is made and entered into as of the
27 day of November, 1995, by and between Samuel Zell, not personally, but solely
as Trustee under Trust Agreement dated December 14, 1990 and known as Trust No.
7800 ("Lessor") by its agent, Equity Office Holdings, L.L.C., Delaware Limited
Liability Company and J.D.
Edwards & Company, a Colorado Corporation ("Lessee").
WITNESSETH
A. WHEREAS, Lessor and Lessee are parties to that certain lease dated December
20, 1991, that certain first amendment to lease dated July 1, 1992, that certain
second amendment to lease dated December 25, 1993, that certain third amendment
dated May 22, 1995, and that certain fourth amendment dated Oct. 23, 1995, (the
lease and first, second, third and fourth amendments thereto are collectively
referred to as the "Lease"), currently containing approximately 109,307 rentable
square feet of space on the basement level and the 1st, 3rd, 4th, 5th, 6th, 7th
and 8th floors (the "Existing Premises") of the building commonly known as
Denver Corporate Center Tower III and the address of which is 7900 East Union
Avenue, Denver, Colorado (the "Building"); and
B. WHEREAS, Lessee has requested that additional space consisting of
approximately 2,000 usable/rentable square feet on the basement level of the
Building as shown on Exhibit A hereto (the "Third Expansion Space") be added to
the Existing Premises and that the Lease be appropriately amended, and Lessor is
willing to do the same on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
I. THIRD EXPANSION SPACE.
A. Effective as of the earlier to occur of (i) December 1, 1995, (ii) the
date upon which Lessee substantially completes the Improvements (hereinafter
defined) in the Third Expansion Space, or (iii) the date upon which Lessee first
begins to use the Third Expansion Space for the operation of its business (the
"Third Expansion Effective Date"), the Existing Premises is increased from
109,307 rentable square feet to 111,307 rentable square feet by the addition of
the Third Expansion Space. The lease term for the Third Expansion Space shall
commence on the Third Expansion Effective Date and end on the termination date
(June 30, 1997). The Third Expansion Space is subject to all the terms and
conditions of the Lease except as expressly modified herein and except that
Lessee shall not be entitled to receive any allowances, abatements or other
financial concessions granted with respect to the Existing Premises unless such
concessions are expressly provided for herein with respect to the Third
Expansion Space.
B. In addition to the Base Monthly Rent payable with respect to the
Existing Premises, Lessee, during the period beginning on the Third Expansion
Effective Date and ending on the termination date, shall pay Lessor Base Monthly
Rent for the Third Expansion Space at the rate of Two Thousand Thirty-Three and
33/100 Dollars ($2,033.33) per month. Such Base Monthly Rent shall be paid by
Lessee to Lessor in accordance with the terms and conditions of the "Payments"
section of the Lease.
C. Effective as of the Third Expansion Effective Date, Lessee's
Proportionate Share shall be increased by 1.1150%. Lessee shall pay for its
Proportionate Share of Operating Expenses and Real Estate Taxes with respect to
the Third Expansion Space in accordance with the terms and conditions of Exhibit
B to the Lease, including, without limitation, a Base Year of 1992.
D. Lessee has inspected the Third Expansion Space and agrees to accept the
same "as is" without any agreements, representations, understandings or
obligations on the part of Lessor to perform any alterations, repairs or
improvements. Notwithstanding the foregoing, Lessee shall be entitled to receive
a Construction Allowance with respect to the Third Expansion Space in accordance
with the terms and conditions of Article 6 of the Addendum to the Lease. Lessor
and Lessee hereby agree that such Construction Allowance shall be in an amount
per square foot of Third Additional Space equal to $.25 x the number of full
calendar months remaining in the lease term on the Third Expansion Effective
Date. For example, if the Third Expansion Effective Date occurs on November 1,
1995, Lessee shall be entitled to receive a Construction Allowance in the amount
of Ten Thousand and 00/100 Dollars ($10,000.00) ($.25 x 20 [the number of months
remaining in the lease term] x 2,000 [square footage of Third Expansion Space] =
$10,000.00)). It is understood and agreed that Lessee's obligation to pay Base
Monthly Rent with respect to the Third Expansion Space shall commence on the
Third Expansion Effective Date regardless of
<PAGE> 36
whether Lessee has commenced or completed its Improvements to the Third
Expansion Space and regardless of whether Lessee has actually taken occupancy or
possession of the Third Expansion Space.
II. EARLY ACCESS TO THIRD EXPANSION SPACE. Upon the full and final
execution of this Amendment, Lessor shall provide Lessee with possession of the
Third Expansion Space for the purpose of performing improvements therein in
preparation of Lessee's occupancy of the Third Expansion Space (the
"Improvements"). All such Improvements shall be performed in accordance with the
terms and conditions of the Lease, including, without limitation, approval by
Lessor of the plans for the Improvements and any contractors Lessee retains to
perform such Improvements. During any period that Lessee shall be permitted to
enter the Third Expansion Space prior to the Third Expansion Effective Date
(e.g., to perform alterations or improvements), Lessee shall comply with all
terms and provisions of the Lease, except those provisions requiring payment of
Fixed Rent or additional Rent as to the Third Expansion Space.
III. MISCELLANEOUS.
A. This Amendment sets forth the entire agreement between the parties with
respect to the matters set forth herein. There have been no additional oral or
written representations or agreements.
B. Except as herein modified or amended, the provisions, conditions and
terms of the Lease shall remain unchanged and in full force and effect.
C. In the case of any inconsistency between the provisions of the Lease
and this Amendment, the provisions of this Amendment shall govern and control.
D. Submission of this Amendment by Lessor is not an offer to enter into
this Amendment but rather is a solicitation for such an offer by Lessee. Lessor
shall not be bound by this Amendment until Lessor has executed and delivered the
same to Lessee.
E. The capitalized terms used in this Amendment shall have the same
definitions as set forth in the Lease to the extent that such capitalized terms
are defined therein and not redefined in this Amendment.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Amendment as
of the day and year first above written.
WITNESSES; ATTESTATION LESSOR: SAMUEL ZELL, NOT PERSONALLY, BUT
Two for each signatory BUT SOLELY AS TRUSTEE UNDER TRUST
mandatory if Building AGREEMENT DATED DECEMBER 14,1990
is in Florida or Ohio) AND KNOW AS TRUST NO. 7800
BY: EQUITY OFFICE HOLDINGS, L.L.C.,
as Agent
By: /s/ Randy Bessolo
Name: Randy Bessolo
Title: Vice President - Asset Management
LESSEE: J.D. EDWARDS AND COMPANY
/s/ signature unreadable By: /s/ Richard E. Allen
/s/ signature unreadable
Name: Richard E. Allen
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.6
SUBLEASE AGREEMENT
THIS Sublease Agreement, dated this 15th, day of July, 1993, made and
entered into between GREEN HOLDINGS, INC., a Iowa corporation with an office at
5275 DTC Parkway, Building 44, Englewood, CO 80111, as Sublessor and J.D.
EDWARDS & COMPANY, a Colorado corporation with an office at 8055 E. Tufts
Avenue, Denver, Colorado 80237, as Sublessee (whether one or more).
WITNESSETH
1. Sublessor hereby demises, leases and lets unto Sublessee the following
described premises in Denver County, State of Colorado to with:
An office suite located on the 8th floor of the Stanford Place I
Building consisting of 1,703 useable square feet and 1,924 rentable square feet,
including proportionate share of common areas, as more particularly described on
Exhibit A attached hereto and made a part hereof said premises being located at
8055 E. Tufts Avenue in the city of Denver, Colorado, together with the
buildings and equipment, if any, located thereon and owned by Sublessor for the
following term:
Beginning on the 1st day of July, 1993, and ending on the 25th day
of August, 1995.
2. Sublessee agrees to pay to Sublessor, with rental checks payable to
Green Holdings, Inc., 5275 DTC Parkway, Building 44, Englewood, Colorado 80111
(until notified to pay differently) the sum of One Thousand Nine Hundred Twenty
Four and no/100 Dollars ($1,924.00) per month payable monthly in advance.
Sublessor acknowledges receipt of the first and the last full month's rental
together with any portion due from date hereof until the first day of the
succeeding month. Without limiting any of Sublessor's other rights herein, it is
agreed that if rentals are delinquent for a period of thirty (30) days,
Sublessor may assess Sublessee a one percent (1%) per month delinquency charge
on the unpaid rentals. In the event the delinquency charge above is deemed
excessive by federal or state law, then the highest applicable charge shall be
assessed.
3. SUBLESSEE AGREES THAT IT HAS MADE A PERSONAL INSPECTION OF THE LEASED
PREMISES AND ANY BUILDINGS AND OTHER IMPROVEMENTS THEREON AND IS SATISFIED WITH
CONDITION AND FITNESS THEREOF AND ACCEPTS THE SAME "AS IS"; PROVIDED, HOWEVER,
SUBLESSEE AGREES TO CORRECT AT ITS OWN EXPENSE, ANY SIGNIFICANT OBVIOUS DAMAGE
IT MAY HAVE DONE TO THE LEASED PREMISES PRIOR TO SUBLESSEE'S OCCUPANCY.
SUBLESSOR DOES NOT WARRANT EITHER EXPRESSLY OR IMPLIEDLY THE CONDITION OR
FITNESS OF THE PROPERTY LEASED HEREUNDER, ANY SUCH WARRANTY BEING HEREBY
EXPRESSLY NEGATIVED. Sublessee agrees to finish the demised premises in
accordance with the
- 1 -
<PAGE> 2
plan attached as Exhibit A. Tenant finish shall be comparable to that found
elsewhere on the first 11 floors of Stanford Place I.
4. Sublessee shall defend, indemnify and save Sublessor harmless for any
losses, costs or expenses resulting from suits, demands or other claims for
damages to persons or property, arising out of the use or existence of the
buildings, structures, improvements and other personal property located on the
]eased premises except where such damages arise out of the gross negligence or
willful misconduct of Sublessor, its employees, agents or invitees; however,
Sublessor at his election may intervene or provide its own defense.
5. It is agreed by the parties for up to thirty (60) days from the
commencement date of this Sublease Sublessor may store certain of its personal
property on the leased premises and that Sublessor will have access to such
personal property upon notice to Sublessee and during normal business hours for
such thirty (60) day period. In partial consideration for such access grant,
Sublessor shall defend, indemnify and save Sublessee harmless for any losses,
costs or expenses resulting from suits, demands or other claims for damages to
persons or property, arising out of the use or existence of the buildings,
structures, improvements and other personal property located on the leased
premises except where such damages arise out of the gross negligence or willful
misconduct of Sublessor, its employees, agents or invitees; however, Sublessor
at his election may intervene or provide its own defense. In addition, Sublessor
will reduce Sublessee's rent by the sum of $500.00 per month for every 30 day
period Sublessor continues to store its personal property on the leased
premises.
6. Upon termination of this Sublease, Sublessee agrees to peacefully quit
and surrender possession of the leased premises. If Sublessee fails to so quit
and surrender possession, Sublessor shall have the right to take possession by
any lawful means, using such force as may be necessary, without being deemed
guilty of any trespass, and without the necessity of first reporting to any
court process. If Sublessee shall remain in possession after the date of
expiration or termination of this Sublease and after the effective date of
notice by Sublessor to terminate this Sublease, the Sublessee will pay as rent
for the leased premises during such time a sum equal to one hundred twenty-five
percent (125%) of the rent herein provided.
7. Should Sublessor's interest in the premises leased hereunder be that of
a lessee then this Sublease shall automatically terminate without notice upon
the termination, for any cause whatsoever including action or inaction of
Sublessor, of Sublessor's leasehold estate in the premises leased hereunder.
8. All notices required or which may be given hereunder shall be
considered as properly given if delivered in writing, personally or sent by
certified United States mail, postage prepaid with return receipt requested,
addressed as follows:
Sublessor: GREEN HOLDINGS, INC., 5275 DTC Parkway, Building 44,
Englewood, Colorado 80111
Sublessee: J.D. EDWARDS & COMPANY, 8055 E. Tufts Avenue, Denver,
Colorado 80237
- 2 -
<PAGE> 3
9. This Sublease shall not be binding on Sublessor or Sublessee unless or
until executed on its behalf by an officer of the company or an employee having
actual authority to execute this Sublease.
10. This Sublease includes the General Conditions attached hereto which
are by reference incorporated herein. This instrument with the General
Conditions so incorporated and any Annex attached hereto constitute the complete
agreement of the parties hereunder and there are no oral agreements or
understandings between the parties concerning the property covered by this
Sublease Agreement.
Executed the day and year first above written.
WITNESS: GREEN HOLDINGS, INC.
_____________________________ By:_________________________
SUBLESSOR
_____________________________
WITNESS: J.D. EDWARDS & COMPANY
_____________________________ By:_________________________
SUBLESSEE
_____________________________
CONSENT OF LESSOR
-----------------
The undersigned, as the Lessor under the Lease Agreement referenced in Paragraph
M of the General Conditions attached hereto, hereby gives the consent of Lessor
to the foregoing Sublease and approves of the Sublessee therein as required by
the provisions of said Lease Agreement.
__________________________________
PHILLIPS PETROLEUM COMPANY, LESSOR
By:_______________________________
Attorney-in-Fact
Date:_____________________________
- 3 -
<PAGE> 4
GENERAL CONDITIONS
A. Sublessee covenants and agrees that it will not permit any illegal or
immoral activity on the ]eased premises nor will it permit any nuisance to
be created or maintained thereon.
B. Upon failure of Sublessee to pay rentals or any part thereof when due or
upon Sublessee's failure to carry out any obligation placed on it under
this Sublease or upon the death of Sublessee or upon Sublessee's making an
assignment for benefit of creditors, filing a voluntary petition in
bankruptcy or being adjudicated bankrupt or insolvent, Sublessor may,
without notice, declare this Sublease at an end and void, and may re-enter
and take possession of said premises and may recover rentals due in any
appropriate action at law, or may recover he possession of said premises
and damages for the detention thereof and/or for such failure by any
appropriate remedy at law or in equity.
C. Sublessor shall pay all charges for utilities and other services supplied
to the premises as and when the same shall come due.
D. Sublessor shall render for taxation and pay all taxes and assessments,
general and special, on the ]eased premises and any buildings or other
improvements permanently fixed to the realty. Sublessee shall pay all
taxes and assessments on all property owned by Sublessee and located on
the leased premises.
E. Sublessee shall pay to Sublessor together with each rental payment the
amount of any sales and/or use tax due thereon.
F. At his own expense Sublessee shall keep the leased premises and all
buildings and other improvements located thereon in good repair. Sublessee
will upon the expiration or termination of this Sublease for any reason
deliver up the property leased hereunder to Sublessor in as good condition
as when received by Sublessee, depreciation due to a reasonable use
thereof excepted.
G. Sublessee shall make no alterations in or upon the leased premises without
the prior written consent of the Sublessor, and all additions, fixtures or
improvements which may be made by Sublessee, except moveable furnishings,
shall become the property of Sublessor and remain upon the leased premises
as a part thereof, and be surrendered with the leased premises at the
termination of this Sublease.
H. Sublessee agrees to obtain and maintain at its expense at all times during
the term hereof the following insurance:
1. Workmen's Compensation Insurance in compliance with the laws of the
state in which the leased premises are located and Employer
Liability Insurance with limit of not less than $100,000.
- 4 -
<PAGE> 5
2. Comprehensive Public Liability Insurance covering Sublessee's use
and occupancy of the leased premises with bodily injury, including
death, limit of not less than $1,000,000 per occurrence and property
damage limit of not less than $300,000 per occurrence.
Sublessee shall upon request furnish Sublessor with certified copies of
the policies or certificates evidencing the above insurance.
I. Sublessee shall not sell, hypothecate or assign this Sublease or sublet
the premises without the prior written consent of Sublessor which consent
shall not be unreasonably withheld.
J. Should all or any part of the leased premises be taken by eminent domain
proceedings or purchased by any public or quasi-public body having the
power of eminent domain, all proceeds from such taking or purchase shall
belong exclusively to Sublessor, except that Sublessor shall have no claim
to any award for loss or damage to Sublessee's trade fixtures, removable
personal property, which Sublessee is entitled to remove upon expiration
of the term of this Sublease. In the event such taking or purchase shall
materially interfere with Sublessee's use of the leased premises,
Sublessee may at its option terminate this Sublease.
K. In the event of any building on the leased premises shall be destroyed or
damaged by fire, explosion, the elements, or other causes so as to render
the same wholly or in part unfit for occupancy, and if the same cannot be
repaired within ninety (90) days from the date of such casualty, this
Sublease shall terminate on the date of such casualty. If such building
can be repaired in such ninety (90) day period then Sublessor shall notify
Sublessee within ten (10) days of such casualty if it elects to repair
said building within such ninety (90) day period. If Sublessor does not so
elect, then Sublessee may terminate this Sublease by giving notice in
writing to Sublessor. If Sublessor elects to repair said building but
fails to do so, this Sublease shall terminate on the expiration of said
ninety (90) days. In the event of any such termination, the Sublease shall
immediately surrender possession of the premises. If Sublessor repairs the
said building within the ninety (90) day period, this Sublease shall
continue in full force and effect. Sublessee shall not be required in any
event to pay rent for any period in which the leased premises are wholly
unfit for the conduct of Sublessee's business and shall be required during
any period which a part of the premises are unfit for the conduct of
Sublessee's business to pay as rent the stipulated rent multiplied by a
fraction the numerator of which is the area of the leased premises which
is fit for the conduct of Sublessee's business and the denominator of
which is the total area of the leased premises.
L. Sublessor reserves the right to place or post "FOR LEASE" signs on the
property to signify the leased property is available for lease no earlier
than four (4) months prior to termination of this Sublease.
- 5 -
<PAGE> 6
M. This Sublease is subject to all of the terms and conditions of that
certain Lease Agreement dated March 1, 1989 and Amendment dated November
8, 1989 between Phillips Petroleum Company, as Lessor, and Green Holdings,
Inc., as Lessee, a copy of said Lease Agreement being attached hereto as
Exhibit B and made a part hereof.
N. Total lease rental for the primary term hereof amount to $48,651.61
payable in monthly installments as provided hereinabove.
0. Sublessee shall pay its allocated and proportionate share of any increase
in operating costs as defined in Paragraph 2 of Exhibit B hereof in excess
of such costs incurred in Sublessee's base year which base year shall be
defined as the period 1/7/93 - 12/31/93. It is agreed that Sublessee's
allocated percentage of Sublessor's operating costs shall be 7.2% of the
operating costs payable by Sublessor to Lessor pursuant to the Lease
Agreement referenced in Paragraph M above. The method of billing Sublessee
for any such increase shall be consistent with the provisions of said
Paragraph 2.
- 6 -
<PAGE> 1
EXHIBIT 10.7
LEASE AGREEMENT
---------------
THIS Lease Agreement, dated this 23rd day of August, 1993, made and
entered into between Phillips Petroleum Company, a corporation with an office at
Bartlesville, Oklahoma, as "Lessor", and J. D. Edwards & Company, whose address
is 8055 East Tufts Avenue, Denver, Colorado 80237, as "Lessee", (whether one or
more);
W I T N E S S E T H:
1. Lessor hereby demises, leases and lets unto Lessee the following
described premises in Denver County, State of Colorado to-wit:
An office suite located on the 8th floor of the Stanford Place I
Building, consisting of 558 useable square feet and 630 rentable square feet,
including a proportionate share of common areas, as more particularly described
on Exhibit "A" attached hereto, and made a part hereof;
said premises being located at 8055 East Tufts Avenue in the City of Denver,
together with the buildings and equipment, if any, located thereon and owned by
Lessor for the following term:
Beginning on the 1st day of August, 1993, and ending on the 25th day of
August, 1995.
2. Lessee agrees to pay to Lessor, with rental checks payable to Phillips
Petroleum Company at P. 0. Box 500553, St. Louis, Missouri 63150 (until notified
to pay differently) the sum of Five Hundred Twenty-five Dollars ($525.00) per
month, payable monthly in advance. Lessor acknowledges receipt of the first and
last full months' rental together with any portion due from date hereof until
the first day of the succeeding month. Without limiting any of Lessor's other
rights herein, it is agreed that if rentals are delinquent for a period of
thirty (30) days, Lessor may assess Lessee a one percent (1%) per month
delinquency charge on the unpaid rentals. In the event the delinquency charge
above is deemed excessive by federal or state law, then the highest applicable
charge shall be assessed.
3. LESSEE AGREES THAT IT HAS MADE A PERSONAL INSPECTION OF THE LEASED
PREMISES AND ANY BUILDINGS AND OTHER IMPROVEMENTS THEREOF AND IS SATISFIED WITH
CONDITION AND FITNESS THEREOF AND ACCEPTS THE SAME "AS IS". LESSOR DOES NOT
WARRANT EITHER EXPRESSLY OR IMPLIEDLY THE CONDITION OR FITNESS OF THE PROPERTY
LEASED HEREUNDER, ANY SUCH WARRANTY BEING HEREBY EXPRESSLY NEGATIVED. LESSOR
AGREES TO FINISH THE DEMISED PREMISES IN ACCORDANCE WITH THE PLAN ATTACHED AS
EXHIBIT "A". TENANT FINISH SHALL BE COMPARABLE TO THAT FOUND ELSEWHERE ON THE
FIRST ELEVEN (11) FLOORS OF STANFORD PLACE 1.
4. Lessee shall defend, indemnify and save Lessor harmless for any losses,
costs or expenses resulting from suits, demands or other claims for damages to
persons or property, arising out of the use or existence of the buildings,
structures, improvements and other personal property located on the leased
premises; however, Lessor, at its election, may intervene or provide its own
defense.
5. Upon termination of this Lease, Lessee agrees to peacefully quit and
surrender possession of the leased premises. If Lessee fails to so quit and
surrender possession, Lessor shall have the right to take possession by any
lawful means, using such force as way be necessary, without being deemed guilty
of any trespass, and without the necessity of first resorting to any court
process. if Lessee shall remain in possession after the date of expiration or
termination of this Lease and after the effective date of notice by Lessor to
terminate this Lease, the Lessee will pay as rent for the leased premises during
such time a sum equal to four (4) times the rent herein provided.
6. Should Lessor's interest in the premises leased hereunder be that of a
lessee, then this Lease shall automatically terminate without notice upon the
termination, for any cause whatsoever, including action or inaction of Lessor,
of Lessor's leasehold estate in the premises leased hereunder.
7. All notices required or which may be given hereunder shall be
considered as properly given if delivered in writing, personally or sent by
certified United States mail, postage prepaid with return receipt requested,
addressed as follows:
<PAGE> 2
<TABLE>
<CAPTION>
Party Address
----- -------
<S> <C>
Lessor: Phillips Petroleum Company 210 West Park Avenue, Suite 2400
Oklahoma City, OK 73102
Lessee: J. D. Edwards & Company 8055 East Tufts Avenue
Denver, CO 80237
</TABLE>
8. This Lease shall not be binding on Lessor unless or until executed on
its behalf by an officer of the company or an employee having actual authority
to execute this Lease.
9. This Lease includes the General Conditions printed on annex A attached
hereto which are by reference incorporated herein. This instrument with the
General Conditions so incorporated and any annex attached hereto constitute the
complete agreement of the parties hereunder and there are no oral agreements or
understandings between the parties concerning the property covered by this Lease
Agreement.
EXECUTED the day and year first above written.
PHILLIPS PETROLEUM COMPANY
Witness:
____________________ By: /s/ Signature Unreadable
____________________ Attorney in Fact LESSOR
J.D. EDWARDS & COMPANY
Witness:
/s/ Signature unreadable By: RE Allen
Title: VP Finance
_____________________ LESSEE
<PAGE> 3
ANNEX A
-------
GENERAL CONDITIONS
A. Lessee covenants and agrees that it will not permit any illegal or immoral
activity on the leased premises nor will it permit any nuisance to be
created or maintained thereon.
B. Upon failure of Lessee to pay rentals or any part hereof when due or upon
Lessee's failure to carry out any obligation placed on it under this Lease
or upon the death of Lessee or upon Lessee's making an assignment for
benefit of creditors, filing a voluntary petition in bankruptcy or being
adjudicated bankrupt or insolvent, Lessor may, without notice, declare
this Lease at an end and void, and may re-enter and take possession of
said premises, and may recover rentals due in any appropriate action at
law, or may recover the possession of said premises and damages for the
detention thereof and/or for such failure by any appropriate remedy at law
or in equity.
C. Lessor shall pay all charges for utilities and other services supplied to
the premises as and when the same shall come due.
D. Lessor shall render for taxation and pay all taxes and assessments, general
and special, on the leased premises and any buildings or other improvements
permanently affixed to the realty. Lessee shall pay all taxes and
assessments on all property owned by Lessee and located on the leased
premises.
E. Lessee shall pay to Lessor together with each rental payment the amount of
any sales and/or use tax due thereon.
F. At its own expense, Lessee shall keep the leased premises and all buildings
and other improvements located thereon in good repair. Lessee will, upon
the expiration or termination of this Lease for any reason, deliver up the
property leased hereunder to Lessor in as good condition as when received
by Lessee, depreciation due to a reasonable use thereof excepted.
G. Lessee shall make no alterations in or upon the leased premises without the
prior written consent of the Lessor, and all additions, fixtures or
improvements which may be made by Lessee, except moveable furnishings,
shall become the property of Lessor and remain upon the leased premises as
a part thereof, and be surrendered with the leased premises at the
termination of this Lease.
H. Lessee agrees to obtain and maintain at its expense at all times during
the term hereof the following insurance:
1. Workmen's Compensation Insurance in compliance with the laws of the
state in which the leased premises are located and Employer
Liability Insurance with limit of not less than $100,000; 2.
Comprehensive Public Liability Insurance covering Lessee's use and
occupancy of the leased premises with bodily injury, including
death, limit of not less than $300,000 per occurrence and property
damage limit of not less than $100,000 per occurrence.
Lessee shall upon request furnish Lessor with certified copies of the policies
or certificates evidencing the above insurance.
I. Lessee shall not sell, hypothecate or assign this Lease or sublet the
premises without the prior written consent of Lessor.
J. Should all or any part of the leased premises be taken by eminent domain
proceedings or purchased by any public or quasi-public body having the
power of eminent domain, all proceeds from such taking or purchase shall
belong exclusively to Lessor. In the event such taking or purchase shall
materially interfere with Lessee's use of the leased premises, Lessee may,
at its option, terminate this lease.
K. In the event any building on the leased premises shall be destroyed or
damaged by fire, explosion, the elements, or other causes so as to render
the same wholly or in part unfit for occupancy, and if the same cannot be
repaired within ninety (90) days from the date of such casualty, this Lease
shall terminate on the date of such casualty. If such building can be
repaired in such ninety (90) day period, then Lessor shall notify Lessee
within ten (10)
<PAGE> 4
days of such casualty if it elects to repair said building within such
ninety (90) day period. If Lessor does not so elect, then Lessee may
terminate this Lease by giving notice in writing to Lessor. If Lessor
elects to repair said building but fails to do so, this Lease shall
terminate on the expiration of said ninety (90) days. In the event of such
termination, the Lessee shall immediately surrender possession of the
premises. If Lessor repairs the said building within the ninety (90) day
period, this Lease shall continue in full force and effect. Lessee shall
not be required in any event to pay rent for any period in which the
leased premises are wholly unfit for occupancy and shall be required
during any period which a part of the premises are unfit for occupancy to
pay as rent the stipulated rent multiplied by a fraction the numerator of
which is the area of the leased premises which is fit for occupancy and
the denominator of which is the total area of the leased premises.
L. Lessor reserves the right to place or post "FOR SALE" signs on the
property to signify the leased property is available for sale.
M. This lease is subject to all of the terms of that certain office lease
dated August 26, 1985 between PERA, as Landlord, and Phillips Petroleum
Company, as Tenant, a copy of said office lease being attached hereto as
Exhibit "B" and made a part hereof.
N. Total lease rental for the primary term hereof amounts to $13,023.00,
payable in monthly installments as provided hereinabove.
O. Lessee shall pay its allocated and proportionate share of any increase in
operating costs as defined in Paragraph 2 of Exhibit "B" hereof in excess
of such costs incurred in Lessee's base year which base year shall be
defined as the period January 1, 1993 - December 31, 1993. It is agreed
that Lessee's allocated percentage of Lessor's operating costs shall be
0.29 percent. The method of billing Lessee for any such increase shall be
consistent with the provisions of said Paragraph 2.
<PAGE> 1
EXHIBIT 10.8
SUBLEASE AGREEMENT
THIS Sublease Agreement, dated this 25th day of October, 1993, made and
entered into between GREEN HOLDINGS, INC., an Iowa corporation with an office at
5275 DTC Parkway, Building 44, Englewood, CO 80111, as Sublessor and J.D.
EDWARDS & COMPANY, a Colorado corporation with an office at 8055 E. Tufts
Avenue, Denver, Colorado 80237, as Sublessee (whether one or more).
WITNESSETH
1. Sublessor hereby demises, leases and lets unto Sublessee the following
described premises in Denver County, State of Colorado to with:
An office suite located on the 7th floor of the Stanford Place I Building
consisting of 17,145 useable square feet and 19,373 rentable square feet, as
more particularly described on Exhibit A attached hereto and made a part hereof,
said premises being located at 8055 E. Tufts Avenue in the City of Denver,
Colorado, together with the buildings and equipment, if any, located thereon and
owned by Sublessor for the following term:
Beginning on the 1st day of November, 1993, and ending on the 25th day of
August, 1995.
2. Sublessee agrees to pay to Sublessor, with rental checks payable to
Green Holdings, Inc., 5275 DTC Parkway, Building 44, Englewood, Colorado 80111
(until notified to pay differently) the sum of Fourteen Thousand Five Hundred
Twenty-Nine and 75/100 Dollars ($14,529.75) per month payable monthly in
advance. Sublessor acknowledges receipt of the first and the last full month's
rental together with any portion due from date hereof until the first day of the
succeeding month. Without limiting any of Sublessor's other rights herein, it is
agreed that if rentals are delinquent for a period of thirty (30) days,
Sublessor may assess Sublessee a one percent (1%) per month delinquency charge
on the unpaid rentals. In the event the delinquency charge above is deemed
excessive by federal or state law, then the highest applicable charge shall be
assessed.
3. Sublessor agrees to provide Sublessee a tenant finish allowance of
Forty Thousand and no/100 Dollars ($40,000.00) due and payable by check upon
execution hereof
4. SUBLESSEE AGREES THAT IT HAS MADE A PERSONAL INSPECTION OF THE LEASED
PREMISES AND ANY BUILDINGS AND OTHER IMPROVEMENTS THEREON AND IS SATISFIED WITH
CONDITION AND FITNESS THEREOF AND ACCEPTS THE SAME "AS IS"; PROVIDED, HOWEVER,
SUBLESSEE AGREES TO CORRECT AT ITS OWN EXPENSE, ANY SIGNIFICANT OBVIOUS DAMAGE
IT MAY
-1-
<PAGE> 2
HAVE DONE TO THE LEASED PREMISES PRIOR TO SUBLESSEE'S OCCUPANCY. SUBLESSOR DOES
NOT WARRANT EITHER EXPRESSLY OR IMPLIEDLY THE CONDITION OR FITNESS OF THE
PROPERTY LEASED HEREUNDER, ANY SUCH WARRANTY BEING HEREBY EXPRESSLY NEGATIVED.
Tenant finish shall be comparable to that found on the first 11 floors of
Stanford Place I.
5. Sublessor agrees to transfer to Sublessee the rights to and the use of
thirty-four (34) indoor parking spaces assigned to the 7th floor office space.
These parking spaces are identified in General Conditions, "P".
6. Sublessee shall defend, indemnify and save Sublessor harmless for any
losses, costs or expenses resulting from suits, demands or other claims for
damages to persons or property,arising out of the use or existence of the
buildings, structures, improvements and other personal property located on the
leased premises except where such damages arise out of the gross negligence or
willful misconduct of Sublessor, its employees, agents or invitees; however,
Sublessor at his election may intervene or provide its own defense.
7. Upon termination of this Sublease, Sublessee agrees to peacefully quit
and surrender possession of the leased premises. If Sublessee fails to so quit
and surrender possession, Sublessor shall have the right to take possession by
any lawful means, using such force as may be necessary, without being deemed
guilty of any trespass, and without the necessity of first reporting to any
court process. If Sublessee shall remain in possession after the date of
expiration or termination of this Sublease and after the effective date of
notice by Sublessor to terminate this Sublease, the Sublessee will pay as rent
for the leased premises during such time a sum equal to one hundred twenty-five
percent (125%) of the rent herein provided.
8. Should Sublessor's interest in the premises leased hereunder be that of
a lessee then this Sublease shall automatically terminate without notice upon
the termination, for any cause whatsoever including action or inaction of
Sublessor, of Sublessor's leasehold estate in the premises leased hereunder.
9. All notices required or which may be given hereunder shall be
considered as properly given if delivered in writing, personally or sent by
certified United States mail, postage prepaid with return receipt requested,
addressed as follows:
Sublessor: GREEN HOLDINGS, INC., 5275 DTC Parkway, Building
44, Englewood, Colorado 80111
Sublessee: J.D. EDWARDS & COMPANY, 8055 E. Tufts Avenue,
Denver, Colorado 80237
10. This Sublease shall not be binding on Sublessor or Sublessee unless or
until executed on its behalf by an officer of the company or an employee having
actual authority to execute this Sublease.
-2-
<PAGE> 3
11. This Sublease includes the General Conditions attached hereto which
are by reference incorporated herein. This instrument with the General
Conditions so incorporated and any Annex attached hereto constitute the complete
agreement of the parties hereunder and there are no oral agreements or
understandings between the parties concerning the property covered by this
Sublease Agreement.
Executed the day and year first above written.
WITNESS: GREEN HOLDINGS, INC.
/s/ signature readable By:/s/ signature unreadable
SUBLESSOR
WITNESS: J.D. EDWARDS & COMPANY
/s/ signature unreadable By:/s/ signature unreadable
SUBLESSEE
CONSENT OF LESSOR
-----------------
The undersigned, as the Lessor under the Lease Agreement referenced in Paragraph
M of the General Conditions attached hereto, hereby gives the consent of Lessor
to the foregoing Sublease and approves of the Sublessee therein as required by
the provisions of said Lease Agreement.
PHLLIPS PETROLEUM COMPANY, LESSOR
By:/s/ signature unreadable
Attorney-in-Fact
Date: 11/12/93
-3-
<PAGE> 4
GENERAL CONDITIONS
A. Sublessee covenants and agrees that it will not permit any illegal or immoral
activity on the leased premises nor will it permit any nuisance to be created or
maintained thereon.
B. Upon failure of Sublessee to pay rentals or any part thereof when due or upon
Sublessee's failure to carry out any obligation placed on it under this Sublease
or upon the death of Sublessee or upon Sublessee's making an assignment for
benefit of creditors, filing a voluntary petition in bankruptcy or being
adjudicated bankrupt or insolvent, Sublessor may, without notice, declare this
Sublease at an end and void, and may re-enter and take possession of said
premises and may recover rentals due in any appropriate action at law, or may
recover he possession of said premises and damages for the detention thereof
and/or for such failure by any appropriate remedy at law or in equity.
C. Sublessor shall pay all charges for utilities and other services supplied to
the premises as and when the same shall come due.
D. Sublessor shall render for taxation and pay all taxes and assessments,
general and special, on the leased premises and any buildings or other
improvements permanently fixed to the realty. Sublessee shall pay all taxes and
assessments on all property owned by Sublessee and located on the leased
premises.
E. Sublessee shall pay to Sublessor together with each rental payment the amount
of any sales and/or use tax due thereon.
F. At his own expense Sublessee shall keep the leased premises and all buildings
and other improvements located thereon in good repair. Sublessee will upon the
expiration or termination of this Sublease for any reason deliver up the
property leased hereunder to Sublessor in as good condition as when received by
Sublessee, depreciation due to a reasonable use thereof excepted.
G. All additions, fixtures or improvements which may be made by Sublessee,
except moveable furnishings, shall become the property of Sublessor and remain
upon the leased premises as a part thereof, and be surrendered with the leased
premises at the termination of this Sublease.
H. Sublessee agrees to obtain and maintain at its expense at all times during
the term hereof the following insurance:
1. Workmen's Compensation Insurance in compliance with the laws of the
state in which the leased premises are located and Employer
Liability Insurance with limit of not less than $100,000.
-4-
<PAGE> 5
2. Comprehensive Public Liability Insurance covering Sublessee's use
and occupancy of the leased premises with bodily injury, including
death, limit of not less than $1,000,000 per occurrence and property
damage limit of not less than $300,000 per occurrence.
Sublessee shall upon request furnish Sublessor with certified copies of
the policies or certificates evidencing the above insurance.
I. Sublessee shall not sell, hypothecate or assign this Sublease or
sublet the premises without the prior written consent of Sublessor
which consent shall not be unreasonably withheld.
J. Should all or any part of the leased premises be taken by eminent domain
proceedings or purchased by any public or quasi-public body having the power of
eminent domain, all proceeds from such taking or purchase shall belong
exclusively to Sublessor, except that Sublessor shall have no claim to any award
for loss or damage to Sublessee's trade fixtures, removable personal property,
which Sublessee is entitled to remove upon expiration of the term of this
Sublease. In the event such taking or purchase shall materially interfere with
Sublessee's use of the leased premises, Sublessee may at its option terminate
this Sublease.
K. In the event of any building on the leased premises shall be destroyed or
damaged by fire, explosion, the elements, or other causes so as to render the
same wholly or in part unfit for occupancy, and if the same cannot be repaired
within ninety (90) days from the date of such casualty, this Sublease shall
terminate on the date of such casualty. If such building can be repaired in such
ninety (90) day period then Sublessor shall notify Sublessee within ten (10)
days of such casualty if it elects to repair said building within such ninety
(90) day period. If Sublessor does not so elect, then Sublessee may terminate
this Sublease by giving notice in writing to Sublessor. If Sublessor elects to
repair said building but fails to do so, this Sublease shall terminate on the
expiration of said ninety
(90) days. In the event of any such termination, the Sublease shall
immediately surrender possession of the premises. If Sublessor repairs the said
building within the ninety (90) day period, this Sublease shall continue in full
force and effect. Sublessee shall not be required in any event to pay rent for
any period in which the leased premises are wholly unfit for the conduct of
Sublessee's business and shall be required during any period which a part of the
premises are unfit for the conduct of Sublessee's business to pay as rent the
stipulated rent multiplied by a fraction the numerator of which is the area of
the leased premises which is fit for the conduct of Sublessee's business and the
denominator of which is the total area of the leased premises.
L. Sublessor reserves the right to place or post "FOR LEASE" signs on the
property to signify the leased property is available for lease no earlier than
four (4) months prior to termination of this Sublease.
-5-
<PAGE> 6
M. This Sublease is subject to all of the terms and conditions of that certain
Lease Agreement dated March 1, 1989 and Amendment dated November 8, 1989 between
Phillips Petroleum Company, as Lessor, and Green Holdings, Inc., as Lessee, a
copy of said Lease Agreement being attached hereto as Exhibit B and made a part
hereof.
N. Total lease rental for the primary term hereof amount to $316,842.29 payable
in monthly installments as provided hereinabove (21 payments of $14,529.75 and 1
payment of $11,717.54).
0. Sublessee shall pay its allocated and proportionate share of any increase in
operating costs as defined in Paragraph 2 of Exhibit B hereof in excess of such
costs incurred in Sublessee's base year which base year shall be defined as the
period 1/7/93 - 12/31/93. It is agreed that Sublessee's allocated percentage of
Sublessor's operating costs shall be 7.2% of the operating costs payable by
Sublessor to Lessor pursuant to the Lease Agreement referenced in Paragraph M
above. The method of billing Sublessee for any such increase shall be consistent
with the provisions of said Paragraph 2.
P. Sublessee will provide the following parking spaces at no additional cost:
Spaces B302 through B307 6 spaces
C108 through C117 10 spaces
C211 through C215 5 spaces
C315 through C327 13 spaces
Total 34 spaces
-6-
<PAGE> 1
EXHIBIT 10.9
SUBLEASE AGREEMENT
THIS Sublease Agreement, dated this 12th day of June, 1995, made and
entered into between MICROSOLUTIONS TECH INC., a corporation with an office at
7860 E. Berry Avenue, Greenwood Village, Colorado 80111, as Sublessor and J. D.
EDWARDS & COMPANY, a Colorado corporation with an office at 8055 E. Tufts
Avenue, Denver, Colorado 80237, as Sublessee (whether one or more).
WITNESSETH
1. Sublessor hereby demises, leases and lets unto Sublessee the following
described premises in Denver County, State of Colorado to wit:
An office suite located on the 8th floor of the Stanford Place I
Building consisting of 1,418 useable square feet and 1,212 rentable square feet,
including proportionate share of common areas, as more particularly described on
Exhibit A attached hereto and made a part hereof said premises being located at
8055 E. Tufts Avenue in the city of Denver, Colorado, together with the
buildings and equipment, if any, located thereon and owned by Sublessor for the
following term:
Beginning on the 12th day of June, 1995, and ending on the 25th day of
August 1995.
2. Sublessee agrees to pay to Sublessor, with rental checks payable to
MICROSOLUTIONS TECH INC., (until notified to pay differently) the sum of One
Thousand Six Hundred Forty-Four and 72/100 Dollars ($1,644.72) per month payable
monthly in advance. Sublessor acknowledges receipt of the first and last full
month's rental together with any portion due from date hereof until the first
day of the succeeding month. Without limiting any of Sublessor's other rights
herein, it is agreed that if rentals are delinquent for a period of thirty (30)
days, Sutblessor may assess Sublessee a one percent (1%) per month delinquency
charge on the unpaid rentals. In the event the delinquency charge above is
deemed excessive by federal or state law, then the highest applicable charge
shall be assessed.
3. SUBLESSEE AGREES THAT IT HAS MADE A PERSONAL INSPECTION OF THE LEASED
PREMISES AND ANY BUILDINGS AND OTHER IMPROVEMENTS THEREON AND IS SATISFIED WITH
CONDITION AND FITNESS THEREOF AND ACCEPTS THE SAME "AS IS"; PROVIDED, HOWEVER,
SUBLESSEE AGREES TO CORRECT AT ITS OWN EXPENSE, ANY SIGNIFICANT OBVIOUS DAMAGE
IT MAY HAVE DONE TO THE LEASED PREMISES PRIOR TO SUBLESSEE'S OCCUPANCY.
SUBLESSOR DOES NOT WARRANT EITHER EXPRESSLY OR IMPLIEDLY THE CONDITION OR
FITNESS OF THE PROPERTY LEASED HEREUNDER, ANY SUCH WARRANTY BEING HEREBY
EXPRESSLY NEGATIVED.
-1-
<PAGE> 2
4. Sublessee shall defend, indemnify and save Sublessor harmless for any
losses, costs or expenses resulting from suits, demands or other claims for
damages to persons or property, arising out of the use or existence of the
buildings, structures, improvements and other personal property located on the
leased premises except where such damages arise out of the gross negligence or
willful misconduct of Sublessor, its employees, agents or invitees; however,
Sublessor at his election may intervene or provide its own defense.
5. Upon termination of this Sublease, Sublessee agrees to peacefully quit
and surrender possession of the leased premises. If Sublessee fails to so quit
and surrender possession, Sublessor shall have the right to take possession by
any lawful means, using such force as may be necessary, without being deemed
guilty of any trespass, and without the necessity of first resorting to any
court process. If Sublessee shall remain in possession after the date of
expiration or termination of this Sublease and after the effective date of
notice by Sublessor to terminate this Sublease, the Sublessee will pay as rent
for the leased premises during such time a sum equal to one hundred twenty five
percent (125%) of the rent herein provided.
6. Should Sublessor's interest in the premises leased hereunder be that of
a lessee then this Sublease shall automatically terminate without notice upon
the termination, for any cause whatsoever including action or inaction of
Sublessor, of Sublessors leasehold estate in the premises leased hereunder.
7. All notices required or which may be given hereunder shall be
considered as properly given if delivered in writing, personally or sent by
certified United States Mail, postage prepaid with return receipt requested,
addressed as follows:
Sublessor: MICROSOLUTIONS TECH INC.
7860 E. Berry Avenue Greenwood
Village, CO 80111
Sublessee: J.D. EDWARDS & COMPANY
8055 E. Tufts Avenue
Denver, CO 80237
8. This Sublease shall not be binding on Sublessor or Sublessee unless or
until executed on its behalf by an officer of the company or an employee having
actual authority to execute this Sublease.
9. This Sublease includes the General Conditions attached hereto which are
by reference incorporated herein. This instrument with the General Conditions so
incorporated and any Annex attached hereto constitute the complete agreement of
the parties hereunder and there are no oral agreements or understandings between
the parties concerning the property covered by this Sublease Agreement.
-2-
<PAGE> 3
EXECUTED the day and year first above written.
WITNESS: MICROSOLUTIONS TECH INC.
SUBLESSOR
_________________ By: /s/ signature unreadable
_________________ Title: _________________
WITNESS: J.D. EDWARDS & COMPANY SUBLESSEE
_________________ By: _____________________
_________________ Title: __________________
CONSENT OF LESSOR
The undersigned, as the Lessor under the Lease Agreement referenced in Paragraph
5 of the General Conditions attached hereto, hereby gives the consent of Lessor
to the foregoing Sublease and approves of the Sublessee therein as required by
the provisions of said Lease Agreement.
----------------------------------
Phillips Petroleum Company, Lessor
By: /s/ Signature unreadable
Attorney-in-Fact
Date: 6/27/95
-3-
<PAGE> 4
GENERAL CONDITIONS
A. Sublessee covenants and agrees that it will not permit any illegal or
immoral activity on the leased premises nor will it permit any nuisance to
be created or maintained thereon.
B. Upon failure of Sublessee to pay rentals or any part thereof when due or
upon Sublessee's failure to carry out any obligation placed on it under
this Sublease or upon the death of Sublessee or upon Sublessee's making an
assignment for benefit of creditors, filing a voluntary petition in
bankruptcy or being adjudicated bankrupt or insolvent, Sublessor may,
without notice, declare this Sublease at an end and void, and may re-enter
and take possession of said premises, and may recover rentals due in any
appropriate action at law, or may recover the possession of said premises
and damages for the detention thereof and/or for such failure by any
appropriate remedy at law or in equity.
C. Sublessor shall pay all charges for utilities and other services supplied
to the premises as and when the same shall come due.
D. Sublessor shall render for taxation and pay all taxes and assessments,
general and special, on the leased premises and any buildings or other
improvements permanently affixed to the realty. Sublessee shall pay all
taxes and assessments on all property owned by Sublessee and located on
the leased premises.
E. Sublessee shall pay to Sublessor together with each rental payment the
amount of any sales and/or use tax due thereon.
F. At his own expense Sublessee shall keep the leased premises and all
buildings and other improvements located thereon in good repair. Sublessee
will upon the expiration or termination of this Sublease for any reason
deliver up the property leased hereunder to Sublessor in as good condition
as when received by Sublessee, depreciation due to a reasonable use
thereof excepted.
G. Sublessee shall make no alterations in or upon the leased premises without
the prior written consent of the Sublessor, and all additions, fixtures or
improvements which may be made by Sublessee, except moveable furnishings,
shall become the property of Sublessor and remain upon the leased premises
as a part thereof, and be surrendered with the leased premises at the
termination of this Sublease.
H. Sublessee agrees to obtain and maintain at its expense at all times during
the term hereof the following insurance:
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1. Workmen's Compensation Insurance in compliance with the laws of the
state in which the leases premises are located and Employer Liability
Insurance with limits of not less than $100,000.
2. Comprehensive Public Liability Insurance covering Sublessee's use and
occupancy of the leased premises with bodily injury, including death,
limit of not less than $1,000,000 per occurrence and property damage
limit of not less than $300,000 per occurrence.
Sublessee shall upon request furnish Sublessor with certified copies of
the policies or certificates evidencing the above insurance.
I. Sublessee shall not sell, hypothecate or assign this Sublease or sublet the
premises without the prior written consent of Sublessor which consent shall not
be unreasonably withheld.
J. This Sublease is subject to all of the terms and conditions of that
certain lease Agreement dated September 4, 1992 and Amendment dated
December 31, 1992 between Phillips Petroleum Company, as Lessor and
Microsolutions, as Lessee, a copy of said Lease Agreement being attached
hereto as Exhibit B and made a part hereof.
K. Total lease rental for the primary term hereof amount to $4,111.80 payable
in monthly installments as provided hereinabove.
L. Sublessee shall pay its allocated and proportionate share of any increase
in operating costs as defined in Paragraph 2 of Exhibit B hereof in excess
of such costs incurred in Sublessee's base year which base year shall be
defined as the period June 1, 1995 through December 31, 1992. It is agreed
that Sublessee's allocated percentage of Sublessor's operating costs shall
be .738% of the operating costs payable by Sublessor to Lessor pursuant to
the Lease Agreement referenced in Paragraph M above. The method of billing
Sublessee for any such increase shall be consistent with the provisions of
said Paragraph 2.
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Exhibit 10.10
AGREEMENT OF PURCHASE AND SALE
J.D. Edwards
ARTICLE 1: PROPERTY/PURCHASE PRICE
1.1 Certain Basic Terms.
(a) Seller and Notice Address:
J.D. EDWARDS & COMPANY
8055 East Tufts Avenue
Denver, Colorado 80237
Attention: General Counsel
Telephone: 303/488-4606
Facsimile: 303/488-4679
With a copy to: Sherman & Howard, LLC
633 17th Street
Suite 3000
Denver, Colorado 80202
Attention: James L. Cunningham
Telephone: 303/299-8356
Facsimile: 303/298-0940
(b) Purchaser and Notice Address:
CARRAMERICA REALTY, L.P.
Attention: William Krokowski
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/624-7534
Facsimile: 202/638-0102
With a copy to: CARRAMERICA REALTY CORPORATION
Attention: Austin Lehr
7600 East Orchard Road
Englewood, CO 80111
Telephone: 303/773-0618
Facsimile: 303/779-6587
And a copy to: Mayer, Brown & Platt
Attn: George Ruhlen
141 East Palace Avenue
Santa Fe, New Mexico 87501
Telephone: 505/820-8186
Facsimile: 505/820-7334
<PAGE> 2
And with a copy to: Mayer, Brown & Platt
190 S. LaSalle Street
Chicago, IL 60603
Attn: John C. Huff
Telephone: 312/701-8619
Facsimile: 312/706-8711
(c) Date of this Agreement: The later date of execution by the
Seller and the Purchaser, as
indicated on the signature page.
(d) Purchase Price: $2,980,456.00 or, if different, the
product of (i) $6.65 and (ii) the
total number of square feet in the
Land (but not including the Easement
Parcel, as defined below), as
certified by the surveyor who
prepares the Survey.
(e) Earnest Money: $550,000.00, together with any
interest accrued thereon while
deposited in escrow pursuant to this
Agreement.
(f) Due Diligence Period: The period ending 30 days after the
Date of this Agreement.
(g) Closing Date: As designated by the Purchaser upon
not less than 5 days' prior notice
to Seller, but no later than 10 days
after the expiration of the Due
Diligence Period, as such date may
be extended pursuant to any express
provision of this Agreement. The
foregoing notwithstanding, the
parties agree to use diligent
efforts to close on or before
December 10, 1996.
(h) Title Company: Land Title Guarantee Company
as agent for Old Republic Title
Company
Attn: Cheryl Relf
3033 East 1st Avenue, No. 600
Denver, Colorado 80206
Telephone: 303/331-6207
Facsimile: 303/322-7603
(i) Escrow Agent: Land Title Guarantee Company
Attn: Ellie Mathew
3033 East 1st Avenue, No. 600
Denver, Colorado 80206
Telephone: 303/321-1880
Facsimile: 303/322-7603
1.2 Property. Subject to the terms and conditions of this
Agreement of Purchase and Sale (the "Agreement"), Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase from Seller, the following property
(collectively, the "Property"):
(a) The "Real Property," being the land described in Exhibit A
("Land") attached hereto; all improvements and fixtures located thereon,
including but not limited to the office building and related improvements
(including the parking garage, surface parking areas, roads, landscaping and
storm water and utility facilities) under construction on such land
(collectively, the "Improvements"); all and singular the rights, benefits,
privileges, easements, tenements, hereditaments, and appurtenances thereon or
in anywise appertaining to such real property; and all right, title, and
interest of Seller in and to all strips and gores and any land lying in the bed
of any street, road or alley, open or proposed, adjoining such real property.
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<PAGE> 3
(b) The "Personal Property," being all right, title and interest
of Seller in and to all tangible personal property now or hereafter used in
connection with the design, construction, operation, ownership, maintenance, or
management of the Real Property, including without limitation: equipment;
machinery; and, whether stored on or offsite, all tools, supplies, and
construction and finish materials not incorporated in the Improvements and held
for repairs and replacements. The term "Personal Property" also shall include
any and all deposits, bonds or other security deposited or delivered by Seller
with or to any and all governmental bodies, utility companies or other third
parties in connection with the operation, ownership, maintenance, management,
occupancy or improvement of the Real Property. The foregoing notwithstanding,
"Personal Property" shall not include any trade fixtures, furniture, art work,
furnishings, and office equipment and supplies or other personal property of
Seller acquired or brought onto the Property after the Closing Date in
connection with Seller's use and occupancy of the Improvements as the tenant
under the Lease (as defined Paragraph 1.5).
(c) The "Project Agreements", being all right, title and interest
of Seller in and to all contracts and agreements for design, engineering,
consulting, equipment, supply, furnishing and construction services provided or
to be provided in connection with the Real Property and/or the Improvements,
and all change orders, amendments or modifications thereto and all guaranties,
bonds and security received in connection therewith, including, without
limitation, the contracts, agreements, guaranties, bonds and other items
identified on attached Exhibit B; provided that as contemplated by the
Construction Supplement (defined in Paragraph 1.5), Seller shall continue to
perform its obligations under the Project Agreements and Purchaser shall not be
deemed to have assumed any of such obligations.
(d) The "Intangible Property," being all, right, title and
interest of Seller in and to all intangible personal property now or hereafter
used in connection with the design, construction, operation, ownership,
maintenance or management, of the Real Property or the Improvements, including
without limitation: all construction plans, drawings and specifications for
the Improvements, including without limitation all landscaping plans (the
"Plans and Specifications"), which Plans and Specifications are itemized in
Exhibit C hereto, and all development plans, shop drawings and other
submittals; all bonds, security instruments, letters of credit and/or cash or
other collateral posted by Seller with any governmental entity to secure
Seller's completion of any of the Improvements as well as any bonds or security
received by Seller from any contractor or subcontractor under any of the
Project Agreements; all trade names and trade marks associated with the Real
Property, including without limitation the name of the building comprising a
part of the Improvements; all construction and building permits, approvals and
licenses and applications for any of the foregoing; warranties; indemnities;
claims against third parties; applications, permits, approvals and licenses (to
the extent assignable); insurance proceeds and condemnation awards or claims
thereto to be assigned to Purchaser hereunder; and all books and records
relating to the Property. The foregoing notwithstanding, "Intangible Property"
shall not include any trade names or trade marks, licenses, copyrights,
contract rights or other intangible personal property of Seller as the tenant
under the Lease in connection with Seller's use and occupancy of the
Improvements or any business conducted by Seller on or within the Improvements.
1.3 Earnest Money. Within 3 business days after the execution of
this Agreement, Purchaser shall deposit the Earnest Money with the Escrow
Agent. The Escrow Agent shall pay the Earnest Money to Seller at and upon the
Closing, or otherwise, to the party entitled to receive the Earnest Money in
accordance with this Agreement. The Earnest Money shall be held and disbursed
by the Escrow Agent pursuant the provisions of Article 8 of this Agreement. In
addition to any other right or remedy of Purchaser under this Agreement, the
Earnest Money shall promptly be returned to Purchaser if Purchaser elects to
terminate this Agreement pursuant to Paragraph 2.2, or if this Agreement is
terminated for any reason other than Purchaser's default hereunder.
1.4 Remedies. Seller's sole remedy in the event of Purchaser's
default in its obligation to close this transaction shall be to terminate this
Agreement and to retain as liquidated damages the Earnest Money, Seller waiving
all other rights or remedies in the event of such default by Purchaser. The
parties acknowledge that Seller's actual damages in the event of a default by
Purchaser under this Agreement will be difficult to ascertain, and that such
liquidated damages represent the parties' best estimate of such damages. In
the event of a Seller default hereunder, if such default is willful or
intentional, Purchaser may elect to terminate this Agreement and receive a
refund of the Earnest Money, or to pursue such other remedies as may be
available to Purchaser at law or in equity, including specific performance.
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<PAGE> 4
1.5 Lease, Option Agreement and Access Easement.
(i) At Closing, Seller shall grant to Purchaser a right
of first refusal agreement in the form attached to this Agreement as Exhibit G
(the "Right of First Refusal Agreement"). At Closing the parties shall execute
a memorandum of such Right of First Refusal Agreement (the "Memorandum of
Agreement") and cause such memorandum to be recorded in the real property
records of the county in which the subject land is located.
(ii) At Closing, Purchaser and Seller shall enter into (a)
a lease in the form attached to this Agreement as Exhibit H (the "Lease")
whereby Purchaser leases the Improvements to Seller on the terms and subject to
the conditions set forth in such Lease and (b) a Supplement to Lease Agreement
in the form attached hereto as Exhibit I (the "Construction Supplement").
(iii) At Closing, Purchaser and Seller shall enter into the
Conveyance of Easement in the form attached to this Agreement as Exhibit K (the
"Access Easement Agreement"), pursuant to which Purchaser will grant to Seller
easements for access and underground utilities on the terms set forth therein,
encumbering the portion of the Property described on Exhibit A as Parcel 2 or
the easement parcel.
ARTICLE 2: INSPECTION
2.1 Seller's Delivery of Specified Documents. To the extent such
items are in Seller's possession or control and have not heretofore been
provided to Purchaser, Seller shall provide to Purchaser or give Purchaser, and
its representatives full access to, at all reasonable times, within 3 business
days after the Date of this Agreement, the items and information with respect
to the Property identified on Purchaser's due diligence request list previously
delivered to Seller and attached hereto as Exhibit J, together with the
following, to the extent not listed on Exhibit J (the "Property Information"):
(a) Project Agreements. A list together with copies of all
Project Agreements;
(b) Reports. Any environmental, soil, structural engineering,
drainage and other physical inspection reports, assessments, audits and surveys
related to the Property;
(c) Plans and Specifications. The Plans and Specifications,
together with any Construction Change Directives, Addenda, Modifications,
approved Change Orders and any pending Change Orders (as such items are defined
in the documents prepared by the American Institute of Architects) or change
order requests or other requests or demands for an extension of time for
performance and/or additional compensation under any of the Project Agreements;
copies of all payment and/or performance bonds or other security received from
any contractor or subcontractor under any of the Project Agreements; copies of
all bonds, security instruments, letters of credit or other collateral posted
by Seller with any governmental authority to secure Seller's obligation to
complete any of the Improvements; project meeting minutes, project logs, cash
flow reports, applications for payment, payment certifications, construction
schedules and updates of same; inspection reports from any governmental entity;
pending requests for information or clarifications; lien waivers, any stop work
notices, or claims for mechanics' liens; all books, records, notices,
correspondence and files relating to the design, engineering and construction
of the Improvements; and all shop drawings (collectively the "Project
Documents");
(d) Insurance. Copies of Seller's certificates of insurance for
the Property and any notices received from insurance carriers as well as
certificates of the insurance required from all contractors, engineers, and
architects providing services in connection with the Improvements;
(e) Proceedings. Copies of any documents or materials relating to
any litigation, investigation, condemnation, or proceeding of any kind pending
or threatened affecting the Property or the ability of Seller to consummate the
transaction contemplated by this Agreement; and
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<PAGE> 5
(f) Existing Title and Survey Documents. Copy of Seller's
existing title insurance policy or policies and any existing surveys of the
Real Property.
At such time as the last item of Property Information shall have been
delivered or made available to Purchaser, Seller shall deliver to Purchaser a
written notice (the "Property Information Notice") certifying that all such
deliveries have been completed together with an itemization of the matters
delivered or made available to Purchaser. Seller shall have the continuing
obligation during the pendency of this Agreement to provide Purchaser with any
document described above and coming into Seller's possession or produced by
Seller after the initial delivery of the Property Information.
2.2 Due Diligence. Purchaser shall have through the last day of
the Due Diligence Period in which to examine, inspect, and investigate the
Property and, in Purchaser's sole and absolute judgment and discretion, to
determine whether the Property is satisfactory to Purchaser and to obtain
appropriate internal approval to proceed with this transaction. Purchaser may
terminate this Agreement pursuant to this Paragraph 2.2 by giving notice of
termination to Seller on or before the last day of the Due Diligence Period.
This Agreement shall continue in full force and effect if Purchaser does not
give the notice of termination. Upon such termination, the Earnest Money shall
be refunded to Purchaser immediately upon request, and all further rights and
obligations of the parties under this Agreement shall terminate, except
pursuant to any provisions which by their terms survive a termination of this
Agreement.
Purchaser shall have reasonable access to the Property and all books
and records for the Property that are in Seller's or its property manager's
possession or control for the purpose of conducting surveys, architectural,
engineering, geotechnical and environmental inspections and tests (including
intrusive inspection and sampling), and any other inspections, studies, or
tests reasonably required by Purchaser. During the pendency of this Agreement,
Purchaser and its agents, employees, and representatives shall have a
continuing right of reasonable access to the Property and any offices where the
records of the Property are kept for the purpose of examining and making copies
of all books and records and other materials relating to the Property in
Seller's or its construction manager's possession or control. In the course of
its investigations, Purchaser may make inquiries to third parties, including,
without limitation, any lender providing construction financing for the
Improvements, contractors, subcontractors, architects, engineers, and other
parties to the Project Agreements and municipal, local and other government
officials and representatives, and Seller consents to such inquiries.
Purchaser shall keep the Real Property free and clear of any liens arising by,
through or under Purchaser, and will indemnify, defend, and hold Seller
harmless from all claims asserted by third parties against Seller to recover
for personal injury or property damage as a result of Purchaser's entry onto
the Property. If any inspection or test disturbs the Property, Purchaser will
restore the Property to its condition before any such inspection or test. The
obligations of Purchaser under the preceding two sentences shall survive the
Closing or termination of this Agreement.
2.3 Construction Plan. During the Due Diligence Period, Purchaser
and Seller shall endeavor in good faith to agree upon the
following:
(a) A detailed line item construction budget for completion of the
Improvements ("Budget");
(b) A line item schedule for completion of the Improvements;
(c) A schedule of disbursements to be made by Purchaser pursuant
to the Construction Supplement;
(d) The total amount of the costs of design and construction of
the Improvements to be reimbursed to Seller at Closing
pursuant to Section 6.1(b);
(e) Time periods and procedures for review by Purchaser of
construction change directives and change orders; and
(f) The terms and location of (i) an easement for drainage of
storm water from the Property over and through land owned by
Seller to existing storm water drainage facilities of the
Denver Technological Center ("Drainage Easement") and (ii)
easements burdening the Property for fiberoptic cables and
other utilities.
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<PAGE> 6
To the extent any of the foregoing matters are not agreed to prior to
the expiration of the Due Diligence Period, then the completion of any
unresolved matters to Purchaser's satisfaction shall continue as conditions to
Purchaser's obligation to close hereunder. Prior to the expiration of the Due
Diligence Period, the parties shall memorialize in writing which matters remain
unresolved.
ARTICLE 3: TITLE AND SURVEY REVIEW
3.1 Delivery of Title Commitment and Survey. Purchaser shall
cause to be prepared (and shall deliver copies thereof to Seller and its
counsel) a current, effective commitment for title insurance with respect to
the Real Property and the easements created under the Access Easement Agreement
(the "Title Commitment") issued by the Title Company, in the amount of the
Purchase Price with Purchaser as the proposed insured, and accompanied by true,
complete, and legible copies of all documents referred to in the Title
Commitment. Not later than 10 days after the date of this Agreement, Seller
shall cause to be prepared and delivered to Purchaser, the Title Company and
Purchaser's counsel (i) a current ALTA-ACSM Urban survey of the Real Property
(the "Survey"), including a certification addressed to Purchaser, in the form
attached hereto as Exhibit D; and (ii) copies of Uniform Commercial Code
searches in the name of Seller, issued by the Title Company or a search company
acceptable to Purchaser ("UCC Searches").
3.2 Title Review and Cure. During the Due Diligence Period,
Purchaser shall review title to the Real Property as disclosed by the Title
Commitment, the Survey and UCC Searches. Purchaser shall be entitled to object
to any title matters shown on the Title Commitment, Survey or UCC Searches, in
its sole discretion, by a written notice of objections delivered to Seller on
or before the expiration of the Due Diligence Period. Seller will cooperate
with Purchaser, at no expense to Seller, in curing any objections Purchaser may
have to title to the Property. Seller shall have no obligation to cure title
objections except liens and security interests created by, under or through
Seller, all of which liens and security interests Seller shall cause to be
released at the Closing. Seller agrees to remove such exceptions or
encumbrances to title which arise after the Date of this Agreement to the
extent created by, through or under Seller. As to any other exceptions or
objections raised by Purchaser, Seller shall have, without any obligations to
do so, 10 days from the receipt of Purchaser's notice of objections either to
have such exceptions or objections removed or, if acceptable to Purchaser, to
provide affirmative title insurance protection for such exceptions satisfactory
to Purchaser in Purchaser's sole discretion. If Seller fails either to provide
for the removal of such exceptions or objections or to obtain affirmative title
insurance protection for such exceptions or objections satisfactory to
Purchaser in Purchaser's sole discretion within such 10 day period, then
Purchaser may elect to terminate this Agreement by delivering written notice to
Seller within 15 days following such period. Upon delivery of such termination
notice by Purchaser, this Agreement shall automatically terminate, the parties
shall be released from all further obligations under this Agreement except
pursuant to any provisions which by their terms survive a termination of this
Agreement, and the Earnest Money shall be immediately returned to the
Purchaser. If after the expiration of the Due Diligence Period the Title
Company revises the Title Commitment, or the surveyor revises the Survey to add
or modify exceptions, or to add or modify the conditions to obtaining any
endorsement requested by Purchaser during the Due Diligence Period, then
Purchaser may terminate this Agreement and receive a refund of the Earnest
Money if provision for their removal or modification satisfactory to Purchaser
is not made. Purchaser shall have been deemed to have approved any title
exception that Seller is not obligated to remove and to which either Purchaser
did not object as provided above, or to which Purchaser did object, but with
respect to which Purchaser did not terminate this Agreement. If there are
exceptions or objections raised by Purchaser, the Closing Date shall be
extended to the extent necessary to permit Seller and Purchaser to exercise
their rights as provided above.
3.3 Delivery of Title Policy at Closing. As a condition to
Purchaser's obligation to close, the Title Company shall deliver to Purchaser
at Closing an ALTA Owner's Policy (Revised 10-17-70 and 10-17-84) (or other
form if required by state law) of title insurance, with extended coverage
(i.e., with ALTA General Exceptions 1 through 5 deleted, or with corresponding
deletions if the Property is located in a non-ALTA state), issued by the Title
Company as of the date and time of the recording of the Deed (as defined
below), in the amount of the Total Project Cost (as defined in the Construction
Supplement), as estimated based upon the Budget, the Purchaser's Endorsements,
insuring Purchaser as owner of good, marketable and indefeasible fee simple
title to the Real Property and the easements benefiting the Property agreed to
by the parties under Paragraph 2.3, and subject only to Permitted Exceptions
which are applicable to the Real Property and such easements (the "Title
Policy"). "Permitted Exceptions" means exceptions approved or deemed approved
by Purchaser pursuant to this Agreement and real estate taxes not yet due and
payable. Permitted Exceptions
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<PAGE> 7
shall include any easements burdening the Property agreed to pursuant to
Paragraph 2.3. "Purchaser's Endorsements" shall mean, to the extent such
endorsements are available under the laws of the state in which the Property is
located: (1) owner's comprehensive; (2) access to a physically open, public
street; (3) survey (accuracy of survey); (4) location (survey legal matches
title legal) (5) single tax parcel; (6) compliance with subdivision laws; (7)
contiguity, if applicable; (8) with respect to the Real Property, a zoning 3.1
endorsement with parking coverage; and (9) such other endorsements as Purchaser
may reasonably require based upon its review of title. To the extent that any
of the coverages provided under a 3.1 zoning endorsement with parking coverage
or an owner's comprehensive endorsement cannot be issued at Closing due to lack
of completion of the Improvements, it shall be a condition to Purchaser's
obligation to close that such endorsements be issued insuring compliance of the
Improvements upon completion, and conditioned solely upon completion of the
Improvements in substantial accordance with the Plans and Specifications.
Seller shall execute at Closing an ALTA Statement (Owner's Affidavit) and any
other documents, undertakings or agreements required by the Title Company to
issue the Title Policy at Closing in accordance with the provisions of this
Agreement.
3.4 Title and Survey Costs. Purchaser shall pay for the cost of
the Survey, including any revisions necessary to make the Survey conform to the
requirements of this Agreement, and the cost of the premium for the Title
Policy, including the premium for extended coverage and Purchaser's
Endorsements; provided that such costs shall be included in Total Project Costs
under the Construction Supplement. Seller shall pay the cost of the UCC
Searches.
ARTICLE 4: OPERATIONS AND RISK OF LOSS
4.1 Ongoing Operations. During the pendency of this Agreement:
(a) Construction of Improvements. Both prior to Closing, and
after Closing as contemplated by the Construction Supplement, Seller shall
continue, in its capacity as "Owner" under the Project Agreements, to cause the
construction of the Improvements to proceed in accordance with the requirements
of such Project Agreements and in substantial accordance with the Plans and
Specifications and shall enforce the requirements of the Project Agreements,
and shall otherwise continue in conformity with its past practices and
procedures, the administration and management of the construction of the
Improvements. Seller shall keep Purchaser apprised of the status of
construction, shall provide copies to Purchaser, as and when received by
Seller, of: (i) all requests for information; (ii) prior to making payment in
respect thereof, applications for payment and invoices for payment under the
Project Agreements together with supporting documentation and certificates for
payment; (iii) prior to agreeing thereto, proposed Change Orders, Construction
Change Directives, Addenda, and Modifications; (iv) project meeting minutes;
(v) inspection certifications and correspondence relating thereto; (vi) any
claims for additional compensation or an extension in time for performance
under any of the Project Agreements; (vii) any notices of any violations of any
legal or regulatory requirements applicable to the performance of the work;
(viii) any schedule modifications; (ix) all shop drawings and other submittals;
and (x) any other material matters relating to the completion of the
Improvements.
(b) Maintenance of Insurance. Seller shall continue to carry its
existing insurance and require that all parties to the Project Agreements
maintain the insurance therein required through the Closing Date, and shall not
allow any breach, default, termination or cancellation of such insurance
policies or agreements to occur or exist. Without limiting the generality of
the foregoing, Seller shall cause the General Contractor (defined in
subparagraph (f) below) to carry, during all such times as the Seller's work is
being performed, all insurance required to be carried by the General Contractor
under Article 11 of the General Conditions to the General Construction Contract
(defined below), including, without limitation, (1) a policy of insurance
covering commercial general liability, with a combined single limit for bodily
injury and property damage per occurrence of not less than $2,000,000,
automobile liability coverage (including owned, non-owned and hired vehicles)
in an amount not less than $1,000,000, combined single limit (each person, each
accident), and umbrella liability with limits not less than $25,000,000, and
endorsed to show Purchaser as an additional insured, and (3) workers'
compensation insurance as required by law, endorsed to show a waiver of
subrogation by the insurer to any claim the General Contractor may have against
Purchaser. In addition, Seller shall carry or cause General Contractor to
carry Builder's Risk Insurance for the Improvements in an amount and with
deductibles approved by Purchaser, which approval shall not be unreasonably
withheld or delayed, and otherwise satisfying the requirements of Section
11.3.1 of the General Conditions to the General Construction Contract. From
and after Closing, such insurance shall include interests of Purchaser in the
Improvements. As a condition to its obligation to Close, Purchaser shall have
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<PAGE> 8
received certificates evidencing the insurance required hereunder and naming
Purchaser as an additional insured (on an occurrence and not a claims basis) or
loss payee as required, and providing primary coverage to Purchaser (any policy
issued to Purchaser providing duplicate or similar coverage shall be deemed
excess over the policies required hereunder). All such insurance shall be
issued by insurance companies which are reasonably acceptable to Purchaser, and
not be cancelable unless 30 days prior written notice shall have been given to
Purchaser.
(c) Change Orders, Modifications, New Contracts. From and after
the Date of this Agreement through the date which is 10 days prior to the
expiration of the Due Diligence Period, if Seller intends to enter into or
amend, terminate, waive any default under, or grant concessions regarding, any
Project Agreements, or any other contract or agreement that will be an
obligation affecting the Property or binding on the Purchaser after the Closing
(except as provided in subparagraph (f), below), or if Seller desires to
execute any Change Order or Construction Change Directive or otherwise agree to
or permit any change in the work provided for in the Plans and Specifications,
Seller shall first provide Purchaser with at least 3 business days' prior
written notice of such action, and shall with such notice, deliver to Purchaser
a copy of any contract, amendment, Change Order, Construction Change Directive,
modification to the Plans and/or Specifications and/or any other document or
agreement to be executed in connection therewith. From and after the date
which is 10 days prior to the expiration of the Due Diligence Period, and
thereafter until the Closing hereunder has occurred or this Agreement has
otherwise been terminated, Seller will not amend, terminate, waive any default
under, or grant concessions regarding, any Project Agreements (except as
provided in subparagraph (f), below) or any contract or agreement that will be
an obligation affecting the Property or binding on the Purchaser after the
Closing or except as permitted under the Construction Supplement, agree to any
Change Order, Construction Change Directive or any other modification to the
Plans and/or Specifications, without in each instance the prior written consent
of Purchaser.
(d) Listings and Other Offers. Seller will not list the Property
with any broker or otherwise solicit or make or accept any offers to sell the
Property, engage in any discussions or negotiations with any third party with
respect to the sale or other disposition of any of the Property, or enter into
any contracts or agreements (whether binding or not) regarding any disposition
of any of the Property.
(e) Maintenance of Permits. Seller shall maintain in existence
all licenses, permits and approvals necessary or reasonably appropriate to the
ownership or improvement of the Property and the construction of the
Improvements.
(f) Contract Requirements. As a condition to Purchaser's
obligation to Close, on or before the Closing Date, Seller shall cause the
general contract (the "General Construction Contract") dated as of May 1, 1996
between Seller and Hensel Phelps Construction Company (the "General
Contractor") to be modified to (i) name Purchaser as an additional indemnitee
under the provisions of Section 3.18 of the General Conditions to such contract
whereby the General Contractor holds Seller harmless from and against any and
all claims, damages, losses, liabilities and expenses arising out of or
resulting from the performance of such work, (ii) name Purchaser as a
beneficiary of (and a party entitled to enforce) all of the warranties of the
General Contractor with respect to the work performed thereunder (including the
warranties under Section 3.5 of the General Conditions to such contract) and
the obligation of the General Contractor to replace defective materials and
correct defective workmanship for a period of not less than one (1) year
following substantial completion of the work under such contract, (iii)
evidence the agreement of the General Contractor that the provisions of the
Lease shall control over the provisions of the contract with respect to
distribution or use of insurance proceeds, in the event of a casualty during
construction, and (iv) set a guaranteed maximum price for the work thereunder,
reasonably satisfactory to Purchaser.
(g) Survival. The obligations of Seller under this Section 4.1
shall survive the Closing; provided that the terms of the Construction
Supplement shall control to the extent of any conflict between the provisions
of this Section 4.1 and the terms of the Construction Supplement.
4.2 Damage. Seller shall promptly give Purchaser written notice
of any damage to the Property, describing such damage, whether such damage is
covered by insurance and the estimated cost of repairing such damage. If such
damage is not material, then (1) Seller shall, to the extent possible, begin
repairs prior to the Closing out of any insurance proceeds received by Seller
for the damage, (2) at Closing Purchaser shall receive all insurance proceeds
not applied to the repair of any such Property prior to the Closing due to
Seller for the damage, (3) any uninsured damage or deductible, as reasonably
estimated by Purchaser, shall be credited to Purchaser at Closing, (4) Seller
shall assume the responsibility
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for the repair after the Closing and (5) the insurance proceeds and the amount
of any uninsured damage or deductible so paid or credited to Purchaser shall be
disbursed by Purchaser to pay for costs of repair as such work is performed, on
the same terms and subject to the same conditions as set forth in the Lease
with respect to payment of remaining costs of completing the Improvements. If
such damage is material, Purchaser may elect by notice to Seller given within
14 days after Purchaser is notified of such damage (and the Closing shall be
extended, if necessary, to give Purchaser such 14 day period to respond to such
notice) to proceed in the same manner as in the case of damage that is not
material or terminate this Agreement, in which event the Earnest Money shall be
immediately returned to Purchaser. Damage as to any one or multiple
occurrences is material if the cost to repair the damage, as reasonably
estimated by Purchaser is equal to or greater than $500,000.
4.3 Condemnation. Seller shall promptly give Purchaser written
notice of any eminent domain proceedings that are contemplated, threatened or
instituted with respect to the Property. By notice to Seller given within 14
days after Purchaser receives notice of any such proceedings in eminent domain,
and if necessary the Closing Date shall be extended to give Purchaser the full
14 day period to make such election, Purchaser may terminate this Agreement or
proceed under this Agreement, in which event Seller shall, at the Closing,
assign to Purchaser its entire right, title and interest in and to any
condemnation award, and Purchaser shall have the sole right during the pendency
of this Agreement to negotiate and otherwise deal with the condemning authority
in respect of such matter.
ARTICLE 5: CLOSING
5.1 Closing and Escrow. The consummation of the transaction
contemplated herein ("Closing") shall occur on the Closing Date. Closing shall
occur through an escrow with the Escrow Agent. Funds shall be deposited into
and held by Escrow Agent in a closing escrow account with a bank satisfactory
to Purchaser and Seller. Upon satisfaction or completion of all closing
conditions and deliveries, the parties shall direct the Escrow Agent to
immediately record and deliver the closing documents to the appropriate parties
and make disbursements according to the closing statements executed by Seller
and Purchaser. The Escrow Agent shall agree in writing with Seller and
Purchaser that (1) recordation of the Deed constitutes its representation that
it is holding the closing documents, closing funds and closing statement and is
prepared and irrevocably committed to disburse the closing funds in accordance
with the closing statements and (2) release of funds to the Seller shall
irrevocably commit it to issue the Title Policy in accordance with this
Agreement. Provided such supplemental escrow instructions are not in conflict
with this Agreement as it may be amended in writing from time to time, Seller
and Purchaser agree to execute such supplemental escrow instructions as may be
appropriate to enable Escrow Agent to comply with the terms of this Agreement.
5.2 Conditions to the Parties' Obligations to Close. In addition
to all other conditions set forth herein, the obligation of Seller, on the one
hand, and Purchaser, on the other hand, to consummate the transactions
contemplated hereunder shall be contingent upon the following:
(a) The other party's representations and warranties contained
herein shall be true and correct as of the date of this Agreement and the
Closing Date;
(b) As of the Closing Date, the other party shall have performed
its obligations hereunder and all deliveries to be made by the other party at
Closing have been tendered;
(c) As of the Closing Date, no action or proceeding by or before
any governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement, other than an action or proceeding instituted or threatened by
such party; and
(d) Any other condition set forth in this Agreement to such
party's obligation to close is not satisfied by the applicable date.
In addition to the conditions set forth above, the following shall be
conditions to Purchaser's obligation to close:
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(x) At Closing Seller shall not be in default under any agreement
to be assigned to Purchaser under this Agreement and no material default by any
other party to any of the Project Agreements shall then be continuing; and
(y) A building permit for base building core and shell shall have
been issued with respect to the Improvements, by the applicable governmental
authority.
So long as a party is not in default hereunder, if any condition to
such party's obligation to proceed with the Closing hereunder has not been
satisfied as of the Closing Date or other applicable date, such party may, in
its sole discretion, terminate this Agreement by delivering written notice to
the other party on or before the Closing Date or other applicable date, or
elect to close, notwithstanding the non-satisfaction of such condition, in
which event such party shall be deemed to have waived any such condition except
for breach by a party of a covenant in which case the Closing shall not relieve
such breaching party from any liability it would otherwise have hereunder.
5.3 Seller's Deliveries in Escrow. Seller shall deliver in escrow
to the Escrow Agent the following:
(a) Deed. A special warranty deed for the Real Property,
Improvements and all other of the Property which is Real Property warranting
title against any party claiming by, through or under Seller, subject only to
the applicable Permitted Exceptions (the "Deed");
(b) Bill of Sale and Assignment of Contracts. A Bill of Sale and
Assignment of and Contracts in the form of Exhibit E attached hereto (the
"Assignment"), executed and acknowledged by Seller, vesting in Purchaser good
title to the property described therein free of any claims, except for the
Permitted Exceptions to the extent applicable, together with such consents to
such assignment as Purchaser may reasonably require from the contractors,
engineers, architects and other consultants who are parties to the Project
Agreements;
(c) Certificate. A certificate from Seller that each of the
representations and warranties contained in Paragraph 7.1 hereof is true and
correct as set forth herein as of the Closing Date modified to correct any
change arising from and after the Date of this Agreement. Such certificate
shall contain an updated certified list of Plans and Specifications and Project
Agreements (including any modifications agreed to since the Date of this
Agreement) which Seller shall certify to be true and correct as of Closing;
(d) Lease. Counterparts of the Lease duly executed by Seller;
(e) Construction Supplement. Counterparts of the Construction
Supplement duly executed by Seller;
(f) Easement Agreements. If Seller is a party thereto,
counterparts of the Access Easement Agreement, Drainage Easement and any other
easements agreed to by the parties pursuant to Paragraph 2.3, in the forms
agreed to by the parties, executed and acknowledged by Seller;
(g) Right of First Refusal Agreement. Counterparts of the Right
of First Refusal Agreement and Memorandum of Agreement duly executed by Seller
and acknowledged as required;
(h) Insurance. Certificates of insurance from all parties
obligated to maintain insurance under the Project Agreements evidencing that
such insurance is in full force and effect and naming Purchaser, to the extent
appropriate, as an additional insured under such policies; including, without
limitation, certificates evidencing the insurance coverage required under
Paragraph 4.1(b);
(i) Amendment to Construction Contract. An amendment to the
General Construction Contract satisfying the requirements of Paragraph 4.1(f),
duly executed by Seller and the General Contractor;
(j) Contractor Bonds. An assignment to Purchaser of Seller's
right, title and interest in and under all payment and/or performance bonds
delivered by any contractor or subcontractor in connection with the completion
of the Improvements and the consent of the applicable sureties to such
assignment;
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(k) Seller Bonds. An assignment to Purchaser of any bonds or
other security posted with any governmental authority by Seller to secure
Seller's obligation to complete any of the Improvements, together with the
consent to such assignment from the surety or other issuer and the applicable
governmental authority;
(l) State Law Disclosures. Such disclosures and reports as are
required by applicable state and local law in connection with the conveyance of
real property;
(m) FIRPTA. A Foreign Investment in Real Property Tax Act
affidavit executed by Seller. If Seller fails to provide the necessary
affidavit and/or documentation of exemption on the Closing Date, Purchaser may
proceed in accordance with the withholding provisions in such Act;
(n) Lien Waivers. Lien waivers from all parties having lien
rights under the Project Agreements, as well as their subcontractors and
sub-subcontractors, of any lien rights they may have with respect to services
provided and paid for prior to the Closing Date (including amounts to be
reimbursed to Seller under Paragraph 6.1(b)) and sworn statements from all such
parties confirming that all amounts owed for work performed in connection with
the Improvements has been paid for work through a date not earlier than 30 days
prior to the Closing Date;
(o) Authority. Evidence of the existence, organization and
authority of Seller and of the authority of the persons executing documents on
behalf of Seller reasonably satisfactory to Purchaser, the Escrow Agent and the
Title Company;
(p) Other Deliveries. Any other Closing deliveries required to be
made by or on behalf of Seller hereunder.
5.4 Purchaser's Deliveries in Escrow. Purchaser shall deliver in
escrow to the Escrow Agent the following:
(a) Purchase Price. The Purchase Price, less the Earnest Money
that is applied to the Purchase Price, plus or minus applicable prorations and
adjustments under Article 6, deposited by Purchaser with the Escrow Agent in
immediate, same-day federal funds wired for credit into the Escrow Agent's
escrow account;
(b) Lease. Counterparts of the Lease duly executed by Purchaser;
(c) Construction Addendum. Counterparts of the Construction
Addendum, duly executed by Purchaser.
(d) Right of First Refusal Agreement. Counterparts of the Right
of First Refusal Agreement and Memorandum of Agreement duly executed by
Purchaser, and acknowledged as required;
(e) Easement Agreements. If Purchaser is a party thereto,
counterparts of the Access Easement Agreement and Drainage Easement and other
easements agreed to by the parties pursuant to Paragraph 2.3, in the forms
agreed to by the parties, executed and acknowledged by Purchaser;
(f) Other Deliveries. Any other Closing deliveries required to be
made by or on behalf of Purchaser hereunder.
5.5 Closing Statements/Escrow Fees. Seller and Purchaser shall
deposit with the Escrow Agent executed closing statements consistent with this
Agreement in the form required by the Escrow Agent. The Escrow Agent's escrow
fee, closing charges, and any cancellation fee shall be divided equally between
and paid by Seller and Purchaser. If Seller and Purchaser cannot agree on the
closing statement to be deposited as aforesaid because of a dispute over the
prorations and adjustments set forth therein, the Closing nevertheless shall
occur, and the amount in dispute shall be withheld from the Purchase Price and
placed in an escrow with the Title Company, to be paid out upon the joint
direction of the parties or pursuant to court order upon resolution or other
final determination of the dispute.
5.6 Transfer, and Documentary Taxes. Purchaser shall pay any
documentary, transfer, deed or similar taxes and fees imposed in connection
with this transaction under applicable state or local law.
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5.7 Possession. At the time of Closing, Seller shall deliver to
Purchaser possession of the Property subject only to the Permitted Exceptions.
5.8 Delivery of Books and Records. Immediately after the Closing,
Seller shall deliver to or make available Purchaser: copies or originals of
all Project Agreements and Project Documents and any other books and records of
account, contracts, copies of correspondence with suppliers, receipts for
deposits, unpaid bills and other papers or documents which pertain to the
Property; all permits and warranties; keys and other items, if any, used in the
operation of the Property; and, if in Seller's possession or control, original
copies of the Plans and Specifications; all other available plans and
specifications and all operation manuals. Seller shall cooperate with
Purchaser after Closing to transfer to Purchaser any such information stored
electronically. Upon Project Close-Out (as defined in the Construction
Supplement) Seller shall cause to be delivered to Purchaser originals of all of
the foregoing to the extent not previously delivered to Purchaser.
ARTICLE 6: PRORATIONS AND ADJUSTMENTS
6.1 Prorations. Not less than 3 business days prior to Closing,
Seller shall provide to Purchaser such information and verification reasonably
necessary to support the prorations and adjustments under this Article 6. The
items in subparagraphs (a) through (e) of this Paragraph 6.1 shall be prorated
between Seller and Purchaser as of the close of the day immediately preceding
the Closing Date, the Closing Date being a day of income and expense to
Purchaser:
(a) Taxes and Assessments. Purchaser shall receive a credit for
any accrued but unpaid real estate taxes and assessments (including without
limitation any assessments imposed by private covenant) applicable to any
period before the Closing Date, even if such taxes and assessments are not yet
due and payable. If the amount of any such taxes have not been determined as
of Closing, such credit shall be based on the most recent ascertainable taxes
and shall be reprorated upon issuance of the final tax bill. Purchaser shall
receive a credit for any special assessments which are levied or charged
against the Property, whether or not then due and payable. Any attorneys fees
incurred by either Seller or Purchaser in connection with the reduction of real
estate taxes benefitting each of Seller's and Purchaser's period of ownership,
respectively, also shall be prorated as of the Closing Date.
(b) Project Costs. Purchaser shall reimburse Seller for amounts
paid by Seller prior to the Closing Date pursuant to, and in accordance with
the terms and provisions of the Project Agreements, for design and construction
of the Improvements. The aggregate amount of such reimbursement shall be
subject to agreement by the parties during the Due Diligence Period.
(c) Utilities. To the extent utilities are not being paid by the
general contractor, Seller shall cause the meters, if any, for utilities to be
read the day on which the Closing Date occurs and to pay the bills rendered on
the basis of such readings. If any such meter reading for any utility is not
available, then adjustment therefor shall be made on the basis of the most
recently issued bills therefor which are based on meter readings no earlier
than 30 days before the Closing Date; and such adjustment shall be reprorated
when the next utility bills are received.
6.2 Post-Closing Adjustments. Either party shall be entitled to a
post-Closing adjustment for any incorrect proration or adjustment. No other
expense related to the ownership or operation of the Property shall be charged
to or paid or assumed by Purchaser, whether allocable to any period before or
after the Closing, other than those obligations expressly assumed by Purchaser.
6.3 Wages. Purchaser shall not be liable for any wages, fringe
benefits, payroll taxes, unemployment insurance contributions, accrued vacation
pay, accrued pay for unused sick leave, accrued severance pay and other
compensation accruing before Closing for employees at the Property or arising
from the termination of such employees at or prior to Closing. Purchaser shall
not be liable for any obligations accruing before Closing under any union
contract applicable to any such employees or arising from the termination of
any such employees or prior to Closing.
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6.4 Utility Deposits. Seller shall receive a credit for the
amount of deposits, if any, with utility companies that are transferable and
that are assigned to Purchaser at the Closing.
6.5 Sales Commissions. Seller and Purchaser represent and warrant
each to the other that they have not dealt with any real estate broker, sales
person or finder in connection with this transaction. In the event of any
claim for broker's or finder's fees or commissions in connection with the
negotiation, execution or consummation of this Agreement or the transactions
contemplated hereby, each party shall indemnify and hold harmless the other
party from and against any such claim based upon any statement, representation
or agreement of such party.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 Seller's Representations and Warranties. As a material
inducement to Purchaser to execute this Agreement and consummate this
transaction, subject to any conflicting or inconsistent information contained
in the Property Information, Seller represents and warrants to Purchaser that:
(a) Organization and Authority. Seller has been duly organized,
is validly existing, and is in good standing as a corporation under the laws of
the state of Colorado. Seller has the full right and authority and has
obtained any and all consents required to enter into this Agreement and to
consummate or cause to be consummated the transactions contemplated hereby.
This Agreement has been, and all of the documents to be delivered by Seller at
the Closing will be, authorized and properly executed and constitute, or will
constitute, as appropriate, the valid and binding obligations of Seller,
enforceable in accordance with their terms.
(b) Conflicts and Pending Actions or Proceedings. There is no
agreement to which Seller is a party or, to Seller's knowledge, binding on
Seller which is in conflict with this Agreement, or which challenges or impairs
Seller's ability to execute or perform its obligations under this Agreement or
under the Construction Supplement or the Right of First Refusal Agreement.
There is not now pending or, to the best of Seller's knowledge, threatened, any
action, suit or proceeding before any court or governmental agency or body
against the Seller that would prevent Seller from performing its obligations
hereunder or under the Lease, the Construction Supplement or the Right of First
Refusal Agreement or against or with respect to the Property. To Seller's
knowledge, no condemnation, eminent domain or similar proceedings are pending
or threatened with regard to the Property. Seller has not received any notice
and has no knowledge of any pending or threatened liens, special assessments,
impositions or increases in assessed valuations to be made against the
Property.
(c) Leases. There are no leases of the Property or any portion
thereof, and no parties other than Seller have any unrecorded rights to possess
or occupy the Property or any portion thereof, other than an expired lease
which the Title Company will insure over at Closing.
(d) Project Agreements. The list of Project Agreements delivered
to Purchaser pursuant to this Agreement is true, correct, and complete as of
the date of its delivery. The documents constituting the Project Agreements
delivered to Purchaser are true, correct and complete copies of all of the
Project Agreements relating to the Property, or any portion thereof. Neither
Seller nor, to Seller's best knowledge, any other party is in default under any
of the Project Agreements.
(e) Environmental. Seller has no knowledge of any violation of
Environmental Laws related to the Property or the presence or release of
Hazardous Materials on or from the Property except as disclosed in the Property
Information. Neither Seller nor, to Seller's knowledge, any tenant or other
occupant, has manufactured, introduced, released or discharged from or onto the
Property any Hazardous Materials or any toxic wastes, substances or materials
(including, without limitation, asbestos), and neither Seller nor, to Seller's
knowledge, any tenant or other occupant, has used the Property or any part
thereof for the generation, treatment, storage, handling or disposal of any
Hazardous Materials, in violation of any Environmental Laws. The term
"Environmental Laws" includes without limitation the Resource Conservation and
Recovery Act and the Comprehensive Environmental Response Compensation and
Liability Act and other federal laws governing the environment as in effect on
the date of this Agreement, together with their implementing regulations,
guidelines, rules or orders as of the date of this Agreement, and all state,
regional, county,
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municipal and other local laws, regulations, ordinances, rules or orders that
are equivalent or similar to the federal laws recited above or that purport to
regulate Hazardous Materials. The term "Hazardous Materials" includes
petroleum, including crude oil or any fraction thereof, natural gas, natural
gas liquids, liquified natural gas, or synthetic gas usable for fuel (or
mixtures of natural gas or such synthetic gas), and any substance, material,
waste, pollutant or contaminant listed or defined as hazardous or toxic under
any Environmental Law.
(f) Withholding Obligation. Seller's sale of the Property is not
subject to any federal, state or local withholding obligation of Purchaser
under the tax laws applicable to Seller or the Property.
(g) ERISA. Seller is not and is not acting on behalf of an
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, a "plan" within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended, or an entity
deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of any such employee benefit plan or plans.
(h) Plans and Specifications and Project Documents. To the best
of Seller's knowledge, the Plans and Specifications and Project Documents
delivered or made available to Purchaser constitute all of the Plans and
Specifications and Project Documents applicable to the Property and are true,
accurate and complete copies of same.
(i) Compliance of Improvements. To Seller's knowledge, the
Improvements have been constructed, to the extent completed, in substantial
compliance with the Plans and Specifications therefor and applicable law and
private covenants, conditions and restrictions of record.
(j) Sufficiency of Contract Sums. Seller has no reason to believe
that the undisbursed balance of the construction sums under the contracts for
construction for the Improvements will not be sufficient to pay for all costs
and expenses associated with the lien free completion of the Improvements in
accordance with the Plans and Specifications and applicable legal requirements
within the time provided under the construction schedule agreed to by the
parties during the Due Diligence Period.
(k) Approvals. Seller and to Seller's knowledge Seller's general
contractor, has obtained all permits, licenses and approvals required under
applicable laws, codes, rules and regulations and private covenants for the
construction of the Improvements, all such permits, licenses and approvals are
in full force and effect, and Seller has not received any notice of a pending
or threatened revocation of or notice of any violation under any such permits,
licenses or approvals.
(l) Disputes with Contractors There are no material pending
claims or disputes with Seller's general contractor for the Improvements, or,
to Seller's knowledge, with any subcontractor, or any other party under any of
the Project Agreements, for additional compensation and/or an extension of time
for performance.
7.2 Purchaser's Representations and Warranties. As a material
inducement to Seller to execute this Agreement and consummate this transaction,
Purchaser represents and warrants to Seller that:
(a) Organization and Authority. Purchaser has been duly organized
and is validly existing as a Delaware limited partnership, in good standing in
the State of Delaware, and will be qualified to do business in the state in
which the Real Property is located on the Closing Date. Subject only to
obtaining certain internal approvals on or before the expiration of the Due
Diligence Period, Purchaser has the full right and authority and has obtained
any and all consents required to enter into this Agreement and to consummate or
cause to be consummated the transactions contemplated hereby. This Agreement
has been, and all of the documents to be delivered by Purchaser at the Closing
will be, authorized and properly executed and constitutes, or will constitute,
as appropriate, the valid and binding obligation of Purchaser, enforceable in
accordance with their terms.
(b) Conflicts and Pending Action. There is no agreement to which
Purchaser is a party or to Purchaser's knowledge binding on Purchaser which is
in conflict with this Agreement. There is no action or proceeding pending or,
to Purchaser's knowledge, threatened against Purchaser which challenges or
impairs Purchaser's ability to execute or perform its obligations under this
Agreement.
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7.3 Survival of Representations and Warranties. The
representations and warranties set forth in this Article 7 are made as of the
Date of this Agreement and are remade as of the Closing Date and to the extent
applicable, as of the date of closing under the Option Agreement, and shall not
be deemed to be merged into or waived by the instruments of Closing, but shall
survive the Closing for a period of 3 years. Seller and Purchaser shall have
the right to bring an action thereon only if Seller or Purchaser, as the case
may be, has given the other party written notice of the circumstances giving
rise to the alleged breach within such 3-year period. To the extent Purchaser
obtains actual knowledge of any breach or inaccuracy in any representation or
warranty of Seller prior to Closing and Purchaser nevertheless proceeds with
Closing, Purchaser shall be deemed to have waived any right, claim or cause of
action arising out of the breach or inaccuracy in any such representation or
warranty.
ARTICLE 8: EARNEST MONEY PROVISIONS
8.1 Investment and Use of Funds. The Escrow Agent shall invest
the Earnest Money in government insured interest-bearing accounts satisfactory
to Purchaser, shall not commingle the Earnest Money with any funds of the
Escrow Agent or others, and shall promptly provide Purchaser and Seller with
confirmation of the investments made. If the Closing under this Agreement
occurs, the Escrow Agent shall deliver the Earnest Money to, or upon the
instructions of, Purchaser on the Closing Date.
8.2 Termination before Expiration of Due Diligence Period. If
Purchaser elects to terminate the Purchase Agreement pursuant to Paragraph 2.2.
Escrow Agent shall pay the entire Earnest Money to Purchaser one business day
following receipt of the Due Diligence Termination Notice from Purchaser (as
long as the current investment can be liquidated in one day) and this Agreement
shall thereupon terminate. No notice to Escrow Agent from Seller shall be
required for the release of the Earnest Money to Purchaser by Escrow Agent.
The Earnest Money shall be released and delivered to Purchaser from Escrow
Agent upon Escrow Agent's receipt of the Due Diligence Termination Notice
despite any objection or potential objection by Seller. Seller agrees it shall
have no right to bring any action against Escrow Agent which would have the
effect of delaying, preventing, or in any way interrupting Escrow Agent's
delivery of the Earnest Money to Purchaser pursuant to this paragraph, any
remedy of Seller being against Purchaser, not Escrow Agent.
8.3 Termination after Expiration of Due Diligence Period. Except
as set otherwise expressly provided herein, at any time after the expiration of
the Due Diligence Period, upon not less than 5 business days' prior written
notice to the Escrow Agent and the non-requesting party (and the Escrow Agent
may rely upon a certification from the requesting party that it has
concurrently notified the other party), Escrow Agent shall deliver the Earnest
Money to the party requesting the same; provided, however, that if the other
party shall, within said 5 business day period, deliver to the requesting party
and the Escrow Agent a written notice that it disputes the claim to the Earnest
Money, Escrow Agent shall retain the Earnest Money until it receives written
instructions executed by both Seller and Purchaser as to the disposition and
disbursement of the Earnest Money, or until ordered by final court order,
decree or judgment, which is not subject to appeal, to deliver the Earnest
Money to a particular party, in which event the Earnest Money shall be
delivered in accordance with such notice, instruction, order, decree or
judgment.
8.4 Interpleader. Seller and Purchaser mutually agree that in the
event of any controversy regarding the Earnest Money, unless mutual written
instructions are received by the Escrow Agent directing the Earnest Money's
disposition, the Escrow Agent shall not take any action, but instead shall
await the disposition of any proceeding relating to the Earnest Money or, at
the Escrow Agent's option, the Escrow Agent may interplead all parties and
deposit the Earnest Money with a court of competent jurisdiction in which event
the Escrow Agent may recover all of its court costs and reasonable attorneys'
fees. Seller or Purchaser, whichever loses in any such interpleader action,
shall be solely obligated to pay such costs and fees of the Escrow Agent, as
well as the reasonable attorneys' fees of the prevailing party in accordance
with the other provisions of this Agreement.
8.5 Liability of Escrow Agent. The parties acknowledge that the
Escrow Agent is acting solely as a stakeholder at their request and for their
convenience, that the Escrow Agent shall not be deemed to be the agent of
either of the parties, and that the Escrow Agent shall not be liable to either
of the parties for any action or omission on its part taken or made in good
faith, and not in disregard of this Agreement, but shall be liable for its
negligent acts and for any loss, cost or expense incurred by Seller or
Purchaser resulting from the Escrow Agent's mistake of law respecting the
Escrow Agent's scope or nature of its duties. Seller and Purchaser shall
jointly and severally indemnify and hold the Escrow Agent harmless from and
against all costs, claims and expenses, including reasonable attorneys' fees,
incurred
-15-
<PAGE> 16
in connection with the performance of the Escrow Agent's duties hereunder,
except with respect to actions or omissions taken or made by the Escrow Agent
in bad faith, in disregard of this Agreement or involving negligence on the
part of the Escrow Agent.
8.6 Escrow Fee. Except as expressly provided herein to the
contrary, the escrow fee, if any, charged by the Escrow Agent for holding the
Earnest Money or conducting the Closing shall be shared equally by Seller and
Purchaser.
ARTICLE 9: MISCELLANEOUS
9.1 Parties Bound. Neither party may assign this Agreement
without the prior written consent of the other, and any such prohibited
assignment shall be void; provided, however, that Purchaser may assign this
Agreement without Seller's consent to an Affiliate. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the respective
legal representatives, successors, assigns, heirs, and devisees of the parties.
For the purposes of this paragraph, the term "Affiliate" means (a) an entity
that directly or indirectly controls, is controlled by or is under common
control with the Purchaser or (b) an entity at least a majority of whose
economic interest is owned by Purchaser; and the term "control" means the power
to direct the management of such entity through voting rights, ownership or
contractual obligations.
9.2 Headings. The article and paragraph headings of this
Agreement are for convenience only and in no way limit or enlarge the scope or
meaning of the language hereof.
9.3 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated hereunder, including all legal and accounting fees
and disbursements.
9.4 Invalidity and Waiver. If any portion of this Agreement is
held invalid or inoperative, then so far as is reasonable and possible the
remainder of this Agreement shall be deemed valid and operative, and, to the
greatest extent legally possible, effect shall be given to the intent
manifested by the portion held invalid or inoperative. The failure by either
party to enforce against the other any term or provision of this Agreement
shall not be deemed to be a waiver of such party's right to enforce against the
other party the same or any other such term or provision in the future.
9.5 Governing Law. This Agreement shall, in all respects, be
governed, construed, applied, and enforced in accordance with the law of the
state in which the Real Property is located.
9.6 Survival. The provisions of this Agreement that contemplate
performance after the Closing and the obligations of the parties not fully
performed at the Closing shall survive the Closing and shall not be deemed to
be merged into or waived by the instruments of Closing.
9.7 No Third Party Beneficiary. This Agreement is not intended to
give or confer any benefits, rights, privileges, claims, actions, or remedies
to any person or entity as a third party beneficiary, decree, or otherwise.
9.8 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings relating to the Property. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against
whom enforcement is sought.
9.9 Time of the Essence. Time is of the essence in the
performance of this Agreement.
9.10 Confidentiality. Neither Purchaser nor Seller shall make any
public announcement or disclosure of any information related to this Agreement
to outside brokers or third parties, before or after the Closing, without the
specific prior written consent of the other party, except for such disclosures
to Seller's or Purchaser's financing sources, creditors, officers, employees
and agents as may be necessary to permit the parties to perform their
obligations hereunder. This restriction does not apply to information
contained in public or recorded closing documents executed as part of this
transaction or in filings required by applicable securities disclosure statutes
or to disclosures made by Purchaser in accordance with its corporate
communications policies.
-16-
<PAGE> 17
9.11 Attorneys' Fees. Should either party employ attorneys to
enforce any of the provisions hereof, the party against whom any final judgment
is entered agrees to pay the prevailing party all reasonable costs, charges,
and expenses, including reasonable attorneys' fees, expended or incurred by the
prevailing party in connection therewith.
9.12 Notices. All notices required or permitted hereunder shall be
in writing and shall be served on the parties at the addresses set forth in
Paragraph 1.1. Any such notices shall be either (1) sent by overnight delivery
using a nationally recognized overnight courier, in which case notice shall be
deemed delivered one business day after deposit with such courier, (2) sent by
telefax, in which case notice shall be deemed delivered upon transmission of
such notice, or (3) sent by personal delivery, in which case notice shall be
deemed delivered upon receipt or refusal of delivery. A party's address may be
changed by written notice to the other party; provided, however, that no notice
of a change of address shall be effective until actual receipt of such notice.
Copies of notices are for informational purposes only, and a failure to give or
receive copies of any notice shall not be deemed a failure to give notice.
9.13 Construction. The parties acknowledge that the parties and
their counsel have reviewed and revised this Agreement and that the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement or any exhibits or amendments hereto.
9.14 Remedies Cumulative. The remedies provided in this Agreement
shall be cumulative and, except as otherwise expressly provided shall not
preclude the assertion or exercise of any other rights or remedies available by
law, in equity or otherwise.
9.15 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event
after which the designate period of time begins to run is not to be included
and the last day of the period so computed is to be included, unless such last
day is a Saturday, Sunday or legal holiday for national banks in the location
where the Property is located, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday, or legal holiday. The
last day of any period of time described herein shall be deemed to end at 6
p.m. Denver, Colorado time.
9.16 Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
and all of such counterparts shall constitute one Agreement. To facilitate
execution of this Agreement, the parties may execute and exchange by telephone
facsimile counterparts of the signature pages.
9.17 Further Assurances. In addition to the acts and deeds recited
herein and contemplated to be performed, executed and/or delivered by either
party at Closing, each party agrees to perform, execute and deliver, on or
after the Closing any further actions, or documents, and will obtain such
consents, as may be reasonably necessary or as may be reasonably requested to
fully effectuate the purposes, terms and conditions of this Agreement or to
further perfect the conveyance, transfer and assignment of the Property to
Purchaser.
9.18 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
-17-
<PAGE> 18
SIGNATURE PAGE TO
AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
J.D. EDWARDS & COMPANY
AND
CARRAMERICA REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year written below.
J.D. EDWARDS & COMPANY, a
Colorado corporation
By:
-----------------------------------------
Name: Richard G. Snow, Jr.
Title: Vice President and General
Counsel
Dated:
--------------------
"Seller"
CARRAMERICA REALTY, L.P., a
Delaware limited partnership
By: CARRAMERICA REALTY GP HOLDINGS, INC., a
Delaware corporation, general partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
--------------------
"Purchaser"
<PAGE> 19
Escrow Agent, by its duly authorized agent, agrees to accept this escrow on the
terms and conditions of, and to comply with the instructions contained in, the
foregoing Agreement.
Date:
-------------------
LAND TITLE GUARANTEE COMPANY
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 20
AGREEMENT OF PURCHASE AND SALE
EXHIBITS
A - Legal Description of Real Property
B - Project Agreements
C - Itemization of Plans and Specifications
D - Survey Certification
E - Bill of Sale and Assignment of Contracts
F - Form of Consent to Assignment
G - Right of First Refusal Agreement
H - Lease
I - Construction Supplement
J - Due Diligence Request List
K - Access Easement Agreement
<PAGE> 21
LEGAL DESCRIPTION OF REAL PROPERTY EXHIBIT A
PARCEL 1
A PARCEL OF LAND BEING LOCATED IN THE DENVER TECHNOLOGICAL CENTER EAST IN
SECTIONS 8 AND 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL
MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF COLORADO, BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
COMMENCING AT THE WEST QUARTER CORNER OF SECTION 9; THENCE ALONG THE EAST-WEST
CENTERLINE OF SECTION 9 BEARING SOUTH 89 DEGREES 59 MINUTES 25 SECONDS EAST,
279.73 FEET TO THE TRUE POINT OF BEGINNING;
THENCE NORTH 52 DEGREES 41 MINUTES 01 SECONDS WEST, 368.62 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE RIGHT HAVING AN ARC LENGTH OF 563.61 FEET, A CENTRAL
ANGLE OF 30 DEGREES 04 MINUTES 04 SECONDS, A RADIUS OF 1,074.00 FEET AND A
CHORD WHICH BEARS NORTH 52 DEGREES 23 MINUTES 11 SECONDS EAST, 557.17 FEET;
THENCE SOUTH 27 DEGREES 16 MINUTES 44 SECONDS EAST, 79.29 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE RIGHT HAVING AN ARC LENGTH OF 413.05 FEET, A CENTRAL
ANGLE OF 23 DEGREES 47 MINUTES 07 SECONDS, A RADIUS OF 995.00 FEET AND A CHORD
WHICH BEARS NORTH 79 DEGREES 41 MINUTES 12 SECONDS EAST, 410.10 FEET TO A POINT
OF NON-TANGENCY;
THENCE NORTH 43 DEGREES 56 MINUTES 35 SECONDS EAST, 67.90 FEET TO THE
RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY; THENCE ALONG SAID
RIGHT-OF-WAY LINE BEING A CURVE TO THE LEFT HAVING AN ARC LENGTH OF 73.83 FEET,
A CENTRAL ANGLE OF 05 DEGREES 13 MINUTES 20 SECONDS, A RADIUS OF 810.00 FEET
AND A CHORD WHICH BEARS SOUTH 48 DEGREES 40 MINUTES 05 SECONDS EAST, 73.80
FEET;
THENCE LEAVING SAID RIGHT-OF-WAY LINE SOUTH 35 DEGREES 51 MINUTES 07 SECONDS
WEST, 95.85 FEET TO POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING
AN ARC LENGTH OF 374.78 FEET, A CENTRAL ANGLE OF 35 DEGREES 37 MINUTES 23
SECONDS, A RADIUS OF 602.79 FEET AND A CHORD WHICH BEARS SOUTH 18 DEGREES 02
MINUTES 32 SECONDS WEST, 368.77 FEET TO A POINT OF TANGENCY;
THENCE SOUTH 00 DEGREES 14 MINUTES 25 SECONDS WEST, 243.10 FEET;
THENCE ALONG A NON-TANGENT CURVE TO THE LEFT HAVING AN ARC LENGTH OF 257.58
FEET, A CENTRAL ANGLE OF 45 DEGREES 28 MINUTES 50 SECONDS, A RADIUS OF 324.50
FEET AND A CHORD WHICH BEARS SOUTH 60 DEGREES 03 MINUTES 24 SECONDS WEST,
250.87 FEET;
THENCE NORTH 52 DEGREES 41 MINUTES 01 SECONDS WEST, 379.45 FEET TO THE TRUE
POINT OF BEGINNING.
BASIS OF BEARINGS: ASSUMED ALONG THE SOUTHEASTERLY LINE OF DTC EAST, WHICH IS
SITUATED SOUTH AND WEST OF SOUTH ULSTER STREET PARKWAY, NORTHWEST OF UNION
AVENUE PARKWAY, AND EAST OF INTERSTATE HIGHWAY I-25, AND BEING THE NORTHERLY
RIGHT-OF-WAY LINE OF UNION AVENUE PARKWAY, BOOK 29, PAGE 56, AS MONUMENTED BY
A PIN AND CAP PLS 9655 BEING THE EASTERLY CORNER OF PARCEL 1, RECEPTION NO.
92-0071136 AND A PIN AND CAP PLS 23899, BEARING NORTH 64 DEGREES 49 MINUTES 30
SECONDS WEST, 766.84 FEET.
<PAGE> 22
PARCEL 2
A PARCEL OF LAND BEING LOCATED IN THE DENVER TECHNOLOGICAL CENTER IN SECTION 9,
TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE SIXTH PRINCIPAL MERIDIAN, CITY AND
COUNTY OF DENVER, STATE OF COLORADO, BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
COMMENCING AT THE WEST QUARTER CORNER OF SECTION 9; THENCE N81 degrees 26'41"E,
808.84 FEET TO THE TRUE POINT OF BEGINNING; THENCE N00 degrees 14'25"E, 17.92
TO A POINT OF CURVATURE; THENCE 10.24 FEET ALONG THE ARC OF A CURVE TO THE
RIGHT HAVING A RADIUS OF 602.79 FEET, A CENTRAL ANGLE OF 00 degrees 58'22", AND
A CHORD WHICH BEARS N00 degrees 43'01"E, 10.24 FEET; THENCE 23.38 FEET ALONG
THE ARCH OF A CURVE TO THE LEFT HAVING A RADIUS OF 25.00 FEET, A CENTRAL ANGLE
OF 53 degrees 35'55", AND A CHORD WHICH BEARS N29 degrees 54'67"E, 22.64 FEET
TO A POINT OF COMPOUND CURVATURE; THENCE 167.63 FEET ALONG THE ARC OF A CURVE
TO THE RIGHT HAVING A RADIUS OF 592.29 FEET, A CENTRAL ANGLE OF 16 degrees
12'58", AND A CHORD WHICH BEARS N11 degrees 13'27"E, 167.07 FEET TO A POINT OF
REVERSE CURVATURE; THENCE 15.26 FEET ALONG THE ARC OF A CURVE TO THE LEFT
HAVING A RADIUS OF 10.00 FEET, A CENTRAL ANGLE OF 87 degrees 25'80", AND A
CHORD WHICH BEARS N24 degrees 23'00"W, 13.82 FEET TO A POINT OF TANGENCY;
THENCE N68 degrees 05'58"W, 0.87 FEET; THENCE 38.35 FEET ALONG THE ARC OF A
NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 602.79 FEET, A CENTRAL ANGLE
OF 03 degrees 38'41", AND A CHORD WHICH BEARS N22 degrees 06'27"E, 38.34 FEET;
THENCE 23.79 FEET ALONG A NON-TANGENT CURVE TO THE LEFT HAVING A RADIUS OF
20.00 FEET, A CENTRAL ANGLE OF 52 degrees 25'54", AND A CHORD WHICH BEARS
N52'08"18"E, 22.97 FEET TO A POINT OF REVERSE CURVATURE; THENCE 103.01 FEET
ALONG AN ARC OF A CURVE TO THE RIGHT HAVING A RADIUS OF 592.29 FEET, A CENTRAL
ANGLE OF 09 degrees 57'53", AND A CHORD WHICH BEARS N30 degrees 52'18"E, 102.88
FEET TO A POINT OF TANGENCY; THENCE N35 degrees 51'07"E, 95.39 FEET TO THE
SOUTHWESTERLY RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY; THENCE 44.90
FEET ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE BEING THE ARC OF A CURVE TO THE
LEFT HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 03 degrees 10'35", AND
A CHORD WHICH BEARS S53 degrees 36'39"E, 44.90 FEET; THENCE LEAVING SAID
SOUTHWESTERLY RIGHT-OF-WAY LINE S35 degrees 51'07"W, 32.45 FEET TO A POINT OF
CURVATURE; THENCE 44.40 FEET ALONG THE ARC OF A CURVE TO THE RIGHT HAVING A
RADIUS OF 115.00 FEET, A CENTRAL ANGLE OF 22 degrees 07'23", AND A CHORD WHICH
BEARS S45 degrees 54'48"W, 44.13 FEET TO A POINT OF REVERSE CURVATURE; THENCE
35.10 FEET ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 85.00 FEET,
A CENTRAL ANGLE OF 23 degrees 39'28", AND A CHORD WHICH BEARS S46 degrees
08'46"W, 34.85 FEET TO A POINT OF COMPOUND CURVATURE; THENCE 334.44 FEET ALONG
THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 582.29 FEET, A CENTRAL ANGLE
OF 34 degrees 04'43", AND A CHORD WHICH BEARS S17 degrees 16'40"W, 329.53 FEET
TO A POINT OF TANGENCY; THENCE S00 degrees 14'25"W, 16.34 FEET; THENCE 40.54
FEET ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 550.00 FEET, A
CENTRAL ANGLE OF 04 degrees 13'25", S87 degrees 52'54"W, 40.35 FEET TO THE TRUE
POINT OF BEGINNING. SAID PARCEL CONTAINS 0.37 ACRES (10030.87 SQUARE FEET),
MORE OR LESS.
BASIS OF BEARINGS: ASSUMED ALONG THE SOUTHEASTERLY LINE OF DTC EAST, WHICH IS
SITUATED SOUTH AND WEST OF SOUTH ULSTER STREET PARKWAY, NORTHWEST OF UNION
AVENUE PARKWAY, AND EAST OF INTERSTATE HIGHWAY I-25, AND BEING THE NORTHERLY
RIGHT- OF-WAY LINE OF UNION AVENUE PARKWAY, BOOK 29, PAGE 58, AS MONUMENTED BY
A PIN AND CAP PLS 9000 BEING THE EASTERLY CORNER OF PARCEL 1, RECEPTION NUMBER
92-0071138 AND A PIN AND CAP PLS 23899 BEARING N64 degrees 49'20"W, 766.84
FEET.
<PAGE> 23
EXHIBIT B
PROJECT AGREEMENTS
1. Project Management Agreement dated May 1, 1996 between J.D. Edwards &
Company and Schal Bovis, Inc.
2. Contract for Construction dated May 1, 1996 between J.D. Edwards &
Company and Hensel Phelps Construction Co.
3. Agreement for Interior Design Services dated May 1, 1996 between J.D.
Edwards & Company and VOA Associates Incorporated.
4. Agreement Between Client and Architect dated May 1, 1996 between J.D.
Edwards & Company and C.W. Fentress J.H. Bradburn & Associates, P.C.
<PAGE> 24
EXHIBIT C
ITEMIZATION OF PLANS AND SPECIFICATIONS
(Attached)
<PAGE> 25
EXHIBIT D
CERTIFICATION
To: CarrAmerica Realty, L.P. and Land Title Guarantee Company:
This is to certify that this map or plat and the survey on which it is based
were made on the date shown below of the premises described in _____________
Title Insurance Company Title Commitment No. ________ dated ___________ and in
accordance with "Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys," jointly established and adopted by ALTA and ACSM in 1992, as defined
therein and includes Items 1, 2, 3, 4, 6, 7(a), 7(c), 8, 9, 10, 11, and 13 of
Table A thereof, indicates all access easements and off-site easements
appurtenant, and meets the accuracy requirements of an Urban Survey, as defined
therein.
The survey correctly shows the zone designation of any area shown as being
within a Special Flood Hazard Area according to current Federal Emergency
Management Agency Maps which make up a part of the National Flood Insurance
Administration Report; Community No. ______, Panel No. ________ dated
_____________.
The subject property has ingress and egress to and from
________________________________ which is a paved, public right-of-way.
[Surveyor's Name]
By
-------------------------------------------
Date
-------------------------------------------
Registered Land Surveyor No.
-----------------------
Date of Survey:
-----------------------------------
Date of Last Revision:
----------------------------
<PAGE> 26
BILL OF SALE AND ASSIGNMENT OF CONTRACTS
This instrument is executed and delivered as of the ____ day of
December, 1996 pursuant to that certain Agreement of Purchase and Sale
("Agreement") dated as of December 11, 1996, by and between J.D. Edwards &
Company, a Colorado corporation ("Seller"), and CarrAmerica Realty, L.P., a
Delaware limited partnership ("Purchaser"), covering the real property
described in Exhibit A attached hereto ("Real Property"), improved with an ____
office building and related improvements (the "Building") currently under
construction.
1. Sale of Personalty. For good and valuable consideration,
Seller hereby sells, transfers, sets over and conveys to Purchaser the
following:
(a) Personal Property. The "Personal Property", being all
Seller's right, title and interest in and to all tangible personal property now
or hereafter used in connection with the design, construction, operation,
ownership, maintenance, or management of the Real Property, including without
limitation: equipment; machinery; whether stored on or offsite, all tools,
supplies, and construction and finish materials not incorporated in the
Improvements and held for repairs and replacements; and any and all deposits,
bonds or other security deposited or delivered by Seller with or to any and all
governmental bodies, utility companies or other third parties in connection
with the operation, ownership, maintenance, management, occupancy or
improvement of the Real Property. The foregoing notwithstanding, "Personal
Property" shall not include any trade fixtures, furniture, art work,
furnishings, and office equipment and supplies or other personal property of
Seller acquired or brought onto the Real Property after the date hereof in
connection with Seller's use and occupancy of the Improvements as the tenant
under the Lease (as defined in the Agreement).
(b) Intangible Property. The "Intangible Property," being all,
right, title and interest of Seller in and to all intangible personal property
now or hereafter used in connection with the design, construction, operation,
ownership, maintenance, or management of the Real Property or the improvements
thereon, including the building, parking garage surface parking areas, roads,
landscaping and related improvements currently planned or under construction
(collectively, the "Improvements"), including without limitation: all
construction plans, drawings and specifications for the Improvements, including
without limitation all landscaping plans (the "Plans and Specifications"),
which Plans and Specifications are itemized in Exhibit B hereto, and all
development plans, shop drawings and other submittals; all bonds, security
instruments, letters of credit and/or cash or other collateral posted by Seller
with any governmental entity to secure Seller's completion of any of the
Improvements as well as any bonds or security received by Seller from any
contractor or subcontractor under any of the Project Agreements; all trade
names and trade marks associated with the Real Property, including without
limitation the name of the building comprising a part of the Improvements; all
construction and building permits, approvals and licenses and applications for
any of the foregoing; warranties; indemnities; claims against third parties;
applications, permits, approvals and licenses (to the extent assignable);
insurance proceeds and condemnation awards or claims thereto to be assigned to
Purchaser hereunder; and all books and records relating to the Property. The
foregoing notwithstanding, "Intangible Property" shall not include any trade
names or trade marks, licenses, copyrights, contract rights or other intangible
personal property of Seller as the tenant under the Lease in connection with
Seller's use and occupancy of the Improvements or any business conducted by
Seller on or within the Improvements.
2. Assignment of Project Agreements. For good and valuable
consideration, Seller hereby assigns, transfers, sets over and conveys to
Purchaser: all right, title and interest of Seller in and to all contracts and
agreements for design, engineering, consulting and construction services
provided or to be provided in connection with the Land and/or the Improvements,
and all change orders, amendments or modifications thereto and all guaranties,
bonds and security received in connection therewith, which "Project Agreements"
are described in Exhibit C attached hereto. Neither this assignment nor any
action by Purchaser shall constitute an assumption by Purchaser of any of the
covenants, duties, agreements or obligations of Seller under the Project
Agreements, and
<PAGE> 27
Seller shall continue to have all rights as the "owner" thereunder. From and
after an Event of Default by Seller under the Construction Supplement (as such
term is defined in the Agreement), Purchaser shall have the right at any time
(but shall have no obligation) to take in its name, or in the name of Seller,
such actions as Purchaser may at any time determine to be necessary or
advisable to cure any default by Seller under the Project Agreements, or to
protect the respective rights of Purchaser or Seller thereunder. Purchaser
shall incur no liability if any actions so taken in good faith by it or in its
behalf shall prove to be inadequate or invalid, and Seller agrees to indemnify,
defend and hold Purchaser harmless from and against any losses, costs,
liabilities or expenses (including, but not limited to, reasonable attorney's
fees) incurred in connection with any such actions.
3. Warranty. Seller hereby represents and warrants to Purchaser
that it is the owner of the property described above, that such property is
free and clear of all liens, charges and encumbrances other than the Permitted
Exceptions (as defined in the Agreement), and Seller warrants and defends title
to the above-described property unto Purchaser, its successors and assigns,
against any person or entity claiming, or to claim, the same or any part
thereof by, through or under Seller, subject only to the Permitted Exceptions
as defined in the Agreement.
4. Indemnification. Seller shall defend, indemnify and hold
harmless Purchaser from and against any liability, damages, causes of action,
expenses, and attorneys' fees incurred by Purchaser by reason of the failure of
Seller to fulfill, perform, discharge, and observe its obligations with respect
to the Project Agreements, whether arising prior to or on or after the Closing
Date; except to the extent that such failure is due to non-payment by Purchaser
of any amounts which Purchaser is obligated to pay pursuant to the terms of the
Construction Supplement.
5. Successors and Assigns. This instrument is binding upon
Seller and its successors and assigns, and shall inure to the benefit of
Purchaser and its successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale and
Assignment of Leases and Contracts to be executed as of the date written above.
SELLER:
J.D. EDWARDS & COMPANY
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE> 28
EXHIBIT F
CONSENT BY CONTRACTOR
The undersigned (the "Contractor") acknowledges that J.D. Edwards &
Company ("Assignor") has assigned all of its rights, but not its obligations,
under that certain _______________________________ dated as of ________________
(the "Contract") to CarrAmerica Realty, L.P. ("Assignee"). In connection with
such assignment, Contractor agrees to the following:
(a The undersigned agrees to deliver to Assignee a copy of all
notices of default given by the undersigned to Assignor pursuant to the
Contract simultaneously with the delivery of such notice to Assignor. Assignee
shall have the right, but not the obligation, to cure such default within the
time period specified in the Contract. Only in the event neither Assignor nor
Assignee cures or causes to be cured any such default during said time period
shall Contractor have the right to terminate or suspend the Contract or to
exercise any other rights or remedies as a result of said default. Contractor
will deliver to Assignee a copy of all notices of termination or suspension
given by Contractor to Assignor under the Contract simultaneously with the
delivery of any notice of termination or suspension to Assignor.
(b In the event of a default by Assignee under that certain
Supplement to Lease Agreement dated as of ____ __________ (the "Lease
Supplement"), Contractor shall, at the request of Assignee, continue
performance on behalf of Assignee in accordance with the terms of the Contract,
provided that Contractor shall be paid all sums due or to become due to
Contractor in accordance with said Contract.
(c Upon Assignee's written request, Contractor shall furnish to
Assignee a current list of all persons or firms with whom Contractor has
entered into subcontracts or other agreements relating to the performance of
work or furnishing of materials in connection with the Improvements, together
with a statement as to the status of each of such subcontract or agreement and
the respective amounts, if any, owed by Contractor thereunder.
(d Contractor further agrees to (i) on written request from
Assignee, furnish Assignee with copies of such information as the Assignor is
entitled to receive under the Contract, and (ii) cooperate with Assignee or its
representatives in its inspection of the progress of construction of the
Improvements.
(e Assignee's obligations to Assignor with respect to advances
are set forth in the Lease Supplement. Contractor is not a third party
beneficiary of the Lease Supplement. The relationship of Assignee to Assignor
is one of a landlord to a tenant and Assignee is not a joint venturer or
partner of Assignor.
(f Contractor shall not enter into any amendment or modification
of the Contract [or any change orders which materially change the plans and
specifications for the Improvements (the "Plans and Specifications")] without
the prior written consent of Assignee.
(g Contractor hereby consent to Assignor's assignment of the
Contract [and the Plans and Specifications] to Assignee.
(h Contractor has executed this Consent with full knowledge and
intent that Assignee shall rely upon the representations, warranties and
agreements herein contained when making advances to Assignor.
IN WITNESS WHEREOF, Contractor has executed this instrument as of the
___ day of _______________, 1996.
CONTRACTOR:
--------------------------------------
By:
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Name:
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Title:
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EXHIBIT G
RIGHT OF FIRST REFUSAL AGREEMENT
(Attached)
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EXHIBIT H
LEASE
(Attached)
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EXHIBIT I
CONSTRUCTION SUPPLEMENT
(Attached)
F-1
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EXHIBIT J
J.D. EDWARDS
Due Diligence-Request List
A. Architectural, Engineering and Construction Records
1. All proposed and existing site plans, development plans,
building plans and specifications
2. Geotechnical reports
3. Building Permits
4. Plans for rooftop antennae installations
5. Existing building calculations
6. Consultant contracts
7. Summary of costs incurred to date with supporting
documentation
8. Change Orders, RFI's, Architect's Supplemental Instructions
B. Accounting Records
1. Development budgets for the building
2. Documentation of land costs
3. Real estate tax bills/assessments during period of ownership
4. Real estate tax assessment appeal history (if applicable)
C. Land/Development Records
1. Existing Boundary, As-Built or Topographical Surveys
2. Copies of any easements, CCR's or other recorded documents
affecting the property, and any unrecorded agreements to which
the Purchaser would be subject to post-closing
3. Copies of all agreements with or applications to any
governmental authority or individual (including but not
limited to the seller(s) of the parcels of land) relating to
zoning, use, development (including timing), subdivision or
platting of the property
4. Information relating to the availability and location of
utilities
D. Environmental Records
1. All environmental reports related to the property
2. Any notices from or to government authority regarding
hazardous substances at the property
E. Other
1. Preliminary title report
2. Most recent ALTA survey
3. Any written notice from any governmental agency or tenants
regarding the property
4. All appraisals performed on the property
5. Financial information on JD Edwards
F-2
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EXHIBIT K
ACCESS EASEMENT AGREEMENT
(Attached)
<PAGE> 1
EXHIBIT 10.11
SUPPLEMENT TO LEASE AGREEMENT
(Construction of Improvements)
This agreement ("Agreement") is made as of December 30, 1996 between
CarrAmerica Realty, L.P., a Delaware Limited Partnership ("Landlord") and J.D.
Edwards & Company, a Colorado corporation ("Tenant").
RECITALS
A. Landlord has purchased from Tenant that certain real property
located in the City and County of Denver, Colorado described in Exhibit A
attached hereto (the "Land"; the Land together with the improvements and other
property located or to be constructed on the Land are collectively referred to
in this Agreement as the "Property") pursuant to that certain Agreement of
Purchase and Sale dated as of December 11, 1996 between Landlord and Tenant
("Purchase Contract").
B. As the prior owner, Tenant had commenced, but as of the closing
under the Purchase Contract had not completed, construction on the Land of a
multi-story office building and related improvements and structures.
C. Landlord and Tenant have executed a lease agreement ("Lease") of
even date with this Agreement pursuant to which Tenant has leased all or a
portion of the Property (the "Premises") from Landlord. Landlord shall provide
funds under this Agreement, which supplements the terms of the Lease, in order
for Tenant to complete the Improvements. Tenant shall be responsible to cause
the completion of the Improvements and shall pay for the cost to achieve such
completion to the extent that the funds that Landlord is obligated to provide
hereunder are insufficient. The rent commencement date ("Rent Commencement
Date") under the Lease will be the earlier of availability of the Premises for
occupancy (as provided in the Lease) and October 1, 1997, as Tenant is bearing
the risk of any delay in the construction of the Improvements. Rent under the
Lease will be calculated under this Agreement to achieve a certain stated
return to Landlord on the funds provided by Landlord pursuant to this
Agreement.
The foregoing provisions are the general intentions of the parties and
are governed by the specific provisions set forth below.
AGREEMENT:
THEREFORE, for valuable consideration, the parties agree as follows:
ARTICLE 1: CONSTRUCTION OF IMPROVEMENTS
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement, for purposes of this Agreement, the terms shown below in this
Paragraph 1.1 shall have the following meanings:
(a) Access Road means the "Access Road", as such term is
defined in the Purchase Contract, and as shown in the Plans and Specifications,
providing ingress and egress between the Property and adjacent public roads,
which access shall be in compliance with all applicable Governmental
Requirements and private covenants, conditions and restrictions of record.
(b) Architects' Agreements means the agreements between each
of the Project Architects and Tenant, each dated as of May 1, 1996, as amended
prior to the date of this Agreement and as amended from time-to-time hereafter
in accordance with the requirements of this Agreement.
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(c) Base Rent means the "Base Rent" payable under the Lease,
as determined pursuant to this Agreement.
(d) Budget means the detailed line item construction budget
for completion of the Improvements attached to this Agreement as Exhibit B.
(e) Escrow Agent means Land Title Guarantee Company.
(f) Expansion has the meaning provided in Paragraph 5.1.
(g) Expansion Commencement Date has the meaning provided in
Paragraph 5.1.
(h) Expansion Notice has the meaning provided in Paragraph
5.4.
(i) Expansion Land has the meaning provided in Paragraph 5.1.
(j) Expansion Option has the meaning provided in Paragraph
5.1.
(k) Final Approvals means all governmental approvals and
certificates required for use and occupancy of the Project, including, without
limitation, a certificate of occupancy issued by the City and County of Denver,
and a Certificate of Compliance issued by the Architectural Control Committee
for the Denver Technological Center.
(l) Financing Fee has the meaning provided in Paragraph 4.1.
(m) General Contractor means Hensel Phelps Construction
Company.
(n) General Construction Contract means the guaranteed maximum
price construction contract for the Improvements between Tenant and General
Contractor, dated as of May 1, 1996, as amended prior to the date of this
Agreement and as amended from time-to-time hereafter in accordance with this
Agreement.
(o) Governmental Requirements means all laws, ordinances,
codes, regulations and governmental requirements applicable to the
construction, completion, use and occupancy of the Property.
(p) Improvements means the multistory office building and all
other improvements to be constructed on the Land as contemplated by the Plans
and Specifications, including the Access Road, surface parking, parking garage,
driveways, storm water and utility facilities and landscaping.
(q) Owner's Title Policy means the owner's policy of title
insurance insuring Landlord's interest in the Land, issued at the closing under
the Purchase Contract.
(r) Plans and Specifications means the plans and
specifications for the Improvements identified on attached Exhibit C, as such
modified from time-to-time hereafter in accordance with the General
Construction Contract and the requirements of this Agreement.
(s) Project Agreements means the Architects' Agreements, the
General Construction Contract and all other contracts and agreements for the
design and construction of the Property, including the contracts and agreements
identified on attached Exhibit D.
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(t) Project Architects means C.W. Fentress, J.H. Bradburn and
Associates, P.C. (core and shell) and VOA Associates Incorporated (interiors).
(u) Project Close-Out has the meaning provided in Paragraph
1.2.
(v) Project Manager means Schal Bovis Inc.
(w) Project Management Agreement means the agreement between
Tenant and the Project Manager dated as of May 1, 1996.
(x) Project Schedule means the line-item schedule for
completion of the Improvements attached to this Agreement as Exhibit E.
(y) Substantial Completion means "substantial completion" of
the Improvements as such term is defined in the General Construction Contract.
(z) Title Company means the title company which issued the
Owner's Title Policy.
(aa) Total Expansion Cost has the meaning provided in Paragraph
5.1.
(bb) Total Project Cost has the meaning provided in Paragraph
4.1.
1.2 Construction. Tenant shall at its sole cost and expense, except
to the extent funds are to be provided by Landlord as provided herein, shall
cause Substantial Completion and Project Close-Out to be achieved by September
30, 1997 and December 15, 1997, respectively; provided that such dates shall be
extended for any Landlord's Delays (as such term is defined in Paragraph 1.4).
Tenant shall cause the Improvements to be constructed in accordance with the
Plans and Specifications, and all applicable Governmental Requirements and
private covenants, conditions and restrictions of record. "Project Close-Out"
shall have occurred when (1) the Project Architects, the Project Manager and
the General Contractor have each issued and delivered to Landlord a
certification that the Improvements have been completed in accordance with the
Plans and Specifications and in compliance with all applicable Governmental
Requirements; (2) all Final Approvals have been obtained; (3) all contractors,
subcontractors, supplies, architects and others who supplied services, labor,
equipment, furnishing, supplies or materials with respect to the Improvements
have been paid in full and have executed affidavits of final payment and
unconditional lien releases and any liens filed against the Property in
connection with completion of the Improvements have been released; (4) all
landscaping and other exterior items have been completed and paid for or
provision for completion and payment has been made for seasonal items; (5) all
punchlist items for all the Improvements have been completed in accordance with
the requirements of the applicable plans and specifications therefor and the
applicable Project Agreements; and (6) written warranties and guaranties from
all subcontractors and suppliers as required by the General Construction
Contract and subcontracts, as-built plans, record drawings, and all project
files have been delivered to Landlord. Tenant shall pay or cause to be paid at
no expense or liability to Landlord, and shall indemnify, defend and hold
harmless Landlord with respect to, any expense or claim incurred by or asserted
against Landlord or the Property and shall reimburse Landlord for any cost or
expense incurred by Landlord that is necessary to achieve Project Close-Out
that is in excess of amounts which Landlord is obligated to fund under this
Agreement, including any such liability, cost or claim resulting from non-
compliance of the Improvements or the Access Road with applicable Governmental
Requirements or private covenants, conditions and restrictions of record.
Tenant shall be entitled to any payment or credits owed or payable by the
General Contractor as a result of delay in completion of the Project.
1.3 Status of Construction. Tenant shall keep Landlord apprised of
the status of construction of the Improvements, and shall provide copies to
Landlord, as and when received by Tenant, of: (i) all requests for
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information; (ii) applications for payment and invoices for payment under the
Project Agreements together with supporting documentation and certificates for
payment; (iii) prior to agreeing thereto, proposed Change Orders, Construction
Change Directives, Addenda, Change Orders and Modifications (as such terms are
defined in document forms prepared by the American Institute of Architects);
(iv) project meeting minutes; (v) inspection certifications and correspondence
relating thereto; (vi) any claims for additional compensation or an extension
in time for performance under any of the Project Agreements; (vii) any notices
of any violations of any legal or regulatory requirements applicable to the
performance of the work; (viii) any schedule modifications; (ix) all shop
drawings and other submittals; and (x) any other material matters relating to
the completion of the Improvements. Landlord shall be entitled to have a
representative present at all project meetings and Tenant shall provide
reasonable advance notice of such meetings to Landlord or its designated
representative.
1.4 Changes. No amendment or modification shall be made to the
Architects' Agreements, the General Construction Contract, the Project
Management Agreement, the Budget or the Project Schedule and no material extra
work or materials or material change in the Plans and Specifications shall be
ordered, authorized or approved by Tenant without, in each case, the prior
written consent of Landlord; provided, however, Landlord shall not unreasonably
withhold its consent to changes in the work or in the Plans and Specifications
(and corresponding Change Orders) which individually or in the aggregate do not
increase or decrease the guaranteed maximum price under the General
Construction Contract by more than $50,000.00; and do not, in Landlord's
reasonable opinion, adversely affect the structure, systems, or equipment, or
appearance of the Improvements or the marketability of the Improvements for
future sale or office leasing. The procedures and time periods for approval of
changes are set forth on attached Exhibit G. As used herein, "Landlord's
Delays" means delays in construction or completion of the Initial Improvements
resulting from Landlord's failure to respond to requests for approvals required
from Landlord hereunder within any time periods specified in Exhibit G for such
response (or if no such period is specified, within a reasonable time).
1.5 Tenant Acts as Principal. With respect to the contracts for
labor, materials and professional services for the construction of the
Improvements, Tenant acts as principal and not as the agent of Landlord.
Landlord expressly disclaims liability for the cost of labor performed for or
supplies or materials furnished to Tenant, except as set forth in this
Agreement. Landlord may post one or more "notices of non-responsibility" for
Tenant's work on the Property. Tenant agrees to indemnify, defend and hold
Landlord and the Property, harmless from all claims (including all costs and
expenses of defending against such claims) arising or alleged to arise from any
act or omission of Tenant or Tenant's agents, employees, contractor,
subcontractors, suppliers, materialmen, architects, designers, surveyors,
engineers, consultants, laborers, or invitees ("Tenant Contractor"), or arising
from any bodily injury or property damage occurring or alleged to have occurred
incident to any of the work to be performed by Tenant or any Tenant Contractor
with respect to the Property. Tenant shall, upon Landlord's request, at
Tenant's expense, resist and defend such action, suit or proceeding, or cause
the same to be resisted and defended by counsel designated by Tenant and
approved in writing by Landlord unless Tenant shall elect to pay or settle any
such claims out of its own funds or proceeds of insurance; Tenant shall
promptly notify Landlord of each action, suit or proceeding threatened or
commenced as a result of injury, damage or liability occurring in, on or about
the Property (whether or not Landlord is named or threatened to be named as a
party), and Tenant shall, upon Landlord's request, at Tenant's expense, resist
and defend such action, suit or proceeding, or cause the same to be resisted
and defended by counsel designated by Tenant and approved in writing by
Landlord unless Tenant shall elect to pay or settle any such claims out of its
own funds or proceeds of insurance. Tenant shall have no authority to place
any lien upon the Property, or any portion thereof or interest therein, nor
shall Tenant have any authority in any way to bind Landlord, and any attempt to
do so shall be void and of no effect. If, because of any actual or alleged act
or omission of Tenant, or Tenant's Contractor, any Tenant Contractor, any lien,
affidavit, charge or order for the payment of money shall be filed against
Landlord or the Project, or any portion thereof or interest therein, whether or
not such lien, affidavit, charge or order is valid or enforceable, Tenant
shall, at its sole cost and expense, cause the same to be discharged of record
by payment, bonding or otherwise no later than 15 days after notice to Tenant
of the filing thereof, but in any event prior to
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the foreclosure thereof. While any such sum remains unpaid, the obligations of
Tenant under this paragraph shall not apply to any claim for payment or lien to
the extent such claim or lien results solely from a failure by Landlord to pay
any sum which Landlord is required to disburse under the terms of this
Agreement.
1.6 Insurance Requirements. Tenant shall cause the General
Contractor to carry, during all such times as the Tenant's work is being
performed, all insurance required to be carried by the General Contractor under
Article 11 of the General Conditions to the General Construction Contract,
including, without limitation, (1) a policy of insurance covering commercial
general liability, with a combined single limit for bodily injury and property
damage per occurrence of not less than $2,000,000, automobile liability
coverage (including owned, non-owned and hired vehicles) in an amount not less
than $1,000,000 combined single limit (each person, each accident), and
umbrella liability with limits not less than $25,000,000, and endorsed to show
Landlord as an additional insured, and (2) workers' compensation insurance as
required by law, endorsed to show a waiver of subrogation by the insurer to any
claim the General Contractor may have against Landlord. In addition, Tenant
shall carry, or cause General Contractor to carry, throughout construction of
the Improvements, builder's risk completed value insurance on the Improvements,
in an amount approved by Landlord, which approval shall not be unreasonably
withheld or delayed, and otherwise satisfying the requirements of Section
11.3.1 of the General Conditions to the General Construction Contract. Such
builder's risk insurance shall include interests of Landlord in the
Improvements. All such insurance shall be issued by insurance companies which
are reasonably acceptable to Landlord and shall provide primary coverage to
Landlord (any policy issued to Landlord providing duplicate or similar coverage
shall be deemed excess over the policies required hereunder).
1.7 Inspection. Landlord shall at all times have the right to
inspect the progress and quality of the construction of the Improvements. No
inspection of the work in progress or any review or approval of the Plans and
Specifications or any other matter hereunder by Landlord, or its consultants or
representatives, shall relieve Tenant from its responsibilities under this
Agreement or the Project Architects, the Project Manager or any contractor or
subcontractor from its responsibilities under its respective contract. Any
approval given by Landlord with respect to Tenant's construction or the plans
and specifications therefor, and/or any monitoring of Tenant's work by
Landlord, shall not make Landlord liable or responsible in any way for the
condition, quality or function of such matters or constitute any undertaking,
warranty or representation by Landlord with respect to any of such matters.
Tenant will allow Landlord its representatives or agents, at any time
during normal business hours, upon reasonable notice, access to the records and
books of account, including any supporting or related vouchers or papers, kept
by or on behalf of Tenant, its respective representatives or agents in
connection with the Property, such access to include the right to make extracts
or copies thereof.
1.8 Permits. Tenant shall be solely responsible for obtaining any
permits required for construction of the Improvements and any certificates of
occupancy or business or other license or permit required for the use and
occupancy of the Property and the conduct of Tenant's business at the Property.
1.9 Utilities. Tenant or General Contractor shall be responsible for
all water, gas, electricity, sewer or other utilities used or consumed at the
Property during the construction of the Improvements.
1.10 Ownership of Improvements. The Property and the Improvements are
the property of Landlord and Tenant hereby disclaims any interest therein
(other than Tenant's leasehold interest under the Lease). All property and
materials incorporated into the Improvements shall become the property of
Landlord upon such incorporation, or upon such earlier time as title passes to
the "owner" under the Project Agreements.
ARTICLE 2: DISBURSEMENTS
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2.1 Applications for Payment. On or before the 20th day of each
month during the construction of the Improvements, Tenant shall submit to
Escrow Agent and Landlord a written request for disbursement for costs incurred
in construction of the Improvements using AIA Form G702 and G703, or a form
containing equivalent information and approved by Landlord (an "Application for
Payment"). Subject to the provisions of this Agreement, payment in respect of
a properly submitted Application for Payment shall be made by the 5th day of
the month following submission. Each Application for Payment shall be
accompanied by:
(a) such backup or supporting documentation as Landlord may
reasonably request substantiating the amount requested;
(b) current lien waivers from general or prime contractors and
lien waivers from subcontractors evidencing that they have received amounts
owing to them from the prior month's disbursement;
(c) with respect to amounts owing to the Project Architects in
respect of the Plans and Specifications, evidence reasonably satisfactory to
Landlord that the applicable governmental approvals have been obtained for the
work in progress or final drawings and specifications, as the case may be, for
which payment is requested; and
(d) with respect to amounts owing in respect of construction
costs, a certificate of one or both of the Project Architects (as applicable),
certifying: (A) the percentage of the work on the Improvements completed as of
the date of the subject Application for Payment; (B) that the work completed to
date complies with the Plans and Specifications and Governmental Requirements;
and (C) the contractors and subcontractors requesting payment are entitled to
payment in the amount requested. In no event shall any amount be disbursed in
excess of the amount certified by the Project Architects as aforesaid.
For each properly submitted Application for Payment, and subject to the
conditions herein, Landlord shall deposit the amount of the Application for
Payment in the escrow account established for such purpose with Escrow Agent,
and Escrow Agent shall disburse such amount to the contractors, subcontractors
or third parties entitled to such payments in accordance therewith.
Final payment and the disbursement of retainages shall be made at such
times as (i) the Project Architects and the General Contractor have each
certified to Landlord that all punch list items applicable to the Improvements
have been properly completed and final completion of the Improvements has been
achieved and such certificates have been delivered to Landlord and Escrow
Agent; (ii) Tenant, the Project Manager and Project Architects have each
delivered to Landlord, with a copy to Escrow Agent, a certificate stating that
all other items required for Project Close-Out have been obtained and delivered
to Landlord and, with respect to the final unconditional lien waivers, to
Escrow Agent.
2.2 Dispute. In the event of a dispute relating to any Application
of Payment, Escrow Agent shall give written notice to Landlord and Tenant
("Dispute Notice"). Landlord and Tenant shall deliver joint written
instructions to Escrow Agent within 15 days of the date of the Dispute Notice.
In the event such joint written instructions are not given within said time
period, the parties shall submit the dispute for arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association and
judgment on the award rendered by the arbitrator may be entered into any court
having jurisdiction. The parties to this Escrow Agreement agree that any
arbitration proceedings shall be conducted in the American Arbitration
Association's regional office located in Denver, Colorado. Each party shall
bear its own costs and expenses in connection with the arbitration; provided,
however, that the substantially prevailing party shall be entitled to
reimbursement by the other party for all reasonable costs and expenses
(including attorneys' fees and costs) that such prevailing party incurred in
the arbitration. Tenant shall continue to perform its obligations under this
Agreement during the pendency of any arbitration.
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2.3 Conditions to Payment. Before any deposit by Landlord in the
escrow account and payment by the Escrow Agent and as a condition to each such
deposit and payment:
(a) No Damage. There shall be no substantial unrepaired
damage to the Improvements by fire or other casualty which is not in Landlord's
judgment adequately covered by collectible proceeds of insurance. If such
proceeds exceed $50,000.00, all proceeds shall be paid to Landlord and shall be
disbursed by it, subject to the terms and provisions of this Agreement. If
such proceeds are less than $50,000.00, all proceeds shall be paid to Tenant
and applied by it to repair any such damages.
(b) Construction Report. Landlord shall have received a
report from the Project Manager dated not earlier than the Application for
Payment to the effect that construction of the Improvements to the date of such
certificate has been in accordance with Governmental Requirements and the Plans
and Specifications.
(c) No Default. No Event of Default shall have occurred and
remain uncured, nor shall any circumstance exist which would, in the reasonable
judgment of Landlord, with the giving of notice or the passage of time, or
both, constitute an Event of Default. At the time of making each disbursement
there shall be delivered to Landlord a certificate, dated as of the date of the
disbursement and signed by Tenant, attesting to the truth of the facts set
forth in the foregoing sentence.
(d) Later Date Title Endorsements. The Title Company is
prepared to endorse the Owner's Title Policy to insure its coverage effective
as of the date of making the disbursement, to include the amount of the
disbursement without exception for any intervening lien, claim of lien or other
encumbrance, in the form of endorsement attached hereto as Exhibit F.
(e) No Mechanic's Liens. No mechanic's or material supplier's
liens shall have been recorded against the Land.
(f) Materials. Landlord shall have received evidence that all
materials for the Improvements to be paid for from such disbursement have been
installed in the Improvements or properly stored on the Property.
2.4 Deficiency. If Landlord reasonably concludes at any time that
the Total Project Cost, including all expenses and charges of every kind and
nature, whether or not described in the Budget, of completion of the
Improvements will exceed $28,000,000.00, after allocation of any realized
savings, there shall be deemed to be a deficiency (herein sometimes called the
"Deficiency"). In the event of any Deficiency within 10 business days after
written demand by Landlord and as a condition to further payment by Landlord
hereunder, Tenant shall deposit the amount of such Deficiency (or an
irrevocable, direct pay letter of credit in such amount issued by a financial
institution reasonably acceptable to Landlord) with the Escrow Agent (such
amount to be disbursed prior to any further disbursements by Landlord), or
otherwise satisfy such Deficiency in a manner reasonably acceptable to
Landlord.
2.5 Dispute with Contractors and Right to Contest. No Application
for Payment shall include amounts which are in dispute between Tenant and any
contractor or between a contractor and any subcontractor. Notwithstanding any
other provisions to the contrary contained in this Agreement, if no Event of
Default has occurred and is continuing, and if Tenant notifies Landlord prior
to any disbursement by Landlord under Paragraph 3.3 for payment of any lien
encumbering the Property that Tenant intends to contest same, Tenant shall have
the right to diligently contest any mechanic's or other lien claim encumbering
the Property (provided that the Tenant shall deposit, with the Title Company, a
sum sufficient (or other security or indemnity acceptable to the Escrow Agent)
to cause the Title Company to insure over such lien claims) assessed against
the Property.
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2.6 Landlord's Maximum Obligation. Landlord's obligation to make
payments with respect to the Improvements under this Agreement (including the
purchase price and costs paid or reimbursed to Tenant at Closing under the
Purchase Contract, real estate taxes, insurance costs and any other payments to
the extent included in the definition of Total Project Cost in Paragraph 4.1)
is limited to a maximum aggregate amount of $28,000,000.00. Any costs in
excess of $28,000,000.00 shall be paid by Tenant.
2.7 Conditions to Escrow Agents Duties. Acceptance of the Escrow
Agent of its duties under this Agreement is subject to the following terms and
conditions:
(a) The duties and obligations of the Escrow Agent shall be
determined solely by the provisions of this Agreement and the Escrow Agent
shall not be liable to any party except for the performance of such duties and
obligations as are specifically set out in this Agreement;
(b) Tenant and Landlord will jointly and severally reimburse
and indemnify the Escrow Agent for, and hold it harmless against, any loss,
liability or expense, including, but not limited to, court costs and attorneys'
fees incurred without gross negligence or willful misconduct on the part of the
Escrow Agent, and arising out of, or in connection with, any dispute arising
under this Agreement, as well as the costs and expense of defending against any
claim or liability arising out of, or relating to, this Agreement, provided
that any reimbursement shall not prejudice the right of Tenant and Landlord to
recover from the other.
(c) The Escrow Agent shall be fully protected in acting on and
relying upon any written notice, instruction, direction or other document which
the Escrow Agent, in good faith, believes to be genuine and to have been signed
or presented by the proper party or parties;
(d) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith, or
for any mistake in fact or law, or for anything which it may do or refrain from
doing in connection herewith, except its own gross negligence or willful
misconduct;
(e) The Escrow Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of the
provisions of this Agreement or its duties hereunder, and it shall incur no
liability and shall be fully protected in respect of any action taken or
suffered by it in good faith in accordance with the opinion of such counsel;
(f) The Escrow Agent may resign and be discharged from its
duties hereunder at any time by giving written notice of such resignation to
each of the parties specifying a date, not less than fifteen (15) days after
the date of such notice. No resignation shall be effective until a substitute
Escrow Agent selected by Landlord and Tenant or if they cannot agree, by Escrow
Agent, has agreed in writing to act as the Escrow Agent hereunder. Any
substitute Escrow Agent must be a United States title company authorized to
insure title to real property in all states. Upon the effective date of such
resignation, the Escrow Agent shall deliver any funds in its escrow account to
the substitute Escrow Agent and upon such delivery and the assumption by the
substitute Escrow Agent of its duties hereunder, the Escrow Agent shall be
relieved of all duties and liabilities thereafter accruing under this
Agreement. Landlord and Tenant shall have the right, at any time, to
substitute a new escrow agent by giving joint notice thereof to the Escrow
Agent then acting;
(g) Nothing contained in this Agreement shall in any way
affect the right of the Escrow Agent to have, at any time, a judicial
settlement of its accounts as Escrow Agent under this Agreement.
(h) Escrow Agent waives all rights of offset and disclaims any
security or other interest in the Escrow Funds except for fees and expenses to
Escrow Agent hereunder for which Escrow Agent is not
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reimbursed as provided herein.
(i) The fee of Escrow Agent for its services hereunder, if
any, shall be paid by Landlord and included in Total Project Costs.
ARTICLE 3: DEFAULT
3.1 Events of Default. Each of the following shall constitute an
"Event of Default" under this Agreement:
(a) Any Event of Default by Tenant that occurs under the Lease
(after expiration of any applicable cure period);
(b) Tenant fails to keep or perform any obligation or
condition which this Agreement obligates Tenant to keep or perform, and such
failure continues for 10 consecutive days after written notice thereof from
Landlord to Tenant, as the case may be;
(c) Any representation, warranty or certification, made or
given in or pursuant to this Agreement or otherwise made by Tenant in writing
in connection with or as contemplated by this Agreement, proves to be untrue in
any material respect at any time when such representation, warranty or
certification is operative or applicable hereunder;
(d) Either of the Architects' Agreements, the General
Construction Contract or any other Project Agreement to which Tenant is a party
is modified or amended in any material respect without the prior written
consent of Landlord; or
(e) The construction of the Improvements is abandoned or
discontinued for a period of 10 consecutive days or more and such delay is not
due to Landlord's Delays or any cause which would permit extension of the
Contract Time under Section 8.3 of the General Conditions to the General
Construction Contract, other than a delay caused by Tenant or its employees; or
(f) Tenant fails to substantially comply with (or to bond or
indemnify Landlord to its satisfaction with regard to) any Governmental
Requirement within 20 consecutive days after Tenant has notice of such
requirement; or
(g) Tenant: makes an assignment for the benefit of creditors;
or petitions or applies to any tribunal for the appointment of a trustee or
receiver for itself or for any substantial part of its assets, or commences any
proceedings under any bankruptcy, arrangement, insolvency, readjustment of debt
or reorganization statute or law of any jurisdiction, whether now or hereafter
in effect; or if any such petition or application is filed or any such
proceedings are commenced, and any such person or entity by any act indicates
any approval thereof, consent thereto or acquiescence therein, or an order is
entered appointing any such trustee or receiver, or adjudicating any such
person or entity bankrupt or insolvent, or approving the petition in any such
proceedings; or if any petition or application for any such proceeding or for
the appointment of trustee or receiver is filed by any third-party against any
such person or entity or any of the aforesaid proceedings is not dismissed
within 90 days of its filing; or
(h) Proceedings are commenced by any public or quasi-public
body to acquire the Property or any material interest in or part thereof by
eminent domain and such proceedings are not dismissed within 90 days; or
9
<PAGE> 10
(i) Tenant enters into any financing agreements or
arrangements of any kind whatsoever directly or indirectly secured or purported
to be secured by the Property, or any part thereof; or
(j) Any lien or notice of lien for the performance of work or
the supplying of materials is filed or served against the Property, or any part
thereof, and remains unsatisfied and if the Escrow Agent fails to insure over
it at the time of any request for disbursement or for a period of 30
consecutive days after the date of filing or serving thereof; or
(k) There is an attachment, execution or other judicial
seizure of any portion of the Property and such seizure is not discharged
within 30 consecutive days after such attachment, execution or other judicial
seizure, as the case may be; or
(l) Any order or decree is entered by any court of competent
jurisdiction directly enjoining the construction or completion of the
Improvements or enjoining or prohibiting Tenant, or Landlord from substantially
performing any of its obligations or rights under or as contemplated by this
Agreement, and such order or decree is not stayed or vacated, or the
proceedings out of which such order or decree arose are not dismissed, within
30 consecutive days after the granting of such decree or order; or
(m) Any Deficiency is not satisfied in a manner reasonably
satisfactory to Landlord in its discretion (whether such Deficiency is existing
or anticipated by Landlord), within 10 business days;
provided, however, that except for a default under subparagraph (a), the time
limit for curing defaults as set forth in the foregoing clauses shall be
extended for a period of not more than an additional 90 consecutive days if the
ability to cure the subject default within the time limits specified in such
clauses is not within the reasonable control of Tenant (lack of funds shall not
be deemed a matter beyond the reasonable control of any such party) and
provided Tenant promptly and in good faith undertakes the curing of such
default and diligently thereafter in good faith pursues the curing thereof to
completion.
3.2 Remedies. After the occurrence of any Event of Default, Landlord
shall have the right in addition to all the remedies conferred upon Landlord by
law or equity or the terms of this Agreement or the Lease, to do any one or
more of the following, concurrently or successively, without notice to Tenant:
(a) Terminate Landlord's obligations under this Agreement to
make any further payments hereunder; and
(b) To the extent and in the manner permitted by applicable
law, and without terminating the Lease, enter upon, take possession of, and use
the Property, and all parts thereof, and all material, equipment and supplies
thereon and elsewhere which were ordered for or appropriated to the
construction of the Improvements, for the purpose of continuing the
construction of the Improvements, and do anything which in its sole judgment is
necessary or desirable to fulfill, pay, settle or compromise the obligations of
Tenant hereunder or to complete the Improvements, including, without
limitation, availing itself or through others of and procuring performance of
the Architects' Agreements, the Project Management Agreement and the General
Construction Contract or letting new contracts with the General Contractor, the
Project Manager or the Project Architects or others. All sums whatsoever paid
or incurred for the construction, completion and equipping of the Improvements,
pursuant to the provisions of this paragraph or otherwise, and all other
payments made or liabilities incurred by Landlord shall constitute
disbursements pursuant to this Agreement. Landlord and its designees,
representatives, agents, licensees and contractors shall be entitled to such
entry, possession and use without the consent of any party and without any
other condition precedent whatsoever. Tenant acknowledges that any denial of
such entry, possession and use by Landlord after Landlord shall be entitled
thereto in the manner permitted by law will cause irreparable injury and
damages to Landlord and Landlord shall be entitled to
10
<PAGE> 11
injunctive relief to obtain such entry.
3.3 Action by Landlord. To implement the rights of Landlord under
Paragraph 3.2 hereof, Tenant hereby constitutes and appoints Landlord its true
and lawful attorney-in-fact with full power of substitution in the premises to,
at its election, after an Event of Default, take possession of the Property
without terminating the Lease and to make such corrections, additions, changes
and modifications in the Plans and Specifications as may be necessary or
desirable in the opinion of Landlord to pursue such construction of the
Improvements; to employ such contractors, subcontractors, employees, agents,
architects, engineers, watchmen, managers, consultants and inspectors as
Landlord may deem appropriate; to pay, settle or compromise all existing bills
and claims which may be or become liens against the Property, or any part
thereof, or as may be necessary or desirable in the opinion of Landlord for
pursuing such construction or for the clearance of title; to prosecute and
defend all actions and proceedings in connection with pursuing such
construction or in connection with title to the Property; to execute all
applications, certificates, or instruments in the name of Tenant which in the
opinion of Landlord may be or are required by any governmental authority or
contract to pursue construction of the Improvements; and to do any and every
act which Tenant might do in its own behalf to pursue construction of the
Improvements. Such power of attorney is coupled with an interest and is
irrevocable. Landlord as such attorney-in-fact shall also have the power, at
its election, after an Event of Default, to prosecute and defend all actions
and proceedings in connection with such construction, and to take such action
and require such performance under any surety bond or other obligation, and to
execute in the name of Tenant such further bonds or obligations, as Landlord
may require in connection with the work.
Funds disbursed by Landlord in the exercise of its judgment that the
same are needed to complete the Improvements or to protect the Property or to
fulfill any of Tenant's obligations hereunder or under the Lease are to be
added to the Total Project Cost.
ARTICLE 4: CALCULATION OF RENT
4.1 Calculation of Base Rent under the Lease. Effective on the Rent
Commencement Date, annual Base Rent shall equal the product of (x) the Total
Project Cost and (y) the Annual Rate of Return. "Annual Rate of Return" means:
an annual rate equal to 9.70%, provided that such rate shall be reduced by one
basis point for each whole $100,000 by which the amount of $27,000,000.00
exceeds the Total Project Cost, up to a maximum reduction of 20 basis points.
For example: if the Total Project Cost is $26,750,000.00, then the Annual Rate
of Return shall be reduced by two basis points to 9.68%. The obligation of
Tenant to pay Base Rent shall commence on the Rent Commencement Date whether or
not the Improvements have been completed and Tenant agrees that the risk of
late completion of the Improvements shall be borne by Tenant. If the Total
Project Cost has not been determined as of the Rent Commencement Date, Base
Rent shall be determined by Landlord based upon Total Project Cost incurred to
date plus a reasonable estimate of remaining amounts to be disbursed by
Landlord hereunder. A final calculation of Base Rent shall be made upon
Project Close-Out (which Base Rent shall be effective retroactively to the Rent
Commencement Date) and Tenant shall (i) remit any underpayment to Landlord
together with the installment of Base Rent next due, or (ii) receive a credit
against Base Rent next due in the amount of any overpayment. "Total Project
Cost" shall mean the sum of (A) the purchase price paid by Landlord under the
Purchase Contract to purchase the Property (without regard to adjustments or
prorations made thereunder), (B) costs incurred by Tenant in connection with
design and construction of the Improvements paid or reimbursed by Landlord
pursuant to Paragraph 6.1(b) of the Purchase Contract, (C) costs disbursed by
Landlord pursuant to this Agreement; (D) real estate taxes and assessments
accrued or assessed for the period from and after the Closing Date under the
Purchase Contract through the date of commencement of Tenant's obligation to
pay real estate taxes under the Lease (whether or not due and payable); (E) any
other amounts specifically included in the Total Project Cost under the terms
of this Agreement or the Purchase Agreement; (F) Landlord's average cost of
coverage for liability insurance during the period ending on Project Close-Out;
(G) the Financing Fee; and (H) imputed interest at the Interest Rate on the
Total Project Cost (imputed interest accrues on actual cost as and when
11
<PAGE> 12
disbursed by Landlord, including amounts under clause (B) above paid or
reimbursed at closing under the Purchase Contract, (and for such purposes, the
Financing Fee shall be deemed to have been disbursed on the Closing Date under
the Purchase Contract) up to the Rent Commencement Date, as such term is
defined in the Lease). Total Project Cost shall not include any transaction
costs incurred by Purchaser in connection with the investigation and purchase
of the Property under the Purchase Contract, except as expressly provided in
the Purchase Agreement. "Interest Rate" means an annual rate equal to the rate
as published in the Wall Street Journal for notes maturing one month after
issuance under the caption "Money Rates, London Interbank Offered Rates"
("Libor"), plus 1.6 percent per annum, but not in any event shall such rate
exceed at any time the maximum rate of interest permitted by applicable law.
The Interest Rate shall change on the same day as any change in the Libor rate
as published in the Wall Street Journal. As used in this Agreement, "Financing
Fee" means a fee equal to 50 basis points levied against the total of all other
components of Total Project Cost, as estimated based upon the Budget and
Project Schedule, which fee shall be adjusted at Project Close-Out to reflect
actual disbursements and imputed interest through the date of Project-Close-
Out.
4.2 INTENTIONALLY OMITTED.
4.3 Escalation of Base Rent. Base Rent shall escalate during the
term of the Lease and any extension term, as set forth in the Lease.
ARTICLE 5: INTENTIONALLY OMITTED
ARTICLE 6: MISCELLANEOUS
6.1 No Waiver; Modifications. No delay on the part of Landlord or
Tenant in exercising any rights set forth herein, or failure to exercise such
rights, shall operate as a waiver thereof or of any of their rights under this
Agreement. No modification or waiver of the provisions of this Agreement shall
be effective unless in writing and signed by the party to be charged therewith,
nor shall any waiver be applicable except in the specific instance for which
given.
6.2 Governing Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
6.3 Conflicts. The provisions of this Agreement shall govern over
any conflicting provisions in the Lease or the Purchase Contract.
6.4 Headings. The article and paragraph headings of this Agreement
are for convenience only and in no way limit or enlarge the scope or meaning of
the language hereof.
6.5 Invalidity and Waiver. If any portion of this Agreement is held
invalid or inoperative, then so far as is reasonable and possible the remainder
of this Agreement shall be deemed valid and operative, and, to the greatest
extent legally possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The failure by either party to enforce
against the other any term or provision of this Agreement shall not be deemed
to be a waiver of such party's right to enforce against the other party the
same or any other such term or provision in the future.
6.6 No Third Party Beneficiary. This Agreement is not intended to
give or confer any benefits, rights, privileges, claims, actions, or remedies
to any person or entity as a third party beneficiary, decree, or otherwise.
12
<PAGE> 13
6.7 Entirety and Amendments. This Agreement and the Lease embody the
entire agreement between the parties and supersede all prior agreements and
understandings between the parties relating to the Property other than
provisions of the Purchase Contract which survive the Closing by their terms.
This Agreement may be amended or supplemented only by an instrument in writing
executed by the party against whom enforcement is sought.
6.8 Time of the Essence. Time is of the essence in the performance
of this Agreement.
6.9 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party against whom any final judgment is
entered agrees to pay the prevailing party all reasonable costs, charges, and
expenses, including reasonable attorneys' fees, expended or incurred by the
prevailing party in connection therewith.
6.10 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the addresses set forth below.
Any such notices shall be either (1) sent by overnight delivery using a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one business day after deposit with such courier, (2) sent by
telefax, in which case notice shall be deemed delivered upon transmission of
such notice, or (3) sent by personal delivery, in which case notice shall be
deemed delivered upon receipt or refusal of delivery. A party's address may be
changed by written notice to the other party; provided, however, that no notice
of a change of address shall be effective until actual receipt of such notice.
Copies of notices are for informational purposes only, and a failure to give or
receive copies of any notice shall not be deemed a failure to give notice.
Tenant Notice Address:
---------------------
J.D. EDWARDS & COMPANY
8055 East Tufts Avenue
Denver, Colorado 80237
Attention: Director of Real Estate
Telephone: 303/488-1188
Facsimile: 303/488-1690
With a copy to: J.D. EDWARDS & COMPANY
8055 East Tufts Avenue
Denver, Colorado 80237
Attention: General Counsel
Telephone: 303/488-4606
Facsimile: 303/488-4679
And with a copy to: Sherman & Howard, LLC
633 17th Street
Suite 3000
Denver, Colorado 80202
Attention: James L. Cunningham
Telephone: 303/299-8356
Facsimile: 303/298-0940
Landlord Notice Address:
-----------------------
With a copy to: CARRAMERICA REALTY, L.P.
13
<PAGE> 14
Attention: Market Officer
7600 East Orchard Road
Englewood, CO 80111
Telephone: 303/773-0618
Facsimile: 303/779-6587
CARRAMERICA REALTY CORPORATION
Attention: Asset Manager
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/624-7500
Facsimile: 202/638-0102
And a copy to: Mayer, Brown & Platt
Attn: George Ruhlen
141 East Palace Avenue
Santa Fe, New Mexico 87501
Telephone: 505/820-8186
Facsimile: 505/820-7334
6.11 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
6.12 Remedies Cumulative. The remedies provided in this Agreement
shall be cumulative and, except as otherwise expressly provided shall not
preclude the assertion or exercise of any other rights or remedies available by
law, in equity or otherwise.
6.13 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
6.14 Independent Obligations. Tenant acknowledges that the undertakings
of Tenant under this Agreement are a material inducement to Landlord to
purchase the Property under the Purchase Contract and to enter into the Lease
and that Landlord would not purchase the Property or enter into the Lease
without Tenant's undertaking to complete the Improvements. The obligations of
Tenant under this Agreement are independent of and in addition to the Lease and
no default by Landlord under the Lease or defense available to Tenant with
respect to its obligations under the Lease shall constitute or be deemed a
defense to Tenant's obligations hereunder.
[Signature Page Follows]
14
<PAGE> 15
SIGNATURE PAGE TO
SUPPLEMENT TO LEASE AGREEMENT
CARRAMERICA REALTY, L.P.
By: CARRAMERICA REALTY GP HOLDINGS, INC.,
a Delaware corporation,
its general partner
By:
---------------------------------------
Name:
---------------------------------
Title:
--------------------------------
J.D. EDWARDS & COMPANY
By:
---------------------------------------
Name: Richard G. Snow, Jr.
Title: Vice President and General Counsel
Escrow Agent accepts its duties pursuant to Paragraph 2.7.
LAND TITLE GUARANTEE COMPANY
By:
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
15
<PAGE> 16
SUPPLEMENT TO LEASE AGREEMENT
EXHIBITS
A - Legal Description of Land
B - Budget
C - List of Plans and Specifications
D - List of Project Agreements
E - Project Schedule
F - Form of Endorsement
G - Change Order Procedures
<PAGE> 17
EXHIBIT A
LEGAL DESCRIPTION OF LAND
PARCEL 1
A PARCEL OF LAND BEING LOCATED IN THE DENVER TECHNOLOGICAL CENTER EAST IN
SECTIONS 8 AND 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL
MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF COLORADO, BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
COMMENCING AT THE WEST QUARTER CORNER OF SECTION 9; THENCE ALONG THE EAST-WEST
CENTERLINE OF SECTION 9 BEARING SOUTH 89 DEGREES 59 MINUTES 25 SECONDS EAST,
279.73 FEET TO THE TRUE POINT OF BEGINNING;
THENCE NORTH 52 DEGREES 41 MINUTES 01 SECONDS WEST, 368.62 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE RIGHT HAVING AN ARC LENGTH OF 563.61 FEET, A CENTRAL
ANGLE OF 30 DEGREES 04 MINUTES 04 SECONDS, A RADIUS OF 1,074.00 FEET AND A
CHORD WHICH BEARS NORTH 52 DEGREES 23 MINUTES 11 SECONDS EAST, 557.17 FEET;
THENCE SOUTH 27 DEGREES 16 MINUTES 44 SECONDS EAST, 79.29 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE RIGHT HAVING AN ARC LENGTH OF 413.05 FEET, A CENTRAL
ANGLE OF 23 DEGREES 47 MINUTES 07 SECONDS, A RADIUS OF 995.00 FEET AND A CHORD
WHICH BEARS NORTH 79 DEGREES 41 MINUTES 12 SECONDS EAST, 410.10 FEET TO A POINT
OF NON-TANGENCY;
THENCE NORTH 43 DEGREES 56 MINUTES 35 SECONDS EAST, 67.90 FEET TO THE
RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY;
THENCE ALONG SAID RIGHT-OF-WAY LINE BEING A CURVE TO THE LEFT HAVING AN ARC
LENGTH OF 73.83 FEET, A CENTRAL ANGLE OF 05 DEGREES 13 MINUTES 20 SECONDS, A
RADIUS OF 810.00 FEET AND A CHORD WHICH BEARS SOUTH 48 DEGREES 40 MINUTES 05
SECONDS EAST, 73.80 FEET;
THENCE LEAVING SAID RIGHT-OF-WAY LINE SOUTH 35 DEGREES 51 MINUTES 07 SECONDS
WEST, 95.85 FEET TO POINT OF CURVATURE;
THENCE ALONG A CURVE TO THE LEFT HAVING AN ARC LENGTH OF 374.78 FEET, A CENTRAL
ANGLE OF 35 DEGREES 36 MINUTES 58 SECONDS, A RADIUS OF 602.79 FEET AND A CHORD
WHICH BEARS SOUTH 18 DEGREES 02 MINUTES 45 SECONDS WEST, 368.70 FEET TO A POINT
OF TANGENCY;
THENCE SOUTH 00 DEGREES 14 MINUTES 25 SECONDS WEST, 243.18 FEET;
THENCE ALONG A NON-TANGENT CURVE TO THE LEFT HAVING AN ARC LENGTH OF 257.58
FEET, A CENTRAL ANGLE OF 45 DEGREES 28 MINUTES 50 SECONDS, A RADIUS OF 324.50
FEET AND A CHORD WHICH BEARS SOUTH 60 DEGREES 03 MINUTES 24 SECONDS WEST, 250.87
FEET;
THENCE NORTH 52 DEGREES 41 MINUTES 01 SECONDS WEST, 379.45 FEET TO THE TRUE
POINT OF BEGINNING.
BASIS OF BEARINGS: ASSUMED ALONG THE SOUTHEASTERLY LINE OF DTC EAST, WHICH IS
SITUATED SOUTH AND WEST OF SOUTH ULSTER STREET PARKWAY, NORTHWEST OF UNION
AVENUE PARKWAY, AND EAST OF INTERSTATE HIGHWAY I-25, AND BEING THE NORTHERLY
<PAGE> 18
RIGHT-OF-WAY LINE OF UNION AVENUE PARKWAY, BOOK 29, PAGE 56, AS MONUMENTED BY A
PIN AND CAP PLS 9655 BEING THE EASTERLY CORNER OF PARCEL 1, RECEPTION NO. 92-
0071136 AND A PIN AND CAP PLS 23899, BEARING NORTH 64 DEGREES 49 MINUTES 30
SECONDS WEST, 766.84 FEET.
<PAGE> 19
PARCEL 2
A PARCEL OF LAND BEING LOCATED IN THE DENVER TECHNOLOGICAL CENTER IN SECTION 9,
TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE SIXTH PRINCIPAL MERIDIAN, CITY AND
COUNTY OF DENVER, STATE OF COLORADO, BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
COMMENCING AT THE WEST QUARTER CORNER OF SECTION 9; THENCE N81 degrees 26'41"E,
808.84 FEET TO THE TRUE POINT OF BEGINNING; THENCE N00 degrees 14'25"E, 17.92
TO A POINT OF CURVATURE; THENCE 10.24 FEET ALONG THE ARC OF A CURVE TO THE
RIGHT HAVING A RADIUS OF 602.79 FEET, A CENTRAL ANGLE OF 00 degrees 58'22", AND
A CHORD WHICH BEARS N00 degrees 43'01"E, 10.24 FEET; THENCE 23.38 FEET ALONG
THE ARCH OF A CURVE TO THE LEFT HAVING A RADIUS OF 25.00 FEET, A CENTRAL ANGLE
OF 53 degrees 35'55", AND A CHORD WHICH BEARS N29 degrees 54'67"E, 22.64 FEET
TO A POINT OF COMPOUND CURVATURE; THENCE 167.63 FEET ALONG THE ARC OF A CURVE
TO THE RIGHT HAVING A RADIUS OF 592.29 FEET, A CENTRAL ANGLE OF 16 degrees
12'58", AND A CHORD WHICH BEARS N11 degrees 13'27"E, 167.07 FEET TO A POINT OF
REVERSE CURVATURE; THENCE 15.26 FEET ALONG THE ARC OF A CURVE TO THE LEFT
HAVING A RADIUS OF 10.00 FEET, A CENTRAL ANGLE OF 87 degrees 25'80", AND A
CHORD WHICH BEARS N24 degrees 23'00"W, 13.82 FEET TO A POINT OF TANGENCY;
THENCE N68 degrees 05'58"W, 0.87 FEET; THENCE 38.35 FEET ALONG THE ARC OF A
NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 602.79 FEET, A CENTRAL ANGLE
OF 03 degrees 38'41", AND A CHORD WHICH BEARS N22 degrees 06'27"E, 38.34 FEET;
THENCE 23.79 FEET ALONG A NON-TANGENT CURVE TO THE LEFT HAVING A RADIUS OF
20.00 FEET, A CENTRAL ANGLE OF 52 degrees 25'54", AND A CHORD WHICH BEARS
N52'08"18"E, 22.97 FEET TO A POINT OF REVERSE CURVATURE; THENCE 103.01 FEET
ALONG AN ARC OF A CURVE TO THE RIGHT HAVING A RADIUS OF 592.29 FEET, A CENTRAL
ANGLE OF 09 degrees 57'53", AND A CHORD WHICH BEARS N30 degrees 52'18"E, 102.88
FEET TO A POINT OF TANGENCY; THENCE N35 degrees 51'07"E, 95.39 FEET TO THE
SOUTHWESTERLY RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY; THENCE 44.90
FEET ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE BEING THE ARC OF A CURVE TO THE
LEFT HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 03 degrees 10'35", AND
A CHORD WHICH BEARS S53 degrees 36'39"E, 44.90 FEET; THENCE LEAVING SAID
SOUTHWESTERLY RIGHT- OF-WAY LINE S35 degrees 51'07"W, 32.45 FEET TO A POINT OF
CURVATURE; THENCE 44.40 FEET ALONG THE ARC OF A CURVE TO THE RIGHT HAVING A
RADIUS OF 115.00 FEET, A CENTRAL ANGLE OF 22 degrees 07'23", AND A CHORD WHICH
BEARS S45 degrees 54'48"W, 44.13 FEET TO A POINT OF REVERSE CURVATURE; THENCE
35.10 FEET ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 85.00 FEET,
A CENTRAL ANGLE OF 23 degrees 39'28", AND A CHORD WHICH BEARS S46 degrees
08'46"W, 34.85 FEET TO A POINT OF COMPOUND CURVATURE; THENCE 334.44 FEET ALONG
THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 582.29 FEET, A CENTRAL ANGLE
OF 34 degrees 04'43", AND A CHORD WHICH BEARS S17 degrees 16'40"W, 329.53 FEET
TO A POINT OF TANGENCY; THENCE S00 degrees 14'25"W, 16.34 FEET; THENCE 40.54
FEET ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 550.00 FEET, A
CENTRAL ANGLE OF 04 degrees 13'25", S87 degrees 52'54"W, 40.35 FEET TO THE TRUE
POINT OF BEGINNING. SAID PARCEL CONTAINS 0.37 ACRES (10030.87 SQUARE FEET),
MORE OR LESS.
BASIS OF BEARINGS: ASSUMED ALONG THE SOUTHEASTERLY LINE OF DTC EAST, WHICH IS
SITUATED SOUTH AND WEST OF SOUTH ULSTER STREET PARKWAY, NORTHWEST OF UNION
AVENUE PARKWAY, AND EAST OF INTERSTATE HIGHWAY I-25, AND BEING THE NORTHERLY
RIGHT-OF-WAY LINE OF UNION AVENUE PARKWAY, BOOK 29, PAGE 58, AS MONUMENTED BY A
<PAGE> 20
PIN AND CAP PLS 9000 BEING THE EASTERLY CORNER OF PARCEL 1, RECEPTION NUMBER
92-0071138 AND A PIN AND CAP PLS 23899 BEARING N64 degrees 49'20"W, 766.84 FEET.
<PAGE> 21
EXHIBIT B
BUDGET
<PAGE> 22
EXHIBIT C
LIST OF PLANS AND SPECIFICATIONS
(Attached)
<PAGE> 23
EXHIBIT D
LIST OF PROJECT AGREEMENTS
1. Project Management Agreement dated May 1, 1996 between J.D. Edwards &
Company and Schal Bovis, Inc.
2. Contract for Construction dated May 1, 1996 between J.D. Edwards &
Company and Hensel Phelps Construction Co.
3. Agreement for Interior Design Services dated May 1, 1996 between J.D.
Edwards & Company and VOA Associates Incorporated.
4. Agreement Between Client and Architect dated May 1, 1996 between J.D.
Edwards & Company and C.W. Fentress J.H. Bradburn & Associates, P.C.
<PAGE> 24
EXHIBIT E
PROJECT SCHEDULE
(Attached)
<PAGE> 25
EXHIBIT F
FORM OF ENDORSEMENT
(Attached)
<PAGE> 26
EXHIBIT G
PROCEDURES FOR CHANGE ORDERS
(Attached)
<PAGE> 1
EXHIBIT 10.12
BUILD-TO-SUIT LEASE AGREEMENT
BETWEEN
CARRAMERICA REALTY, L.P.
(LANDLORD)
AND
J. D. EDWARDS & COMPANY
(TENANT)
DATED AS OF DECEMBER 30, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Granting Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Acceptance of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Operating Expense Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Taxes - Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14. Subletting, Assignment and Contraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
16. Inspection and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
17. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
18. Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
19. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
20. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
21. Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
22. Tenant's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
23. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
i
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<TABLE>
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24. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
25. Mortgagee Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
26. Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
27. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
28. Environmental Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
29. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
30. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
32. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
33. Rules and Regulations; Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
34. No Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
35. Management and Operation of Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
36. Self Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
37. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
38. Options to Extend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
39. Tenant's Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
40. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
ii
<PAGE> 4
BUILD-TO-SUIT LEASE AGREEMENT
[Denver, Colorado]
THIS LEASE AGREEMENT is made as of this _____ day of December, 1996, between
CARRAMERICA REALTY, L.P., a Delaware limited partnership ("Landlord"), and the
Tenant named below.
<TABLE>
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<S> <C>
TENANT: J. D. Edwards & Company, a Colorado corporation.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
TENANT'S REPRESENTATIVE, David M. Hurtado
ADDRESS, AND PHONE NO.: J. D. Edwards & Company
8055 E. Tufts Avenue, Suite 1331
Denver, CO 80237
(303) 488-1188
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PREMISES: All of the rentable area in the Building, excluding Common Areas, and any
area occupied by an on-site building management office, but including
locker rooms and shower facilities. Attached hereto as Exhibit B is a
document entitled "J.D. Edwards & Company Building Statistics", which
describes the rentable area within the Building.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
INITIAL IMPROVEMENTS: The improvements to be constructed pursuant to the Supplement to Lease
Agreement on the land described on attached Exhibit A ("Land").
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
BUILDING: The building being constructed as part of the Initial Improvements, to be
known as the J. D. Edwards Building, or such name as Tenant shall designate
from time to time as provided herein, and to be located at 4555 So. Ulster
Street Parkway, Denver, Colorado.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
LEASE TERM: Beginning on the date of this Lease and ending on the last day of the 180th
full calendar month after the Rent Commencement Date:
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
RENT COMMENCEMENT DATE: The earlier of (i) October 1, 1997 or (ii) the Beneficial Occupancy Date.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
BENEFICIAL OCCUPANCY DATE: Ten Business days after issuance of a tenant improvement certificate or
certificates of occupancy (which may be temporary) permitting Tenant to
occupy not less than one full floor of the Premises. In the event of any
dispute as to such date, the decision of the Interiors Architect for the
Building shall be final.
- ---------------------------------------------------------------------------------------------------------------
BASE RENT: See Paragraph 5 of this Lease and Article 4 of the Supplement to Lease
Agreement
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
BROKER: None
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
CONSTRUCTION CONTRACT: That certain Construction Contract dated May 1, 1996 between Tenant and
Hensel Phelps Construction Co. ("General Construction Contractor") duly
assigned to Landlord by Tenant.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
ARCHITECTS CONTRACTS: That certain Agreement dated May 1, 1996 between Tenant and C.W. Fentress
J.H. Bradburn and Associates, P.C. (the "Core and Shell Architect") (Core
and Shell) and that certain Agreement for Interior Design Services dated
May 1, 1996 between Tenant as client and VOA Associates Incorporated
("Interiors Architect").
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENT TO The Supplement to Lease Agreement (Construction of Improvements) of even
LEASE AGREEMENT: date with this Lease, between Landlord and Tenant.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
MANAGER: The property manager for the Building, which shall be Landlord or its
designee.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
COMMON AREAS: That portion of the Building which consists of the entrance lobby,
corridors to the lobby and office suites, stairwells, rest rooms for the
building (but not including locker rooms and shower facilities, which shall
be deemed to be part of the Premises), loading dock, plumbing or heating,
ventilation, and air conditioning (HVAC) rooms used for the whole Building,
the roof, general terraces open to all tenants, storage rooms for the
exclusive use of maintaining the Building and operating plant, courtyards,
atriums, elevators, and any other area that is open to all tenants and
their guests or that is for the general good of the whole Building. The
foregoing notwithstanding, so long as the Premises include all of the
rentable area on any floor, the Premises shall include the elevator
vestibules, corridors and all restrooms on such floor and such areas shall
not be deemed to be "Common Areas".
===============================================================================================================
</TABLE>
1. GRANTING CLAUSE. In consideration of the obligation of Tenant
to pay rent as herein provided and in consideration of the other terms,
covenants, and conditions hereof, Landlord leases to Tenant, and Tenant takes
from Landlord, the Premises, to have and to hold for the Lease Term, subject to
the terms, covenants and conditions of this Lease.
2. ACCEPTANCE OF PREMISES. Tenant is constructing the Initial
Improvements and hereby accepts the Premises in its condition as of the date
hereof, subject to all provisions of the Supplement to Lease Agreement or
restrictions of all applicable covenants of record and the applicable zoning
and other laws regulating the use of the Premises. Tenant acknowledges that
Landlord has made no representation or warranty as to the suitability of the
Premises for the conduct of Tenant's business. The risk of any defect or
deficiency in the Premises, or any portion thereof, of any nature, whether
patent or latent, as between Landlord and Tenant, is to be borne by Tenant. As
provided in the Supplement to Lease Agreement, Tenant shall be entitled to
enforce any and all warranties and guarantees under the Construction Contract.
Within thirty (30) days after the Beneficial Occupancy Date, the parties will
execute an acknowledgment letter for the purpose of confirming the Rent
Commencement Date, the amount of Base Rent (separately identifying the
components of Base Rent calculated pursuant to Paragraphs 4.1 and 4.2 of the
Lease Supplement), the rentable square footage of each floor of the Building,
the total rentable square footage of the Building, and the core factors for the
Building. To the extent that any of such items differ from the projected
square footages shown on Exhibit B, the parties agree to amend Exhibit B to
conform. Rentable square footage and core factors shall be determined by the
Interiors Architect in accordance with BOMA standards.
2
<PAGE> 6
3. USE. The Premises shall be used only for general office
purposes, including software demonstration and training, and for no other
purposes, which use shall be consistent with use of other first class office
buildings in the Denver Technological Center. Tenant will use the Premises in
a careful, safe and proper manner and shall not commit waste, overload the
floors or structure of the Premises, or subject the Premises to any use that
would damage the Premises. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the
Premises, or take any other action that would constitute a nuisance. Outside
storage, including without limitation, storage of trucks and other vehicles
(except vehicles used in connection with Tenant's business), is prohibited
except to the extent permitted by and in accordance with any conditions imposed
under applicable Legal Requirements (defined in the following Paragraph) and
recorded covenants. Tenant shall pay the amount of any increase in the cost of
any insurance carried by Landlord for the Premises that is caused by Tenant's
use of the Premises. Tenant shall comply with all covenants or restrictions of
record applicable to the Premises and any reasonable rules and regulations with
respect to the Premises that are not inconsistent with this Lease promulgated
by Landlord in accordance with this Lease after reasonable notice to Tenant.
Any occupation of the Premises by Tenant before the Rent Commencement Date
shall be subject to all obligations of Tenant under this Lease.
Anything in this Lease to the contrary notwithstanding, Tenant may use
a portion of the Premises for a cafeteria providing food services to its
employees and invitees, and a portion of the basement of the Premises for a
florist shop for employees and invitees, subject in each case to the following
conditions: (i) Tenant, at its cost, shall obtain and maintain all required
permits and licenses and shall comply with all Legal Requirements applicable to
each such use; (ii) such cafeteria and florist shop shall not be open to the
general public; (iii) the portion of the Premises used for such cafeteria and
florist shop shall be subject to Landlord's reasonable approval; and (iv) if
Tenant employs or contracts with any third party vendors to provide food or
beverage services or operation of or services within the florist shop, any such
vendor shall be subject to Landlord's prior written approval, which approval
shall not be unreasonably withheld or delayed and Tenant shall be solely
responsible for compliance by any such vendor with the requirements of this
Paragraph. In addition, the following conditions shall apply with respect to
the florist shop: (a) the area of the basement of the Premises occupied by such
shop and any related storage facilities shall not exceed 1,000 square feet; (b)
the florist shop and any fixtures and equipment incorporated therein shall not
be deemed to be part of the Initial Improvements and Landlord shall have no
obligation to pay any of the cost of such items; and (c) any alterations or
additions to the Premises in connection with the florist shop (including the
initial construction thereof) shall be deemed to be Alterations subject to the
provisions of Section 11.
4. COMPLIANCE WITH LAWS. Tenant, at its sole expense, shall
comply with and make necessary modifications, alterations, or additions,
whether substantial or insubstantial required by: (i) all municipal, county,
state and federal statutes, laws, ordinances, and regulations and all private
covenants, conditions and restrictions applicable to the Premises, the Building
or Tenant's use thereof, including, without limitation, the Americans with
Disabilities Act of 1990 ("ADA"), as amended and supplemented by further laws
from time to time (collectively, "Legal Requirements"); and (ii) all material
terms of any insurance policy covering or applicable to the Premises, all
material requirements of the issuer of any such policy, and all material
orders, rules, regulations, and any other requirements of the National Board of
Fire Underwriters (or any other body exercising similar functions) binding upon
Landlord or Tenant or the Premises or any use or condition of the Premises
(collectively, "Insurance Requirements"). The foregoing notwithstanding,
Tenant shall not be responsible for any modifications due to changes in Legal
Requirements occurring after Project Close-Out and which are required for
general office use (as opposed to any specific use by Tenant or any of its
subtenants); and Landlord shall bear the cost of any such modifications;
provided that such cost shall be amortized and included in Operating Expenses
as provided in Exhibit C. In the event additions, alterations or other
accommodations to the Premises, the Building, or the Common Areas are required
as a result of Tenant's occupancy or actions, which would not otherwise be
required of Landlord under the ADA or regulations promulgated thereunder,
Tenant shall be solely responsible for and shall indemnify and hold harmless
Landlord, its successors and assigns, for, from and against any loss, damage,
cost, claim, expense or liability directly or indirectly arising out of or
attributable to such occupancy or action. An order or directive by a building
official or other appropriate authority is not a prerequisite for Tenant's
obligations under this Paragraph 4. Tenant, at its sole expense, shall obtain
and maintain all permits, licenses, and other governmental approvals in a form
transferable to Landlord (to the extent permitted by law) required for the use,
3
<PAGE> 7
occupancy or possession of the Premises by Tenant and any permits for any
constriction in or to the Premises. At Tenant's request, Landlord shall
without charge sign, but without any obligation to incur any liability or
responsibility, applications for all permits and other instruments that may be
necessary or appropriate for the use of the Premises as contemplated herein.
5. BASE RENT. Tenant shall pay Base Rent as calculated in the
Supplement to Lease Agreement. The first full or partial month's Base Rent
shall be due and payable on the Rent Commencement Date, and Tenant promises to
pay to Landlord in advance without demand, deduction or set-off, monthly
installments of Base Rent on or before the first day of each calendar month
succeeding the Rent Commencement Date. Payments of Base Rent for any
fractional calendar month shall be prorated based upon the number of days in
such month. All payments required to be made by Tenant to Landlord hereunder
shall be payable at such address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant shall have no right at
any time to abate, reduce, or set-off any rent due hereunder except where
expressly provided in this Lease. Tenant waives and releases all statutory
liens and offset rights as to rent. If Tenant is delinquent in any monthly
installment of Base Rent, and such delinquency continues for more than ten (10)
days (provided that such ten-day grace period shall not apply to more than two
delinquencies in any twelve-month period) Tenant shall pay to Landlord on
demand a late charge equal to two percent (2%) of such delinquent sum. The
provision for such late charge shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as a
penalty. Base Rent shall increase as of the thirty-seventh month and as of the
eighty-fifth month after the Rent Commencement Date by an amount equal to the
increase in the Consumer Price Index from the Rent Commencement Date or the
third anniversary of the Rent Commencement Date, as the case may be; provided,
however, in no event shall the Base Rent be increased on either such date by
more than 6% per annum or, in the case of the first such increase, by less than
1% per annum, compounded annually, on a cumulative basis from the beginning of
the Lease term. "Consumer Price Index" means the Consumer Price Index for All
Urban Consumers (Revised Series) (CPI-U). All Items, U.S. City Average
(1982-1984 equals 100) of the United States Department of Labor, Bureau of
Labor Statistics. If the manner in which the Consumer Price Index is
calculated shall be revised, Landlord shall make an adjustment in such revised
index so as to produce results equivalent, as nearly as possible, to those
which would have been obtained if the Consumer Price Index had not been so
revised. If the Consumer Price Index shall become unavailable to the public
because publication is discontinued or otherwise, Landlord will substitute
therefor a comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by any other governmental
agency or, if no such index shall be available, then a comparable index
published by a major bank or other financial institution or by a university or
a recognized financial publication.
6. OPERATING EXPENSE PAYMENTS. During each month of the Lease
Term, on the same date that Base Rent is due, Tenant shall pay Landlord an
amount equal to 1/12 of the annual cost, as estimated by Landlord from time to
time, of the Operating Expenses. Payments thereof for any fractional calendar
month shall be prorated based on the number of days in such month. The term
"Operating Expenses" is defined in Exhibit C.
Adjustments for overpayment or underpayment on account of
Tenant's obligation for Operating Expenses shall be made as soon as practicable
after the end of a year, and payment by Tenant or credit and refund by
Landlord, as appropriate, shall be effected within fifteen (15) days after a
final determination of the amount thereof and billing therefor by Landlord to
Tenant, provided that with respect to any overpayment by Tenant, Landlord shall
have the option to credit such overpayment against installments of Operating
Expenses next due and owing by Tenant.
This Lease is a net lease and any present or future law to the
contrary notwithstanding, shall not terminate except as expressly provided
herein. Except as may be expressly provided herein, Tenant shall not be
entitled to any abatement, reduction, set-off, counterclaim, defense or
deduction with respect to any Base Rent, Operating Expenses or other sum
payable hereunder, nor shall the obligations of Tenant hereunder be affected
other than as expressly provided for herein, for any reason, including any
damage to or destruction of the Premises or any part thereof; any taking of the
Premises or any part thereof or interest therein by condemnation or otherwise;
any prohibition, limitation, restriction or prevention of Tenant's use,
occupancy or enjoyment of the Premises or any part thereof or any interference
with such use, occupancy or enjoyment by any person or for any other reason;
any title defect or encumbrance or any matter affecting title to the Premises
or any part thereof; any eviction by paramount title or otherwise; any default
by Landlord hereunder; any
4
<PAGE> 8
proceeding relating to Landlord; the impossibility or illegality of performance
by Landlord, Tenant or both; any action of governmental authority; any breach
of warranty or misrepresentation; any defect in the condition, quality or
fitness for use of the Premises or any part thereof; or any other cause whether
similar or dissimilar to the foregoing and whether or not Tenant shall have
notice or knowledge or any of the foregoing. Except as expressly provided in
this Lease, Tenant hereby waives and releases (i) all right to terminate or
surrender this Lease, (ii) all right to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with respect
to any Base Rent, Operating Expenses, Taxes or other sum payable by Tenant
hereunder, and (iii) all statutory liens and offset rights as to rent.
70 UTILITIES. Tenant shall pay for all water, gas, electricity,
heat, light, power, telephone, sewer, sprinkler services, refuse and trash
collection, and other utilities and services used on the Premises, all
maintenance charges for utilities, and any storm sewer charges or other similar
charges for utilities imposed by any governmental entity or utility provider,
together with any taxes, penalties, surcharges or the like pertaining to
Tenant's use of the Premises. Landlord may cause at Tenant's expense any of
said utilities (and any required utility deposits) to be charged directly to
Tenant by the provider. No interruption or failure of utilities shall result
in the termination of this Lease or the abatement of rent. Tenant shall have
the right to install, at Tenant's cost, separate metering of utilities in the
event of subletting of any portion of the Building so that subtenants can be
charged with their actual share of utilities.
80 TAXES - ASSESSMENTS. Landlord agrees to pay all real estate
taxes and assessments and governmental charges of any kind and nature
(collectively referred to as "Taxes") that accrue against the Premises during
the Lease Term. Taxes shall be included as part of Operating Expenses charged
to Tenant, payable in advance in estimated monthly installments, with
reconciliation after the end of each calendar year, as provided in Paragraph 6.
For purposes of determining Taxes for any given year, the amount payable by
Tenant for such year (a) from special assessments payable in installments shall
be the amount of the installments (and any interest due and payable during such
year), and (b) from all other taxes, at Landlord's election (which election
shall be consistent throughout the Lease Term), shall either be the amount
accrued, assessed or otherwise imposed for such year or the amount due and
payable in such year. The obligation of Tenant to pay Taxes for periods prior
to termination of this Lease shall survive such termination (whether by
expiration or otherwise). Landlord shall have the right to contest by
appropriate legal proceedings the amount, validity, or application of any Taxes
or liens thereof. All capital levies or other taxes assessed or imposed on
Landlord upon the rents payable to Landlord under this Lease and any franchise
tax, any excise, transaction, sales or privilege tax, assessment, levy or
charge measured by or based, in whole or in part, upon such rents from the
Premises or any portion thereof shall be paid by Tenant to Landlord, but Tenant
shall not be liable for any net income taxes imposed on Landlord unless such
net income taxes are in substitution for any tax or assessment payable
hereunder. If any such tax or excise is levied or assessed directly against
Tenant, then Tenant shall be responsible for and shall pay the same at such
times and in such manner as the taxing authority shall require. With respect
to the Taxes levied in respect of any period of time within which either the
Rent Commencement Date or the expiration date occurs, Tenant must only pay a
proportionate part of those Taxes, which part will bear the same ratio to the
total amount of those Taxes as the number of days in the period between the
Rent Commencement Date and the end of the period of time or in the period
between the beginning of that period of time and the expiration date, whichever
is applicable, bears to the total number of days in that period of time.
So long as no uncured Event of Default has occurred hereunder
and provided that Tenant occupies not less than 75% of the rentable area of the
Building, and provided further that Landlord is not also contesting such Taxes,
Tenant may contest in good faith and at its expense the amount or validity of
any Taxes that it is obligated to pay in accordance with the foregoing and, if
successful in that regard, is entitled to recover from Landlord any refund paid
to Landlord as a result of that successful contest, after deduction of fees and
expenses incurred in obtaining such refund. Landlord shall join in any contest
undertaken by Tenant in accordance with the foregoing at Tenant's expense if
the provisions of any law, rule or regulation at the time in effect require
that the proceedings be brought by or in the name of Landlord. Notwithstanding
any such contest by Tenant, Landlord shall not be required to withhold any
payment of Taxes otherwise due and payable and Tenant shall continue to pay
monthly installments of Operating Expenses with respect to Taxes as required
hereunder. Tenant shall indemnify, defend and hold Landlord harmless from any
loss, claim, cost or liability resulting from or arising out of any such
contest by Tenant. Tenant shall pay all taxes and charges on account of
Tenant's use, occupancy, operation of and interest in the Premises including,
but not limited to, all personal property, inventory, sales and use taxes, and
all occupation and license fees issued or charged against the Premises or the
contents thereof on account of Tenant's use or occupancy thereof.
5
<PAGE> 9
9. INSURANCE. From and after substantial completion of the
Initial Improvements (but in no event later than expiration of the builder's
risk coverage carried for the Initial Improvements as required under the
Supplement to Lease Agreement) Landlord shall maintain "all-risk" property
insurance covering the replacement cost of the Initial Improvements. Landlord
may, but is not obligated to, maintain such other insurance and additional
coverages as it may deem necessary, including, but not limited to, commercial
liability insurance and rent loss insurance. All such insurance shall be
included as part of the Operating Expenses charged to Tenant hereunder. The
insurance required hereunder may be included in a blanket policy (in which case
the cost of such insurance allocable to the Initial Improvements will be
determined by Landlord based upon the insurer's cost calculations). Tenant
shall also reimburse Landlord for any increased premiums or additional
insurance which Landlord reasonably deems necessary as a result of Tenant's use
of the Premises.
Tenant, at its expense, shall maintain during the Lease Term:
"all-risk" property insurance on a replacement cost basis for the full
insurable value of all Alterations (defined in Paragraph 11), property and
improvements installed or placed in the Premises by Tenant and any improvements
constructed by Landlord and not required to be insured by Landlord; workers'
compensation insurance with no less than the minimum limits required by law;
employer's liability insurance with such limits as required by law; commercial
liability insurance, with a minimum limit of $3,000,000.00 per occurrence and a
total minimum combined general liability and umbrella limit of $3,000,000.00
(together with such additional umbrella coverage as Landlord may reasonably
require) for property damage, personal injuries, or deaths of persons occurring
in or about the Premises; and business interruption insurance covering the Base
Rent for a period of 12 months. Landlord may from time to time require
reasonable increases in any such limits. The commercial liability policies
shall name Landlord as an additional insured, insure on an occurrence and not a
claims-made basis, be issued by insurance companies which are reasonably
acceptable to Landlord, not be cancelable unless 30 days prior written notice
shall have been given to Landlord, contain a hostile file endorsement and a
contractual liability endorsement and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant's policies). Such policies or certificates thereof
shall be delivered to Landlord by Tenant upon commencement of the Lease Term
and upon each renewal of said insurance.
The all-risk property insurance obtained by Landlord and
Tenant shall include a waiver of subrogation by the insurers and all rights
based upon an assignment from its insured, against Landlord or Tenant, their
officers, directors, employees, managers, agents, invitees and contractors, in
connection with any loss or damage thereby insured against. Neither party nor
its officers, directors, employees, managers, agents, invitees or contractors
shall be liable to the other for loss or damage caused by any risk covetable by
all risk property insurance, and each party waives any claims against the other
party, and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims
against such parties for, interruption to business and losses occasioned
thereby sustained by Tenant or any person claiming through Tenant resulting
from any accident or occurrence in or upon the Premises or in or about the
Premises from any cause whatsoever.
10. MAINTENANCE.
(a) From and after Project Close-Out (as defined in the
Supplement to Lease Agreement), Landlord agrees, at its cost and expense,
except to the extent that such costs and expenses constitute Operating
Expenses, to keep in first-class order, condition and repair, consistent with
the standards generally applicable to a first-class office building in the
Denver Technological Center as of the date of this Lease, reasonable wear and
tear excepted, and except to the extent such compliance is the obligation of
Tenant under subparagraph 10(b), below, or under the Supplement to Lease
Agreement, in compliance with Legal Requirements and Insurance Requirements,
the roof (including support members, membranes and flashing), windows and solar
film if any on the exterior, downspouts, all structural portions of the
Building, the Common Areas and all other parts of the exterior of the Building
except Tenant's signs, and, to the extent the same are part of the base
Building systems, all plumbing, sewer, electrical, sprinkler, heating,
ventilating and air-conditioning equipment in the Building and all utility
lines on the Premises serving the Building, whether located within or outside
of the Building. The structural portions of the Building shall mean all
footings, foundations, floor slabs,
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<PAGE> 10
columns, girders, load bearing interior walls and all exterior walls. Landlord
also shall maintain the automatic lighting controls and life safety systems for
the Building and the exterior of the Premises, including, without limitation,
the sidewalks, curbings, exterior light standards and bulbs and landscaped
areas, and the driveways and parking areas on the Premises in accordance with
the standards of a first-class office building in the Denver Technological
Center, ordinary wear and tear excepted. Except for Landlord's obligations as
provided above in this Paragraph 10 and in Paragraph 12 (relating to
restoration) Landlord shall have no obligation to repair, modify, alter, add
to, maintain, or replace the Premises or any portion thereof.
Landlord and Tenant have entered into a Conveyance of Easement of even
date with this Lease (the "Access Easement Agreement"), pursuant to which
Landlord has granted to Tenant a non-exclusive access easement to use a private
roadway which also serves the Building. Any provisions of the Access Easement
Agreement to the contrary notwithstanding, so long as the Driveway (as defined
in the Access Easement Agreement) is being used solely for access to the
Building and not for ingress and egress to and from any buildings or
improvements located on the JDE Tract (as defined in the Access Easement
Agreement), the Driveway shall be deemed to be part of the Common Areas and
shall be maintained by Landlord in accordance with the requirements of this
Paragraph 10. The foregoing notwithstanding, Landlord shall have no obligation
to maintain any portion of the Driveway or Access Road (as defined in the
Access Easement Agreement) located on the JDE Tract. All expenses incurred by
Landlord in performing such maintenance shall be included in Operating
Expenses. Landlord's obligation hereunder to maintain the Driveway shall
terminate upon the earlier of: (i) dedication of the Access Road as
contemplated by the Access Easement Agreement, or (ii) commencement of use of
the Driveway or the Access Road for ingress and egress to and from buildings or
improvements constructed on the JDE Tract.
(b) Tenant, at its expense, shall repair, replace and
maintain in a first class condition consistent with other first class office
buildings in the Denver Technological Center, reasonable wear and tear
excluded, and in compliance with Legal Requirements and Insurance Requirements,
all portions of the Premises (other than those required to be maintained by
Landlord hereunder), including, interior walls and the inside surfaces of
demising walls, doors, floor coverings, ceilings, lighting and systems which
are internal to the Premises. Tenant shall bear the full cost of any repair or
replacement to any part of the Building or Project that results from damage
caused by Tenant, its agents, contractors, or invitees and any repair that
benefits only the Premises. Anything in this Lease to the contrary
notwithstanding, Tenant shall be solely responsible for, and Landlord shall
have no obligation with respect to, compliance of the Initial Improvements with
Legal Requirements or compliance of the Premises with Legal Requirements
applicable to Tenant's use and occupancy.
(c) All repairs, modifications and replacements made by
Tenant or Landlord shall be equal in quality and class to the Initial
Improvements and shall be performed in compliance with all applicable
warranties in effect with respect to the Premises and, with respect to
modifications and replacements by Tenant, the requirements for Alterations.
Landlord may as an Operating Expense enter into regularly scheduled preventive
maintenance and service contracts covering the heating, ventilation and air
conditioning systems and other mechanical and building systems in form and
substance reasonably acceptable to Landlord with contractors approved by
Landlord. Landlord may have the roof inspected at regular intervals by a
qualified roofing consultant, as an Operating Expense, and shall undertake any
replacements, repairs, or maintenance work deemed prudent by Landlord.
Landlord may, but shall not be obligated to, enter the Premises and perform any
obligation of Tenant under this Paragraph 10 or any other provision of this
Lease that Tenant has failed to perform after 10 days' prior written notice to
Tenant, except in the case of an emergency, when no notice shall be required.
The cost of Landlord's performance together with interest as provided in this
Lease, shall be due and payable as additional rental on the next following due
date for Base Rent.
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11. ALTERATIONS.
(a) During the Term, except as provided in this Paragraph
11, Tenant shall not make alterations or additions (collectively,
"Alterations") to the Premises without Landlord's prior written consent.
Tenant will have the right, without Landlord's consent to make Alterations to
the interior of the Premises that cost less than $50,000, do not materially
impair the value of the Premises and do not pierce or otherwise compromise the
roof membrane or roof system, pierce, cut or drill the floor or affect the
structural components of the Building or the integrity or operation of any
building or mechanical systems and provided that Tenant provides Landlord with
reasonable advance notice of any such proposed Alterations. Landlord may not
unreasonably withhold or delay its consent to all other additions or
alterations provided that such alterations or additions (i) do not compromise
the roof membrane or roof system, or adversely affect the structural components
of the Building or the integrity or operation of any building or mechanical
systems, (ii) in Landlords' reasonable opinion, do not materially adversely
affects the value or marketability of the Premises and (iii) comply with all
other requirements for Alterations hereunder. As a condition to Tenant's
commencement of any Alterations, the parties shall agree in writing as to
whether Tenant shall be required to remove such Alterations prior to expiration
of the Lease. Landlord may require that Tenant remove any such Alterations
except for Alterations which are customary for general office space in first
class buildings in the Denver Technological Center. Tenant shall not do or
permit others under its control to do, during the term of this Lease, any work
on the Premises related to any Alterations unless Tenant shall have first
procured and paid, or caused to be procured and paid, all requisite municipal
and other governmental permits and authorizations. All Alterations shall
comply with Insurance Requirements and with Legal Requirements and shall be
constructed in good and workmanlike manner using only good grades of materials,
consistent with a first class office building in the Denver Technological
Center. All plans and specifications and contracts for any Alterations shall
be submitted to Landlord for its approval. Landlord may monitor construction
of the Alterations and Tenant shall reimburse Landlord for its reasonable costs
in reviewing plans and documents and in monitoring construction; provided that
such costs shall be limited to reasonable, actual out-of-pocket costs paid or
payable to third parties and reasonable charges for time spent by employees of
Landlord or its affiliates which do not exceed market rates for similar
services. Landlord's right to review plans and specifications and monitor
construction shall be solely for its own benefit, and Landlord shall have no
duty to see that such plans and specifications or construction comply with
Legal Requirements or Insurance Requirements. Tenant shall furnish to Landlord
satisfactory certificates of insurance from an insurance company satisfactory
to Landlord evidencing worker's compensation and insurance coverage in amounts
satisfactory to Landlord and protecting Landlord against public liability and
property damage to any person or property arising during construction of any
Alterations. Tenant shall provide Landlord with the identities and mailing
addresses of all persons performing work or supplying materials, prior to
beginning such construction. If requested by Landlord, Tenant shall furnish to
Landlord payment bonds or such other security satisfactory to Landlord to
insure payment for the completion of all work free and clear of liens.
Landlord may post or give notices of non-responsibility in compliance with
applicable law. Upon completion of any Alterations, Tenant shall deliver to
Landlord sworn statements setting forth the names of all contractors and
subcontractors who did work on the Alterations and final lien waivers from all
such contractors and subcontractors. Tenant at its expense shall provide to
Landlord upon completion complete as-built drawings of the Alterations.
Landlord may require as a condition to granting any consent to the making of
any Alterations that the cost that Landlord estimates will be necessary to
restore any Initial Improvements that are to be damaged or altered during the
construction of Alterations be paid to Landlord as security for Tenant's
obligation to restore the Initial Improvements.
(b) Tenant's trade fixtures, furnishings and equipment in
the Premises will remain Tenant's property for all purposes and Tenant shall
remove them at its expense on or before the expiration date. Upon the
expiration of the Term or any earlier termination of this Agreement, Tenant
shall return the Premises to substantially the condition that existed on the
Project Close-Out (as defined in the Supplement to Lease Agreement), except for
ordinary wear and tear and damage that Landlord has the obligation to repair
under the terms of this Agreement. Unless otherwise agreed by Landlord in
writing, Tenant shall remove all Alterations, and other tenant improvements not
included in the Initial Improvements. If Tenant does not remove any
Alterations, fixtures, furnishings, equipment and other improvements which
Tenant is required to remove hereunder, Landlord may remove such items and
restore the Premises at Tenant's expense. All fixtures, furnishings and
equipment not so removed by Tenant on or before expiration or termination of
the Lease shall upon such termination be and become the property of Landlord
without requirement of
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<PAGE> 12
payment of any compensation or consideration. In all cases, Tenant shall
repair any damage to the Premises occasioned by the removal of Alterations and
Tenant's trade fixtures, furnishings and equipment.
12. RESTORATION. If the Premises are damaged during the Lease
Term by a risk covered by Landlord's insurance, Landlord shall promptly repair
and reconstruct the portion of the Premises required to be insured by Landlord
hereunder, subject to delays arising from the collection of insurance proceeds
or from Force Majeure events; and this Lease shall remain in full force and
effect. Tenant at Tenant's expense shall promptly perform, subject to delays
arising from the collection of insurance proceeds, all repairs or restoration
not required to be done by Landlord and shall promptly reenter the Premises and
commence doing business in accordance with this Lease. Notwithstanding the
foregoing, either party may terminate this Lease (as provided in the following
sentence) if the Premises are damaged during the Lease Term and Landlord
reasonably estimates that it will take more than nine (9) months to repair such
damage. Landlord shall promptly notify Tenant in writing if it reasonably
estimates that such restoration will require in excess of nine months and each
party shall have a period of ten business days after delivery of such notice to
Tenant in which to notify the other party of its election to terminate,
otherwise the Lease shall continue in full force and effect. The foregoing
notwithstanding, if the Lease Term (as it may have been previously extended
but not including any unexercised extension period) extends for at least 5
years beyond such estimated repair period and Tenant elects by written notice
to Landlord within such 10 day period not to terminate this Lease, then this
Lease shall continue in full force and effect, Landlord shall not be entitled
to terminate as provided above, and Landlord shall proceed with restoration as
required hereunder.
If the Premises or a portion thereof is not usable as a result
of damage by a risk covered by insurance required hereunder to be carried by
Landlord, Base Rent shall be abated for the period of restoration in the
proportion which the area of the Premises which is not usable by Tenant bears
to the total area of the Premises. Such abatement shall be the sole remedy of
Tenant, and to the extent permitted by applicable law, Tenant waives any right
to terminate the Lease by reason of damage or casualty loss.
If the Premises are damaged during the Lease Term by a risk
not covered by Landlord's insurance and not caused by the negligence of Tenant,
its agents, employees, or contractors, then Landlord may either restore the
Premises at Landlord's expense, in which case this Lease shall continue or,
subject to Tenant's right to continue this Lease as provided below, terminate
this Lease. Landlord shall make its election no later than 20 days after
Tenant's written request to Landlord. Tenant may continue the Lease despite
Landlord's election to terminate if Tenant notifies Landlord within 20 days
after receipt of Landlord's notice to terminate that Tenant intends to restore
the damage at its expense.
13. CONDEMNATION. If any part of the Premises should be taken for
any public or quasi-public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of the Premises, then upon written notice by
Landlord this Lease shall terminate and Base Rent shall be apportioned as of
the date of title vesting in such proceeding or purchase. If part of the
Premises shall be Taken, and this Lease is not terminated as provided above,
the Base Rent payable hereunder during the unexpired Lease Term (or period of
such taking if shorter) shall be reduced to such extent as may be fair and
reasonable under the circumstances. In the event of any such Taking, Landlord
shall be entitled to receive the entire price or award from any such Taking.
Tenant shall have the right, to the extent that same shall not diminish
Landlord's award, to make a separate claim against the condemning authority
(but not Landlord) for such compensation as may be separately awarded or
recoverable by Tenant for moving expenses and damage to the property and
fixtures that Tenant is permitted to remove under this Lease, if a separate
award for such items is made to Tenant.
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14. SUBLETTING, ASSIGNMENT AND CONTRACTION.
14.1 RESTRICTIONS ON ASSIGNMENT AND SUBLETTING.
(a) Except as otherwise expressly provided
herein, without Landlord's prior written consent (which consent may be withheld
in Landlord's sole discretion except as expressly provided in this Paragraph
14), Tenant shall not assign this Lease or sublease the Premises or any part
thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any
concession or license within the Premises and any attention to do any of the
foregoing shall be void and of no effect.
(b) Tenant shall reimburse Landlord for all of
Landlord's reasonable out-of-pocket expenses in connection with any assignment
or sublease. Notwithstanding any assignment or subletting, Tenant shall at all
times remain fully responsible and liable for the payment of the rent and for
the compliance with all of Tenant's other obligations under this Lease
(regardless of whether Landlord's approval has been obtained for any such
assignments or subletting).
(c) If this Lease be assigned or if the Premises
be subleased (whether in whole or in part) or in the event of the mortgage,
pledge, or hypothecation of Tenant's leasehold interest or grant of any
concession or license within the Premises or if the Premises be occupied in
whole or in part by anyone other than Tenant, then upon a default by Tenant
hereunder Landlord may collect rent from the assignee, sublessee, mortgagee,
pledgee, party to whom the leasehold interest was hypothecated, concessionee or
licensee or other occupant and, except to the extent set forth in the preceding
paragraph, apply the amount collected to the next rent payable hereunder; and
all such rentals collected by Tenant shall be held in trust for Landlord and
immediately forwarded to Landlord. No such transaction or collection of rent
or application thereof by Landlord, however, shall be deemed a waiver of these
provisions or a release of Tenant from the further performance by Tenant of its
covenants, duties, or obligations hereunder.
(d) So long as (i) no uncured Event of Default
has occurred under this Lease and (ii) no Material Adverse Change in Tenant's
financial condition has occurred and is continuing, Landlord shall not
unreasonably withhold its consent to Tenant's request for permission to
sublease all or part of the Premises. It shall be reasonable for the Landlord
to withhold its consent to any sublease in any of the following instances:
(i) The intended use of the Premises by
the sublessee is not consistent, in Landlord's opinion, with
use of first class office buildings in the Denver
Technological Center;
(ii) Occupancy of the Premises by the
sublessee would, in Landlord's opinion, violate any agreement
binding upon Landlord or the real property on which the
Building is located with regard to the identity of tenants,
usage in the Building, or similar matters;
(iii) The identity or business reputation
of the sublessee will, in the reasonable of Landlord, tend to
damage the goodwill or reputation of the Building;
(iv) The sublet is to another tenant or a
party whom Landlord has identified as a prospective tenant in
the Building;
(v) The subtenant has not acknowledged
that the Lease controls over any inconsistent provision in the
sublease; or
(vi) The proposed sublessee is a
government entity.
The foregoing criteria shall not exclude any other reasonable basis for
Landlord to refuse its consent to such sublease.
(e) Any approved assignment or sublease shall be
expressly subject to the terms and conditions of this Lease.
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<PAGE> 14
(f) Tenant shall provide to Landlord all
information concerning the assignee or sublessee as Landlord may request.
(g) Landlord may revoke its consent immediately
and without notice if, prior to the effective date of the assignment or
sublease, there has occurred and is continuing any default under the Lease.
(h) As used in this Lease, "Material Adverse
Change" means the occurrence of any one of the following, determined in
accordance with Generally Accepted Accounting Principles:
(i) As of the end of Tenant's most
recent fiscal quarter, the ratio of Tenant's current assets to
Tenant's current liabilities (excluding current portion of
unearned revenue) is less than 1.0;
(ii) As of the end of Tenant's most
recent fiscal quarter, the amount of Tenant's current assets
less the amount of Tenant's current liabilities (excluding
current portion of unearned revenue) is less than
$40,000,000.00;
(iii) Stockholders' equity in Tenant
(excluding nonrecurring and extraordinary items) is equal to
or less than 85% of stockholder's equity in Tenant (excluding
nonrecurring and extraordinary items) as of Tenant's fiscal
year end October 31, 1995;
(iv) Stockholder's equity in Tenant
(excluding nonrecurring and extraordinary items) is less than
$35,000,000.00; or
(v) In connection with any audited
financial statements of Tenant, the independent certified
public accountants performing such audit are not able to issue
an unqualified opinion.
14.2 So long as (i) no uncured Event of Default has
occurred under this Lease and (ii) no Material Adverse Change in the financial
condition of Tenant has occurred and is continuing, Tenant shall also have the
unrestricted right to sublet space in the Premises to a Successor or Affiliate,
and such subletting shall not be subject to the restrictions and requirements
of subparagraphs (a) and (d) of Paragraph 14.1.
14.3 So long as (i) no uncured Event of Default has
occurred under this Lease and (ii) no Material Adverse Change in the financial
condition of Tenant has occurred and is continuing, Tenant shall have the
unrestricted right to assign this Lease to a Successor or Affiliate which
Successor or Affiliate is the resulting entity after a merger or other similar
form of business reorganization; provided that such Successor or Affiliate has
a net worth which is not less than the net worth of Tenant as of the date of
this Lease (excluding good will). Without limitation, an assignment of this
Lease effected by operation of law, i.e., by merger, acquisition or other
similar form of business reorganization shall not require the consent of
Landlord so long as the surviving entity meets the qualifications of a
Successor or Affiliate in the first sentence of this Paragraph 14.3.
Otherwise, there shall be no assignment of Tenant's
interest in this Lease. No consent given by Landlord to any assignment shall
be treated as a consent to any further assignment, such consent being required
in each and every instance thereof.
Any assignment or subletting of Tenant's interest in
this Lease, whether or not requiring Landlord's consent, shall not relieve
Tenant from Tenant's liability or obligations under this Lease which shall be
and remain in full force and effect.
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14.4 Tenant shall, in any event, notify Landlord of the
fact of an assignment or subletting not requiring Landlord's consent. Tenant
shall provide Landlord with a copy of any assignment or sublease entered into
for any assignment or subletting.
14.5 Anything in Paragraph 14 to the contrary
notwithstanding, no subtenant shall have any right to make any alterations,
additions, or improvements, it being agreed that any right under this Lease to
make such alterations, additions or improvements shall be limited to Tenant.
150 INDEMNIFICATION. Except for the indemnified party's
negligence and to the extent permitted by law, Tenant agrees to indemnify,
defend and hold harmless Landlord, Mortgagee and their respective agents,
employees and contractors, from and against any and all losses, liabilities,
damages, costs and expenses (including attorneys' fees) resulting from claims
by third parties for injuries to any person and damage to or theft or
misappropriation or loss of property occurring in or about the Premises, the
Building or the Common Areas and arising from the use and occupancy of the
Premises, the Building or the Common Areas or from any activity, work, or thing
done, permitted or suffered by Tenant in or about the Premises, the Building or
the Common Areas or due to any other act or omission of Tenant, its subtenants,
assignees, invitees, employees, contractors and agents. The furnishing of
insurance required hereunder shall not be deemed to limit Landlord's or
Tenant's obligations under the provisions of this Paragraph 15. Landlord
agrees to indemnify, defend and hold harmless Tenant, Mortgagee and their
respective agents, employees and contractors from and against any and all
losses, liabilities, damages, costs and expenses (including reasonable
attorneys' fees) arising on account of or by reason of claims by third parties
for injuries or death to persons or damages to property resulting from the
negligence or willful misconduct of Landlord or its agents, employees, or
contractors, to the extent not attributable to any negligence of Tenant, any
assignee or subtenant or Tenant, or their respective employees, agents, or
contractors. The obligations of Tenant and Landlord under this paragraph shall
survive the termination of this Lease.
160 INSPECTION AND ACCESS. Landlord and its agents,
representatives, and contractors may enter the Premises at any reasonable time
to perform its maintenance obligations hereunder and to inspect the Premises
and to make changes and alterations to any portion of the Common Areas or the
Premises' exterior, including, without limitation, the parking areas, access
areas and the exterior walls and roof of the Premises, with any such material
changes adverse to the Tenant being made only with the consent of the Tenant,
which consent shall not be unreasonably withheld, delayed or conditioned.
Landlord agrees that in exercising any right to enter the Premises and in
exercising any other rights reserved pursuant to this Paragraph, Landlord shall
use reasonable efforts to minimize any interference with Tenant's use of the
Premises. Landlord and Landlord's representatives may enter the Premises
during business hours for the purpose of showing the Premises to prospective
purchasers or, during the last eighteen months of the Lease Term, to
prospective tenants; in addition, Landlord shall have the right to erect a
suitable sign on the Premises stating the Premises is available to let or is
available for sale. Landlord reserves the right to grant easements, change any
common area or access, create restrictions, and make public dedications on or
affecting the Premises that do not materially interfere with Tenant's use or
occupancy of the Premises. At Landlord's request, Tenant shall execute such
instruments as may be necessary for such easements or dedications.
170 QUIET ENJOYMENT. If Tenant shall perform all of the covenants
and agreements herein required to be performed by Tenant, Tenant shall, subject
to the terms of this Lease, at all times during the Lease Term, have peaceful
and quiet enjoyment of the Premises against any person claiming by, through or
under Landlord.
180 SURRENDER. Upon termination of the Lease Term or earlier
termination of Tenant's right of possession, Tenant shall surrender the
Premises to Landlord in the same condition as received, broom clean, ordinary
wear and tear and results from any condemnation excepted. All obligations of
Tenant and Landlord hereunder not fully performed as of the termination of the
Lease Term shall survive the termination of the Lease Term.
190 HOLDING OVER. If, for any reason, Tenant retains possession
of the Premises after the termination of the Lease Term, unless otherwise
agreed in writing, such possession shall be subject to immediate termination by
Landlord at any time, and all of the other terms and provisions of this Lease
(excluding any expansion or renewal option or other similar right or option)
shall be applicable during such holdover period, except that Tenant shall pay
Landlord
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from time to time, upon demand, as Base Rent for the holdover period, an amount
equal to 150% of the Base Rent in effect on the termination date, computed on a
monthly basis for each month or part thereof during such holding over. All
other payments shall continue under the terms of this Lease. In addition,
Tenant shall be liable for all damages incurred by Landlord as a result of such
holding over. No holding over by Tenant, whether with or without consent of
Landlord, shall operate to extend this Lease except as otherwise expressly
provided, and this Paragraph 19 shall not be construed as consent for Tenant to
retain possession of the Premises.
200 EVENTS OF DEFAULT. Each of the following events shall be an
event of default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any
installment of Base Rent or any other payment required herein
when due, and, with respect only to the first two such
delinquencies in any 12-month period, such failure shall
continue for a period of ten (10) days from the date such
payment was due.
(ii) Tenant or any guarantor or surety of
Tenant's obligations hereunder shall (A) make a general
assignment for the benefit of creditors; (B) commence any
proceeding for relief, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or
its debts or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or of
any substantial part of its property; (C) become the subject
of any such proceeding which is not dismissed within 60 days
of its filing or entry; or (D) die or suffer a legal
disability (if Tenant, guarantor, or surety is an individual)
or be dissolved or otherwise fail to maintain its legal
existence (if Tenant, guarantor or surety is a corporation,
partnership or other entity).
(iii) Any insurance required to be
maintained by Tenant pursuant to this Lease shall be canceled
or terminated or shall expire or shall be reduced or
materially changed, except, in each case, as permitted in this
Lease.
(iv) Tenant shall vacate the Premises or
shall fail to continuously operate its business at the
Premises for the permitted use set forth herein, whether or
not Tenant is in monetary or other default under this Lease.
(v) Tenant shall attempt or there shall
occur any assignment, subleasing or other transfer of Tenant's
interest in or with respect to this Lease except as otherwise
permitted in this Lease.
(vi) Tenant shall fail to discharge or
bond over or insure over with title insurance any lien placed
upon the Premises in violation of this Lease within 30 days
after any such lien or encumbrance is filed against the
Premises.
(vii) Tenant shall fail to comply with any
provision of this Lease which failure is not addressed in any
other subparagraph of this Paragraph 20 and except as
otherwise expressly provided therein, such failure shall
continue for more than 30 days after Landlord shall have given
Tenant written notice of such failure. It is agreed, however,
that if the event of failure is not reasonably capable of cure
within such 30 day period but is otherwise reasonably capable
of cure, provided Tenant begins to cure the failure during the
30-day period and diligently pursues the cure thereof, as long
as Tenant is proceeding diligently to cure such failure,
Tenant shall have such longer period to cure such failure as
may be reasonably necessary.
(viii) the occurrence of any Event of
Default by Tenant under the Supplement to Lease Agreement.
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(ix) the occurrence of any default (after
expiration of any applicable grace or cure period) by Tenant
under the Access Easement Agreement (defined in Paragraph 10)
between Landlord and Tenant of even date with this Lease.
21. LANDLORD'S REMEDIES. Upon each occurrence of an Event of
Default, and so long as such Event of Default shall be continuing, Landlord may
at any time thereafter at its election: (i) terminate this Lease or Tenant's
right of possession, but Tenant shall remain liable as hereinafter provided;
and/or (ii) pursue any remedies provided for under this Lease or at law or in
equity. Upon the termination of this Lease or termination of Tenant's right of
possession, to the extent permitted by applicable law, Landlord, without formal
demand or notice of any kind, may re-enter the Premises by summary
dispossession proceedings or any other action or proceeding authorized by law
and remove Tenant and all persons and property therefrom. If Landlord
re-enters the Premises as provided herein, Landlord shall have the right to
keep in place and use, or remove and store, all of the furniture, fixtures and
equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from
Tenant the sum of all Base Rent and all other amounts accrued hereunder to the
date of such termination; the cost of reletting the whole or any part of the
Premises, including without limitation brokerage fees and/or leasing
commissions incurred by Landlord, and costs of removing and storing Tenant's or
any other occupant's property, repairing, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant or tenants, and
all reasonable expenses incurred by Landlord in pursuing its remedies,
including reasonable attorneys' fees and court costs; and the excess of the
then present value of the Base Rent and other amounts payable by Tenant under
this Lease as would otherwise have been required to be paid by Tenant to
Landlord during the period following the termination of this Lease measured
from the date of such termination to the expiration date stated in this Lease,
over the present value of any net amounts which Landlord can reasonably expect
to recover by reletting the Premises for such period, taking into consideration
the availability of acceptable tenants and other market conditions affecting
leasing. Such present values shall be calculated at a discount rate equal to
the 90-day U.S. Treasury bill rate at the date of such termination.
If Landlord terminates Tenant's right of possession (but not
this Lease), Landlord may, but shall be under no obligation to, relet the
Premises for the account of Tenant for such rent and upon such terms as shall
be satisfactory to Landlord without thereby releasing Tenant from any liability
hereunder and without demand or notice of any kind to Tenant. For the purpose
of such reletting Landlord is authorized to make any repairs, changes,
alterations, or additions in or to the Premises as Landlord deems reasonably
necessary or desirable. If the Premises are not relet, then Tenant shall pay
to Landlord as damages a sum equal to the amount of the rental reserved in this
Lease for such period or periods, plus the cost of recovering possession of the
Premises (including attorneys' fees and costs of suit), the unpaid Base Rent
and other amounts accrued hereunder at the time of repossession, and the costs
incurred in any attempt by Landlord to relet the Premises. If the Premises are
relet and a sufficient sum shall not be realized from such reletting [after
first deducting therefrom, for retention by Landlord, the unpaid Base Rent and
other amounts accrued hereunder at the time of reletting, the cost of
recovering possession (including attorneys' fees and costs of suit), all of the
costs and expense of repairs, changes, alterations, and additions, the expense
of such reletting (including without limitation brokerage fees and leasing
commissions) and the cost of collection of the rent accruing therefrom] to
satisfy the rent provided for in this Lease to be paid, then Tenant shall
immediately satisfy and pay any such deficiency. Any such payments due
Landlord shall be made upon demand therefor from time to time and Tenant agrees
that Landlord may file suit to recover any sums falling due from time to time.
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect in writing to terminate this Lease for such previous
breach.
Exercise by Landlord of any one or more remedies hereunder
granted or otherwise available shall not be deemed to be an acceptance of
surrender of the Premises and/or a termination of this Lease by Landlord,
whether by agreement or by operation of law, it being understood that such
surrender and/or termination can be effected only by the written agreement of
Landlord and Tenant. Any law, usage, or custom to the contrary
notwithstanding, Landlord shall have the right at all times to enforce the
provisions of this Lease in strict accordance with the terms hereof, and the
failure of Landlord at any time to enforce its rights under this Lease strictly
in accordance with same shall not be construed as having created a custom in
any way or manner contrary to the specific terms, provisions, and covenants of
this Lease or
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as having modified the same. Tenant and Landlord further agree that
forbearance or waiver by Landlord to enforce its rights pursuant to this Lease
or at law or in equity, shall not be a waiver of Landlord's right to enforce
one or more of its rights in connection with any subsequent default. A receipt
by Landlord of rent or other payment with knowledge of the breach of any
covenant hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made
unless expressed in writing and signed by Landlord. To the extent permitted by
applicable law, Tenant waives the service of notice of Landlord's intention to
re-enter as provided for in any statute, or to institute legal proceedings to
that end, and also waives all right of redemption in case Tenant shall be
dispossessed by a judgment or by warrant of any court or judge. The terms
"enter," "re-enter," "entry" or "re-entry," as used in this Lease, are not
restricted to their technical legal meanings. Any reletting of the Premises
shall be on such terms and conditions as Landlord in its sole discretion may
determine (including without limitation a term different than the remaining
Lease Term, rental concessions, alterations and repair of the Premises, lease
of less than the entire Premises to any tenant). Landlord shall not be liable,
nor shall Tenant's obligations hereunder be diminished, because of Landlord's
failure to relet the Premises or collect rent due in respect of such reletting.
22. TENANT'S REMEDIES. Landlord shall not be in default hereunder
unless Landlord fails to perform any of its obligations hereunder within thirty
(30) days after written notice from Tenant specifying such failure (unless such
performance will, due to the nature of the obligation, require a period of time
in excess of thirty (30) days, then after such period of time as is reasonably
necessary). All obligations of Landlord hereunder shall be construed as
covenants, not conditions. All obligations of Landlord under this Lease will
be binding upon Landlord only during the period of its ownership of the
Premises and not thereafter. The term "Landlord" in this Lease shall mean only
the owner, for the time being of the Premises, and in the event of the transfer
by such owner of its interest in the Premises, such owner shall thereupon be
released and discharged from all obligations of Landlord thereafter accruing,
but such obligations shall be binding during the Lease Term upon each new owner
for the duration of such owner's ownership. Any liability of Landlord under
this Lease shall be limited solely to its interest in the Premises, and in no
event shall any personal liability be asserted against Landlord in connection
with this Lease nor shall any recourse be had to any other property or assets
of Landlord.
23. WAIVER OF JURY TRIAL. TENANT AND LANDLORD WAIVE ANY RIGHT TO
TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING
OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
24. SUBORDINATION. Tenant hereby agrees to subordinate this Lease
to any first mortgage covering the Premises, provided that, simultaneously with
the execution of such a mortgage, the mortgagee ("Mortgagee") and Landlord
execute an agreement in favor of Tenant on the Mortgagee's current standard
non-disturbance, attornment and subordination form if the Mortgagee is an
institutional lender and, otherwise, in form generally acceptable to
institutional lenders, in proper form for recording, to the effect that the
tenancy and other rights of Tenant hereunder shall not be disturbed so long as
Tenant pays the Base Rent and performs all of the other terms and conditions of
this Lease. The term "mortgage" whenever used in this Lease shall be deemed to
include deeds of trust, security assignments, ground leases and any other
encumbrances, and any reference to the "Mortgagee" of a mortgage shall be
deemed to include the beneficiary under a deed of trust and the lessor under a
ground lease.
25. MORTGAGEE PROTECTION. In the event of any default by Landlord
under this Lease, Tenant will give notice by registered mail to, in addition to
Landlord, any Mortgagee whose address shall have been furnished it, and shall
offer such Mortgagee that same period of time as is afforded Landlord to cure
the default (which period of time shall run concurrently with Landlord's cure
period), plus reasonable time to obtain possession of the Premises by judicial
foreclosure, or otherwise if such should prove necessary to effect a cure.
26. MECHANIC'S LIENS. Tenant has no express or implied authority
to create or place any lien or encumbrance of any kind upon, or in any manner
to bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish
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materials or perform labor for any construction or repairs. Tenant covenants
and agrees that it will pay or cause to be paid all sums legally due and
payable by it on account of any labor performed or materials furnished in
connection with any work performed on the Premises by or for Tenant and that it
will save and hold Landlord harmless from all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the interest of Landlord in the Premises or under this Lease as a result of
work done by or for Tenant. Tenant shall give Landlord immediate written
notice of the placing of any lien or encumbrance against the Premises and cause
such lien or encumbrance to be discharged within 30 days of the filing or
recording thereof; provided, however, Tenant may contest such liens or
encumbrances as long as such contest prevents foreclosure of the lien or
encumbrance and Tenant causes such lien or encumbrance to be bonded or insured
over in a manner satisfactory to Landlord within such 30-day period.
27. ESTOPPEL CERTIFICATES. Each party hereto shall, upon request
from the other party or from any of Landlord's lenders, at any time and from
time to time execute, acknowledge and deliver to such party a written
statement, in the form generally acceptable to institutional purchasers or
lenders certifying as follows: that this Lease is unmodified and in full force
and effect (or if there has been modification thereof, that the same is in full
force and effect as modified and stating the nature thereof); that to the best
of its knowledge there are no uncured defaults on the part of the other party
hereto (or if any such default exists, the specific nature and extent thereof);
the date to which any rents and other charges have been paid in advance, if
any; and such other matters as are typically contained in such certificates.
28. ENVIRONMENTAL REQUIREMENTS. Except for Hazardous Material
contained in products used in reasonable quantities and in compliance with all
applicable Environmental Requirements in connection with the construction of
the Initial Improvements or for ordinary cleaning, maintenance and office
purposes, neither Tenant nor Landlord shall bring any Hazardous Material upon
the Premises or transport, store, use, generate, manufacture, or release any
Hazardous Material in or about the Premises or permit or cause any other party
to do any of the foregoing. Tenant, at its sole cost and expense, shall cause
the Initial Improvements to comply with all applicable Environmental
Requirements and shall operate its business in the Premises in compliance with
all Environmental Requirements and shall immediately remediate any Hazardous
Materials released on or from the Premises, the Initial Improvements or the
Land by Tenant, its agents, employees, contractors, subtenants or invitees.
Tenant shall complete and certify to disclosure statements as requested by
Landlord from time to time relating to Tenant's transportation, storage,
handling, generation, manufacture, use, or release of Hazardous Materials on
the Premises. As Manager Landlord shall complete and certify to similar
disclosure statements requested by Tenant from time to time. If the release of
any Hazardous Material on the Premises or the Land caused or permitted by
Tenant, its agents, employees, contractors or invitees, with or without
Landlord's consent, results in any contamination, damage or injury to the
Premises, the Initial Improvements, the Land, the environment or human health,
Tenant shall promptly take all actions at its sole expense as are necessary to
return the Premises, Initial Improvements or Land to the condition existing
prior to the release of any such Hazardous Material and as may be required by
Environmental Requirements, provided that Landlord's written approval shall
first be obtained in cases where the Premises are to be physically altered.
The same requirement shall apply with respect to any release of Hazardous
Materials caused by Landlord as Manager or its employees or agents. Actual or
threatened action or litigation by any governmental authority is not a
condition prerequisite to Tenant's or Landlord's obligations under this
Paragraph.
The term "Environmental Requirements" means all applicable
present and future statutes, regulations, ordinances, rules, codes, judgments,
orders or other similar enactments of any governmental authority or agency
regulating or relating to health, safety, or environmental conditions on,
under, or about the Premises or the environment, including without limitation,
the following: the Comprehensive Environmental Response, Compensation and
Liability Act; the Resource Conservation and Recovery Act; and all state and
local counterparts thereto, and any regulations or policies promulgated or
issued thereunder. The term "Hazardous Materials" means and includes any
substance, material, waste, pollutant, or contaminant listed or defined as
hazardous or toxic, under any Environmental Requirements and petroleum,
including crude oil or any fraction thereof, natural gas, natural gas liquids,
liquefied natural gas or synthetic gas usable for fuel (or mixtures of such
natural gas and synthetic gas).
Tenant shall indemnify, defend, and hold Landlord harmless
from and against any and all losses (including, without limitation, diminution
in value of the Premises and loss of rental income from the Premises), claims,
demands, actions, suits, damages (including, without limitation, punitive
damages), expenses (including, without
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limitation, remediation, corrective action, or cleanup expenses), and costs
(including, without limitation, actual attorneys' fees, consultant fees or
expert fees) which are brought or recoverable against, or suffered or incurred
by Landlord as a result of the failure of the Initial Improvements to comply
with any Environmental Requirements or any release of Hazardous Materials that
Tenant is required to remediate as provided above or any breach of Tenant's
obligations under this Paragraph 28 by Tenant or its agents, employees,
contractors or invitees and in the use of the Premises by Tenant, its
subtenants, or invitees, regardless of whether Tenant had knowledge of such
noncompliance. The indemnification and hold harmless obligations of Tenant
shall survive any termination of this Lease.
Landlord shall indemnify, defend, and hold Tenant harmless
from and against any and all losses, claims, demands, actions, suits, damages
(including, without limitation, punitive damages), expenses (including, without
limitation, remediation, corrective action, or cleanup expenses), and costs
(including, without limitation, actual attorneys' fees, consultant fees or
expert fees) which are brought or recoverable against, or suffered or incurred
by Tenant as a result of release of Hazardous Materials that Landlord is
required to remediate as provided above or any breach of Landlord's obligations
under this Paragraph 28 by Landlord or its agents, employees, contractors,
regardless of whether Landlord had knowledge of such noncompliance. The
indemnification and hold harmless obligations of Landlord shall survive any
termination of this Lease. The foregoing notwithstanding, Landlord shall not
be responsible for and shall have no obligation to indemnify Tenant with
respect to release of Hazardous materials or any violation of Environmental
Requirements by any tenants or occupants of the Building or their employees,
agents, contractors licensees or invitees.
Landlord shall have access to, and a right to perform
inspections and tests of, the Premises as it may require to determine Tenant's
compliance with Environmental Requirements and Tenant's obligations under this
Paragraph 28. Access shall be granted to Landlord upon Landlord's prior notice
to Tenant and at such times so as to minimize, so far as may be reasonable
under the circumstances, any disturbance to Tenant's operations. Such
inspections and tests shall be conducted at Landlord's expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement, in which case Tenant shall reimburse Landlord for the reasonable
cost of such inspection and tests. Tenant shall have the same rights to
inspect Landlord's operation as Manager, at Tenant's cost except as provided in
the preceding sentence with respect to Landlord's cost. One Party's receipt of
or satisfaction with any environmental assessment in no way waives any rights
that either Party holds against the other hereunder.
Upon any violation of any of the foregoing covenants, Landlord
or Tenant as the case may be, shall be entitled to exercise all remedies
available for an Event of Default, including, but not limited to those set
forth in Paragraph 21. Without limiting, the generality of the foregoing, the
parties expressly agree that upon any such violation the other party may, at
its option (i) immediately terminate this Lease, or (ii) continue this Lease in
effect until compliance by the Applicable Party with its clean-up and removal
covenant (notwithstanding the expiration of the term of this Lease). No action
by Landlord or Tenant hereunder shall impair the obligations of the other party
pursuant to this Paragraph 28.
29. FORCE MAJEURE. Landlord or Tenant shall not be held
responsible for delays in the performance of obligations hereunder when caused
by strikes, lockouts, labor disputes, acts of God, inability to obtain labor or
materials or reasonable substitutes therefor, governmental restrictions,
governmental regulations, governmental controls, enemy or hostile governmental
action, civil commotion, fire or other casualty, and other causes beyond the
reasonable control of Landlord or Tenant, as applicable ("Force Majeure").
30. ENTIRE AGREEMENT. This Lease constitutes the complete
agreement of Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have
been made by Landlord or Tenant, or anyone acting on behalf of Landlord or
Tenant, which are not contained herein, and any prior agreements, promises,
negotiations, or representations are superseded by this Lease. This Lease may
not be amended except by an instrument in writing signed by both parties
hereto.
31. SEVERABILITY. If any clause or provision of this Lease is
illegal, invalid or unenforceable under present or future laws, then and in
that event, it is the intention of the parties hereto that the remainder of
this Lease shall not be affected thereby. It is also the intention of the
parties to this Lease that in lieu of each clause or provision of this Lease
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that is illegal, invalid or unenforceable, there be added, as a part of this
Lease, a clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
32. BROKERS. Each party represents and warrants that it has dealt
with no broker, agent or other person in connection with this transaction and
that no broker, agent or other person brought about this transaction, other
than the broker, if any, set forth on the first page of this Lease, agrees to
defend, indemnify and hold the other harmless from and against any claims by
any other broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with the indemnitor with regard to this
Lease.
33. RULES AND REGULATIONS; SIGNAGE.
33.1 The use of the Building and Common Areas in and
outside the Building by tenants in the Building (including Tenant) shall be
subject to the rules and regulations set forth in Exhibit D, annexed hereto.
Landlord shall have the right to amend the rules and regulations from time to
time as reasonably required to assure to all tenants in the Building the
orderly operation of the Building, but any amendment of rules and regulations
which changes the scope of the same and which material adversely affects
Tenant's own operations or materially adversely affects its use of the Premises
or Common Areas in the Building shall not be made without the consent of
Tenant, such consent not unreasonably to be withheld or delayed. Such rules
and regulations shall be published from time to time by Landlord and submitted
to all tenants in the Building. Landlord shall enforce the rules and
regulations against all tenants and occupants in a non-discriminatory manner.
Nothing contained in this Lease shall be construed to impose upon Landlord any
duty or obligation to enforce such rules and regulations, or the terms,
conditions or covenants contained in any other lease as against any other
tenant, and Landlord shall not be liable to Tenant for violation of the same by
any other tenant, any other tenant's employees, agents, business invitees,
licenses, customers, clients, family members or guests.
33.2 Tenant agrees that Landlord shall have the right of
access to the Premises at all reasonable times (or, in the case of an
emergency, at any time) for the inspection, protection, maintenance and repair
of the Premises, to the extent the same may be the responsibility of Landlord.
Landlord and Tenant shall establish reasonable procedures for access (including
emergency access) to areas located within the Premises which customarily are
secured facilities such as computer rooms, and software production and
duplication areas.
33.3 So long as Tenant occupies not less than 75% of the
rentable area of the Building, the Building shall be known as the J. D. Edwards
Building or such other name as Tenant shall designate from time to time or
shall carry such other name as any Successor or Affiliate uses in the conduct
of its business. Any change from the name "J. D. Edwards Building" or any
name designated by Tenant shall require the approval of Landlord, such approval
not unreasonably to be withheld or delayed. Landlord agrees, however, that it
will consent to the use of any name properly identifying an organization which
is the then name in use by Tenant or any Successor or Affiliate thereof, as
long as such name is not associated with a competitor of Landlord or an
Affiliate of Landlord at the time and provided that Tenant shall bear the cost
of any sign changes required by such name change.
Signs and flagpoles for Tenant's use shall be set
forth in the Plans and Specifications (as defined in the Supplement to Lease
Agreement). Any changes or replacements to such signs or flagpoles desired by
Tenant shall be at Tenant's expense and shall be subject to Landlord's
reasonable approval as to size, location, color and other specifications. All
such sign changes or replacements by Tenant shall comply with all Legal
Requirements and any covenants, conditions and restrictions affecting the real
property on which the Building is located. Landlord reserves the right to
place a monument or other sign on the exterior of the Building and in the
Building lobby identifying Landlord as the owner and/or manager of the
Building, in accordance with Landlord's corporate sign policy.
So long as Tenant occupies at least 100% of the
rentable area of the Building, Landlord shall affix no other signs to the
exterior of the Building and Landlord shall not permit signs visible to public
view in the lobby of the Building other than directional, information or safety
signs required by applicable Legal Requirements. Landlord also reserves the
right to place a sign in the lobby and on any exterior monuments or signs
identifying Landlord as the Owner and Manager of the Building. At any time
that Tenant no longer occupies 100% of the Premises, Landlord may
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erect or place signs in the Common Areas related to operations and/or tenants
of the Building, consistent with other first class office buildings in the
Denver Technological Center.
Tenant has the right to use a portion of the roof
area of the Building or such other location on the Premises, as Tenant may
reasonably select and as Legal Requirements and applicable private covenants
permit, for the installation, operation, maintenance, security, repair and
replacement of one satellite dish serving the Premises and related cable
connections (the "Telecommunications Equipment"). Tenant's use of the Premises
in respect to the Telecommunications Equipment will be subject to such
reasonable rules as Landlord may from time to time designate and to the
following additional conditions: (i) Tenant is solely responsible for the
installation, maintenance, repair, operation and replacement of the
Telecommunications Equipment, (ii) Tenant must comply with the covenants of
the Denver Technological Center, (iii) such installation shall not penetrate
the roof membrane or compromise the structure of the roof or Building and prior
to such installation Tenant shall provide to Landlord a structural report from
an engineer or roofing contractor satisfactory to Landlord confirming such
requirements, (iv) such installation shall not void any warranties applicable
to the roof or roof membrane, and (v) Tenant shall promptly repair any damage
to the roof or the roof membrane caused by such installation or use and shall
indemnify, defend and hold Landlord harmless from any loss, cost, claim or
liability resulting from such installation or use or any roof leaks caused by
such installation or use. Within thirty (30) days after the expiration of the
Term or the earlier termination of this Agreement, Tenant shall remove the
Telecommunications Equipment and fully restore the areas of the roof occupied
by such equipment to their prior condition and repair any damage to the
Premises that the removal causes. Tenant shall pay Landlord within 30 days
after Landlord's demand the cost of repairing any damage to the Premises
arising from the removal and restoration.
33.4 To the extent not included in the Plans and
Specifications for the Initial Improvements, so long as Tenant occupies at
least 75% of the rentable area of the Building (excluding any on-site
management office), Tenant may install at its cost a tenant directory in the
lobby of the Building listing tenants in the Building generally, and listing
all of Tenant's departments, corporate offices and the names of affiliates of
Tenant, in accordance with the practice followed, as of the date hereof, or as
the same may from time to time during the term of this Lease be changed with
Tenant's consent. At any time that Tenant no longer occupies all of the
rentable area of the Building (excluding any on-site management office),
whether as a result of a sublease a surrender of a portion of the Premises as
permitted hereunder, Landlord may install such a directory at Tenant's cost (to
be reimbursed to Landlord within 10 days after demand). Whether installed as
part of the Initial Improvements or by Tenant or Landlord, Landlord shall
maintain such directory as an Operating Expense.
34. NO SECURITY INTEREST. Landlord shall not have a security
interest in any personal property of Tenant.
35. MANAGEMENT AND OPERATION OF BUILDING.
35.1 Landlord agrees that the Building shall be operated
so that:
(a) Access is available to the Premises for Tenant and
its employees and invitees at all times, subject to reasonable security and
Building access procedures imposed by Landlord and any security arrangements
made by Tenant as permitted under the Lease;
(b) Heat and air-conditioning shall be furnished in
season, between the hours of 7:00 AM and 6:00 PM on weekdays and 8:00 AM to
1:00 PM on Saturdays ("Normal Building Hours"), which shall be deemed to
exclude the following holidays ("Building Holidays"): New Year's Day, Memorial
Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day, and any
other holiday agreed to by Landlord and Tenant. Heat and air-conditioning at
times other than Normal Building Hours ("After Hours HVAC") shall be provided
at Tenant's expense, provided Tenant gives Landlord a request for after hours
HVAC at least one business day in advance. Whenever machines or equipment
which generate heat and which affect the temperature otherwise maintained by
the air conditioning system are used by Tenant in the Premises, Landlord
reserves the right to install supplementary air conditioning units in
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the Premises, and the costs therefor, including the costs of installation,
operation and maintenance thereof, shall be paid by Tenant as additional rent
upon demand by Landlord.
(c) All Building passenger elevators and freight
elevators shall be available for use at all times during Normal Business Hours
(subject to shutdown of individual elevators by mechanical breakdown or for
maintenance or inspection). At lease one passenger elevator in each bank of
elevators shall be available at all other times, subject to reasonable security
procedures. Freight elevators shall be made available at times other than
Normal Building Hours upon reasonable prior notice to Landlord; provided that
Tenant shall pay for any costs of such use, including overtime costs for
building staff or security personal.
(d) Landlord shall supply hot and cold water for Building
lavatories at all times (except as required in connection with maintenance or
repairs).
(e) Landlord shall supply cleaning services on Monday
through Friday of each week, except on Building Holidays in accordance with
specifications as reasonably agreed by Landlord and Tenant from time to time.
The foregoing notwithstanding, Landlord shall not be required to provide
cleaning services to controlled access areas of the Premises. For purposes
hereof, "controlled access areas" means any areas of the Premises for which
access is controlled to an extent greater than customary for general office
space in the Denver Technological Center. If Tenant desires janitorial
services other than those provided by Landlord, Tenant shall separately pay for
such services monthly as additional rent upon billing by Landlord, or Tenant
shall, at Landlord's option, separately contract for such services with the
same company furnishing janitorial services to Landlord. Notwithstanding the
foregoing, Tenant shall have the right, subject to such reasonable rules,
regulations and requirements as Landlord may impose (including but not limited
to the requirement that such janitors belong to a trade union), to employ
Tenant's own janitors to perform such additional services.
(f) In the event any public utility supplying energy
requires, or government law, regulation, executive or administrative order
results in a requirement, that Landlord or Tenant must reduce, or maintain at a
certain level, the consumption of electricity for the Premises or Building,
which affects the heating, air-conditioning, lighting, or hours of operation of
the Premises or Building, Landlord and Tenant shall each adhere to and abide by
these laws, regulations or administrative orders without any reduction in rent.
(g) Should any of the Building equipment or machinery
cease to function properly for any cause, Landlord shall use reasonable
diligence to repair the same promptly. Landlord's inability to furnish, to any
extent, the building services required hereunder, or any cessation thereof
resulting from any causes, and any renovation, redecoration or rehabilitation
of any area of the Building, including the lobby, or any of the surrounding
public spaces, shall not render Landlord liable for damages to either person or
property, nor be construed as an eviction of Tenant, nor work an abatement of
any portion of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. However, in the event that an interruption of Building
Services causes the Premises to be untenantable for a period of at least 10
consecutive business days, Monthly Rent shall be abated proportionately.
35.2 Landlord shall contract with a reputable third party
security service as an Operating Expense, to provide security services within
the Building consistent with other first class multitenant office buildings in
the Denver Technological Center. The foregoing notwithstanding, Tenant hereby
acknowledges and agrees that Landlord shall have no responsibility or liability
for security within the Building or the Premises or any surrounding areas and
Tenant, for itself and its employees, contractors, agents, invitees,
subtenants, successors and assigns, hereby waives and releases Landlord from
and all such responsibility and liability.
Tenant shall have the right to maintain at its
expense a separate staff of security personnel for Tenant's own Premises, the
exercise of which right shall be subject to Landlord's reasonable regulation
from time to time. In addition, so long as Tenant is the sole occupant of the
Building, Tenant, upon not less than 60 days prior notice to Landlord, may
elect to obtain security services, at Tenant's cost, in lieu of the security
services to be arranged by
20
<PAGE> 24
Landlord hereunder. Such Tenant arranged security, and any third party
provider of such security services, shall be subject to Landlord's reasonable
prior approval.
35.3 Tenant shall have the right to the use of the
following facilities in the Building, in a reasonable manner and subject to
Landlord's rules and regulations referred to in Paragraph 33:
(a) After the completion of the lawns, parking,
plazas and the lobbies of the Building, such areas may be used by Tenant on
reasonable prior written notice to Landlord for Tenant sponsored or civic and
charitable events and displays and Tenant related promotional events and
seasonal displays, in each case always consistent with the character of the
Building as a first-class office building in the Denver Technological Center
and in accordance with all applicable Legal Requirements, Insurance
Requirements and covenants, conditions and restrictions of record. As a
condition to any such use, Landlord may require that Tenant furnish evidence
(i) that Tenant has obtained any required governmental licenses or permits and
(ii) of public liability, special events or other insurance with respect
thereto, naming Landlord as an additional insured, and otherwise issued by
insurance companies and with coverages reasonably satisfactory to Landlord.
Tenant shall not unreasonably interfere with use of the Common Areas by other
tenants or occupants of the Building and Tenant shall be responsible for all
cost in connection with such special use, including additional or after-hours
security and cleaning services.
(b) Loading and receiving facilities for their
intended purpose with due regard to the requirements of other tenants in the
Building, if any, all without the payment of any additional rent or other
charges.
35.4 Subject to the provisions of Paragraph 3 and
Paragraph 14, Tenant shall have the right to operate at its expense a dining
facility or facilities and a florist shop within the Premises for its employees
and guests, and to sublet space to an operation of either of such facilities or
to contract for the operation of such facilities or for catering and food
services and vending.
35.5 Landlord agrees at all times to provide professional
management services to the Building by a manager ("Manager") having the
financial ability, management expertise and other resources to enable such
Manager to maintain and operate the Building to the standard of a first-class
office building in the Denver Technological Center or to provide management
from resources available to Landlord, including Landlord's own employees, which
are the equivalent of professional management services which would be available
from such an independent Manager.
So long as Landlord, or an Affiliate of Landlord, is
providing management to the Building, the requirements of the preceding
Paragraph shall have been satisfied.
A change in the management of the Building from
Landlord or an Affiliate of Landlord shall not be made without the prior
approval of Tenant, such approval not to be unreasonably withheld or delayed.
Incident to making any change, Landlord may present to Tenant a list of
proposed Managers for advance approval and, if submitted, Tenant agrees to
respond promptly to the acceptability of the names on the list. Further, on
Tenant's request for reasonable cause, the Manager shall replace the person who
acts as the Building Manager.
35.6 Landlord and the Manager shall make reasonable
efforts to provide a draft Operating Expense and Capital Budget to Tenant by
October 1 of each calendar year (the "Budget") estimating the Operating
Expenses for the Building for the following year. Representatives of Landlord
and the Manager will consult with Tenant during the thirty (30)-day period next
ensuing, if Tenant shall reasonably request, for the purposes of reviewing the
contents of the Budget. Nothing in this Paragraph 35.6 shall be construed as
entitling Tenant to approve or disapprove the Budget or to relieve Tenant from
the obligation to pay Tenant's share of Operating Expenses. It is, however,
the agreement of the parties that Tenant shall have an opportunity to review
the Budget to enable Tenant to recommend to Landlord areas in which adjustment
of the Budget may be appropriate.
35.7 Tenant agrees that all of Tenant's personal property
in or upon the Premises, the Building or the Premises shall be at Tenant's risk
except as specifically hereinafter provided. If the whole or any part thereof
shall
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<PAGE> 25
be damaged, destroyed, stolen or removed, Landlord shall have no responsibility
for such damage or loss unless caused by (i) the willful or negligent act of
Landlord, its agent, servants, contractors or employees or (ii) failure on the
part of Landlord to carry out an obligation to repair under this Lease after
notice to Landlord of the condition requiring such repair and the expiration of
reasonable time after such notice has been received without such repair having
been made or where due to the negligence of Landlord continuing after notice to
Landlord of the condition claimed to constitute negligence of Landlord and the
expiration of a reasonable time after such notice to Landlord without such
condition having been cured or corrected. The foregoing sentence shall not
apply to an insured loss where a waiver of subrogation applies under this
Lease.
36. SELF HELP. Tenant shall have the rights of self-help and
offset on the terms and conditions specified in this Section.
If Landlord permits to exist a condition (the "Condition")
which is in breach of Landlord's maintenance, repair, service and restoration
or other obligations under this Lease in the Premises, the Building and the
Premises or shall fail to make timely payment of Taxes, as required by
Paragraph 8, and Tenant makes a good faith determination that the existence or
continuation thereof will materially adversely affect Tenant's use and
occupancy of the Premises or the character of the Building as a first-class
office building in the Denver Technological Center, Tenant may give notice (the
"First Notice") to Landlord specifying in reasonable detail (x) the Condition
and (y) a reasonable time within which Landlord is to cure such Condition which
shall not be less than 30 days. If Landlord shall fail to provide a good faith
written response to the First Notice denying liability, or if Landlord's
response is that Landlord will cure the condition and Landlord fails to
commence within a reasonable time or thereafter fails diligently to proceed to
completion the cure of such Condition, Tenant shall have the right to commence
to cure such Condition for the account of Landlord (subject to the terms of
this Section) at any time after giving to Landlord an additional notice (the
"Cure Notice") referring to the First Notice, and describing the respects in
which Landlord has failed to comply with the First Notice and Tenant's intended
action as a consequence thereof.
In a serious emergency of substantial magnitude which
immediately and materially interferes with Tenant's business operations in the
Building (for example, an interruption of utility service, lack of access of
the Building and malfunction, or loss of HVAC), Tenant shall have the right to
proceed to remedy the Condition, but Tenant shall give immediate oral notice
(confirmed by a written notice given in accordance with the notice clause of
this Lease) of the Condition claimed to require immediate action and Tenant's
intentions with respect thereof. The right on the part of Tenant so to proceed
shall be at Tenant's own risk and Tenant shall be responsible for any damage to
the Building caused by Tenant's action. Tenant's action shall not give rise to
a right of setoff.
In such event, Tenant shall be entitled to reasonable access
to any part of the Building as may be required to permit Tenant to cure the
Condition, but Tenant agrees to minimize interference with any other operation
in the Building or other tenants' use of any part of the Building and to
exonerate and indemnify Landlord from and against all claims of other tenants
and other persons in respect thereof. Whenever practicable, consistent with
the nature of the Condition, work in space other than the Premises shall be
performed during non-business hours.
For purposes of this Paragraph 36, Landlord's failure to pay
Taxes, as provided in Paragraph 8, two (2) business days at least before the
date on which and to the extent the same must be paid to avoid loss of the
right to proceed for an abatement thereof or Landlord's failure to cause to be
maintained or renewed insurance as required by this Lease shall, without
notice, be treated as a Condition which Tenant is entitled to cure as if notice
thereof had been given by Tenant to Landlord and as if Landlord had failed to
cure the same within a reasonable time.
Tenant shall not be entitled to set-off or reimbursement from
Landlord for the costs of curing such Conditions and Tenant hereby acknowledges
that if performed by Landlord, any such costs would have been included in
Operating Expenses and paid by Tenant.
37. TERMINATION. Tenant shall have the option, exercisable, by
notice to Landlord twelve (12) months prior to the end of year 10 of the Lease
to terminate this Lease effective at the end of year 10 upon payment of all
unpaid
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<PAGE> 26
Base Rent and Operating Expenses then due and owing plus a termination fee of
$31.25 per rentable square foot within the Premises.
38. OPTIONS TO EXTEND.
38.1 Provided that as of the time of the giving of the
Tenant's extension notice and the commencement date of the extension term, (x)
Tenant is the Tenant originally named herein or successors or affiliates of
Tenant, (y) Tenant actually occupies at least 75% of the Premises, and (z) no
uncured Event of Default exists; then Tenant shall have the successive options
to extend the term of this Lease for two (2) successive five (5) year periods
from and after the date of the expiration of the original term thereof. Tenant
shall exercise each option of extension by notice to Landlord given not later
than the last to occur of the date which is twelve (12) months prior to the
expiration of the then current (initial or extended) term. However, in any
event, the term of this Lease shall expire on the day scheduled therefor
without extension if such option to extend shall not have been exercised by
Tenant. If Tenant, having exercised an available extension option, is in
occupancy of space during an extended term of this Lease and the Base Rent and
any other applicable charge have not been established for such period then
Tenant shall be obligated to pay the Base Rent and any other charge for such
period when established, retroactively to the first day of the period following
the expiration of the initial or an extended term of this Lease.
Notice from Tenant to Landlord of the exercise of an
option shall always be sufficient if notice thereof is given as required by the
notice clause of this Lease and if signed by an authorized officer of Tenant
and such notice is accompanied by the certification of authority of such
officer from a suitable attesting officer, such as a vice president of Tenant,
and, upon the giving of such notice, the term of this Lease shall be
automatically extended for the period next ensuing, without the requirement of
the execution of any further instrument, upon all the terms, provisions and
conditions set forth in this Lease, except that the Base Rent and other charges
payable on account of each such extension shall be adjusted as set forth below
and that there shall be no right to extend beyond those provided herein.
38.2 (a) The Base Rent payable by Tenant to Landlord
for the first extension term shall be the greater of (i) the Base Rent in
effect for the last year of the initial term or (ii) an amount equal to the
product of (x) the initial Base Rent determined under the Supplement to Lease
Agreement and (y) 1.800944.
(b) The Base Rent payable by Tenant to Landlord
during the second extension term shall be the greater of (i) the Base Rent
applicable to the last year of the previous extension terms or (ii) the then
prevailing market rate for renewal leases of comparable space in the Denver
Technological Center, taking into account the size of the Lease, the length of
the renewal terms, market escalations and the credit of Tenant ("Fair Market
Rent"). The Base Rent shall not be further reduced by reason of any costs or
expenses saved by Landlord by reason of Landlord's not having to find a new
tenant for such premises (including, without limitation, brokerage commissions,
costs of improvements, rent concessions or lost rental income during any
vacancy period). In the event Landlord and Tenant fail to reach an agreement
in writing as to such Base Rental rate at least six (6) months prior to the
expiration of the Lease, then Tenant's exercise of the second renewal option
shall be deemed withdrawn and the Lease shall terminate on the expiration date
of the first extension period, unless Tenant or Landlord invokes the
arbitration procedure provided below to determine the Fair Market Rent.
(c) Arbitration to determine the Fair Market Rent
shall be in accordance with the procedures set forth on attached Exhibit E;
provided that the rules applied shall be the Real Estate Valuation Arbitration
Rules of the American Arbitration Association. Either party may elect to
arbitrate by sending written notice to the other party and the Denver area
regional office of the American Arbitration Association within 5 days after the
expiration of the negotiating period provided in Paragraph (b), invoking the
binding arbitration provisions of this Paragraph and Exhibit E.
Notwithstanding any other provision herein or in Exhibit E, the Fair Market
Rent determined by the arbitrator shall not be less than, and the arbitrator
shall have no authority to determine a Fair Market Rent less than, the Base
Rent in effect as of the scheduled expiration of the Lease Term.
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<PAGE> 27
(d) The determination of Base Rent does not
reduce the Tenant's obligation to pay or reimburse Landlord for Operating
Expenses and other reimbursable items as set forth in the Lease, and Tenant
shall reimburse and pay Landlord as set forth in the Lease with respect to such
Operating Expenses and other items with respect to the Premises during such
extension term without regard to any cap on such expenses set forth in the
Lease.
(e) Landlord shall have no obligation to
refurbish or otherwise improve the Premises for any extension term.
39. TENANT'S RIGHT OF FIRST OFFER.
(a) Provided that as of the date of the giving of
Landlord's Notice, (x) Tenant is the Tenant originally named herein or its
affiliate or successor, (y) Tenant actually occupies not less than 75% of the
rentable area of the Building, and (z) no Event of Default has occurred and is
continuing, if at any time during the Lease Term Landlord desires to sell or
transfer the Building, then Landlord, before offering the Building to anyone,
shall offer to Tenant the right to purchase the Building for the price (net of
commissions) and on the same terms and conditions upon which Landlord intends
to offer to sell or transfer Building. The foregoing shall not apply to any
foreclosure or deed in lieu of foreclosure nor to a transfer to an Affiliate,
even if the transfer takes the form of a purchase, but a subsequent transfer or
sale shall be subject to the provisions of this paragraph.
(b) Such offer shall be made by Landlord to
Tenant in a written notice (hereinafter called the "Offer Notice") which offer
shall specify the terms upon which Landlord intends to offer the Building for
sale. Tenant may accept the offer set forth in the Offer Notice by delivering
to Landlord an unconditional acceptance (hereinafter called "Tenant's Notice")
of such offer within 10 business days after delivery by Landlord of the Offer
Notice to Tenant. Time shall be of the essence with respect to the giving of
Tenant's Notice. If Tenant does not deliver Tenant's Notice within the time
period required hereunder, Tenant shall be deemed to have declined Landlord's
offer.
(c) If Tenant at any time declines or is deemed
to have declined Landlord's offer, Landlord shall be free to sell or transfer
the Building, including on terms which may be less favorable to Landlord than
those offered to Tenant; provided that Landlord may not sell the Building for a
purchase price (net of commissions) which is less than 90% of the purchase
price offered to Tenant without first re-offering the Building to Tenant at
such lesser price in accordance with the provisions of this Paragraph 39. Upon
any sale permitted hereunder following an offer which Tenant declined or is
deemed to have declined, the provisions of this Paragraph 39 shall terminate
and be of not further force and effect and Tenant shall be deemed to have
waived any further rights hereunder.
(d) The provisions of this Paragraph 39 shall not
apply to any sale or transfer of the Building as part of a portfolio sale which
includes other property.
(e) The closing of any sale to Tenant pursuant to
this Paragraph 39 shall be conducted through an escrow established at a title
company acceptable to both Landlord and Tenant. All deliveries shall be
deposited in escrow and all closing deliveries and disbursements shall be made
through the escrow. The closing shall occur no later than 45 days following
delivery of Tenant's Notice to Landlord.
(f) Landlord shall convey to Tenant fee simple
title to the Building by special warranty deed (warranting title by, through,
or under Landlord, but not otherwise) subject only to (i) all matters of record
as of the date of Landlord's acquisition of the Building pursuant to the
Agreement of Purchase and Sale between Landlord and Tenant dated as of
______________, 1996 (the "Purchase Agreement"), (ii) matters created by or
arising through Tenant, (iii) rights of tenants under this Lease and any other
lease for space in the Building and (iv) those matters which a correct survey
would show, but free and clear of any liens or any other exceptions created by,
under, or through Landlord. Landlord shall assign to Tenant all its right,
title and interest in and to all contracts, warranties, permits, approvals, and
other intangible property related to the Building.
(g) There shall be no proration of taxes or other
expenses.
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(h) The Lease shall be terminated as of the
closing. All rent and other payments due by Tenant to Landlord under the Lease
shall be prorated to the date of Closing and shall be deposited into the escrow
and disbursed to Landlord at closing.
(i) Landlord makes no, and at closing Tenant
shall waive in writing satisfactory to Landlord any, warranty or representation
with respect to the Building or the Premises (other than title to the Premises
as provided in the deed) and shall release Landlord from any right or claims,
known or unknown, with respect to the physical or environmental condition of
the Premises or the compliance of the Premises with applicable law.
(j) Landlord may conduct the sale as a tax-free
exchange pursuant to Section 1031 of the Internal Revenue Code. Such exchange
shall be conducted through a qualified intermediary, at no cost to Tenant, and
without affecting Landlord's obligations to Tenant. Tenant shall not be
required to take title to any other property in connection with a Section 1031
exchange.
(k) Tenant's exercise of its option to purchase
hereunder is irrevocable. Time is of the essence.
(l) Only the Tenant originally named herein or a
Successor of such Tenant may exercise this Purchase Option. The rights of
Tenant hereunder are not assignable except to a Successor to which the Lease is
assigned as permitted hereunder and shall terminate automatically upon any
termination of the Lease other than as a result of default by Landlord.
Further, no such right is exercisable if as of the date of exercise of the
right or the closing, the Lease has terminated or an Event of Default has
occurred and is continuing.
40. MISCELLANEOUS. (a) Any payments or charges due from Tenant
to Landlord hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term
"Tenant," as used in this instrument, there is more than one person, firm or
corporation, each shall be jointly and severally liable for the obligations of
Tenant.
(c) All notices required or permitted to be given
under this Lease shall be in writing and shall be sent by registered or
certified mail, return receipt requested, or by a reputable national overnight
courier service, postage prepaid, or by hand delivery addressed to the parties
at their addresses. Either party may by notice given aforesaid change its
address for all subsequent notices. Except where otherwise expressly provided
to the contrary, notice shall be deemed given upon delivery.
(d) At Landlord's request from time to time
Tenant shall furnish Landlord with true and complete copies of its most recent
annual and quarterly financial statements prepared by Tenant or Tenant's
accountants and any other financial information or summaries that Tenant
typically provides to its lenders or shareholders.
(e) Except as set forth in the following
sentence, neither this Lease nor a memorandum of lease shall be filed by or on
behalf of Tenant in any public record. The parties agree to execute, prepare
and record a memorandum of lease stating only the names and addresses of the
parties, the description of the Premises, the term of this Lease, the Right of
First Offer and the Extension Options described in Paragraph 38.
(f) The normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Lease or any exhibits or amendments
hereto.
(g) The submission by Landlord to Tenant of this
Lease shall have no binding force or effect, shall not constitute an option for
the leasing of the Premises, nor confer any right or impose any obligations
upon either party until execution of this Lease by both parties.
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<PAGE> 29
(h) Words of any gender used in this Lease shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires. The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease,
or any provision hereof, or in any way affect the interpretation of this Lease.
(i) Any amount not paid by Tenant within 10 days
after its due date in accordance with the terms of this Lease shall bear
interest from such due date until paid in full at the lesser of the highest
rate permitted by applicable law or 15 percent per year. It is expressly the
intent of Landlord and Tenant at all times to comply with applicable law
governing the maximum rate or amount of any interest payable on or in
connection with this Lease. If applicable law is ever judicially interpreted
so as to render usurious any interest called for under this Lease, or
contracted for, charged, taken, reserved, or received with respect to this
Lease, then it is Landlord's and Tenant's express intent that all excess
amounts theretofore collected by Landlord be credited on the applicable
obligation (or, if the obligation has been or would thereby be paid in full,
refunded to Tenant), and the provisions of this Lease immediately shall be
deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply
with the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.
(j) Construction and interpretation of this Lease
shall be governed by the laws of the state in which the Premises are located,
excluding any principles of conflicts of laws.
(k) Time is of the essence as to the performance
of Landlord's and Tenant's obligations under this Lease.
(l) All exhibits and addenda attached hereto are
hereby incorporated into this Lease and made a part hereof. In the event of
any conflict between such exhibits or addenda and the terms of this Lease, such
exhibits or addenda shall control.
(m) The following definitions apply in this Lease:
(i) A Successor (limited to a successor
by merger or other form of business acquisition) of
Tenant named herein shall be any corporation or
entity into which Tenant named herein shall be merged
or with which Tenant named herein shall be
consolidated, or any successor (by merger or
consolidation) thereto. An Affiliate of Tenant named
herein shall be a corporation or other entity which
owns or controls (by reason of stockholdings therein)
Tenant named herein, or which is owned by or
controlled by (by reason of stockholdings therein)
Tenant named herein or which is owned by controlled
by (by reason of stockholdings therein) a corporation
which owns or controls (by reason of stockholdings
therein) Tenant named herein. Holders of beneficial
interest shall be included within the meaning of the
term "stockholdings." Where a Successor to or
Affiliate of Tenant is in occupancy of space meeting
minimum requirements for certain rights conferred on
Tenant under the terms of this Lease and the space
occupied by Tenant and such Successor or Affiliate
aggregates such minimum, Tenant shall have the same
rights as if itself were in occupancy thereof.
An Affiliate of Landlord shall be an
entity which owns or controls (by reason of
stockholdings therein or, if not a corporation, by
reason of the ownership or control of beneficial
interests therein) Landlord, or which is owned by or
controlled by (by reason of stockholdings therein, or
if not a corporation, by reason of ownership or
control of beneficial interests therein) Landlord, or
which is owned by or controlled by (by reasons of
stockholdings therein or, if not a corporation, by
reason of the ownership or control of beneficial
interests therein) a corporation or other entity
which owns or controls (by reason of stockholdings
therein or, if not a corporation, by reason of the
ownership or control of beneficial interests therein)
Landlord.
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(ii) The term "business day" means those
days other than a Saturday or Sunday on which, under
applicable law or regulation, banks in Denver,
Colorado, are not prohibited by law from being open
for business.
Whenever the last day for performance
of an act or satisfaction of an obligation falls on a
day which is not a business day, such act shall be
performed or obligation satisfied on the next regular
business day in Denver, Colorado.
(o) All notices required or permitted hereunder shall be
in writing and shall be served on the parties at the addresses set forth below.
Any such notices shall be either (1) sent by overnight delivery using a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one business day after deposit with such courier, (2) sent by
telefax, in which case notice shall be deemed delivered upon transmission of
such notice, or (3) sent by personal delivery, in which case notice shall be
deemed delivered upon receipt or refusal of delivery. A party's address may be
changed by written notice to the other party; provided, however, that no notice
of a change of address shall be effective until actual receipt of such notice.
Copies of notices are for informational purposes only, and a failure to give or
receive copies of any notice shall not be deemed a failure to give notice.
<TABLE>
<S> <C>
Tenant Notice Address: J.D. EDWARDS & COMPANY
8055 East Tufts Avenue
Denver, Colorado 80237
Attn: Director of Real Estate
Telephone: 303/488-1188
Facsimile: 303/488-1690
With a copy to: J.D. EDWARDS & COMPANY
8055 East Tufts Avenue
Denver, Colorado 80237
Attention: General Counsel
Telephone: 303/488-4606
Facsimile: 303/488-4679
And with a copy to: Sherman & Howard, LLC
633 17th Street
Suite 3000
Denver, Colorado 80202
Attention: James L. Cunningham
Telephone: 303/299-8356
Facsimile: 303/298-0940
Landlord Notice Address: CARRAMERICA REALTY, L.P.
Attention: Market Officer
7600 East Orchard Road
Englewood, CO 80111
Telephone: 303/773-0618
Facsimile: 303/779-6587
With a copy to: CARRAMERICA REALTY, CORPORATION
Attention: Asset Management
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/624-7500
Facsimile: 202/638-0102
And a copy to: Mayer, Brown & Platt
Attn: George Ruhlen
141 East Palace Avenue
Santa Fe, New Mexico 87501
Telephone: 505/820-8186
Facsimile: 505/820-7334
</TABLE>
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<PAGE> 31
SIGNATURE PAGE
TO
BUILD-TO-SUIT LEASE AGREEMENT
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
<TABLE>
<CAPTION>
=====================================================================================================
TENANT: LANDLORD:
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<S> <C>
J. D. EDWARDS & COMPANY, L.P. CARRAMERICA REALTY, L.P.
a Colorado corporation a Delaware limited partnership
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
By: CarrAmerica Realty GP Holdings, Inc.,
a Delaware corporation,
general partner
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
By: By:
------------------------------------------- -------------------------------------------
- -----------------------------------------------------------------------------------------------------
Richard G. Snow, Jr.
- -----------------------------------------------------------------------------------------------------
Title: Vice President and General Counsel Title:
----------------------------------------
=====================================================================================================
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
List of Exhibits:
-----------------
<S> <C> <C>
EXHIBIT A - Legal Description of Land
EXHIBIT B - Schedule and Depiction of Rentable Areas
EXHIBIT C - Operating Expenses
EXHIBIT D - Rules and Regulations
EXHIBIT E - Arbitration
</TABLE>
<PAGE> 33
EXHIBIT A
LEGAL DESCRIPTION OF LAND
PARCEL 1
A PARCEL OF LAND BEING LOCATED IN THE DENVER TECHNOLOGICAL CENTER EAST IN
SECTIONS 8 AND 9, TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL
MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF COLORADO, BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
COMMENCING AT THE WEST QUARTER CORNER OF SECTION 9; THENCE ALONG THE EAST-WEST
CENTERLINE OF SECTION 9 BEARING SOUTH 89 DEGREES 59 MINUTES 25 SECONDS EAST,
279.73 FEET TO THE TRUE POINT OF BEGINNING;
THENCE NORTH 52 DEGREES 41 MINUTES 01 SECONDS WEST, 368.62 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE RIGHT HAVING AN ARC LENGTH OF 563.61 FEET, A CENTRAL
ANGLE OF 30 DEGREES 04 MINUTES 04 SECONDS, A RADIUS OF 1,074.00 FEET AND A
CHORD WHICH BEARS NORTH 52 DEGREES 23 MINUTES 11 SECONDS EAST, 557.17 FEET;
THENCE SOUTH 27 DEGREES 16 MINUTES 44 SECONDS EAST, 79.29 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE RIGHT HAVING AN ARC LENGTH OF 413.05 FEET, A CENTRAL
ANGLE OF 23 DEGREES 47 MINUTES 07 SECONDS, A RADIUS OF 995.00 FEET AND A CHORD
WHICH BEARS NORTH 79 DEGREES 41 MINUTES 12 SECONDS EAST, 410.10 FEET TO A POINT
OF NON-TANGENCY; THENCE NORTH 43 DEGREES 56 MINUTES 35 SECONDS EAST, 67.90 FEET
TO THE RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY; THENCE ALONG SAID
RIGHT-OF-WAY LINE BEING A CURVE TO THE LEFT HAVING AN ARC LENGTH OF 73.83 FEET,
A CENTRAL ANGLE OF 05 DEGREES 13 MINUTES 20 SECONDS, A RADIUS OF 810.00 FEET
AND A CHORD WHICH BEARS SOUTH 48 DEGREES 40 MINUTES 05 SECONDS EAST, 73.80
FEET; THENCE LEAVING SAID RIGHT-OF-WAY LINE SOUTH 35 DEGREES 51 MINUTES 07
SECONDS WEST, 95.85 FEET TO POINT OF CURVATURE; THENCE ALONG A CURVE TO THE
LEFT HAVING AN ARC LENGTH OF 374.78 FEET, A CENTRAL ANGLE OF 35 DEGREES 36
MINUTES 58 SECONDS, A RADIUS OF 602.79 FEET AND A CHORD WHICH BEARS SOUTH 18
DEGREES 02 MINUTES 45 SECONDS WEST, 368.70 FEET TO A POINT OF TANGENCY; THENCE
SOUTH 00 DEGREES 14 MINUTES 25 SECONDS WEST, 243.18 FEET; THENCE ALONG A
NON-TANGENT CURVE TO THE LEFT HAVING AN ARC LENGTH OF 257.58 FEET, A CENTRAL
ANGLE OF 45 DEGREES 28 MINUTES 50 SECONDS, A RADIUS OF 324.50 FEET AND A CHORD
WHICH BEARS SOUTH 60 DEGREES 03 MINUTES 24 SECONDS WEST, 250.87 FEET; THENCE
NORTH 52 DEGREES 41 MINUTES 01 SECONDS WEST, 379.45 FEET TO THE TRUE POINT OF
BEGINNING.
BASIS OF BEARINGS: ASSUMED ALONG THE SOUTHEASTERLY LINE OF DTC EAST, WHICH IS
SITUATED SOUTH AND WEST OF SOUTH ULSTER STREET PARKWAY, NORTHWEST OF UNION
AVENUE PARKWAY, AND EAST OF INTERSTATE HIGHWAY I-25, AND BEING THE NORTHERLY
RIGHT- OF-WAY LINE OF UNION AVENUE PARKWAY, BOOK 29, PAGE 56, AS MONUMENTED BY
A PIN AND CAP PLS 9655 BEING THE EASTERLY CORNER OF PARCEL 1, RECEPTION NO.
92-0071136 AND A PIN AND CAP PLS 23899, BEARING NORTH 64 DEGREES 49 MINUTES 30
SECONDS WEST, 766.84 FEET.
<PAGE> 34
PARCEL 2
A PARCEL OF LAND BEING LOCATED IN THE DENVER TECHNOLOGICAL CENTER IN SECTION 9,
TOWNSHIP 5 SOUTH, RANGE 67 WEST OF THE SIXTH PRINCIPAL MERIDIAN, CITY AND
COUNTY OF DENVER, STATE OF COLORADO, BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
COMMENCING AT THE WEST QUARTER CORNER OF SECTION 9; THENCE N81 degrees 26'41"E,
808.84 FEET TO THE TRUE POINT OF BEGINNING; THENCE N00 degrees 14'25"E, 17.92
TO A POINT OF CURVATURE; THENCE 10.24 FEET ALONG THE ARC OF A CURVE TO THE
RIGHT HAVING A RADIUS OF 602.79 FEET, A CENTRAL ANGLE OF 00 degrees 58'22", AND
A CHORD WHICH BEARS N00 degrees 43'01"E, 10.24 FEET; THENCE 23.38 FEET ALONG
THE ARCH OF A CURVE TO THE LEFT HAVING A RADIUS OF 25.00 FEET, A CENTRAL ANGLE
OF 53 degrees 35'55", AND A CHORD WHICH BEARS N29 degrees 54'67"E, 22.64 FEET
TO A POINT OF COMPOUND CURVATURE; THENCE 167.63 FEET ALONG THE ARC OF A CURVE
TO THE RIGHT HAVING A RADIUS OF 592.29 FEET, A CENTRAL ANGLE OF 16 degrees
12'58", AND A CHORD WHICH BEARS N11 degrees 13'27"E, 167.07 FEET TO A POINT OF
REVERSE CURVATURE; THENCE 15.26 FEET ALONG THE ARC OF A CURVE TO THE LEFT
HAVING A RADIUS OF 10.00 FEET, A CENTRAL ANGLE OF 87 degrees 25'80", AND A
CHORD WHICH BEARS N24 degrees 23'00"W, 13.82 FEET TO A POINT OF TANGENCY;
THENCE N68 degrees 05'58"W, 0.87 FEET; THENCE 38.35 FEET ALONG THE ARC OF A
NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 602.79 FEET, A CENTRAL ANGLE
OF 03 degrees 38'41", AND A CHORD WHICH BEARS N22 degrees 06'27"E, 38.34 FEET;
THENCE 23.79 FEET ALONG A NON-TANGENT CURVE TO THE LEFT HAVING A RADIUS OF
20.00 FEET, A CENTRAL ANGLE OF 52 degrees 25'54", AND A CHORD WHICH BEARS N52
degrees 08'18"E, 22.97 FEET TO A POINT OF REVERSE CURVATURE; THENCE 103.01
FEET ALONG AN ARC OF A CURVE TO THE RIGHT HAVING A RADIUS OF 592.29 FEET, A
CENTRAL ANGLE OF 09 degrees 57'53", AND A CHORD WHICH BEARS N30 degrees
52'18"E, 102.88 FEET TO A POINT OF TANGENCY; THENCE N35 degrees 51'07"E, 95.39
FEET TO THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF SOUTH ULSTER STREET PARKWAY;
THENCE 44.90 FEET ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE BEING THE ARC OF A
CURVE TO THE LEFT HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 03 degrees
10'35", AND A CHORD WHICH BEARS S53 degrees 36'39"E, 44.90 FEET; THENCE LEAVING
SAID SOUTHWESTERLY RIGHT-OF-WAY LINE S35 degrees 51'07"W, 32.45 FEET TO A POINT
OF CURVATURE; THENCE 44.40 FEET ALONG THE ARC OF A CURVE TO THE RIGHT HAVING A
RADIUS OF 115.00 FEET, A CENTRAL ANGLE OF 22 degrees 07'23", AND A CHORD WHICH
BEARS S45 degrees 54'48"W, 44.13 FEET TO A POINT OF REVERSE CURVATURE; THENCE
35.10 FEET ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 85.00 FEET,
A CENTRAL ANGLE OF 23 degrees 39'28", AND A CHORD WHICH BEARS S46 degrees
08'46"W, 34.85 FEET TO A POINT OF COMPOUND CURVATURE; THENCE 334.44 FEET ALONG
THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 582.29 FEET, A CENTRAL ANGLE
OF 34 degrees 04'43", AND A CHORD WHICH BEARS S17 degrees 16'40"W, 329.53 FEET
TO A POINT OF TANGENCY; THENCE S00 degrees 14'25"W, 16.34 FEET; THENCE 40.54
FEET ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 550.00 FEET, A
CENTRAL ANGLE OF 04 degrees 13'25", S87 degrees 52'54"W, 40.35 FEET TO THE TRUE
POINT OF BEGINNING. SAID PARCEL CONTAINS 0.37 ACRES (10030.87 SQUARE FEET),
MORE OR LESS.
BASIS OF BEARINGS: ASSUMED ALONG THE SOUTHEASTERLY LINE OF DTC EAST, WHICH IS
SITUATED SOUTH AND WEST OF SOUTH ULSTER STREET PARKWAY, NORTHWEST OF UNION
AVENUE PARKWAY, AND EAST OF INTERSTATE HIGHWAY I-25, AND BEING THE NORTHERLY
RIGHT- OF-WAY LINE OF UNION AVENUE PARKWAY, BOOK 29, PAGE 58, AS MONUMENTED BY
A PIN AND CAP PLS 9000 BEING THE EASTERLY CORNER OF PARCEL 1, RECEPTION NUMBER
92-0071138 AND A PIN AND CAP PLS 23899 BEARING N64 degrees 49'20"W, 766.84
FEET.
<PAGE> 35
EXHIBIT B
SCHEDULE AND DEPICTION OF RENTABLE AREAS
[See Attached]
<PAGE> 36
EXHIBIT C
OPERATING EXPENSES ADDENDUM
A. Operating Expenses. The term "Operating Expenses" as used in
the Lease means all costs and expenses incurred by Landlord in owning,
managing, operating, maintaining, servicing, insuring and repairing the
Building, the surface and garage parking lots and other exterior appurtenances,
and the land upon which the Building is located (the "Land"), including but not
limited to the following:
1. premiums and other charges for insurance (including,
but not limited to, property insurance, rent loss insurance and liability
insurance and deductibles);
2. all management fees incurred in the management of the
Building, whether such management services are provided by Landlord, an
affiliate of Landlord, or an independent management company; provided that so
long as the Building is managed by Landlord or an Affiliate of Landlord,
management fees included in Operating Expenses in any year shall not exceed
2.5% of Base Rent for such year;
3. the cost of goods, services equipment and supplies
used or incurred directly or indirectly in the operation, maintenance,
replacement, repair and administration of the Building, including lighting,
relamping, heating, ventilating, and air conditioning cost, the cost of
maintaining and repairing all mechanical, electrical and other Building
systems, costs of providing hot and cold water, electrical or any other energy
supplied to the Building, elevator maintenance and operation, and other service
contracts;
4. except as expressly excluded below, costs of capital
expenditures made by Landlord in order to comply with its maintenance
obligations under the Lease, or for the purpose of complying with Legal
Requirements or Insurance Requirements or that are intended to result in a net
decrease in Operating Expenses or improve building safety; provided that any
such expense in excess of $5,000 (any such expense which is less than or equal
to $5,000 may be included in Operating Expenses in the year incurred) shall be
amortized over the useful life of such capital improvement (determined in
accordance with GAAP but in no event longer than 15 years), with interest
thereon at the rate of 10% per annum.
5. salaries, wages, benefits and other expenses of
Building personnel (including cost of uniforms, worker's compensation and
unemployment insurance, fidelity bonds, vacation pay, pension and retirement
benefits, health care, and other employee benefits, whether statutory or
otherwise but excluding club memberships, events tickets or other similar
fringe benefits) and of all employees of Landlord or any Affiliate of Landlord
employed in or who perform services or provide supervision in connection with
the operation, maintenance, repair and administration of the Building and
related grounds and improvements (including nonadministrative personnel but
excluding any employees located outside of the Denver metropolitan area and (i)
if the Landlord employs a dedicated building manager for the Building,
excluding any executive employee above the level of building manager or (ii) if
landlord does not employ a dedicated building manager for the Building,
excluding any executive employees above the level of director of property
management or director of operations), and amounts paid to contractors and
subcontractors in connection with any of the foregoing (with respect to
employees of Landlord or any Affiliate of Landlord which are not exclusively
employed in connection with the Building, Operating Expenses shall include a
pro rata allocation of costs and expenses related to such employees, as
reasonably determined by Landlord);
6. the cost of any security services provided or
arranged by Landlord (but not for any period for which Tenant elects to provide
security in lieu of security provided by Landlord, as permitted in the Lease);
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<PAGE> 37
7. legal fees, and accounting, architectural and other
professional fees and expenses incurred in connection with the operation,
maintenance repair and administration of the Building and related improvements
(but not including fees and expenses of in-house accountants employed by
Landlord or any Affiliate of Landlord);
8. costs of any service not provided to the Building on
the Rent Commencement Date but thereafter provided by Landlord at the request
of Tenant or in the prudent management of the Building;
9. cost of maintenance and replacement of landscaping,
the cost of maintenance, resurfacing and restriping of parking areas, and the
cost of maintenance and repair of Common Areas and cleaning services and
supplies furnished to Building or the Premises;
10. costs associated with the provision or operation of
any common facilities and service amenities;
11. the cost of maintaining management or engineering
offices for the Building (including administrative expenses but excluding rent
on any such offices), which offices may be located in another building, and
this expense may include a reasonable allocation of such costs related to
maintaining offices that Building management and engineering personnel occupy
in off-site offices of Landlord or any Affiliate of Landlord;
12. electricity, water, sewer and other utility charges
not billed directly to tenants or occupants;
13. any and all Taxes;
14. expenses (including reasonable attorneys' fees and
appraisers' fees) incurred in reviewing, protesting or seeking a reduction of
Taxes, which shall be sought solely at Landlord's sole discretion;
15. any dues, assessments or costs payable to owner's
associations or special districts or under any covenants, conditions and
restrictions or easements of record;
16. any costs of maintaining and repairing the Access
Road (as such term is defined in the Conveyance of Easement (the "Access
Easement") between Landlord and Tenant of even date with this Lease), including
Landlord's share under the Access Easement of any costs incurred by any party
other than Landlord (such costs shall be included in Operating Expenses in the
year incurred and not amortized, without regard to whether such costs
constitute capital expenditures); provided that Operating Expenses shall not
include any of such costs to the extent that Landlord is reimbursed for any
such costs;
17. any other costs or expenses expressly included in
Operating Expenses pursuant to the Lease.
B. Exclusions from Operating Expenses. Anything in Paragraph A
above notwithstanding, the following items shall not be included in Operation
Expenses:
1. capital expenditures incurred in connection with
maintaining the structural soundness of the roof (but not the integrity of the
roof membrane), foundation, structural steel and exterior walls of the Building
(damages caused by Tenant, its employees, agents and contractors excluded).
The term "walls" as used in this Paragraph shall not include windows, glass or
plate glass, flashing, curtain walls, doors, or entries;
2. all costs associated with the operation of the business of
the entity which constitutes Landlord, as distinguished from the costs of
Building operations, management and maintenance, including, but not limited to,
costs of partnership accounting and legal matters, costs of defending any
lawsuits with any mortgagee (except as the actions of Tenant may be in issue),
costs of selling, syndicating, financing, mortgaging or hypothecating any of
the Landlord's interest in the Building or the Land, and costs of any disputes
between Landlord and its employees;
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<PAGE> 38
3. costs of disputes of Landlord with Building management, or
costs incurred in connection with disputes with Tenant or any other tenants;
4. costs (including permit, license and inspection fees and
tenant allowances or other incentives) associated with preparing any vacated
space in the Building for occupancy by any new tenant, including costs of space
planning, renovating, improving or decorating, painting or redecorating vacant
space;
5. any advertising or promotional expense relating to the
Building;
6. any costs of services sold or provided to tenants or other
occupants which are paid or reimbursed directly by such tenants or occupants,
rather than through Operating Expenses;
7. expenses in connection with services or other benefits
which are provided to another tenant or occupant and which are not services
required hereunder or generally made available to all tenants or occupants of
the Building;
8. depreciation and amortization of the Building, other than
amortization of capital expenses as provided in Paragraph A above;
9. costs incurred due to violation by Landlord or any
managing agent or any tenant of the terms and conditions of any lease;
10. interest on debt or amortization payments on any
mortgages or deeds of trust or any other debt service or instrument encumbering
the Building or Land;
11. any cost or expense related to removal, cleaning,
abatement or remediation of "hazardous materials" or environmental conditions
which were not located on the Land or did not exist as of Project Close-Out and
which were not deposited, released or caused by Tenant, its subtenants,
assignees or their respective agents, contractors, employees, licensees or
invitees;
12. any compensation paid to clerks, attendants, concierges
or other persons working in or managing commercial concessions which charge
fees or sales prices and which are not part of the services provided to all
tenants or occupants of the Building;
13. the cost of repairs or other work incurred by reason of
fire, windstorm or other casualty (except that deductibles paid pursuant to any
insurance shall be included as Operating Expenses) or by the exercise of the
right of eminent domain to the extent that Landlord is compensated therefor
through proceeds of insurance or condemnation awards, or would have been so
reimbursed if Landlord had in force all of the insurance required to be carried
by Landlord under the provisions of this Lease;
14. leasing commissions, attorney fees, costs and
disbursements and other expenses incurred in connection with negotiations or
disputes with tenants or other occupants or prospective tenants, or associated
with the enforcement of any leases;
15. "takeover" expenses incurred by Landlord with respect to
space located in another building of any kind or nature in connection with the
leasing of space in the Building;
16. costs of repair or replacement for any item covered by a
warranty to the extent that such costs are paid or reimbursed by the party
honoring such warranty;
17. costs for which Landlord is reimbursed by its insurance
carrier or by any tenant's insurance carrier or by any other entity (other than
through Operating Expense passthroughs); and
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<PAGE> 39
18. any fines, costs, penalties or interest resulting from
the gross negligence or willful misconduct of the Landlord or its agents,
contractors, or employees.
C. Occupancy Adjustment. If during all or any portion of any
year the Building is not fully rented and occupied by tenants, Landlord may
elect to make an appropriate adjustment of Operating Expenses for such year,
employing sound accounting and management principles, to determine the
Operating Expenses that would have been paid or incurred by Landlord had the
Building been fully rented and occupied for the entire year, and the amount so
determined shall be deemed to have been the Operating Expenses for such year.
D. Tenant's Audit Right. At any time within 4 months after
Landlord has issued a statement of final reconciliation of Operating Expenses
payable by Tenant for the preceding year, and after at least 10 business days
prior written notice to Landlord, Tenant will have the right to review and
audit the books and records of Landlord relating to such Operating Expenses
during normal business hours and at the office of Landlord at which such books
and records are routinely maintained. The audit will be conducted at Tenant's
expense by a certified public accountant. If Tenant's audit reveals that the
Operating Expenses charged to Tenant exceed or were less than Tenant's share of
actual Operating Expenses, and such variance is confirmed by Landlord's
certified public accountant, then Landlord will reimburse Tenant for any
overcharge, or Tenant will pay to Landlord any undercharge, as applicable,
within 30 days after such final determination. In the event of a confirmed
overcharge of Operating Expenses to Tenant in excess of 5% of Tenant's share of
actual Operating Expenses in such year, Landlord also shall reimburse Tenant
for the reasonable cost of Tenant's audit if such audit was conducted by an
independent certified public accountant, but not in excess of an amount equal
to $5,000.
C-4
<PAGE> 40
EXHIBIT D
RULES AND REGULATIONS
1. The sidewalks, entrances, halls, corridors, elevators, and
stairways of the Building shall not be obstructed or used as a waiting or
lounging place by Tenant, or its agents, servants, employees, invitees,
licensees, and visitors.
2. Landlord reserves the right to refuse admittance to the
Building at any time other than between the hours of 7:00 a.m. and 6:00 p.m.
weekdays which are not Building Holidays, to any person not producing either a
key to this Premises or a pass issued in accordance with the access and
security procedures for the Building. Landlord shall in no case be liable for
damages for the admission or exclusion of any person to or from the Building.
3. Landlord will furnish each Tenant with two keys to each door
lock in its Premises, and Landlord may make a reasonable charge for any
additional keys requested by Tenant. No Tenant shall have any keys made for
its Premises; nor shall any Tenant alter any lock, or install new or additional
locks or bolts on any door without the prior written approval of Landlord. If
a lock alteration or installation is made, the new lock must accept the master
key for the Building. Each tenant, upon the expiration or termination of its
tenancy, shall deliver to Landlord all keys in such Tenant's possession for all
locks and bolts in the Building.
4. In order that the Building may be kept in a state of
cleanliness, subject to any agreed security procedures, Tenant shall permit
Landlord's employees (or Landlord's agent's employees) to clean its Premises
and except as expressly agreed by Landlord, no Tenant shall employ any
person(s) other than Landlord's employees (or Landlord's agents employees) for
such purpose. No Tenant shall cause any unnecessary labor by reason of such
Tenant's carelessness or indifference in the preservation of good order and
cleanliness of its Premises. Tenant will see that during any periods of
nonuse:
a. the windows are closed;
b. the doors securely locked; and
c. all water faucets and other utilities are shut off
(so as to prevent waste or damage).
In the event Tenant must dispose of crates, boxes, etc., which will
not fit into office waste paper baskets or for which disposal is not provided
under the agreed cleaning specifications, it will be the responsibility of
Tenant to dispose of same. In no event shall Tenant set such items in the
hallways or other areas of the Building or garage facility.
5. Landlord reserves the right to prescribe reasonable rules as
to the date, time, method and conditions upon which any personal property,
equipment, trade fixtures, merchandise and other similar items shall be
delivered to or removed from the Building. No heavy or bulky object shall be
delivered to or removed from the Building, except by experienced movers or
riggers. All damage done to the Building by the delivery or removal of such
items, or by reason of their presence in the Building, shall be paid to
Landlord, immediately upon demand, by the Tenant, by, through or under whom
such damage was done. There shall not be used, in any space, or in the public
halls of the Building, either by Tenant or by jobbers or others, in the
delivery or receipt of merchandise, any hand-trucks except those equipped with
rubber tires.
6. The walls, partitions, skylights, windows, doors, and transoms
that reflect or admit light into passageways or into any other part of the
Building shall not be covered or obstructed by any Tenant.
D-1
<PAGE> 41
7. The toilet-rooms, toilets, urinals, wash bowls and water
apparatus shall not be used for any purpose other than for those for which they
were constructed or installed, and no sweeping, rubbish, chemicals, or other
unsuitable substances shall be thrown or placed therein.
The expense of any breakage, stoppage or damage resulting from
violations of this rule by Tenant or by Tenant's agents, servants, employees,
invitees, licensees, or visitors, shall be borne by Tenant.
8. No signaling, telegraphic, or telephonic instruments or
devices, or other wires, instruments or devices, shall be installed in
connection with any Premises without the prior written approval of Landlord.
Such installations, and the boring or cutting for wires, shall be made at the
sole cost and expense of Tenant. All such wires used by Tenant must be clearly
tagged at the distribution boards and junction boxes and elsewhere in the
Building, with (x) the number of this Leased Premises to which said wires lead,
(y) the purpose for which said wires are used, and (z) the name of the company
operating same. Landlord retains, in all cases, the right to require:
a. the installation and use of such electrical
protecting devices that prevent the transmission of excessive currents of
electricity into or through the Building;
b. the changing of wires and of their installation and
arrangement underground or otherwise as Landlord may direct; and
c. compliance on the part of all using or seeking access
to such wires with such rules as Landlord may establish relating thereto.
9. Tenant, its agents, servants, or employees shall not:
a. go upon the roof of the Building without Landlord's
prior consent;
b. except as approved by Landlord in writing, use any
additional method of heating or air conditioning its Premises;
c. sweep or throw any dirt or other substance from its
Premises into any of the halls, corridors, elevators, or stairways of the
Building;
d. except as agreed by Landlord in writing, install any
radio or television antenna or any other device or item on the roof, exterior
walls, windows, or window sills of the Building;
e. place objects against glass partitions, doors, or
windows which would be unsightly from the interior or exterior of the Building;
or
f. except to the extent permitted under the Lease, use
any portion of its Premises: (i) for the storage of merchandise for sale to the
general public (other than sale of Tenant's software products), (ii) for
lodging or sleeping, or (iii) for cooking (except that the use by any Tenant of
Underwriter's Laboratory equipment for brewing coffee, tea and similar
beverages or the use of by Tenant of a similarly approved microwave oven shall
be permitted, provided that such use is in compliance with law). Tenant, its
agents, servants and employees, invitees, licensees, or visitors shall not
permit the operation of any musical or sound producing instruments or device
which may be heard outside its Premises, or which may emit electrical waves
which will impair radio or television broadcast or reception from or into the
Building.
10. Tenant shall not store or use in its Premises:
a. any ether, naphtha, phosphorous, benzol, gasoline,
benzine, petroleum, crude or refined earth or coal oils, kerosene or camphene;
D-2
<PAGE> 42
b. any other flammable, combustible, explosive or
illuminating fluid, gas or material of any kind;
or
c. any other fluid, gas or material or any kind having
an offensive odor.
11. No canvassing, soliciting, distribution of hand bills or other
written material, or peddling shall be permitted in the Building, and Tenant
shall cooperate with Landlord in prevention and elimination of same.
12. Tenant shall give Landlord prompt notice of all accidents to,
or defects in, air conditioning equipment, plumbing, electrical facilities, or
any part or appurtenances of its Premises, the Building or the Initial
Improvements.
13. The landscaped grounds adjacent to the Building shall be used
for the enjoyment of Tenant, its agents, servants, and employees so long as
such parties conduct themselves in a manner so as not to disturb, destroy, or
litter said grounds. All parties using the grounds shall comply with all laws,
ordinances, and rules and regulations of the city and/or county in which the
Building lies.
D-3
<PAGE> 43
EXHIBIT E
ARBITRATION PROCEDURE
1. Disputes To Be Resolved By Binding Arbitration. Anything in
the Lease to the contrary notwithstanding, the submission to arbitration in
accordance with the terms of this exhibit is the sole and exclusive method,
means, and procedure to resolve any claims, disputes, or disagreements arising
under this Lease with respect to the following matters: (i) the reasonableness
of any action taken or judgment that either party makes in any instance where
that party has expressly agreed in this Lease to be reasonable in taking that
action or making that judgment; (ii) the amount of any abatement of Base Rent
or Operating Expenses where Tenant is entitled to such an abatement under the
provisions of this Lease; (iii) whether an item of Operating Expenses is
commercially reasonable where expressly required to be reasonable by the terms
of this Lease; (iv) whether a matter conforms with the standards of first class
office buildings in the Denver Technological Center where the Lease requires
such conformance; and (v) the amount of Fair Market Rent for the second
extension term under Paragraph 38 of the Lease. The provisions of this Exhibit
shall not apply with respect to any claim, dispute or disagreement except for
those expressly identified above.
2. Selection of Arbitrator. Any dispute to be arbitrated
pursuant to the provisions of this Exhibit shall be determined by binding
arbitration before a panel of three arbitrators, and except as provided under
Paragraph 38 of the Lease with respect to disputes as to Fair Market Rent,
under the commercial arbitration rules then in effect (the "Arbitration Rules")
of the American Arbitration Association ("AAA"). Such arbitration shall be
initiated by the parties, or either of them, within ten (10) days after either
party sends written notice (the "Arbitration Notice") of a demand to arbitrate
by registered or certified mail to the other party and to the Denver regional
office of the AAA. The Arbitration Notice shall contain a description of the
subject matter of the arbitration, the dispute with respect thereto, the amount
involved, if any, and the remedy or determination sought. Each party shall
designate an arbitrator from the AAA's list of available arbitrators within ten
(10) days after the initiation of the arbitration and within 3 business days
thereafter the two designated arbitrators shall select a third arbitrator. If
either party fails to select an arbitrator, or if the two arbitrators fail to
select the third arbitrator, the panel of three arbitrators shall be selected
in accordance with the Arbitration Rules. Each arbitrator selected hereunder
shall have substantial experience in commercial real estate matters generally,
including specific experience related to commercial leases. The panel of
arbitrators selected hereunder is sometimes referred to herein as the
"Arbitrator".
3. Pre-Decision Arbitration Procedures. The Arbitrator shall
schedule a pre-hearing conference to resolve procedural matters, arrange for
the exchange of information, obtain stipulations, and narrow the issues. The
parties will submit proposed discovery schedules to the Arbitrator at the
pre-hearing conference. The scope and duration of discovery will be within the
sole discretion of the Arbitrator. The Arbitrator shall have the discretion to
order a pre-hearing exchange of information by the parties, including, without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties and
third-party witnesses. This discretion shall be exercised so as to limit the
scope of discovery to the amount of discovery which the Arbitrator determines
to be reasonable under the circumstances.
4. Arbitration Hearing. The arbitration shall be conducted in
Denver, Colorado. Any party may be represented by counsel or other authorized
representative. The parties may offer such evidence as is relevant and
material to the dispute. The Arbitrator shall be the judge of relevance and
materiality.
5. Governing Law. In rendering a decision, the Arbitrator shall
determine the rights and obligations of the parties according to the laws of
Colorado and the terms and provisions of this Lease.
6. Arbitration Award. The Arbitrator shall issue the award as
soon as reasonably possible following the conclusion of the arbitration
hearing, but in no event later than thirty (30) days after the conclusion of
the arbitration hearing. The Arbitrator's award shall be based on the evidence
introduced at the hearing, including all logical and reasonable inferences
therefrom. The Arbitrator may make any determination, and/or grant any remedy
or relief that is just and equitable; provided, however, in no event may the
Arbitrator award punitive damages. The award must be based
E-1
<PAGE> 44
on, and accompanied by, a written statement of decision explaining the factual
and legal basis for the award as to each of the principal controverted issues.
The award shall be conclusive and binding, and it may thereafter be confirmed
as a judgment by any Colorado court of applicable jurisdiction, subject to
challenge only on one or more of the following grounds: (i) the award was
procured by corruption, fraud or other undue means; (ii) there was corruption
in any of the arbitrators; (iii) the rights of the appealing party were
substantially prejudiced by misconduct of a neutral arbitrator; (iv) the
arbitrators exceeded their powers and the award cannot be corrected without
affecting the merits of the decision upon the controversy submitted; (v) the
rights of the appealing party were substantially prejudiced by the refusal of
the arbitrators to postpone any hearing upon sufficient cause being shown
therefor or by the refusal of the arbitrators to hear evidence material to the
controversy or by other conduct of any arbitrator contrary to the Arbitration
Rules; (vi) any other grounds which permit appeal under the Arbitration Rules;
or (vii) based upon the Arbitrator's incorrect application of Colorado
statutory or common law. The validity and enforceability of the Arbitrator's
decision is to be determined exclusively by the Colorado courts pursuant to the
provisions of this Lease.
7. Attorneys' Fees and Costs. The Arbitrator may award costs,
including, without limitation, attorneys' fees, and expert and witness costs,
to the prevailing party, if any, as determined by the Arbitrator in the
Arbitrator's discretion. The Arbitrator's fees and costs shall be paid by the
non-prevailing party as determined by the Arbitrator in his discretion. A
party shall be determined by the Arbitrator to be the prevailing party if its
proposal for the resolution of dispute is the closer to that adopted by the
Arbitrator.
E-2
<PAGE> 1
EXHIBIT 10.14
The CORPORATE plan for Retirement
THE PROFIT SHARING/401(k) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
<PAGE> 2
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS TO
OR FROM OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
11.04 - Transfer of Assets from Trust
ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic Relations
Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
3
<PAGE> 3
Article 1. ADOPTION AGREEMENT.
Article 2. DEFINITIONS.
2.01. DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:
(1) "Account" means an account established on the books of the Trust
for the purpose of recording contributions made on behalf of a
Participant and any income, expenses, gains or losses incurred thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1 under which the Employer
establishes and adopts, or amends, the Plan and Trust and designates
the optional provisions selected by the Employer, and the Trustee
accepts its responsibilities under Article 14. The provisions of the
Adoption Agreement shall be an integral part of the Plan.
(4) "Annuity Starting Date" means the first day of the first period for
which an amount is payable as an annuity or in any other form.
(5) "Beneficiary" means the person or persons entitled under Section
7.04 to receive benefits under the Plan upon the death of a
Participant, provided that for purposes of Section 7.04 such term shall
be applied in accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
(6) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(7) "Compensation" shall mean:
(A) for purposes of Article 4 (Contributions), compensation as
defined in Section 5.03(e)(2) excluding any items elected by the
Employer in Section 1.04(a), reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving expenses,
deferred compensation and welfare benefits, but including amounts
that are not includable in the gross income of the Participant
under a salary reduction agreement by reason of the application of
Sections 125, 402(a)(8), 402(h), or 403(b) of the Code; and
(B) for purposes of Section 2.01(a)(16) (Highly Compensated
Employees), Section 5.03 (Code Section 415 Limitations), and
Section 9.03 (Top Heavy Plan Minimum Contributions), compensation
as defined in Section 5.03(e)(2).
Compensation shall generally be based on the amount actually paid
to the Participant during the Plan Year or, for purposes of Article 4
if so elected by the Employer in Section 1.04(b), during that portion
of the Plan Year during which the Employee is eligible to participate.
Notwithstanding the preceding is eligible to participate.
Notwithstanding the preceding sentence, compensation for purposes of
Section 5.03 (Code Section 415 Limitations) shall be based on the
amount actually paid or made available to the Participant during the
Limitation Year. Compensation for the initial Plan Year for a new plan
<PAGE> 4
Related Employer, each 12-consecutive month period beginning with the
first day of reemployment and each anniversary thereof.
A "break in service for participation purposes" shall mean an
Eligibility Computation Period during which the participant does not
complete more than 500 Hours of Service with the Employer.
(10) "Employee" means any employee of the Employer, an Self-Employed
Individual or Owner-Employee. The Employer must specify in Section
1.03(a)(3) any Employee, or class of Employees, not eligible to
participate in the Plan. If the Employer elects to exclude collective
bargaining employees, the exclusion applies to any employee of the
Employer included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more employers unless the
collective bargaining agreement requires the employee to be included in
the Plan. The term "employee representatives" does not include any
organization more than half the members of which are owners, officers,
or executives of the Employer.
For purposes of the Plan, an individual shall be considered to become
an Employee on the date on which he first completes an Hour of Service
and he shall be considered to have ceased to be an Employee on the date
on which he last completes an Hour of Service. The term also includes
a leased Employee, such that contributions or benefits provided by the
leasing organization which are attributable to services performed for
the Employer shall be treated as provided by the Employer.
Notwithstanding the above, a Leased Employee shall not be considered an
Employee if Leased Employee do not constitute more that 20 percent of
the Employer's non-highly compensated work force (taking into account
all Related Employers) and the Leased Employee is covered by a money
purchase pension plan maintained by the leasing organization which plan
provides (i) an nonintegrated employer contribution rate of at least 10
percent of compensation, as defined for purposes of Section 415(c)(3)
of the Code, but including amounts contributed pursuant to a salary
reduction agreement which are excludable from gross income under
Section 125, Section 402(a)(9), Section 402(h) or Section 403(b) of the
Code, (ii) full and immediate vesting, and (iii) immediate
participation by each employee of the leasing organization.
(11) "Employer" means the employer named in Section 1.02(a) and any
Related Employers required by this Section 2.01(a)(11). If Article 1
of the Employer's Plan is the Standardized Adoption Agreement, the term
"Employer" includes all Related Employers. If Article 1 of the
Employer's Plan is the Non-standarized Adoption Agreement, the term
"Employer" includes those Related Employers designated in Section
1.02(b).
(12) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(13) "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
(14) "Fidelity Fund" means any Registered Investment Company or
Managed Income Portfolio of the Fidelity Group Trust for Employee
Benefit Plans which is made available to plans utilizing the CORPORATE
plan for Retirement.
3
<PAGE> 5
The determination of who is a highly compensated Employee, including
the determinations of the number and identify of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated
as officers and the compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
thereunder.
(17) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for the
Employer or a Related Employer, each such hour to be credited to
the Employee for the Eligibility Computation Period in which the
duties were performed;
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related Employer
(including payments made or due from a trust fund or insurer to
which the Employer contributes or pays premiums) on account of a
period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity, disability, layoff, jury
duty, military duty, or leave of absence, each such hour to be
credited to the Employee for the Eligibility Computation Period in
which such period of time occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited under
this paragraph (B) on account of any single continuous period
during which the Employee performs no duties;
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made or
due under a plan maintained solely for the purpose of complying
with applicable workmen's compensation, unemployment
compensation or disability insurance laws; and
(iii) If the period during which the Employee performs no
duties falls within two or more Eligibility Computation Periods
and if the payment made on account of such period is not
calculated on the basis of units of time, the Hours of Service
credited with respect to such period shall be allocated between
not more than the first two such Eligibility Computation
Periods on any reasonable basis consistently applied with
respect to similarly situated Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been either
award or agreed to be paid by the Employer or a Related Employer,
each such hour to be credited to the Employee for the Eligibility
Computation Period to which the award or agreement pertains rather
than the Eligibility Computation Period in which the award
agreement or payment is made.
For purposes of determining Hours of Service, Employees of the
Employer and of all Related Employers will be treated as employed
by a single employer. For purposes of paragraphs (B) and (C)
above, Hours of Service will be calculated in accordance with the
provisions of Section 2530.200b-2(b) of the Department of Labor
regulations which are incorporated herein by reference.
5
<PAGE> 6
(26) "Related Employer" means any employer other than the Employer named in
Section 1.02(a), if the Employer and such other employer are members of a
controlled group of corporations (as defined in Section 414(b) of the Code) or
an affiliated service group (as defined in Section 414(m)), or are trades or
businesses (whether or not incorporated) which are under common control (as
defined in Section 414(c)), or such other employer is required to be aggregated
with the Employer pursuant to regulations issued under Section 414(o).
(27) "Self-Employed Individual" means an individual who has Earned Income for
the taxable year from the Employer or who would have had Earned Income but for
the fact that the trade or business had no net profits for the taxable year.
(28) "Trust" means the trust created by the Employer in accordance with the
provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the Employer and the Trustee,
as set forth in Article 14, under which the assets of the Plan are held,
administered, and managed.
(30) "Trust Fund" means the property held in Trust by the Trustee for the
Accounts of the Participants and their Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust Company, or its successors.
(32) "Year of Service for Participation" means, with respect to any Employee, an
Eligibility Computation Period during which the Employee has been credited with
at least 1,000 Hours of Service. If the Plan maintained by the Employer is the
plan of a predecessor employer, an Employee's Years of Service for Participation
shall include years of service and such predecessor employer. In any case in
which the Plan maintained by the Employer is not the plan maintained by a
predecessor employer, service for such predecessor shall be treated as service
for the Employer, to the extent provided in Section 1.08.
(33) "Years of Service for Vesting" means, with respect to any Employee, the
number of whole years of his periods of service with the Employer or a Related
Employer (the elapsed time method to compute vesting service), subject to any
exclusions elected by the Employer in Section 1.07(b). An Employee will receive
credit for the aggregate of all time period(s) commencing with the Employee's
Employment Commencement Date and ending on the date a break in service begins,
unless any such years are excluded by Section 107(b). An Employee will also
receive credit for any period of severance of less than 12 consecutive months.
Fractional periods of a year will be expressed in terms of days.
In the case of a Participant who has 5 consecutive 1-year breaks in
service, all years of service after such breaks in service will be disregarded
for the purpose of vesting the Employer-derived account balance that accrued
before such breaks, but both pre-break and post-break service will count for the
purposes of vesting the Employer-derived account balance that accrues after such
breaks. Both accounts will share in the earnings and losses of the fund.
In the case of a Participant who does not have 5 consecutive 1-year
breaks in service, both the pre-break and post-break service will count in
vesting both the pre-break and post-break employer-derived account balance.
7
<PAGE> 7
(b) any distribution which he is receiving under the Plan will
cease except as otherwise required under Section 8.08.
3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS.
If any Participant continues in the employ of the Employer or Related Employer
but ceases to be a member of an eligible class as defined in Section
1.03(a)(3), the individual shall continue to be a Participant for most purposes
until the entire amount of his benefit is distributed; however, the individual
shall not be entitled to receive an allocation of contributions or forfeitures
during the period that he is not a member of the eligible class. Such
Participant shall continue to receive credit for service completed during the
period for purposes of determining his vested interest in his Accounts. In the
event that the individual subsequently again becomes a member of an eligible
class of Employees, the individual shall resume full participation immediately
upon the date of such change in status.
3.04. PARTICIPATION BY OWNER-EMPLOYEE; CONTROLLED BUSINESSES.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control both the trade or business with respect to which the Plan is
established and one or more other trades or businesses, the Plan and any plan
established with respect to such other trades or businesses must, when looked
at as a single plan, satisfy Sections 401(a) and 401(d) of the Code with
respect to the employees of this and all such other trades or businesses. If
the Plan provides contributions or benefits for one or more Owner-Employees who
control one or more other trades or businesses, the Employees of each such
other trade or business must be included in a plan which satisfied Sections
401(a) and 401(d) of the Code and which provides contributions and benefits not
less favorable than provided for Owner-Employees under the Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
Employees under the plan of the trades or businesses which are controlled must
be as favorable as those provided for him under the most favorable plan of the
trade or business which is not controlled.
For purposes of this Section, an Owner-Employee, or two or more
Owner-Employees, shall be considered to control a trade or business if such
Owner-Employee, or such Owner-Employees together, (i) own the entire interest
in an unincorporated trade or business, or (ii) in the case of a partnership,
own more than 50 percent of either the capital interest or the profits interest
in such partnership. For this purpose, an Owner-Employee, or two or more
Owner-Employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership controlled by such
Owner-Employee or such Owner-Employees.
3.05. OMISSION OF ELIGIBLE EMPLOYEE. If any Employee who should be included
as a Participant in the Plan is erroneously omitted and discovery of such
omission is not made until after a contribution by his Employer for the year has
been made, the Employer shall make a subsequent contribution, if necessary, so
that the omitted Employee receives the total amount which the said Employee
would have received had he not been omitted. For purposes of this Section 3.05,
the term "contribution" shall not include Deferral Contributions and Matching
Contributions made pursuant to Sections 4.01 and 4.03, respectively.
9
<PAGE> 8
Deferrals is (1) income or loss allocable to the Participant's
Deferral Contributions account for the taxable year multiplied by a
fraction, the numerator of which is such Participant's excess
Deferrals for the year and the denominator is the Participant's
account balance attributable to Deferral Contributions without regard
to any income or loss occurring during such taxable year, or (2) such
other amount determined under any reasonable method, provided that
such method is used consistently for all Participants in calculating
the distributions required under this section 4.01(c) and Sections
4.02(d) and 4.04(d) for the Plan Year, and it used by the Plan in
allocating income or loss to participants' accounts. Income or loss
allocable to the period between the end of the Plan Year and the date
of distribution shall be disregarded in determining income or loss.
(d) In order for the plan to comply with the requirements of
Sections 401(k), 402(g) and 415 of the Code and the regulations
promulgated thereunder, at any time in a Plan Year the Administrator
may reduce the rate of Deferral Contributions to be made on behalf of
any Participant, or class of Participants, for the remainder of that
Plan Year, or the Administrator may require that all Deferral
contributions to be made on behalf of a Participant be discontinued
for the remained of that Plan Year. Upon the close of the Plan Year or
such earlier date as the Administrator may determine, any reduction or
discontinuance in Deferral Contributions shall automatically cease
until the Administrator again determines that such a reduction or
discontinuance of Deferral Contributions is required.
4.02 ADDITIONAL LIMIT ON DEFERRAL CONTRIBUTIONS.
(a) The Actual Deferral Percentage (hereinafter "ADP") for
Participants who are Highly Compensated Employees for each Plan year
and the ADP for participants who are Non-highly Compensated Employees
for the same Plan Year must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-highly Compensate Employees for the same
Plan Year multiplied by 1.25; or
(2) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided that the ADP for
participants who are Highly Compensated Employees doe not exceed
the ADP for Participants who are Non-highly Compensated Employees
by more than two (2) percentage points.
(b) The following special rules apply for the purposes of this
Section:
(i) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have Deferral
Contributions (and Qualified Discretionary Contributions if
treated as Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements
described in Section 401 (k) of the Code, that are maintained by
the Employer, shall be determined as if such Deferral
Contributions (and, if applicable, such Qualified Discretionary
Contributions) were made under a single arrangement. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash
11
<PAGE> 9
considered as Employer Contributions for purposes of this paragraph. For
purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Deferral Contributions shall be
treated as a Participant on whose behalf no Deferral Contributions are
made.
(2) "Excess Contributions" shall mean, with respect to any Plan Year, the
excess of:
(a) The aggregate amount of Employer contributions actually taken
into account in computing the ADP of Highly Compensated Employees for
such Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP
test (determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the
highest of such percentages).
(3) "Qualified Discretionary Contributions" shall mean contributions made
by the Employer as elected in Section 1.05(g) and allocated to Participant
accounts of Non-highly Compensated Employees that such Participants may not
elect to receive in cash until distributed from the plan; that are
nonforfeitable when made; and that are distributable only in accordance
with the distribution provisions that are applicable to Deferral
Contributions. Participants shall not be required to satisfy any hours of
service or employment requirement in order to receive an allocation of such
contributions.
(d) Notwithstanding any other provision of this plan, Excess Contributions,
plus any income and minus any loss allocable thereto, shall be distributed no
later than the last day of each Plan Year to participants to whose accounts such
Excess Contributions were allocated for the preceding Plan Year. If such
excess amounts are distributed more than 2-1/2 months after the last day of the
Plan Year in which such excess amounts arose, a ten (10) percent excise tax
will be imposed on the employer maintaining the plan with respect to such
amounts. Such distributions shall be made to Highly Compensated Employees on
the basis of the respective portions of the Excess Contributions attributable
to each of such employees. Excess Contributions of Participants who are
subject to the family member aggregation rules of Section 414(q)(6) of the Code
shall be allocated among the family members in proportion to the Deferral
Contributions (and amounts treated as Deferral Contributions) of each family
member that is combined to determine the combined ADP.
Excess Contributions shall be treated as annual additions under the plan.
Excess Contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Contributions is
(1) income or loss allocable to the Participant's Deferral Contribution
account (and if applicable, the Qualified Discretionary Contribution account)
for the Plan Year multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the year and the denominator is the
Participant's account balance attributable to Deferral Contributions without
regard to any income or loss occurring during such Plan Year, or (2) an amount
determined under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions required
under Section 4.02(d) and Sections 4.01(c) and 4.04(d) for the Plan Year, and
is used by the Plan in allocating income or loss to the
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<PAGE> 10
his or her account under two or more plans described in section 401(a) of the
Code, or arrangements described in section 401(k) of the Code that are
maintained by the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or deferred arrangements
that have different plan years, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations under Section 401(m) of the Code.
(3) In the event that this plan satisfies the requirements of Sections
401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this plan, then this section shall
be applied by determining the contribution Percentage of Employees as if all
such plans were a single plan. For plan years beginning after December 31,
1989, plans may be aggregated in order to satisfy Section 401(m) of the code
only if they have the same Plan Year.
(4) For purposes of determining the Contribution percentage of a Participant
who is a five-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Contribution Percentage Amounts and Compensation of
such Participant shall include the Contribution Percentage Amounts and
Compensation for the Plan Year of Family Members (as defined in Section 414(g)
(6) of the Code). Family Member, with respect to Highly Compensated Employees,
shall be disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are Non-highly Compensated Employees and
for Participant who are Highly Compensated Employees.
(5) For purposes of determining the Contribution Percentage test, Employee
Contributions made pursuant to Section 1.05(d)(1) are considered to have been
made in the Plan Year in which contributed to the Trust. Matching Contributions
and Qualified Discretionary Contributions will be considered made for a Plan
Year if made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(6) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Discretionary
Contributions used in such test.
(7) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Aggregate Limit" shall mean the greater of (A) or (B) where (A) is the
sum of (i) 125 percent of the greater of the ADP of the Non-highly Compensated
Employees for the Plan Year or the ACP of Non-highly Compensated Employees
under the plan subject to Section 401(m) of the Code for the Plan Year
beginning with or within the Plan Year of the CODA and (ii) the lesser of 200%
or two plus the lesser of such ADP or ACP and where (B) is the sum of (i) 125
percent of the lesser of the ADP of the Non-highly Compensated Employees for
the Plan Year or the
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<PAGE> 11
Such determination shall be made after first
determining Excess Deferrals pursuant to Section 4.01
and then determining Excess Contributions pursuant to
Section 4.02.
(d) Notwithstanding any other provision of the Plan, Excess
Aggregate Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited, if forfeitable, or if not forfeitable,
distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Aggregate contributions were
allocated for the preceding Plan Year. Excess Aggregate contributions
of Participants who are subject to the family member aggregation rules
of Section 414(q)(6) of the Code shall be allocated among the family
members in proportion to the Employee and Matching Contributions of
each family member that is combined to determine the combined ACP. If
such Excess Aggregate Contributions are distributed more than 2 1/2
months after the last day of the Plan Year in which such excess amounts
arose, a ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to those amounts. Excess Aggregate
contributions shall be treated as annual additions under the Plan.
Excess Aggregate Contributions shall be adjusted for any income
or loss up to the date of distribution. The income or loss allocable
to Excess Aggregate Contributions is (1) income or loss allocable to
the Participant's Employee Contribution account, Matching Contribution
account (if any, and if all amounts therein are not used in the ADP
test) and if applicable, Qualified Non-elective Contribution account
for the Plan Year multiplied by a fraction, the numerator of which is
such Participant's Excess Aggregate Contributions for the year and the
denominator is the Participant's account balance(s) attributable to
Contribution Percentage Amounts without regard to income or loss
occurring during such Plan Year, or (2) such other amount determined
under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions
required under Section 4.04 (d) and Sections 4.01(c) and 4.02(d) for
the Plan Year, and is used by the Plan in allocating income or loss to
the Participants' accounts. Income or loss allocable to the period
between the end of the Plan Year and the date of distribution shall be
disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions shall be applied
to reduce Employer contributions; the forfeitures shall be held in the
money market fund, if any, listed in Section 1.14(b) pending such
application.
Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a prorata basis from the Participant's
Employee Contribution Account, Matching Contribution Account and if
applicable, the Participant's Deferral Contributions Account or
Qualified Discretionary Contribution Account or both.
4.05. SPECIAL RULES. Deferral Contributions and Qualified Discretionary
Contributions and income allocable to each are not distributable to a
Participant or his or her beneficiary or beneficiaries, in accordance with such
Participant's or beneficiary or beneficiaries election, earlier than upon
separation from service, death, or disability, except as otherwise provided in
Section 7.10, 7.11 or 10.06. Such amounts may also be distributed, but after
March 31, 1988 in the form of a lump sum only, upon:
(a) Termination of the Plan without establishment of
another defined contribution plan, other than an employee stock
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<PAGE> 12
to the total Compensation of all Participants for the
Plan Year.
For purposes of this Section, "Excess Compensation" means
Compensation in excess of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the
first day of the Plan Year. Further, this Section 4.06(b)(2)
shall be modified as provided in Section 9.03 for years in
which the Plan is top heavy under Article 9.
4.07. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will pay its
contribution for each Plan Year not later than the time prescribed by law for
filing the Employer's Federal income tax return for the fiscal (or taxable)
year with or within which such Plan Year ends (including extensions thereof).
The Trustee will have no authority to inquire into the correctness of the
amounts contributed and paid over to the Trustee, to determine whether any
contribution is payable under this Article 4, or to enforce, by suit or
otherwise, the Employer's obligation, if any, to make a contribution to the
Trustee.
4.08. RETURN OF EMPLOYER CONTRIBUTIONS. The Trustee shall, upon request by
the Employer, return to the Employer the amount (if any) determined under
Section 14.22. Such amount shall be reduced by amounts attributable thereto
which have been credited to the Accounts of Participants who have since
received distributions from the Trust, except to the extent such amounts
continue to be credited to such Participants' Accounts at the time the amount
is returned to the Employer. Such amount shall also be reduced by the losses
of the Trust attributable thereto, if and to the extent such losses exceed the
gains and income attributable thereto, but will not be increased by the gains
and income of the Trust attributable thereto, if and to the extent such gains
and income exceed the losses attributable thereto, if and to the extent such
gains and income exceed the losses attributable thereto. In no event will the
return of a contribution hereunder cause the balance of the individual Account
of any Participant to be reduced to less than the balance which would have been
credited to the Account had the mistaken amount not been contributed.
4.09. EMPLOYEE CONTRIBUTIONS. If the Employer elected to permit Deferral
Contributions in Section 1.05(b), each Participant may elect to make Employee
Contributions to the Plan in accordance with the rules and procedures
established by the Employer and in an amount not less than one percent (1%) and
not greater than ten percent (10%) of such Participant's Compensation for the
Plan Year. Such contributions and all Employee Contributions for Plan Years
beginning after December 31, 1986 shall be subject to the nondiscrimination
requirements of Section 401(m) of the Code as set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions" shall mean any
voluntary non-deductible contribution made to a plan by or on behalf of a
Participant that is or was included in the Participant's gross income in the
year in which applicable earnings and losses are allocated. Excess
Contributions may not be recharacterized as Employee Contributions.
Employee Contributions shall be paid over to the Trustee not later than
thirty (30) days following the end of the month in which the Participant makes
the contribution. A Participant shall have a fully vested 100% nonforfeitable
right to his Employee Contributions and the earnings or losses allocated
thereon. Distributions of Employee Contributions shall be made in accordance
with Section 7.10.
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<PAGE> 13
withdraw any part of the deductible voluntary contribution account upon
request.
4.12. ADDITIONAL RULES FOR PAIRED PLANS. If the Employer has adopted a
qualified plan under Fidelity Basic Plan Document No. 09 which is to be
considered as a paired plan with this Plan, the elections in Section 1.03 must
be identical to the Employer's corresponding elections for the other plan.
When the paired plans are top-heavy or are deemed to be top-heavy as provided
in Section 9.01, the Plan paired with this Plan will provide a minimum
contribution to each non-key Employee which is equal to 3 percent (or such
other percent elected by the Employer in Section 1.12(c)) of such Employee's
Compensation. Notwithstanding the preceding sentence, the minimum
contribution shall be provided by this Plan if contributions under the other
Plan paired with this Plan are frozen.
ARTICLE 5. PARTICIPANT'S ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Employer and Employee
Contributions made on behalf of the Participant and earnings, expenses, gains
and losses attributable thereto, and investments made with amounts in the
Participant's Account. The Administrator will establish and maintain such
other accounts and records as it decides in its discretion to be reasonably
required or appropriate in order to discharge its duties under the Plan.
5.02. VALUATION OF ACCOUNTS. Participant Accounts will be valued at their
fair market value at least annually as of a date specified by the Administrator
in accordance with a method consistently followed and uniformly applied, and on
such date earnings, expenses, gains and losses on investments made with amounts
in each Participant's Account will be allocated to such Account. Participants
will be furnished statements of their Account values at least once each Plan
Year.
5.03. CODE SECTION 415 LIMITATIONS. Notwithstanding any other provisions of
the Plan:
Subsections (a)(1) through (a)(4) -- (These subsections apply to
Employers who do not maintain any qualified plan including a Welfare Benefit
Fund, an Individual Medical Account, or a simplified employee pension in
addition to this Plan.)
(a)(1) If the Participant does not participate in, and has never
participated in any other qualified plan, Welfare Benefit Fund,
Individual Medical Account, or a simplified employee pension, as
defined in section 408(k) of the Code, maintained by the Employer,
which provides an annual addition as defined in Section 5.03(e)(1), the
amount of Annual Additions to a Participant's Account for a Limitation
Year shall not exceed the lesser of the Maximum Permissible Amount or
any other limitation contained in this Plan. If the Employer
contribution that would otherwise be contributed or allocated to
the Participant's account would cause the annual additions for the
limitation year to exceed the maximum permissible amount, the amount
contributed or allocated will be reduced so that the annual additions
for the limitation year will equal the maximum permissible amount.
(a)(2) Prior to the determination of the Participant's actual
Compensation for a Limitation year, the Maximum Permissible Amount may
be determined on the basis of a reasonable estimation of the
21
<PAGE> 14
defined in Section 5.03(e)(1), the amount of Annual Additions to a
Participant's Account for a Limitation Year, shall not exceed the lesser
of:
(A) the Maximum Permissible Amount, reduced by the sum of any Annual
Additions to the Participant's accounts for the same Limitation Year under
such other qualified Master or Prototype defined contribution plans, and
Welfare Benefit Funds, Individual Medical Accounts, and simplified employee
pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant under other
qualified Master or Prototype defined contribution plans Welfare Benefit
Funds, Individual Medical Accounts and simplified employee pensions
maintained by the Employer are less than the maximum permissible amount and
the Employer contribution that would otherwise be contributed or allocated
to the Participant's Account under this plan would cause the annual
additions for the limitation year to exceed this limitation, the amount
contributed or allocated will be reduced so that the annual additions under
all such plans and funds for the limitation year will equal the maximum
permissible amount. If the annual additions with respect to the
Participant under such other qualified Master or Prototype defined
contribution plans, Welfare Benefit Funds, Individual Medical Accounts and
simplified employee pensions in the aggregate are equal to or greater than
the maximum permissible amount, no amount will be contributed or allocated
to the Participant's Account under this plan for the limitation year.
(b)(2) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in (b)(1)(A)
above may be determined on the basis of a reasonable estimation of the
Participant's Compensation for such Limitation Year, uniformly determined
for all Participants similarly situated. Any Employer contribution based
on estimated annual Compensation shall be reduced by any Excess Amounts
carried over from prior years.
(b)(3) As soon as is administratively feasible after the end of the
Limitation Year, the amounts referred to in (b)(1)(A) shall be determined
on the basis of the Participant's actual Compensation for such Limitation
Year.
(b)(4) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount, such Excess Amount shall be deemed
to consist of the Annual Additions last allocated, except that Annual
Additions attributable to a simplified employee pension will be deemed to
have been allocated first, followed by Annual Additions to a Welfare
Benefit Fund or Individual Medical Account regardless of the actual
allocation date.
(b)(5) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another plan,
the Excess Amount attributed to this Plan will be the product of:
(A) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of
Section 415 of the Code), times
(B) the ratio of (i) the Annual Additions allocated to the
Participant as of such date under this Plan, divided by (ii) the
Annual Additions allocated as of such date under all
23
<PAGE> 15
Code. Compensation must be determined without regard to any rules under
Section 3401(a) of the Code that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in Section 3401(a)(2) of the Code.)
For any Self-Employed Individual compensation will mean Earned Income.
For Limitation years beginning after December 31, 1991, for purposes of
applying the limitations of this article, compensation for a limitation year is
the compensation actually paid or made available during such limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the numerator of which is
the sum of the Participant's annual benefits (adjusted to an actuarially
equivalent straight life annuity if such benefit is expressed in a form other
than a straight life annuity or qualified joint and survivor annuity) under all
the defined benefit plans (whether or not terminated) maintained by the
Employer, each such annual benefit computed on the assumptions that the
Participant will remain in employment until the normal retirement age under
each such plan (or the Participant's current age, if later) and that all other
factors used to determine benefits under such plan will remain constant for all
future Limitation Years, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation Year under
Sections 415(b)(1)(A) and 415(d) of the Code or 140 percent of the
Participant's average Compensation for the 3 highest consecutive calendar years
of service during which the Participant was active in each such plan, including
any adjustments under Section 415(b) of the Code. However, if the Participant
was a participant as of the first day of the first Limitation year beginning
after December 31, 1986 in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986 then the denominator of the
Defined Benefit Fraction shall not be less than 125 percent of the
Participant's total accrued benefit as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986, under all such defined benefit plans
as met, individually and in the aggregate, the requirements of Section 415 of
the Code for all Limitation Years beginning before January 1, 1987.
(e)(4) "Defined Contribution Fraction" means a fraction, the numerator of
which is the sum for the current and all prior Limitation Years of (A) all
Annual Additions (if any) to the Participant's accounts under each defined
contribution plan (whether or not terminated) maintained by the Employer, and
(B) all Annual Additions attributable to the Participant's nondeductible
employee contributions to all defined benefit plans (whether or not terminated)
maintained by the Employer, and the Participant's Annual Additions attributable
to all Welfare Benefit Funds, Individual Medical Accounts, and simplified
employee pensions, maintained by the Employer, and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
Limitation Years during which the Participant was an Employee (regardless of
whether the Employer maintained a defined contribution plan in any such year).
The maximum aggregate amount in any Limitation Year is the lesser of 125
percent of the dollar limitation in effect under
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<PAGE> 16
numerator is the number of months in the short Limitation Year and whose
denominator is 12.
The compensation limitation referred to in subsection (e)(10)(ii)
shall not apply to any contribution for medical benefits within the
meaning of Section 401(h) or Section 419A(f)(2) of the Code after
separation from service which is otherwise treated as an Annual Addition
under Section 419A(d)(2) or Section 415(1)(1) of the Code.
(e)(11) "Welfare Benefit Fund" means a welfare benefit fund as defined
in Section 419(e) of the Code.
Article 6. INVESTMENT OF CONTRIBUTIONS
6.01. MANNER OF INVESTMENT. All contributions made to the Accounts of
Participants shall be held for investment by the Trustee. The Accounts of
Participants shall be invested and reinvested only in eligible investments
selected by the Employer in Section 1.14(b), subject to Section 14.10.
6.02. INVESTMENT DECISION. Investments shall be directed by the Employer or
by each Participant or both, in accordance with the Employer's election in
Section 1.14(a). Pursuant to Section 14.04, the Trustee shall have no
discretion or authority with respect to the investment of the Trust Fund.
(a) With respect to those Participant Accounts for which Employer
investment direction is elected, the Employer has the right to direct
the Trustee in writing with respect to the investment and reinvestment
of assets comprising the Trust Fund in the Fidelity Fund(s) designated
in Section 1.14(b) and as allowed by the Trustee.
(b) If Participant investment direction is elected, each Participant
shall direct the investment of his Account among the Fidelity Funds
listed in Section 1.14(b). The Participant shall file initial
investment instructions with the Administrator, on such form as the
Administrator may provide, selecting the Funds in which amounts credited
to his Account will be invested.
(1) Except as provided in this Section 6.02, only authorized Plan
contacts and the participant shall have access to a Participant's
account. While any balance remains in the Account of a Participant
after his death, the Beneficiary of the Participant shall make
decisions as to the investment of the Account as though the
Beneficiary were the Participant. To the extent required by a
qualified domestic relations order as defined in Section 414(p) of
the Code, an alternate payee shall make investment decisions with
respect to a Participant's Account as though such alternate payee
were the Participant.
(2) If the Trustee receives any contribution under the Plan as
to which investment instructions have not been provided, the
Trustee shall promptly notify the Administrator and the
Administrator shall take steps to elicit instructions from the
Participant. The Trustee shall credit any such contribution to the
Participant's Account and such amount shall be invested in the
Fidelity Fund selected by the Employer for such purposes or, absent
Employer selection, in the most conservative Fidelity Fund listed
in Section 1.14(b), until investment instructions have been
received by the Trustee.
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<PAGE> 17
engage in any substantial, gainful activity because of a medically determinable
physical or mental impairment likely to result in death or to be of a
continuous period of not less than 12 months, and terminates his employment with
the employer. Such termination of employment is referred to as a disability
retirement. Determination with respect to disability shall be made by the
Administrator who may rely on the criteria set forth in Section 1.06(c) as
evidence that the Participant is disabled.
7.04. DEATH. Subject, if applicable, to Section 8.04, if a Participant dies
before the distribution of his Account has commenced, or before such
distribution has been completed, his Account shall become 100 percent vested
and his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, subject to the provisions of
Section 7.08. Distribution to the Beneficiary or Beneficiaries will be made in
accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change any
prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one
person is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form. In the case of a married Participant the
Participant's spouse shall be deemed to be the designated Beneficiary unless
the Participant's spouse has consented to another designation in the manner
described in Section 8.03(d).
A copy of the death notice or other sufficient documentation must be filed
with and approved by the Administrator. If upon the death of the Participant
there is, in the opinion of the Administrator, no designated Beneficiary for
part or all of the Participant's Account, such amount will be paid to his
surviving spouse or, if none, to his estate (such spouse or estate shall be
deemed to be the Beneficiary for the purposes of the Plan). If a Beneficiary
dies after benefits to such Beneficiary have commenced, but before they have
been completed, and, in the opinion of the Administrator, no person has been
designated to receive such remaining benefits, then such benefits shall be paid
in a lump sum to the deceased Beneficiary's estate.
7.05 OTHER TERMINATION OF EMPLOYMENT. If a participant terminates his
employment for any reason other than death or normal, late, or disability
retirement, he will be entitled to a termination benefit equal to (i) the
vested percentage(s) of the value of the Matching and/or Fixed/Discretionary
Contributions to his Account, as adjusted for income, expense, gain, or loss,
such percentage(s) determined in accordance with the vesting schedule(s)
selected by the Employer in Section 1.07, and (ii) the value of the Deferral,
Employee, Qualified Discretionary and Rollover Contributions to his Account as
adjusted for income, expense, gain or loss. The amount payable under this
Section 7.05 will be subject to the provisions of Section 7.08 and will be
distributed in accordance with Article 8 below.
7.06. SEPARATE ACCOUNT. If a distribution from a Participant's Account has
been made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Employer Contributions
allocated after such distribution. The Balance of his Account immediately
after such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
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<PAGE> 18
7.09 PARTICIPANT LOANS. If permitted under Section 1.09, the Administrator
shall allow Participants to apply for a loan from the Plan, subject to the
following:
(a) Loan Application. All Plan loans shall be administered by the
Administrator. Applications for loans shall be made to the Administrator
on forms available from the Administrator. Loans shall be made available
to all Participants on a reasonably equivalent basis. For this purpose,
the term "Participant" means any Participant or Beneficiary, including an
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, who is a party-in-interest (as determined under
ERISA Section 3(14)) with respect to the Plan except no loans will be made
to: (i) an Employee who makes a rollover contribution in accordance with
Section 4.10 who has not satisfied the requirements of Section 3.01, or
(ii) a shareholder-employee or Owner-Employee. For purposes of this
requirements, a shareholder-employee means an employee or officer of an
electing small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1) of the Code),
on any day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
A Participant with an existing loan may not apply for another loan
until the existing loan is paid in full and may not refinance an existing
loan or attain a second loan for the purpose of paying off the existing
loan. A Participant may not apply for more than one loan during each Plan
Year.
(b) Limitation of Loan Amount/Purpose of Loan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the
amount made available to other Employees. No loan to any Participant or
Beneficiary can be made to the extent that such loan when added to the
outstanding balance of all other loans to the Participant or Beneficiary
would exceed the lesser of (a) $50,000 reduced by the excess (if any) of
the highest outstanding balance of loans during the one year period ending
on the day before the loan is made over the outstanding balance of loans
from the plan on the date the loan is made, or (b) one-half the present
value of nonforfeitable Account of the Participant. For the purpose of the
above limitation, all loans from all plans of the Employer and Related
Employers are aggregated. A Participant may not request a loan for less
than $1,000. The Employer may provide that loans only be made from certain
contribution sources within Participant Account(s) by notifying the Trustee
in writing of the restricted source.
Loans may be made for any purpose or if elected by the Employer in
Section 1.09(a), on account of hardship only. A loan will be
considered to be made on account of hardship only if made on account of an
immediate and heavy financial need described in Section 7.10(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable rate of interest as
determined by the Administrator based on the prevailing interest rates
charged by persons in the business of lending money for loans which would
be made under similar circumstances. The determination of a reasonable
rate of interest must be based on appropriate regional factors unless the
Plan is administered on a national basis in which case the Administrator
may establish a uniform reasonable rate of interest applicable to all
regions.
All loans shall by their terms require that repayment (principal and
interest) be amortized in level payments, not less
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<PAGE> 19
the loan, and then determining the benefit payable to the surviving spouse.
No loan to any Participant or Beneficiary can be made to the extent that
such loan when added to the outstanding balance of all other loans to the
Participant or Beneficiary would exceed the lesser of (a) $50,000 reduced
by the excess (if any) of the highest outstanding balance of loans during
the one year period ending on the day before the loan is made over the
outstanding balance of loans from the plan on the date the loan is made, or
(b) one-half the present value of the nonforfeitable Account of the
Participant. For the purpose of the above limitation, all loans from all
plans of the Employer and Related Employers are aggregated.
7.10. IN-SERVICE/HARDSHIP WITHDRAWALS. Subject to the provisions of
Article 8, a Participant shall not be permitted to withdraw any Employer or
Employee Contributions (and earnings thereon) prior to retirement or
termination of employment, except as follows:
(a) Age 59 1/2. If permitted under Section 1.11(b), a Participant who has
attained the age of 59 1/2 is permitted to withdraw upon request all or any
portion the Accounts specified by the Employer in 1.11(b).
(b) Hardship. If permitted under Section 1.10, a Participant may apply to
the Administrator to withdraw some or all of his Deferral Contributions (and
earnings thereon accrued as of December 31, 1988 and, if applicable, Rollover
Contributions and such other amounts allowed by a predecessor plan, if such
withdraw is made on account of a hardship. For purposes of this Section, a
distribution is made on account of hardship if made on account of an immediate
and heavy financial need of the Employee where such Employee lacks other
available resources. Determinations with respect to hardship shall be made by
the Administrator and shall be conclusive for purposes of the Plan, and shall
be based on the following special rules:
(1) The following are the only financial needs considered immediate and
heavy: expenses incurred or necessary for medical care (within the
meaning of Section 213(d) of the Code) of the Employee, the Employee's
spouse, children, or dependents; the purchase (excluding mortgage
payments) of a principal residence for the Employee; payment of tuition
and related educational fees for the next twelve (12) months of
post-secondary education for the Employee, the Employee's spouse,
children or dependents; or the need to prevent the eviction of the
Employee from, or a foreclosure on the mortgage of, the Employee's
principal residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than the
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(ii) The Employee suspends Deferral Contributions and Employee
Contributions to the Plan for the 12-month period following the
date of his hardship distribution. The suspension must also apply
to all elective contributions and employee contributions to all
other qualified plans and nonqualified plans maintained by the
Employer, other than any mandatory employer contribution portion of
a defined benefit plan, including stock option, stock purchase and
other
33
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to the commencement of his benefits the life expectancy of the
Participant's Beneficiary, as further described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b) above, if a
Participant's Account is, and at the time of any prior distribution(s) was,
$3,500 or less, the balance of such Account shall be distributed in a lump
sum as soon as practicable following retirement, disability, death or other
termination of employment.
(d) This paragraph (d) applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article 8, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The following definitions shall apply for purposes of
this paragraph (d):
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to a surviving spouse, an
eligible retirement plan is a individual retirement account or
individual retirement annuity.
(3) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations order,
as defined in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
(4) Direct rollover: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
8.02. ANNUITY DISTRIBUTIONS. If so provided in Section 1.11(C), A Participant
may elect distributions made in whole or in part in the form of an annuity
contract subject to the provisions of Section 8.03.
(a) An annuity contract distributed under the Plan must be purchased from
an insurance company and must be nontransferable. The terms of an annuity
contract shall comply with the requirements
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<PAGE> 21
and (iv) the right to revoke and the period of time effect of a revocation of
the election to waive application of this subsection.
(c) ANNUITY DEATH BENEFIT. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below at any time within the applicable election period (which
election may be revoked, and if revoked, remade, at any time in such period),
if a married Participant to whom this Section applies dies before his Annuity
Starting Date, then notwithstanding any designation of a Beneficiary to the
contrary, 50 percent of his vested Account will be applied to purchase an
annuity contract described in Section 8.02 providing an annuity for the life of
the Participant's surviving spouse, which contract will then be promptly
distributed to such spouse. In lieu of the purchase of such an annuity
contract, the spouse may elect in writing to receive distributions under the
Plan as if he or she had been designated by the Participant as his Beneficiary
with respect to 50 percent of his Account. For purposes of this subsection,
the applicable election period will commence on the first day of the Plan Year
in which the Participant attains age 35 and will end on the date of the
Participant's death, provided that in the case of a Participant who terminates
his employment the applicable election period with respect to benefits accrued
prior to the date of such termination will in no event commence later than the
date of his termination of employment. A Participant may elect to waive the
application of this subsection prior to the Plan Year in which he attains age
35, provided that any such waiver will cease to be effective as of the first
day of the Plan Year in which the Participant attains age 35.
The Administrator will provide a Participant to whom this subsection
applies with a written explanation with respect to the annuity death benefit
described in this subsection (c) comparable to that required under subsection
(b) above. Such explanation shall be furnished within whichever of the
following periods ends last: (i) the period beginning with the first day of
the Plan Year in which the Participant reaches age 32 and ending with the end
of the Plan Year preceding the Plan Year in which he reaches age 35, (ii) a
reasonable period ending after the Employee becomes a participant, (iii) a
reasonable period ending after this Section 8.04 first becomes applicable to
the Participant in accordance with Section 8.04(a), (iv) in the case of a
Participant who separates from service before age 35, a reasonable period of
time ending after separation from service. For purposes of the preceding
sentence, the two-year period beginning one year prior to the date of the event
described in clause (ii), (iii) or (iv), whichever is applicable, and ending
one year after such date shall be considered reasonable, provided, that in the
case of a Participant who separates from service under (iv) above and
subsequently recommences employment with the Employer, the applicable period
for such Participant shall be redetermined in accordance with this subsection.
(d) REQUIREMENTS OF ELECTIONS. This subsection will be satisfied with
respect to a waiver or designation which is required to satisfy this subsection
if such waiver or designation is in writing and either
(1) the Participant's spouse consents thereto in writing, which consent
must acknowledge the effect of such waiver or designation and be witnessed
by a notary public or Plan representative, or
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Distributions after the death of the Participant shall be made using the
applicable life expectancy under (i) above, without regard to Section
1.401(a)(9)-2 of such regulations.
The minimum distribution required under this subsection (a) for the
calendar year immediately preceding the calendar year in which the
Participant's required beginning date, as determined under Section 8.08(b),
occurs shall be made on or before the Participant's required beginning date, as
so determined. Minimum distributions for other calendar years shall be made on
or before the close of such calendar year.
(b) ADDITIONAL REQUIREMENTS FOR DISTRIBUTIONS AFTER DEATH OF PARTICIPANT.
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant dies before
distribution of his benefits has begun, distributions shall be made in
accordance with the provisions of this paragraph. Distributions under
Section 8.01(a) shall be complete by the close of the calendar year in
which the fifth anniversary of the death of the Participant occurs.
Distributions under Section 8.01(b) shall commence, if the Beneficiary is
not the Participant's spouse, not later than the close of the calendar year
immediately following the calendar year in which the death of the
Participant occurs. Distributions under Section 8.01(b) to a Beneficiary
who is the Participant's surviving spouse shall commence not later than the
close of the calendar year in which the Participant would have attained age
70 1/2 or, if later, the close of the calendar year immediately following
the calendar year in which the death of the Participant occurs. In the
event such spouse dies prior to the date distribution to him or her
commences, he or she will be treated for purposes of this subsection (other
than the preceding sentence) as if he or she were the Participant. If the
Participant has not designated a Beneficiary, or the Participant or
Beneficiary has not effectively selected a method of distribution,
distribution of the Participant's benefit shall be completed by the close
of the calendar year in which the fifth anniversary of the death of the
Participant occurs.
Any amount paid to a child of the Participant will be treated as if it had
been paid to the surviving spouse if the amount becomes payable to the
surviving spouse when the child reaches the age of majority.
For purposes of this subsection (b)(1), the life expectancy of a
Beneficiary who is the Participant's surviving spouse shall be recalculated
annually unless the Participant's spouse irrevocably elects otherwise prior
to the time distributions are required to begin. Life expectancy shall be
compute in accordance with the provisions of subsection (a) above.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant dies after
distribution of his benefits has begun, distributions to the Participant's
beneficiary will be made at least as rapidly as under the method of
distribution being used as of the date of the Participant's death.
For purposes of this Section 8.04(b), distribution of a Participant's
interest in his Account will be considered to begin as of the Participant's
required beginning date, as determined under Section 8.08(b). If distribution
in the form of an annuity irrevocably commences prior to such date,
distribution will be considered to begin as of the actual date distribution
commences.
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<PAGE> 23
8.06. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
the method of distribution of benefits to himself and may determine the
method of distribution to his Beneficiary. Such determination will be made
prior to the time benefits become payable under the Plan. If the Participant
does not determine the method of distribution to his Beneficiary or if the
Participant permits his Beneficiary to override his determination, the
Beneficiary, in the event of the Participant's death, will determine the method
of distribution of benefits to himself as if he were the Participant. A
determination by the Beneficiary must be made no later than the close of the
calendar year in which distribution would be required to begin under Section
8.04(b) or, if earlier, the close of the calendar year in which the fifth
anniversary of the death of the Participant occurs.
8.07. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form of benefits that
such Participant or Beneficiary shall receive and (in the case of distributions
to a Participant) the name of any designated Beneficiary or Beneficiaries.
8.08. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made later than the earlier of the dates described in (a) and (b) below:
(a) Absent the consent of the Participant (and his spouse, if
appropriate), the 60th day after the close of the Plan Year in which occurs
the later of the date on which the Participant attains age 65, the date on
which the Participant ceases to be employed by the Employer; or the 10th
anniversary of the year in which the Participant commenced participation in
the Plan; and
(b) April 1 of the calendar year first following the calendar year in
which the Participant attains age 70 1/2 or, in the case of a Participant
who had attained the age 70 1/2 before January 1, 1988, the required
beginning date determined in accordance with (1) or (2) below:
(1) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age 70-1/2 occurs.
(2) The required beginning date of a Participant who is a 5-percent
owner during any year beginning after December 31, 1979, is the first
day of April following the later of:
(i) the calendar year in which the participant attains age
70-1/2, or
(ii) the earlier of the calendar year with or within which ends
the plan year in which the participant becomes a 5-percent owner,
or the calendar year in which the participant retires.
Notwithstanding the foregoing, in the case of a Participant who
attained age 70 1/2 during 1988 and who had not retired prior to January 1,
1989, the required beginning date described in this paragraph shall be April 1,
1990.
Notwithstanding (a) above, the failure of a Participant (and spouse) to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 8.05, shall be deemed to be
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paragraph, the determination period is the Plan Year containing the
Determination Date and the four preceding Plan years. The
determination of who is a Key employee shall be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder.
Annual compensation means compensation as defined in Section
5.03(e)(2), but including a mounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Section 125, Section 402(a)(8), and
Section 403(b) of the Code.
(b) TOP-HEAVY PLAN. The Plan is a top-Heavy Plan if any of the
following conditions exists:
(1) the Top-Heavy Ration for the Plan exceeds 60 percent
and the Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group;
(2) the Plan is a part of a Required Aggregation Group
but not part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the Required Aggregation Group exceeds
60 percent; or
(3) the Plan is a part of a Required Aggregation Group
and a Permissive Aggregation Group and the top-Heavy Ratio for
both Groups exceeds 60 percent.
(c) TOP-HEAVY RATIO.
(1) With respect to this Plan, or with respect to any
Required Aggregation Group or Permissive Aggregation Group
that consists solely of defined contribution plans (including
any simplified employee pension plans) and the Employer has
not maintained any defined benefit plan which during the
5-year period ending on the determination date(s) has or has
had accrued benefits, Top-Heavy Ratio is a fraction, the
numerator of which is the sum of the account balances of all
Key Employees under the plans as of the Determination Date
(including any part or any account balance distributed in the
5-year period ending on the Determination Date), and the
denominator of which is the sum of all account balances
(including any part of any account balance distributed in the
5-year period ending on the Determination Date) of all
participants under the plans as of the Determination Date.
Both the numerator and denominator of the Top-Heavy Ratio
shall be increased, to the extent required by Section 416 of
the Code, to reflect any contribution which is due but
unpaid as of the Determination Date.
(2) With respect to any Required Aggregation Group or
Permissive Aggregation Group that includes one or more defined
benefit plans, which, during the 5-year period ending on the
Determination Date, has covered or could cover a Participant in
this Plan, the Top-Heavy Ratio is a fraction, the numerator of
which is the sum of the account balances under the defined
contribution plans for all Key employees and the present value
of accrued benefits under the defined benefit plans for all Key
Employees, and the denominator of which is the sum of the
account balances under the defined contribution plans for all
participants and the present value of accrued benefits under
the defined benefit plans for all participants. Both the
numerator and denominator of the Top-Heavy Ratio shall be
increased for any distribution of an account balance or an
accrued benefit made in the 5-year period ending on the
Determination Date and any contribution due but unpaid as of
the Determination Date.
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<PAGE> 25
(a) Except as otherwise provided in (b) and (c) below, the
Fixed/Discretionary Contributions made on behalf of any Participant who
is not a Key Employee shall not be less than the lesser of 3 percent
(or such other percent elected by the Employer in Section 1.12 (c) of
such Participant's Compensation or, in the case where the Employer has
no defined benefit plan which designates this Plan to satisfy Section
401 of the code, the largest percentage of Employer contributions, as a
percentage of the first $200,000 of the Key Employee's Compensation,
made on behalf of any Key Employee for that year. If the Employer
selected the Integrated Formula in Section 1.05(a)(2), the minimum
contribution shall be determined under paragraph (e) of this Section
9.03. Further, the minimum contribution under this Section 9.03 shall
be made even though, under other Plan provisions, the Participant would
not otherwise be entitled to receive a contribution, or would have
received a lesser contribution for the year, because (i) the
Participant failed to complete 1,000 Hours of Service or any equivalent
service requirement provided in the Adoption Agreement; or (ii) the
Participant's Compensation was less than a stated amount.
(b) The provisions of (a) above shall not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.
(c) The Employer contributions for the Plan Year made on behalf of
each Participant who is not a Key Employee and who is a participant in
a defined benefit plan maintained by the Employer shall not be less than
5 percent of such Participant's Compensation, unless the Employer has
provided in Section 1.12(c) that the minimum contribution requirement
will be met in the other plan or plans of the Employer.
(d) The minimum contribution required under (a) above (to the
extent required to be nonforfeitable under Section 416(b) of the Code)
may not be forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the
Code.
(e) If the Employer elected an Integrated Formula in Section
1.05(a)(2), the allocation steps in Section 4.06(b)(2) shall be
preceded by the following steps:
(1) The Discretionary Employer Contributions will be
allocated to each eligible Participant (as determined under this
Section 9.03) in the ratio that the Participant's Compensation
bears to all Participants' Compensation, but not in excess of
3% (or such other percent elected by the Employer in Section
1.12(c).
(2) Any Discretionary Employer Contributions remaining
after (e) (1) above will be allocated to each eligible
Participant in the ratio that the Participant's Excess
Compensation for the Plan Year bears to the Excess Compensation
of all eligible Participants, but not in excess of 3% (or such
other percent elected by the Employer in Section
1.12(c)).
9.04 ADJUSTMENT TO THE LIMITATION ON CONTRIBUTIONS AND BENEFITS. If this
Plan is in Top-Heavy status, the number 100 shall be substituted for the number
125 in subsections (e)(3) and (e)(4) of Section 5.03. However, this
substitution shall not take effect with respect to this Plan in any Plan Year
in which the following requirements are satisfied:
(a) The Employer contributions for such Plan Year made on behalf of
each Participant who is not a Key Employee and who is a
45
<PAGE> 26
deemed to have an individually designed plan. Following such amendment,
the Trustee may transfer the assets of the Trust to the trust forming part
of such newly adopted plan upon receipt of sufficient evidence (such as a
determination letter or opinion letter form the Internal Revenue Service or
an opinion of counsel satisfactory to the Trustee) that such trust will be
a qualified trust under the Code.
10.02. AMENDMENT BY PROTOTYPE SPONSOR. The Prototype Sponsor may in its
discretion amend the Plan or the Adoption Agreement at any time, subject to the
provisions of Article 1 and Section 10.03, and provided that the Prototype
Sponsor mails a copy of such amendment to the Employer at its last known
address as shown on the books of the Prototype Sponsor.
10.03. AMENDMENTS AFFECTING VESTED AND/OR ACCRUED BENEFITS.
(a) Except as permitted by Section 10.04, no amendment to the Plan shall
be effective to the extent that it has the effect of decreasing a
Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment.
Furthermore, if the vesting schedule of the Plan is amended, the
nonforfeitable interest of a Participant in his Account, determined as of
the later of the date the amendment is adopted or the date it becomes
effective, will not be less than the Participant's nonforfeitable interest
in his Account determined without regard to such amendment.
(b) If the Plan's vesting schedule is amended, including any amendment
resulting from a change to or from Top-Heavy Plan status, or the Plan is
amended in any way that directly or indirectly affects the computation of a
Participant's nonforfeitable interest in his Account, each Participant
with at least three (3) Years of Service for Vesting with the Employer may
elect, within a reasonable period after the adoption of the amendment, to
have the nonforfeitable percentage of his Account computed under the Plan
without regard to such amendment. The Participant's election may be made
within 60 days from the latest of (i) the date the amendment is adopted;
(ii) the date the amendment becomes effective; or (iii) the date the
Participant is issued written notice of the amendment by the Employer or
the Administrator.
10.04. RETROACTIVE AMENDMENTS. An amendment made by the sponsor in accordance
with Section 10.02 may be made effective on a date prior to the first day of
the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable requirements
of the Code or to conform the Plan to any change in federal law, or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 10.01.
10.05. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate
the Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
10.06. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination or partial
termination of the Plan or complete discontinuance of contributions thereunder,
each Participant (including a terminated Participant with respect to amounts
not previously forfeited by him) who is affected by such termination or partial
termination or discontinuance
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<PAGE> 27
forfeitures will constitute the opening balance of his Account or Accounts
under the Plan;
(e) Amounts being paid to a former Participant or to a Beneficiary in
accordance with the provisions of the predecessor plan will continue to be
paid in accordance with such provisions;
(f) Any election and waiver of the qualified pre-retirement annuity in
effect after August 23, 1984, under the predecessor plan immediately before
such amendment and continuation will be deemed a valid election and waiver
of Beneficiary under Section 8.04 if such designation satisfies the
requirements of Section 8.04(d), unless and until the Participant revokes
such election and waiver under the Plan; and
(g) Unless the Employer and the Trustee agree otherwise, all assets of the
predecessor trust will be deemed to be assets of the Trust as of the
effective date of such amendment. Such assets will be invested by the
Trustee as soon as reasonably practicable pursuant to Article 6. The
Employer agrees to assist the Trustee in any way requested by the Trustee
in order to facilitate the transfer of assets from the predecessor trust to
the Trust Fund.
11.02. TRANSFER OF FUNDS FROM AN EXISTING PLAN. The Employer may from time to
time direct the Trustee, in accordance with such rules as the Trustee may
establish, to accept cash, allowable Fund Shares or participant loan promissory
notes transferred for the benefit of Participants from a trust forming part of
another qualified plan under the Code, provided such plan is a defined
contribution plan. Such transferred assets will become assets of the Trust as of
the date they are received by the Trustee. Such transferred assets will be
credited to Participants' Account in accordance with their respective interests
immediately upon receipt by the Trustee. A Participant's interest under the
Plan in transferred assets which were fully vested and nonforfeitable under the
transferring plan will be fully vested and nonforfeitable at all times. Such
transferred assets will be invested by the Trustee in accordance with the
provisions of paragraph (g) of Section 11.01 as if such assets were transferred
from a predecessor plan. No transfer of assets in accordance with this Section
may cause a loss of an accrued or optional form of benefit protected by Section
411(d)(6) of the Code.
11.03 ACCEPTANCE OF ASSETS BY TRUSTEE. The Trustee will not accept assets
which are not either in a medium proper for investment under the Plan, as set
forth in Section 1.14(b), or in cash. Such assets shall be accompanied by
written instructions showing separately the respective contributions by the
prior employer and by the Employee, and identifying the assets attributable to
such contributions. The Trustee shall establish such accounts as may be
necessary or appropriate to reflect such contributions under the Plan. The
Trustee shall hold such assets for investment in accordance with the provisions
of Article 6, and shall in accordance with the written instructions of the
Employer make appropriate credits to the Accounts of the Participants for whose
benefit assets have been transferred.
11.04. TRANSFER OF ASSETS FROM TRUST. The Employer may direct the Trustee to
transfer all or a specified portion of the Trust assets to any other plan or
plans maintained by the Employer or the employer or employers of a former
Participant or Participants, provided that the Trustee has received evidence
satisfactory to it that such other plan meets all applicable requirements of
the Code. The assets so transferred shall be accompanied by written
instructions from the Employer naming the persons for whose benefit such assets
have been
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<PAGE> 28
alternate payee prior to the Participant's earliest retirement age (as defined
in Section 414(p) of the Code) under the Plan. A distribution to an alternate
payee prior to the Participant's attainment of the earliest retirement age is
available only if: (1) the order specifies distribution at that time; and (2)
if the present value of the alternate payee's benefits under the Plan exceeds
$3,500, and the order requires, the alternate payee consents to any
distribution occurring prior to the Participant's attainment of earliest
retirement age.
12.04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under State law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
12.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code and any regulations issued or
forms adopted by the Treasury Department thereunder or under the provisions of
ERISA and any regulations issued or forms adopted by the Labor Department
thereunder.
12.06. EFFECT OF FAILURE TO QUALIFY UNDER CODE. Notwithstanding any other
provision contained herein, if the Employer fails to obtain or retain approval
of the Plan by the Internal Revenue Service as a qualified Plan under the Code,
the Employer may no longer participate in this prototype Plan arrangement and
will be deemed to have an individually designed plan.
12.07. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in
the United States mails, first-class postage prepaid and registered or
certified:
(a) If to the Employer or Administrator, to it at the address set forth in
the Adoption Agreement, to the attention of the person specified to
receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Adoption
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
12.08. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
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<PAGE> 29
within 90 days after the claim is received by the Administrator (or within
180 days, if special circumstances require an extension of time for
processing the claim, and if written notice of such extension and
circumstances is given to such person within the initial 90-day period).
If such notification is not given within such period, the claim will be
considered denied as of the last day of such period and such person may
request a review of his claim.
(B) Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60
days after the date on which such denial is considered to have occurred),
such person (or his duly authorized representative) may (i) file a written
request with the Administrator for a review of his denied claim and of
pertinent documents and (ii) submit written issues and comments to the
Administrator. The Administrator will notify such person of its decision
in writing. Such notification will be written in a manner calculated to be
understood by such person and will contain specific reasons for the
decision as well as specific references to pertinent Plan provisions. The
decision on review will be made within 60 days after the request for
review is received by the Administrator (or within 120 days, if special
circumstances require an extension of time for processing the request,
such as an election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person within
the initial 60-day period). If the decision on review is not made within
such period, the claim will be considered denied.
13.04. NAMED FIDUCIARY. The Administrator is a "named fiduciary" for purposes
of Section 402(a)(1) of ERISA and has the powers and responsibilities with
respect to the management and operation of the Plan described herein.
13.05. COSTS OF ADMINISTRATION. Unless some or all are paid by the Employer,
all reasonable costs and expenses (including legal, accounting, and employee
communication fees) incurred by the Administrator and the Trustee in
administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.07, then from the remaining Trust Fund. All
such costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a prorata basis or in such other reasonable manner as may be
directed by the Employer.
ARTICLE 14. TRUST AGREEMENT.
14.01. ACCEPTANCE OF TRUST RESPONSIBILITIES. By executing the Adoption
Agreement, the Employer establishes a trust to hold the assets of the plan. By
executing the Adoption Agreement, the Trustee agrees to accept the rights,
duties and responsibilities set forth in this Article 14.
14.02. ESTABLISHMENT OF TRUST FUND. A trust is hereby established under the
Plan and the Trustee will open and maintain a Trust account for the Plan and,
as part thereof, Participants' Accounts for such individuals as the Employer
shall from time to time give written notice to the Trustee are Participants in
the Plan. The Trustee will accept and hold in the Trust Fund such contributions
on behalf of Participants as it may receive from time to time from the
Employer. The Trust Fund shall be fully invested and reinvested in accordance
with the applicable provisions of the Plan in Fund Shares or as otherwise
provided in Section 14.10.
14.03. EXCLUSIVE BENEFIT. The Trustee shall hold the assets of the Trust Fund
for the exclusive purpose of providing benefits to
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<PAGE> 30
ministerial, nonfiduciary duties under the Trust. The expenses and compensation
of such agent shall be paid by the Trustee.
The Trustee shall provide the Employer with reasonable notice of any claim
filed against the Plan or Trust or with regard to any related matter, or of any
claim filed by the Trustee on behalf of the Plan or Trust or with regard to any
related matter.
14.05. ACCOUNTS. The Trustee will keep full accounts of all receipts and
disbursements and other transactions hereunder. Within 60 days after the close
of each Plan Year, within 60 days after termination of the Trust, and at such
other times as may be appropriate, the Trustee will determine the then net fair
market value of the Trust Fund as of the close of the Plan Year, as of the
termination of the Trust, or as of such other time, whichever is applicable,
and will render to the Employer and Administrator an account of its
administration of the Trust during the period since the last such accounting,
including all allocations made by it during such period.
14.06. APPROVING OF ACCOUNTS. To the extent permitted by law, the written
approval of any account by the Employer or Administrator will be final and
binding, as to all matters and transactions stated or shown therein, upon the
Employer, Administrator, Participants and all persons who then are or
thereafter become interested in the Trust. The failure of the Employer or
Administrator to notify the Trustee within six (6) months after the receipt of
any account of its objection to the account will, to the extent permitted by
law, be the equivalent of written approval. If the Employer or Administrator
files any objections within such six (6) month period with respect to any
matters or transactions stated or shown in the account, and the Employer or
Administrator and the Trustee cannot amicably settle the question raised by
such objections, the Trustee will have the right to have such questions settled
by judicial proceedings. Nothing herein contained will be construed so as to
deprive the Trustee of the right to have judicial settlement of its accounts.
In any proceeding for a judicial settlement of any account or for instructions,
the only necessary parties will be the Trustee, the Employer and the
Administrator.
14.07. DISTRIBUTION FROM TRUST FUND. The Trustee shall make such distribution
from the Trust Fund as the Employer or Administrator may in writing direct, as
provided by the terms of the Plan, upon certification by the Employer or
Administrator that the same is for the exclusive benefit of Participants or
their Beneficiaries, or for the payment of expenses of administering the Plan.
14.08. TRANSFER OF AMOUNTS FROM QUALIFIED PLAN. If the Plan provides that
amounts may be transferred to the Plan from another qualified plan or trust
under Section 401(a) of the Code, such transfer shall be made in accordance
with the provisions of the Plan and with such rules as may be established by
the Trustee. The Trustee will only accept assets which are in a medium proper
for investment under this Agreement or in cash. Such amounts shall be
accompanied by written instructions showing separately the respective
contributions by the prior employer and the transferring Employee, and
identifying the assets attributable to such contributions. The Trustee shall
hold such assets for investment in accordance with the provisions of this
Agreement.
14.09. TRANSFER OF ASSETS FROM TRUST. Subject to the provisions of the Plan,
the Employer may direct the Trustee to transfer all or a specified portion of
the Trust assets to any other plan or plans maintained by the Employer or the
employer or employers of a former Participant or Participants, provided that
the Trustee has received evidence satisfactory to it that such other plan meets
all applicable requirements of the Code. The assets so transferred shall be
55
<PAGE> 31
to the appropriate Participant or the Beneficiary of a deceased Participant. the
Trustee shall not vote any securities held by the Trust except in accordance
with the written instructions of the Employer, Participant or the Beneficiary of
the Participant, if the Participant is deceased; provided, however, that the
Trustee may, in the absence of instructions, vote "present" for the sole purpose
of allowing such shares to be counted for establishment of a quorum at a
shareholders' meeting. The Trustee shall have no duty to solicit instructions
from Participants, the Beneficiary or the Employer.
14.12 COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee's fee for
performing its duties hereunder will be such reasonable amounts as the Trustee
may from time to time specify by written agreement with the Employer. Such
fee, any taxes of any kind which may be levied or assessed upon or in respect
of the Trust Fund and any and all expenses, including without limitation legal
fees and expenses of administrative and judicial proceedings, reasonably
incurred by the Trustee in connection with its duties and responsibilities
hereunder will, unless some or all have been paid by said Employer, be paid
first from forfeitures resulting under Section 7.07, then from the remaining
Trust Fund and will, unless allocable to the Accounts of particular
Participants, be charged against the respective Accounts of all Participants,
in such reasonable manner as the Trustee may determine.
14.13 RELIANCE BY TRUSTEE ON OTHER PERSONS. The Trustee may rely upon and
act upon any writing from any person authorized by the Employer or
Administrator to give instructions concerning the Plan and may conclusively
rely upon and be protected in acting upon any written order from the Employer
or Administrator or upon any other notice, request, consent, certificate, or
other instructions or paper reasonably believed by it to have been executed by
a duly authorized person, so long as it acts in good faith in taking or
omitting to take any such action. The Trustee need not inquire as to the basis
in fact of any statement in writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest certificate it has
received from the Employer or Administrator as to any person or persons
authorized to act for the Employer or Administrator hereunder and to sign on
behalf of the Employer or Administrator any directions or instructions, until it
receives from the Employer or Administrator written notice that such authority
has been revoked.
Notwithstanding any provision contained herein, the Trustee will be
under no duty to take any action with respect to any Participant's Account
(other than as specified herein) unless and until the Employer or Administrator
furnishes the Trustee with written instructions on a form acceptable to the
Trustee, and the Trustee agrees thereto in writing. The Trustee will not be
liable for any action taken pursuant to the Employer's or Administrator's
written instructions (nor for the collection of contributions under the Plan,
nor the purpose of propriety of any distribution made thereunder).
14.14 INDEMNIFICATION BY EMPLOYER. The Employer shall indemnify and save
harmless the Trustee from and against any and all liability to which the
Trustee may be subjected by reason of any act or conduct (except willful
misconduct or negligence) in its capacity as Trustee, including all expenses
reasonably incurred in its defense.
14.15 CONSULTATION BY TRUSTEE WITH COUNSEL. The Trustee may consult with
legal counsel (who may be but need not be counsel for the Employer or the
Administrator) concerning any question which may arise with respect to its
rights and duties under the Plan and Trust, and the opinion of such counsel
will, to the extent permitted by law, be full and complete protection in
respect of any action taken or omitted by the
57
<PAGE> 32
will be under no duty to make any distributions under the Plan until it
receives written instructions from the Employer or Administrator. Upon the
completion of such distributions, the Trust will terminate, the Trustee will be
relieved from all liability under the Trust, and no Participant or other person
will have any claims thereunder, except as required by applicable law.
14.22. PERMITTED REVERSION OF FUNDS TO EMPLOYER. If it is determined by the
Internal Revenue Service that the Plan does not initially qualify under Section
401 of the Code, all assets then held under the Plan will be returned by the
Trustee, as directed by the Administrator, to the Employer, but only if the
application for determination is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan was adopted or
such later date as may be prescribed by regulations. Such distribution will be
made within one year after the date the initial qualification is denied. Upon
such distribution the Plan will be considered to be rescinded and to be of no
force of effect.
Contributions under Plan are conditioned upon their deductibility under
Section 404 of the Code. In the event the deduction of a contribution made by
the Employer is disallowed under Section 404 of the Code, such contribution (to
the extent disallowed) must be returned to the Employer within one year of the
disallowance of the deduction.
Any contribution made by the Employer because of a mistake of fact must be
returned to the Employer within one year of the contribution.
14.23. GOVERNING LAW. This Trust Agreement will be construed, administered
and enforced according to ERISA and, to the extent not preempted thereby, the
laws of the Commonwealth of Massachusetts.
59
<PAGE> 1
EXHIBIT 10.15
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
OF
J. D. EDWARDS & COMPANY
(As Amended and Restated Effective January 1, 1996)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
Article I Definitions ..................................................... 1
1.1 Plan .............................................................. 1
1.2 Employer .......................................................... 1
1.3 Trustee ........................................................... 1
1.4 Plan Administrator ................................................ 2
1.5 Advisory Committee ................................................ 2
1 6 Employee .......................................................... 2
1.7 Highly Compensated Employee ....................................... 2
1.8 Participant ....................................................... 3
1.9 Beneficiary ....................................................... 3
1.10 Compensation ...................................................... 3
1.11 Account ........................................................... 5
1.12 Accrued Benefit ................................................... 5
1.13 Nonforfeitable .................................................... 5
1.14 Plan Year ......................................................... 6
1.15 Effective Date .................................................... 6
1.16 Plan Entry Date ................................................... 6
1.17 Accounting Date ................................................... 6
1.18 Trust ............................................................. 6
1.19 Trust Fund ........................................................ 6
1.20 ERISA ............................................................. 6
1.21 Code .............................................................. 6
1.22 Service ........................................................... 6
1.23 Hour of Service ................................................... 6
1.24 Disability ........................................................ 7
1.25 Service for Predecessor Employer .................................. 8
1.26 Related Employers ................................................. 8
1.27 Leased Employees .................................................. 8
1.28 Determination of Top Heavy Status ................................. 9
1.29 Disqualified Person ............................................... 11
1.30 Employer Securities ............................................... 11
1.31 Exempt Loan ....................................................... 11
1.32 Leveraged Employer Securities ..................................... 11
Article II Employee Participants .......................................... 11
2.1 Eligibility ....................................................... 11
2.2 Year of Service - Participation ................................... 11
2.3 Break in Service - Participation .................................. 12
2.4 Participation Upon Re-Employment .................................. 12
</TABLE>
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(CONTINUED)
<TABLE>
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Article III Employer Contributions and Forfeitures ........................... 12
Part 1. Amount of Employer Contributions and Plan Allocations: Sections 3.1
through 3.6 ......................................................... 12
3.1 Amount .............................................................. 12
3.2 Determination of Contribution ....................................... 12
3.3 Time of Payment of Contribution ..................................... 12
3.4 Contribution Allocation ............................................. 13
3.5 Forfeiture Allocation ............................................... 14
3.6 Accrual of Benefit .................................................. 14
Part 2. Limitations on Allocations: Sections 3.7 and 3.8 .................... 15
3.7 Limitations on Allocations to Participants' Accounts ................ 15
3.8 Definitions - Article III ........................................... 16
Article IV Participant Contributions ......................................... 18
4.1 Participant Voluntary Contributions ................................. 18
4.2 Participant Rollover Contributions .................................. 18
Article V Termination of Service - Participant Vesting ....................... 18
5.1 Normal Retirement Age ............................................... 18
5.2 Participant Disability or Death ..................................... 18
5.3 Vesting Schedule .................................................... 18
5.4 Cash-Out Distributions to Partially-Vested Participants/Restoration
of Forfeited Accrued Benefit ........................................ 19
5.5 Segregated Account for Repaid Amount ................................ 20
5.6 Year of Service - Vesting ........................................... 20
5.7 Break in Service - Vesting .......................................... 21
5.8 Included Years of Service - Vesting ................................. 21
5.9 Forfeiture Occurs ................................................... 21
Article VI Time and Method of Payment of Benefit ................................ 21
6.1 Time of Payment of Accrued Benefit .................................. 21
6.2 Method of Payment of Accrued Benefit ................................ 23
6.3 Benefit Payment Elections ........................................... 24
6.4 Special Distribution and Payment Requirements ....................... 25
</TABLE>
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6.5 Distributions Under Domestic Relations Orders ............................ 26
6.6 Rollover Distributions ................................................... 27
Article VII Employer Administrative Provisions ................................ 28
7.1 Information to Committee ................................................. 28
7.2 No Liability ............................................................. 28
7.3 Indemnity of Committee ................................................... 28
7.4 Employer Direction of Investment ......................................... 28
7.5 Amendment to Vesting Schedule ............................................ 29
Article VIII Participant Administrative Provisions ............................ 29
8.1 Beneficiary Designation .................................................. 29
8.2 No Beneficiary Designation ............................................... 29
8.3 Personal Data to Committee ............................................... 30
8.4 Address for Notification ................................................. 30
8.5 Assignment or Alienation ................................................. 30
8.6 Notice of Change in Terms ................................................ 30
8.7 Litigation Against the Trust ............................................. 30
8.8 Information Available .................................................... 30
8.9 Appeal Procedure for Denial of Benefits .................................. 31
8.10 Participant Direction of Investment ...................................... 31
Article IX Advisory Committee Duties with Respect to Participants' Accounts ... 32
9.1 Members' Compensation, Expenses .......................................... 32
9.2 Term ..................................................................... 32
9.3 Powers ................................................................... 32
9.4 General .................................................................. 33
9.5 Funding Policy ........................................................... 34
9.6 Manner of Action ......................................................... 34
9.7 Authorized Representative ................................................ 34
9.8 Interested Member ........................................................ 34
9.9 Individual Accounts ...................................................... 34
9.10 Value of Participant's Accrued Benefit ................................... 34
9.11 Allocations To Participant's Accounts .................................... 35
9.12 Individual Statement ..................................................... 36
</TABLE>
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(CONTINUED)
<TABLE>
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9.13 Account Charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.14 Unclaimed Account Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article X Trustee, Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1 Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2 Receipt of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.3 Full Investment Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Records and Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.5 Fees and Expenses From Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.6 Parties to Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.7 Professional Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.8 Distribution of Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.9 Distribution Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.10 Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.11 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.12 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.13 Interim Duties and Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.14 Valuation of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.15 Limitation on Liability - If Investment Manager Appointed . . . . . . . . . . . . . . . . . . . . . 44
10.16 Participant Voting Rights--Employer Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Article XI Repurchase Of Employer Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Put Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 Restriction on Employer Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 Lifetime Transfer/Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 Terms and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Article XII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.1 Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.2 No Responsibility for Employer Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.3 Fiduciaries Not Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.4 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.5 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.6 Word Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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12.7 State Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.8 Employment Not Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Article XIII Exclusive Benefit, Amendment, Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.1 Exclusive Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2 Amendment by Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.3 Discontinuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.4 Full Vesting on Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.5 Merger/Direct Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.6 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
v.
<PAGE> 7
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
OF
J. D. EDWARDS & COMPANY
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996)
J. D. EDWARDS & COMPANY, a corporation organized under the laws of the
State of Colorado, referred to as the "Employer," makes this Agreement with
JACK THOMPSON, GREG A. DIXON AND RICHARD E. ALLEN, collectively referred to as
the "Trustee. "
RECITALS
The Employer hereby establishes, within this Trust Agreement, a Plan for
the administration and distribution of contributions made by the Employer for
the purpose of providing retirement benefits for eligible Employees. The
provisions of this Plan shall apply solely to an Employee whose employment with
the Employer terminates on or after the Effective Date. The Plan and Trust are
amended and restated in their entirety effective January 1, 1996.
Now, THEREFORE, in consideration of their mutual covenants, the Employer
and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
1.1 Plan means the retirement plan established by the Employer in the
form of this Agreement, designated as the J. D. Edwards & Company Employee
Stock Ownership Plan. The Employer has designed this plan to invest primarily
in Employer Securities. The Plan is a stock bonus plan referred to as an
employee stock ownership plan, designed to invest primarily in Employer
Securities.
1.2 Employer means J.D. Edwards & Company, and, effective January 1,
1996,such other companies as adopt the Plan in writing with the consent of J.D.
Edwards & Company. Effective January 2, 1996, J.D. Edwards World Solutions
Company and J.D. Edwards World Source Company shall be Employers with respect
to the Plan.
1.3 Trustee means C. Edward McVaney, Daniel J. Ellis and Richard E.
Allen, or any successor in office who in writing accepts the position of
Trustee. Effective January 1, 1993, Trustee means Jack Thompson, Greg A. Dixon
and Richard E. Allen, or any successor in office who in writing accepts the
position of Trustee.
1.
<PAGE> 8
1.4 Plan Administrator is the J.D. Edwards Company unless it designates
another person to hold the position of Plan Administrator. In addition to other
duties, the Plan Administrator has full responsibility for compliance with the
reporting and disclosure rules under ERISA as respects this Agreement.
1.5 Advisory Committee means the Employer's Advisory Committee as from
time to time constituted.
1.6 Employee means any employee of the Employer who (i) regularly
performs Service for the Employer within the United States (or, effective for
Plan Years beginning before January 1, 1995, Canada), or (ii) is a citizen of
the United States who is regularly employed by the Employer outside the United
States and, effective January 1, 1989, receives compensation in the form of
United States source income. Solely for purposes of crediting service under
Sections 2.2, 3.6, and 5.3 of the Plan, the term "employee" shall include, for
employees who are eligible to participate in the Plan and who have at least one
Hour of Service on or after January 1, 1996 after taking this provision into
account, any employee of the Employer who performs Service for the Employer,
without regard to the country in which the Services are performed and without
regard to the country of citizenship. Effective January 1, 1996, the following
employees shall not be eligible to participate in the Plan: (i) an employee who
is an attorney at law engaged primarily by the Employer to handle
Employer-related litigation, or (ii) an employee who is a permanent resident of
a foreign country employed in the United States on temporary assignment for a
specific period of time, after which time such employee will return to the
foreign country of permanent residence.
1.7 Highly Compensated Employee means an Employee who, during the Plan
Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the
constructive ownership rules of Code Section 318, and applying the principles
of Code Section 318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part of the
top-paid 20% group of employees (based on Compensation for the relevant year);
(d) has Compensation in excess of 50% of the dollar amount prescribed
in Code Section 415(b)(1)(A) (relating to defined benefit plans) and is an
officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but not during the preceding 12-month period and does not satisfy
clause (a) in either period, the Employee is a Highly Compensated Employee only
if he is one of the 100 most highly compensated Employees for the Plan Year.
The number of officers taken into account under
2.
<PAGE> 9
clause (d) will not exceed the greater of 3 or 10% of the total number (after
application of the Code Section 414(q) exclusions) of Employees, but no more
than 50 officers. If no Employee satisfies the Compensation requirement in
clause (d) for the relevant year, the Advisory Committee will treat the highest
paid officer as satisfying clause (d) for that year.
For purposes of this Section 1.7, "Compensation" means Compensation as
defined in Section 1.10, except any exclusions from Compensation other than the
exclusions described in paragraphs (a), (b), (c) and (d) of Section 1.10, and
Compensation must include: (i) elective deferrals under a Code Section 401(k)
arrangement or under a Simplified Employee Pension maintained by the Employer;
and (ii) amounts paid by the Employer which are not currently includible in the
Employee's gross income because of Code Section 125 (cafeteria plans) or Code
Section 403(b) (tax-sheltered annuities). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the top
100 paid Employees, the number of officers includible in clause (d) and the
relevant Compensation, consistent with Code Section 414(q) and regulations
issued under the Code section. The Employer may make a calendar year election
to determine the Highly Compensated Employees for the Plan Year, as prescribed
by Treasury regulations. A calendar year election must apply to all plans and
arrangements of the Employer. For purposes of applying any nondiscrimination
test required under the Plan or under the Code, in a manner consistent with
applicable Treasury regulations, the Advisory Committee will not treat as a
separate Employee a family member (a spouse, a lineal ascendant or descendant,
or a spouse of a lineal ascendant or descendant) of a Highly Compensated
Employee described in clause (a) of this Section, or a family member of one of
the ten Highly Compensated Employees with the greatest Compensation for the
Plan Year, but will treat the Highly Compensated Employee and all family
members as a single Highly Compensated Employee. This aggregation rule applies
to a family member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday.
1.8 Participant is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.1. A Participant who
ceases to be eligible to participate in the Plan shall continue to be a
Participant for all purposes other than for purposes of contribution or
forfeiture allocations.
1.9 Beneficiary is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan shall remain a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's, or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan shall not
arise until he first becomes entitled to receive a benefit under the Plan.
3.
<PAGE> 10
1.10 COMPENSATION means the Participant's wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits and bonuses). Compensation
also includes elective contributions made by the Employer on the Employee's
behalf. "Elective contributions" are amounts excludible from the Employee's
gross income under Code Section 402(a)(8) (relating to a Code Section 401(k)
arrangement), Code Section 402(h) (relating to a Simplified Employee Pension),
Code Section 125 (relating to a cafeteria plan) or Code Section 403(b)
(relating to a tax-sheltered annuity). The term "Compensation" does not
include:
(a) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are not included
in the gross income of the Employee for the taxable year in which contributed,
on behalf of an Employee to a Simplified Employee Pension Plan to the extent
such contributions are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of whether such
amounts are includible in the gross income of the Employee when distributed.
(b) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(d) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in Code
Section 403(b) (whether or not the contributions are excludible from the gross
income of the Employee), other than "elective contributions".
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.10, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into account
only Compensation actually paid for the relevant period.
For any Plan Year, the Advisory Committee must take into account only the
first $200,000 (or beginning January 1, 1990, such larger amount as the
Commissioner of Internal Revenue may prescribe) of any Participant's
Compensation. The $200,000 Compensation limitation applies to the combined
Compensation of the Employee and of any family member aggregated with the
Employee under Section 1.9 and who is either (i) the Employee's spouse; or (ii)
the Employee's lineal descendant under the age of 19. If the $200,000 (or
adjusted) Compensation limitation applies to the combined Compensation of the
Employee and one or more family members, the Advisory Committee will apply the
contribution and allocation provisions of Article III by prorating the $200,000
(or adjusted) limitation among the affected
4.
<PAGE> 11
Participants in proportion to each such Participant's Compensation determined
prior to application of this limitation. For any Plan Year beginning prior to
January 1, 1989, this $200,000 limitation (but not the family aggregation
requirement) applies only if the Plan is top heavy (as determined under Section
1.28) for such Plan Year.
Nondiscrimination. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, "Compensation" means
Compensation as defined in this Section 1.10, except any exclusions from
Compensation other than the exclusions described in paragraphs (a), (b), (c)
and (d), unless the Employer elects to use an alternate nondiscriminatory
definition, in accordance with the requirements of Code Section 414(s) and the
regulations issued under that Code section. The Employer may elect to include
all elective contributions made by the Employer on behalf of the Employees. The
Employer's election to include elective contributions must be consistent and
uniform with respect to Employees and all plans of the Employer for any
particular Plan Year. The Employer may make this election to include elective
contributions for nondiscrimination testing purposes, irrespective of whether
this Section 1.10 includes elective contributions in the general Compensation
definition applicable to the Plan.
Compensation Limitation. In addition to other applicable limitations set
forth in the Plan, and notwithstanding any other provision of the Plan to the
contrary, for plan years beginning on or after January 1, 1994, the annual
compensation of each employee taken into account under the Plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation
limit is $150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code.
The cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference
in this Plan to the limitation under Section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first plan year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
1.11 Account means the separate account(s) which the Advisory Committee
or Trustee shall maintain for a Participant under the Plan.
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1.12 Accrued Benefit means the amount standing in a Participant's
Account as of any date derived from both Employer contributions and Employee
contributions, if any.
1.13 Nonforfeitable means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Accrued
Benefit.
1.14 Plan Year means the fiscal year of the Plan, a 12 consecutive month
period ending every December 31.
1.15 Effective Date of this Plan is January 1, 1989. The Effective Date
of this amendment and restatement is January 1, 1996.
1.16 Plan Entry Date means Effective Date and every January 1 and July 1
after the Effective Date. The Plan Entry Date for an employee who was
ineligible to participate in the Plan and who subsequently becomes eligible to
participate in the Plan shall be the later of (i) his Plan Entry Date as
defined in the preceding sentence or (ii) the date on which the employee first
became eligible to participate in the Plan.
1.17 Accounting Date is the last day of the Plan Year. Unless otherwise
specified in the Plan, the Advisory Committee will make all Plan allocations
for a particular Plan Year as of the Accounting Date of the Plan Year.
1.18 Trust means the Trust created under the Plan
1.19 Trust Fund means all property of every kind held or acquired by the
Trustee under this Agreement.
1.20 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
1.21 Code means the Internal Revenue Code of 1986, as amended.
1.22 Service means any period of time the Employee is in the employ of an
Employer, including any period the Employee is on unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. "Separation from Service" means a separation from Service
with the Employer maintaining this Plan.
1.23 Hour of Service means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to payment,
for the performance of duties during the Plan Year. The Advisory Committee
credits Hours of Service under this paragraph (a) to the Employee for the
computation period in which the Employee performs the duties, irrespective of
when paid;
6.
<PAGE> 13
(b) Each Hour of Service for back pay, irrespective of mitigation of
damages, to which the Employer has agreed or for which the Employee has
received an award. The Advisory Committee credits Hours of Service under this
paragraph (b) to the Employee for the computation period(s) to which the award
or the agreement pertains rather than the computation period in which the
award, agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to payment
(irrespective of whether the employment relationship is terminated), for
reasons other than for the performance of duties during a computation period,
such as leave of absence, vacation, holiday, sick leave, illness, incapacity
(including disability), layoff, jury duty or military duty. The Advisory
Committee will credit no more than 501 Hours of Service under this paragraph
(c) to an Employee on account of any single continuous period during which the
Employee does not perform any duties (whether or not such period occurs during
a single computation period). The Advisory Committee credits Hours of Service
under this paragraph (c) in accordance with the rules of paragraph (b) and (c)
of Labor Reg. Section 2530.200b-2, which the Plan, by this reference,
specifically incorporates in full within this paragraph (c).
The Advisory Committee shall not credit an Hour of Service under more
than one of the above paragraphs. A computation period for purposes of this
Section 1.23 is the Plan Year, Year of Service period, Break in Service period
or other period, as determined under the Plan provision for which the Advisory
Committee is measuring an Employee's Hours of Service in favor of the Employee.
The Advisory Committee will resolve any ambiguity with respect to the
crediting of an Hour of Service in favor of the Employee. The Advisory
Committee will credit every Employee with Hours of Service on the basis of the
"actual" method. For purposes of the Plan, "actual" method means the
determination of Hours of Service from records of hours worked and hours for
which the Employer makes payment or for which payment is due from the Employer.
Solely for purposes of determining whether the Employee incurs a Break in
Service under any provision of this Plan, the Advisory Committee must credit
Hours of Service during an Employee's unpaid absence period due to maternity or
paternity leave. The Advisory Committee considers an Employee on maternity or
paternity leave if the Employee's absence is due to the Employee's pregnancy,
the birth of the Employee's child, the placement with the Employee of an
adopted child, or the care of the Employee's child immediately following the
child's birth or placement The Advisory Committee credits Hours of Service
under this paragraph on the basis of the number of Hours of Service the
Employee would receive if he were paid during the absence period or, if the
Advisory Committee cannot determine the number of Hours of Service the Employee
would receive, on the basis of 8 hours per day during the absence period. The
Advisory Committee will credit only the number (not exceeding 501) Hours of
Service necessary to prevent an Employee's Break in Service. The Advisory
Committee credits all Hours of Service described in this paragraph to the
computation period in which the absence period begins or, if the Employee does
not need these Hours of Service to prevent a Break in Service in the
7.
<PAGE> 14
computation period in which his absence period begins, the Advisory Committee
credits these Hours of Service to the immediately following computation period.
1.24 Disability means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.24 in a nondiscriminatory, consistent and uniform manner.
1.25 Service for Predecessor Employer. If the Employer maintains the plan
of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer. In addition, the Advisory
Committee may, in a uniform and nondiscriminatory matter, credit service with
former employers of the Employee as service with the Employer.
1.26 Related Employers. A related group is a controlled group of
corporations (as defined in Code Section 414(b)), trades or businesses (whether
or not incorporated) which are under common control (as deemed in Code Section
414(c)) or an affiliated service group (as defined in Code Section 414(m) or in
Code Section 414(o)). if the Employer is a member of a related group, the term
"Employer" includes the related group members for purposes of crediting Hours
of Service, determining Years of Service and Breaks in Service under Articles
II and V, applying the limitations on allocations in Part 2 of Article III,
applying the top heavy rules and the minimum allocation requirements of Article
III, the definitions of Employee, Highly Compensated Employee, Compensation and
Leased Employee, and for any other purpose required by the Applicable Code
section or by a Plan provision. However, only an Employer described in Section
1.2 may contribute to the Plan and only an Employee employed by an Employer
described in Section 1.2 is eligible to participate in this Plan. For Plan
allocation purposes, compensation, does not include Compensation received
from a related employer that is not participating in this Plan.
1.27 Leased Employees. The Plan treats a Leased Employee as an Employee
of the Employer. A "Leased Employee" is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of Code
Section 144(a)(3)) on a substantially full time basis for at least one year and
who performs services historically performed by employees in the Employer's
business field. If a Leased Employee is treated as an Employee by reason of
this Section 1.27 of the Plan, " Compensation" includes Compensation from the
leasing organization which is attributable to services performed for the
Employer.
8.
<PAGE> 15
Safe harbor plan exception. The Plan does not treat a Leased Employee as
an Employee if the leasing organization covers the employee in a safe harbor
plan and, prior to application of this safe harbor plan exception, 20% or less
of the Employer's Employees (other than Highly Compensated Employees) are
Leased Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective contributions
(as defined in Section 1.10).
Other requirements. The Advisory Committee must apply this Section 1.27
in a manner consistent with Code Section 414(n) and Code Section 414(o) and the
regulations issued under those Code sections. The Advisory Committee will
reduce a Leased Employee's allocation of Employer contributions under this Plan
by the Leased Employee's allocation under the leasing organization's plan, but
only to the extent that allocation is attributable to the Leased Employee's
service provided to the Employer. The leasing organization's plan must be a
money purchase plan which would satisfy the definition under this Section 1.27
of a safe harbor plan, irrespective of whether the Employer is able to use the
safe harbor plan exception.
1.28 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only
qualified plan maintained by the Employer, the Plan is top heavy for a Plan
Year if the top heavy ratio as of the Determination Date exceeds 60%. The top
heavy ratio is a fraction, the numerator of which is the sum of the present
value of Accrued Benefits of all Key Employees as of the Determination Date and
the denominator of which is a similar sum determined for all Employees. The
Advisory Committee must include in the top heavy ratio, as part of the present
value of Accrued Benefits, any contribution not made as of the Determination
Date but includible under Code Section 416 and the applicable Treasury
regulations, and distributions made within the Determination Period. The
Advisory Committee must calculate the top heavy ratio by disregarding the
Accrued Benefit (and distributions, if any, of the Accrued Benefit) of any
Non-Key Employee who was formerly a Key Employee, and by disregarding the
Accrued Benefit (including distributions, if any, of the Accrued Benefit) of an
individual who has not received credit for at least one Hour of Service with
the Employer during the Determination Period. The Advisory Committee must
calculate the top heavy ratio, including the extent to which it must take into
account distributions, rollovers and transfers, in accordance with Code Section
416 and the regulations under that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is
terminated, this Plan is top heavy only if it is part of the Required
Aggregation Group, and the top heavy ratio for the Required Aggregation Group
and for the Permissive Aggregation Group, if any, each exceeds 60%. The
Advisory Committee will calculate the top heavy ratio in the same manner as
required by the first paragraph of this Section 1.28, taking into account all
plans within the Aggregation Group. To the extent the Advisory Committee must
take into account distributions to a Participant, the Advisory Committee must
include distributions from a terminated plan which would have been part of the
Required Aggregation Group if it were in existence on the Determination Date.
The
9.
<PAGE> 16
Advisory Committee will calculate the present value of Accrued Benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code Section 416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his Accrued
Benefit under the accrual method, if any, which is applicable uniformly to all
defined benefit plans maintained by the Employer or, if there is no uniform
method, in accordance with the slowest accrual method described in Code
Section 411(b)(1)(C). To calculate the present value of benefits from a defined
benefit plan, the Advisory Committee will use the actuarial assumptions
(interest and mortality only) prescribed by the defined benefit plan(s) to
value benefits for top heavy purposes. If an aggregated plan does not have a
valuation date coinciding with the Determination Date, the Advisory Committee
must value the Accrued Benefits in the aggregated plan as of the most recent
valuation date falling within the twelve-month period ending on the
Determination Date, except as Code Section 416 and applicable Treasury
regulations require for the first and second plan year of a defined benefit
plan. The Advisory Committee will calculate the top heavy ratio with reference
to the Determination Dates that fall within the same calendar year.
DEFINITIONS. For purposes of applying the provisions of this Section
1.28:
(a) KEY EMPLOYEE means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan Year in the
Determination Period: (i) has Compensation in excess of 50% of the dollar
amount prescribed in Code Section 415(b)(1)(A) (relating to defined benefit
plans) and is an officer of the Employer; (ii) has Compensation in excess of
the dollar amount prescribed in Code Section 415(c)(1)(A) (relating to defined
contribution plans) and is one of the Employees owning the ten largest
interests in the Employer; (iii) is a more than 5% owner of the Employer; or
(iv) is a more than 1% owner of the Employer and has Compensation of more than
$150,000. The constructive ownership rules of Code Section 318 (or the
principles of that section, in the case of an unincorporated Employer,) will
apply to determine ownership in the Employer. The number of officers taken into
account under clause (i) will not exceed the greater of 3 or 10% of the total
number (after application of the Code Section 414(q)(8) exclusions) of
Employees, but no more than 50 officers. The Advisory Committee will make the
determination of who is a Key Employee in accordance with Code Section
416(i)(1) and the regulations under that Code section.
(b) NON-KEY EMPLOYEE is an employee who does not meet the definition
of Key Employee.
(c) COMPENSATION means Compensation as determined under Section 1.7
(relating to the Highly Compensated Employee definition).
(d) REQUIRED AGGREGATION GROUP means: (1) each qualified plan of the
Employer in which at least one Key Employee participates at any time during the
Determination Period; and (2) any other qualified plan of the Employer which
enables a plan described in clause (1) to meet the requirements of Code Section
401(a)(4) or Code Section 410.
10.
<PAGE> 17
(e) PERMISSIVE AGGREGATION GROUP is ????? Aggregation Group plus any
other qualified plans maintained by the Employer, but only if such group would
satisfy in the aggregate the requirements of Code Section 401(a)(4) and Code
Section 410. The Advisory Committee will determine the Permissive Aggregation
Group.
(f) EMPLOYER means the Employer that adopts this Plan and any related
employers described in Section 1.26.
(g) DETERMINATION DATE for any Plan Year is the Accounting Date of
the preceding Plan Year, or in the case of the first Plan Year of the Plan, the
Accounting Date of the Plan Year. The "Determination Period" is the 5 year
period ending on the Determination Date.
1.29 DISQUALIFIED PERSON has the meaning ascribed to that term under Code
Section 4975(e)(2).
1.30 EMPLOYER SECURITIES means common stock issued by the Employer (or by
a corporation which is a member of the same controlled group as defined in Code
Section 409(1)(4)) having a combination of voting power and dividend rights
equal to or in excess of (i) that class of common stock of the Employer (or of
any other such corporation) having the greatest voting power, and (ii) that
class of common stock of the Employer (or of any other such corporation) having
the greatest dividend rights.
1.31 EXEMPT LOAN means a loan made to this Plan by a Disqualified Person,
or a loan to this Plan which a Disqualified Person guarantees, provided the
loan satisfies the requirements to Treasury Regulation Sections 54.4975-7(b).
1.32 LEVERAGED EMPLOYER SECURITIES means Employer Securities acquired by
the Trust with the proceeds of an Exempt Loan and which satisfy the definition
of "qualifying employer securities" in Code Section 4975(e)(8).
ARTICLE II
EMPLOYEE PARTICIPANTS
2.1 ELIGIBILITY. Each Employee becomes a Participant in the Plan on the
Plan Entry Date (if employed on that date) coincident with or immediately
following the later of the date on which the Employee completes one Year of
Service or attains the age of 21.
2.2 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
participation in the Plan under Section 2.1, the Plan takes into account all of
his Years of Service with the Employer, except as provided in Section 2.3.
"Year of Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the beginning of the
first 12 month period from the Employment Commencement Date. If the
11.
<PAGE> 18
Employee does not complete 1,000 Hours of Service during the 12 month period ???
ending with the Employment Commencement Date, the Plan measures the second 12
month period from the first day of the Plan Year which includes the anniversary
of the Employment Commencement Date. The Plan measures any subsequent 12 month
period necessary for a determination of Year of Service for participation by
reference to succeeding Plan Years. "EMPLOYMENT COMMENCEMENT DATE" means the
date on which the Employee first performs an Hour of Service for the Employer.
2.3 BREAK IN SERVICE - PARTICIPATION. For purposes of participation in
the Plan, the Plan does not apply any Break in Service rule.
2.4 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
terminates shall re-enter the Plan as a Participant on the date of his
re-employment. An Employee who satisfies the Plan's eligibility condition(s)
but who terminates employment prior to becoming a Participant becomes a
Participant in the Plan on the later of the Plan Entry Date on which the
Employee would have entered the Plan had he not terminated employment on the
date of his reemployment. Any Employee who terminates employment prior to
satisfying the Plan's eligibility conditions becomes a Participant in
accordance with the provisions of Section 2.1.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS: SECTIONS 3.1
THROUGH 3.6
3.1 AMOUNT. The Employer may make its contribution in cash or in Employer
Securities as the Employer from time to time may determine. The Employer may
make its contribution of Employer Securities at fair market value determined at
the time of contribution. The Employer may contribute to this Plan irrespective
of whether it has profits. The Employer may not make a contribution to the
Trust for any Plan Year to the extent the contribution would exceed the
Participants' "Maximum Permissible Amounts" under Section 3.8.
The Trustee, upon written request from the Employer, must return to the
Employer the amount of the Employer's contribution made by the Employer by
mistake of fact or the amount of the Employer's contribution disallowed as a
deduction under Code Section 404. The Trustee will not return any portion of
the Employer's contribution under the provisions of this Section 3.1 more than
one year after: (a) the Employer made the contribution by mistake of fact; or
(b) the disallowance of the contribution as a deduction, and then, only to the
extent of the disallowance. The Trustee will not increase the amount of the
Employer contribution returnable under this Section 3.1 for any earnings
attributable to the contribution, but the Trustee will decrease the Employer
contribution returnable for any losses attributable to it. The Trustee may
require the Employer to furnish the Trustee whatever evidence the Trustee deems
necessary to
12.
<PAGE> 19
enable the Trustee to confirm the amount the Employer has requested be returned
is properly returnable under ERISA.
3.2 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.3 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Trustee within the time
prescribed by the Code or applicable Treasury regulations.
3.4 CONTRIBUTION ALLOCATION.
(A) METHOD OF ALLOCATION. Subject to Section 3.4(B) and any
restoration allocation required under Section 5.4, the Advisory Committee will
allocate and credit each annual Employer contribution (and Participant
forfeitures, if any), to the Account of each Participant who satisfies the
conditions of Section 3.6, in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(B) TOP HEAVY MINIMUM ALLOCATION.
(1) MINIMUM ALLOCATION. If the Plan is top heavy in any Plan
Year:
(a) Each Non-Key Employee (as defined in Section 1.28)
who is a Participant and is employed by the Employer on the last day of the
Plan Year will receive a top heavy minimum allocation for the Plan Year,
irrespective of whether he satisfies the Hours of Service condition under
Section 3.6; and
(b) The top heavy minimum allocation is the lesser of 3%
of the Non-Key Employee's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Key Employee (as
defined in Section 1.28). However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on this Plan to satisfy the
antidiscrimination rules of Code Section 401(a)(4) or the coverage rules of
Code Section 410 (or another plan benefiting the Key Employee so depends on
such defined benefit plan), the top heavy minimum allocation is 3% of the
Non-Key Employee's Compensation regardless of the contribution rate for the Key
Employees.
For purposes of clause (b), "Compensation" means Compensation as defined
in Section 1.10, disregarding elective contributions and any exclusions from
Compensation, other than the exclusions described in paragraphs (a), (b), (c)
and (d) of Section 1.10 and disregarding the requirements of Section 3.6. For
purposes of this Section 3.4(B), a Participant's contribution rate is the sum
of Employer contributions (not including Employer contributions to Social
Security) and forfeitures allocated to the Participant's Account for the Plan
Year divided by his Compensation for the entire Plan Year. However, for Plan
Years beginning after December 31,
13.
<PAGE> 20
1988, a Non-Key Employee's contribution rate does not include any elective
contributions under a Code Section 401(k) arrangement nor any Employer matching
contributions subject to the nondiscrimination requirements of Code Section
401(k) or of Code Section 401(m). To determine a Participant's contribution
rate, the Advisory Committee must treat all qualified top heavy defined
contribution plans maintained by the Employer (or by any related Employers
described in Section 1.26) as a single plan.
(2) METHOD OF COMPLIANCE. The Plan will satisfy the top heavy
minimum allocation in accordance with this Section 3.4(B)(2). The Advisory
Committee first will allocate the Employer contributions (and Participant
forfeitures, if any) for the Plan Year in accordance with the allocation
formula under Section 3.4(A). The Employer then will contribute an additional
amount for the Account of any Participant who is entitled under this Section
3.4(B) to a top heavy minimum allocation and whose contribution rate for the
Plan Year is less than the top heavy minimum allocation. The additional amount
is the amount necessary to increase the Participant's contribution rate to the
top heavy minimum allocation. The Advisory Committee will allocate the
additional contribution to the Account of the Participant on whose behalf the
Employer makes the contribution.
3.5 FORFEITURE ALLOCATION. The amount of a Participant's Accrued Benefit
forfeited under the Plan is a Participant forfeiture. Subject to any
restoration allocation required under Sections 5.4 or 9.14, the Advisory
Committee will allocate the forfeiture in accordance with Section 3.4, as an
Employer contribution for the Plan Year in which the forfeiture occurs, as if
the Participant forfeiture were an additional Employer contribution for the
Plan Year. The Advisory Committee will continue to hold the undistributed
non-vested portion of a terminated Participant's Accrued Benefit in his Account
solely for this benefit until a forfeiture occurs at the time specified in
Section 5.9. Except as provided under Section 5.4, a Participant will not share
in the allocation of a forfeiture of any portion of his Accrued Benefit. In
making a forfeiture allocation under this Section 3.5, the Advisory Committee
will base forfeitures of Employer Securities upon the fair market value of the
Employer Securities as of the Accounting Date of the forfeitures. Employer
Securities may be forfeited only after other assets held in the Participant's
General Investment Account are forfeited. If interests in more than one class
of Employer Securities have been allocated to any accounts held by a
Participant, such Participant must be treated as forfeiting the same proportion
of each such class of Employer Securities.
3.6 ACCRUAL OF BENEFIT. The Advisory Committee will determine the accrual
of benefit (Employer contributions and Participant forfeitures) on the basis of
the Plan Year.
Compensation Taken Into Account. In allocating an Employer contribution
to a Participant's Account, the Advisory Committee, except for purposes of
determining the top heavy minimum contribution under Section 3.4(B), will take
into account only the Compensation determined for the portion of the Plan Year
in which the Employee actually is a Participant.
Hours of Service Requirement. Subject to the top heavy minimum allocation
requirement of Section 3.4(B), the Advisory Committee will not allocate any
portion of an Employer contribution for a Plan Year to any Participant's
Account if the Participant does not
14.
<PAGE> 21
complete a minimum of 1,000 Hours of Service during the Plan Year, unless the
Participant terminates employment during the Plan Year because of death or
disability or because of the attainment of Normal Retirement Age in the current
Plan Year or in a prior Plan Year.
Employment Requirement. A Participant who, during a particular Plan Year,
completes the Hours of Service requirement under this Section 3.6 will not
share in the allocation of Employer contributions and Participant forfeitures,
if any, for that Plan Year unless he is employed by the Employer on the
Accounting Date of the Plan Year, unless the Participant terminates employment
during the Plan Year because of death or disability or because of the
attainment of Normal Retirement Age in the current Plan Year or in a prior Plan
Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.7 AND 3.8
3.7 LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. The amount of
Annual Additions the Advisory Committee may allocate under this Plan on a
Participant's behalf for a Limitation Year may not exceed the Maximum
Permissible Amount. If the amount the Employer otherwise would contribute to
the Participant's Account would cause the Annual Additions for the Limitation
Year to exceed the Maximum Permissible Amount, the Employer will reduce the
amount of its contribution so the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount. If an allocation of Employer
contributions, pursuant to Section 3.4, would result in an Excess Amount (other
than an Excess Amount resulting from the circumstances described in Section
3.7(B)) to the Participant's Account, the Advisory Committee will reallocate
the Excess Amount to the remaining Participants who are eligible for an
allocation of Employer contributions for the Plan Year in which the Limitation
Year ends. The Advisory Committee will make this reallocation on the basis of
the allocation method under the Plan as if the Participant whose Account
otherwise would receive the Excess Amount is not eligible for an allocation of
Employer contributions.
(A) ESTIMATION OF COMPENSATION. Prior to the determination of the
Participant's actual Compensation for a Limitation Year, the Advisory Committee
may determine the Maximum Permissible Amount on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The Advisory Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated. The Advisory Committee must reduce any
Employer contributions (including any allocation of forfeitures) based on
estimated annual Compensation by an Excess Amount carried over from prior
years. As soon as is administratively feasible after the end of the Limitation
Year, and the Advisory Committee will determine the Maximum Permissible Amount
for such Limitation Year on the basis of the Participant's actual Compensation
for such Limitation Year.
(B) DISPOSITION OF EXCESS AMOUNT. If, pursuant to Section 3.7(A), or
because of the allocation of forfeitures, there is an Excess Amount with
respect to a Participant for a Limitation Year, the Advisory Committee will
dispose of such Excess Amount as follows:
(a) If the Plan covers the Participant at the end of the
Limitation Year, then the Advisory Committee will use the Excess Amount(s) to
reduce future Employer
15.
<PAGE> 22
contributions (including any allocation of forfeitures) under the Plan for the
next Limitation Year and for each succeeding Limitation Year, as is necessary,
for the Participant. The Participant may elect to limit his Compensation for
allocation purposes to the extent necessary to reduce his allocation for the
Limitation Year to the Maximum Permissible Amount and eliminate the excess
Amount.
(b) If an Excess Amount still exists and the Plan does not cover
the Participant at the end of the Limitation Year, then the Advisory Committee
will hold the Excess Amount unallocated in a suspense account. The Advisory
Committee will apply the suspense account to reduce Employer Contributions
(including allocation of forfeitures) for all remaining Participants in the
next Limitation Year, and in each succeeding Limitation Year if necessary.
(c) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants.
(C) DEFINED BENEFIT PLAN LIMITATION. The Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in
this Plan. Accordingly, no special defined benefit plan limitation applies
under this Plan.
3.8 DEFINITIONS - ARTICLE III. For purposes of Article III, the following
terms mean:
(a) Annual Addition. The sum of the following amount allocated on
behalf of a Participant for a Limitation Year, of (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury Regulations, Annual Additions include
excess contributions described in Code Section 401(k), excess aggregate
contributions described in Code Section 401(m) and excess deferrals described
in Code Section 402(g), irrespective of whether the Plan distributes or
forfeits such excess amounts. Annual Additions also shall include Excess
Amounts reapplied to reduce Employer contributions under Section 3.7. Amounts
allocated to an individual medical account (as defined in Code Section
415(1)(2)) included as part of a defined benefit plan maintained by the
Employer are Annual Additions. Furthermore, Annual Additions include
contributions paid or accrued after December 31, 1985, for taxable years ending
after December 31, 1985, attributable to postretirement medical benefits
allocated to the separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit fund (as defined in Code Section 419(e))
maintained by the Employer, but only for purposes of the dollar limitation
applicable to the Maximum Permissible Amount.
"Annual Additions" do not include any Employer contributions applied
by the Advisory Committee (not later than the due date, including extensions,
for filing the Employer's Federal income tax return for that Plan Year) to pay
interest on an Exempt Loan, and any Leveraged Employer Securities the Advisory
Committee allocates as forfeitures; provided, however, the provisions of this
sentence do not apply in a Plan Year for which the Advisory Committee allocates
more than one-third (1/3) of the Employer contributions applied to pay
principal and interest on an Exempt Loan to Restricted Participants. The
Advisory Committee may reallocate the Employer contributions in accordance with
Section 3.4 to the Accounts of
16.
<PAGE> 23
non-Restricted Participants to the extent necessary in order to satisfy this
special limitation. For purposes of this Section 3.8, "Restricted Participants"
mean Participants who are Highly Compensated Employees within the meaning of
Code Section 414(q).
(b) Compensation. For purposes of applying the limitations of Part 2
of this Article III, "Compensation" means Compensation as defined in Section
1.10, disregarding elective contributions and any exclusions from Compensation,
other than the exclusions described in paragraphs (a), (b), (c) and (d) of
Section 1.10.
(c) Maximum Permissible Amount. The lesser of (i) $30,000 (or, if
greater, one-fourth (1/4) of the defined benefit dollar limitation under Code
Section 415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. Effective for Plan Years beginning before January 1, 1990, the
dollar amount of clause (i) will increase by the lesser of (1) 100% of the
dollar amount in effect for the Plan Year; or (2) the amount of the Employer
Securities allocated to the Participant's Employer Securities Account as an
Employer contribution for the Plan Year. The immediately preceding sentence
does not apply for any Plan Year for which the Advisory Committee allocates
more than one-third of the Employer contribution to Restricted Participants. If
there is a short Limitation Year, the Advisory Committee will multiply the
$30,000 (or adjusted) limitation by the following fraction:
NUMBER OF MONTHS IN THE SHORT LIMITATION YEAR
---------------------------------------------
12
(d) Employer. The Employer that adopts this Plan and any related
employers described in Section 1.26. Solely for purposes of applying the
limitations of Part 2 of this Article III, the Advisory Committee will
determine related employers described in Section 1.26 by modifying Code Section
414(b) and (c) in accordance with Code Section 415(h).
(e) Excess Amount. The Excess of the Participant's Annual Additions
credited to the Participant's Account for the Limitation Year over the Maximum
Permissible Amount.
(f) Limitation Year - The Plan Year. If the Employer amends the
Limitation Year to a different 12 consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year for which the Employer
makes the amendment, creating a short Limitation Year.
(g) Defined Contribution Plan. A retirement plan which provides for
an individual account for each participant and for benefits based solely on the
amount contributed to the participant's account, and any income, expenses,
gains or losses, and any forfeitures of accounts of other participants which
the Plan may allocate to such participant's account. The Advisory Committee
must treat all defined contribution plans (whether or not terminated)
maintained by the Employer as a single plan. For purposes of the limitations of
Part 2 of this Article III, the Advisory Committee will treat employee
contributions made to a defined benefit plan maintained by the Employer as a
separate defined contribution plan. The Advisory
17.
<PAGE> 24
Committee ??????? a defined contribution plan an individual medical account (as
defined in Code Section 415(1)(2)) included as part of a defined benefit plan
maintained by the Employer and for taxable years ending after December 31, 1985,
a welfare benefit fund under Code Section 415(e) maintained by the Employer to
the extent there are post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)).
(h) Defined Benefit Plan. A retirement plan which does not provide
for individual accounts for Employer contributions. The Advisory Committee must
treat all defined benefit plans (whether or not terminated) maintained by the
Employer as a single plan.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.1 PARTICIPANT VOLUNTARY CONTRIBUTIONS. The Plan does not permit nor
require Participant voluntary contributions.
4.2 PARTICIPANT ROLLOVER CONTRIBUTIONS. The Plan does not permit
Participant rollover contributions.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.1 NORMAL RETIREMENT AGE. A Participant's Normal Retirement Age is 65
years of age. A Participant who remains in the employ of the Employer after
attaining Normal Retirement Age will continue to participate in Employer
contributions. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his or her attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.2 PARTICIPANT DISABILITY OR DEATH. If a Participant's employment with
the Employer terminates as a result of death or disability, the Participant's
Accrued Benefit derived from Employee contributions will be 100%
Nonforfeitable.
5.3 Vesting Schedule. Except as provided in Sections 5.1 and 5.2, for
each Year of Service, a Participant's Nonforfeitable percentage of his or her
Accrued Benefit derived from Employer contributions equals the percentage in
the following vesting schedule:
<TABLE>
<CAPTION>
Years of Service Percent of Nonforfeitable
with the Employer Accrued Benefit
----------------- -------------------------
<S> <C>
Any service less than one (l) year None
</TABLE>
18.
<PAGE> 25
<TABLE>
<S> <C>
At least one (1) year None
At least two (2) years None
At least three (3) years 20%
At least four (4) years 40%
At least five (5) years 60%
At least six (6) years 80%
At least seven (7) or more years 100%
</TABLE>
Effective the first Plan Year for which the Plan is a top heavy Plan (as
defined in Section 1.28) and in all subsequent Plan Years, the Advisory
Committee will calculate a Participant's Nonforfeitable Percentage of his
Accrued Benefit under the following schedule:
<TABLE>
<CAPTION>
Percent of
Years of Service Nonforfeitable
With the Employer Accrued Benefit
----------------- ---------------
<S> <C>
Any service less than one (1) year None
At least one (1) year None
At least two (2) years 20%
At least three (3) years 40%
At least four (4) years 60%
At least five (5) years 80%
At least six (6) or more years 100%
</TABLE>
The Advisory Committee will apply the top heavy schedule to Participants
who earn at least one Hour of Service after the top heavy schedule becomes
effective. A shift between vesting schedules under this Section 5.3 is an
amendment to the vesting schedule and the Advisory Committee must apply the
rules of Section 7.5 accordingly. A shift to a new vesting schedule under this
Section 5.3 is effective on the first day of the Plan Year for which the top
heavy status of the Plan changes.
5.4 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION
OF FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a partially-vested
Participant receives a cash-out distribution before he or she incurs a
Forfeiture Break in Service (as defined in Section 5.8), the cash-out
distribution will result in an immediate forfeiture of the nonvested portion of
the Participant's Accrued Benefit derived from Employer contributions. See
Section 5.9. A partially-vested Participant is a Participant whose
Nonforfeitable Percentage determined under Section 5.3 is less than one hundred
percent (100%). A cash-out distribution is a distribution of the entire present
value of the Participant's Nonforfeitable Accrued Benefit.
(A) RESTORATION AND CONDITIONS UPON RESTORATION. A partially-vested
Participant who is re-employed by the Employer after receiving a cash-out
distribution of the Nonforfeitable percentage of his Accrued Benefit may repay
the Trustee the amount of the cash-out distribution attributable to Employer
restoration contributions, unless the Participant no longer has a right to
restoration under the requirements of this Section 5.4. If a partially-vested
Participant makes the cash-out distribution repayment, the Advisory Committee
subject to the
19.
<PAGE> 26
conditions of this paragraph (A), must restore his Accrued Benefit attributable
to Employer contributions to the same dollar amount as the dollar amount of his
Accrued Benefit on the Accounting Date, or other valuation date, immediately
preceding the date of the cash-out distribution, unadjusted for any gains or
losses occurring subsequent to that Accounting Date, or other valuation date.
Restoration of the Participant's Accrued Benefit shall include restoration of
all Code Section 411(d)(6) protected benefits with respect to that restored
Accrued Benefit, in accordance with applicable Treasury regulations. The
Advisory Committee shall not restore a re-employed Participant's Accrued
Benefit under this paragraph if: (1) 5 years have elapsed since the
Participant's first re-employment date following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as defined in
Section 5.8). This condition also applies if the Participant makes repayment
within the Plan Year in which he incurs the Forfeiture Break in Service and
that Forfeiture Break in Service would result in a complete forfeiture of the
amount the Advisory Committee otherwise would restore.
(B) TIME AND METHOD OF RESTORATION. If neither of the two conditions
preventing restoration of the Participant's Accrued Benefit applies, the
Advisory Committee will restore the Participant's Accrued Benefit as of the
Plan Year Accounting Date coincident with or immediately following the
repayment. To restore the Participant's Account Benefit, the Advisory
Committee, to the extent necessary, will allocate to the Participant's Account:
(1) the amount, if any, of Participant forfeitures the Advisory Committee would
otherwise allocate under Section 3.5; (2) the amount, if any, of the Trust Fund
net income or gain for the Plan Year; and (3) the Employer contribution of the
Plan Year to the extent made under a discretionary formula. To the extent the
amounts described in clauses (1), (2) and (3) are insufficient to enable the
Advisory Committee to make the required restoration, the Employer must
contribute, without regard to any requirement or condition of Section 3.1, the
additional amount necessary to enable the Advisory Committee to make the
required restoration. If, for a particular Plan Year, the Advisory Committee
must restore the Accrued Benefit of more than one re-employed Participant, then
the Advisory Committee will make the restoration allocation(s) to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of all
re-employed Participants. The Advisory Committee will not take into account the
allocation(s) under this Section 5.4 in applying the limitation on allocations
under Part 2 of Article III.
5.5 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
restores the Participant's Accrued Benefit, as described in Section 5.4, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any
expense or loss it incurs. The Advisory Committee will direct the Trustee to
repay to the Participant as soon as is administratively practicable the full
amount of the Participant's segregated Account if the Advisory Committee
determines either of the conditions of Section 5.4(a), prevents restoration as
of the applicable Accounting Date,
20.
<PAGE> 27
notwithstanding the Participant's repayment. The Advisory Committee will direct
the Trustee to commingle the Participant's segregated account with the balance
of the Trust Fund as of the second Accounting Date immediately following the
date of the Participant's repayment.
5.6 YEAR OF SERVICE - VESTING. For purposes of vesting under Section 5.3,
Year of Service means any Plan Year during which an Employee completes not less
than 1,000 Hours of Service with the Employer.
5.7 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any Plan Year he does not
complete more than 500 Hours of Service with the Employer.
5.8 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
"Years of Service" under Section 5.6, the Plan takes into account all Years of
Service an Employee completes with the Employer, except Years of Service
completed prior to January 1, 1987 shall not be taken into account. For the
sole purpose of determining a Participant's Nonforfeitable percentage of his
Accrued Benefit derived from Employer contributions which accrued for his
benefit prior to a Forfeiture Break in Service, the Plan disregards any Year of
Service after the Participant first incurs a Forfeiture Break in Service. The
Participant incurs a Forfeiture Break in Service when he incurs 5 consecutive
Breaks in Service.
5.9 FORFEITURE OCCURS. A Participant's forfeiture, if any, of the
Participant's Accrued Benefit derived from Employer contributions occurs under
the Plan on the earlier of: (a) The last day of the Accounting Date of the Plan
Year in which the Participant first incurs a Forfeiture Break in Service; or,
(b) The date the Participant receives a cash-out distribution. The Advisory
Committee determines the percentage of a Participant's Accrued Benefit
forfeiture, if any, under this Section 5.9 solely by reference to the vesting
schedule of Section 5.3. A Participant will not forfeit any portion of his
Accrued Benefit for any other reason or cause except as expressly provided by
this Section 5.9 or as provided under Section 9.14.
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFIT
6.1 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section 6.3,
the Participant or the Beneficiary elects in writing to a different time of
payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.1. A Participant must consent, in writing, to any
distribution required under this Section 6.1 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution
to the Participant, or at the time of any prior distribution to the
Participant, exceeds or, at the time of the prior distribution, exceeded,
$3,500 and the Participant has not attained the later of Normal Retirement Age
or age 62. For all purposes of this Article VI, the term "annuity starting
date" means the first day of the first period for which the Plan pays an amount
in any form. A distribution date under this
21.
<PAGE> 28
Article VI, unless otherwise specified within the Plan, is the 90th day of the
Plan Year, or as soon as administratively practicable following the 90th day of
the Plan Year.
(A) TERMINATION OF EMPLOYMENT FOR A REASON OTHER THAN DEATH. For a
Participant who terminates employment with the Employer for a reason other than
death, the Advisory Committee will direct the Trustee to commence distribution
of the Participant's Accrued Benefit, as follows:
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING
$3,500. On the first distribution date in the first Plan Year beginning after
the Participant's Separation from Service with the Employer, but in no event
later than the 60th day following the close of the Plan Year in which the
Participant attains Normal Retirement Age. If the Participant has obtained
Normal Retirement Age when he separates from Service with the Employer, the
distribution under this paragraph will occur no later than the 60th day
following the close of the Plan Year in which the Participant's Separation from
Service occurs.
(2) OTHER THAN DISABILITY AND PARTICIPANT'S NONFORFEITABLE
ACCRUED BENEFIT EXCEEDS $3,500. In the absence of an election by the
Participant for an earlier distribution consistent with the provisions of the
Plan, the Advisory Committee will direct the Trustee to distribute or to begin
distribution of the Participant's Nonforfeitable Accrued Benefit on the 60th
day following the close of the Plan Year in which the latest of the following
events occurs: (a) the Participant attains Normal Retirement Age; (b) the
Participant attains age 62; or (c) the Participant separates from Service. If
the Participant elects an earlier distribution, the Advisory Committee will
direct the Trustee to distribute or begin distribution at the earliest
distribution date consistent with Section 6.3(A).
(3) DISABILITY AND PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT
EXCEEDS $3,500. If the Participant terminates employment because of Disability,
the first distribution date in the first Plan Year beginning after the date on
which the Participant terminates employment because of Disability, subject to
the notice and consent requirements of this Article VI and to the applicable
mandatory commencement dates described in Paragraph (1) or in Paragraph (2).
Effective January 1, 1993, if the Participant terminates employment because of
Disability, the distribution shall be on the last day of the month following
the month in which the Participant terminates employment because of Disability,
or as soon thereafter as is administratively practicable, subject to the notice
and consent requirements of this Article VI and to the applicable mandatory
commencement dates described in Paragraph (1) or in Paragraph (2). Effective
January 1, 1996, if the Participant terminates employment because of
Disability, the distribution shall be on the first distribution date in the
first Plan Year beginning after the date on which the Participant terminates
employment.
(B) REQUIRED BEGINNING DATE. If any distribution commencement date
described under Paragraph A of this Section 6.1, either by Plan provision or by
Participant election (or nonelection), is later than the participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.1 on the Participant's Required Beginning
Date. A Participant's Required Beginning Date is the April
22.
<PAGE> 29
1 following the close of the calendar year in which the Participant attains age
70 1/2. However, if the Participant, prior to incurring a Separation from
Service, attained age 70 1/2 by January 1, 1988, and, for the five Plan Year
period ending in the calendar year in which he attained age 70 1/2 and for all
subsequent years, the Participant was not a more than 5% owner (as defined in
Section 1.7(a)), the Required Beginning Date is the April 1 following the close
of the calendar year in which the Participant separates from Service or, if
earlier, the April 1 following the close of the calendar year in which the
Participant becomes a more than 5 % owner. Furthermore, if a Participant who
was not a more than 5% owner attained age 70 1/2 during 1988 and did not incur
a Separation from Service prior to January 1, 1989, his Required Beginning Date
is April 1, 1990. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum unless the Participant, pursuant to the
provisions of this Article VI, makes a valid election to receive an alternative
form of payment. Effective January 1, 1996, a mandatory distribution at the
Participant's Required Beginning Date will be installments in accordance with
Section 6.3 and in amounts sufficient to satisfy the applicable requirements of
the Code, particularly section 401(a)(9) of the Code.
(C) DEATH OF THE PARTICIPANT. In the event of the Participant's
death, the Advisory Committee will direct the Trustee to distribute to the
Participant's Beneficiary the Participant's Nonforfeitable Accrued Benefit
remaining in the Trust in accordance with this Section 6.1(C). The Advisory
Committee will determine the death benefit by reducing the Participant's
Nonforfeitable Accrued Benefit by any security interest the Plan has against
that Nonforfeitable Accrued Benefit by reason of an outstanding Participant
loan, if any.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT DOES
NOT EXCEED $3,500. The Advisory Committee must direct the Trustee to pay the
deceased Participant's Nonforfeitable Accrued Benefit, as soon as
administratively practicable following the Participant's death or, if later,
the date on which the Advisory Committee receives notification of or otherwise
confirms the Participant's death.
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. Subject to the Notice and Consent requirements of this Article VI, the
Advisory Committee must direct the Trustee to distribute or commence
distribution of the Participant's undistributed Nonforfeitable Accrued Benefit
on the first distribution date in the first Plan Year beginning after the date
of the Participant's death, or, if later, the first distribution date following
the date the Advisory Committee receives notification of or otherwise confirms
the Participant's death. If the death benefit is payable to the Participant's
surviving spouse in full, the surviving spouse, in addition to the distribution
options provided in this Section 6.1(C), may elect distribution at any time
this Article VI would permit for a Participant.
6.2 METHOD OF PAYMENT OF ACCRUED BENEFIT. For Plan Years beginning prior
to January 1, 1996, the sole method of distribution under this Plan shall be
payment in a lump sum. Effective January 1, 1996, the sole method of
distribution under this Plan for benefits not in excess of $3,500 shall be a
lump sum payable in cash or in Employer Securities, as elected by the
Participant. Effective January 1, 1996, the sole method of distribution under
this Plan for benefits in excess of $3,500 shall be a lump sum paid in Employer
Securities (and cash for
23.
<PAGE> 30
fractional shares); provided, however, that if, for a Plan Year, the aggregate
value of the distributions (taking into account only those distributions that
are in excess of $3,500) that otherwise would be made for such Plan Year,
equals or exceeds Three Million Dollars ($3,000,000), the sole method of
distribution for all such distributions (taking into account only those
distributions that are in excess of $3,500) shall be installments paid in
Employer Securities (and cash for fractional shares) over the longest period of
years permitted under Section 6.4(c) commencing at the latest point in time
permitted under Section 6.4(a) or 6.4(b), or any longer period of time
applicable to Employer Securities acquired with the proceeds of an Exempt Loan.
For purposes of this Section 6.2, the aggregate value of distributions (taking
into account only those distributions that are in excess or $3,500) that
otherwise would be made for a Plan Year shall be determined as of the first day
of such Plan Year, or as soon thereafter as is administratively practicable,
and shall take into account the value of the Accounts of all Participants who
are eligible to elect to receive a distribution during such Plan Year
regardless of whether such Participant has actually elected to receive a
distribution for such Plan Year. The Company expressly reserves its rights to
eliminate or modify any form of distribution as permitted under section
411(d)(6)(C) of the Code, or any comparable provision of succeeding law, and
any regulatory or administrative guidance promulgated thereunder.
6.3 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days before nor later
than 30 days before the Participant's annuity starting date, the Plan
Administrator must provide a benefit notice to a Participant who is eligible to
make an election under this Section 6.3. The benefit notice must explain any
optional forms of benefit in the Plan, including the material features and
relative values of those options, and the Participant's right to defer the date
of distribution his benefits shall commence (if his Nonforfeitable Accrued
Benefit exceeds $3500) until he attains the later of Normal Retirement Age or
age 62. If a Participant or Beneficiary makes an election to begin
distributions, as prescribed by this Section 6.3, the Advisory Committee will
direct the Trustee to distribute the Participant's Nonforfeitable Accrued
Benefit in accordance with that election. Any election under this Section 6.3
is subject to the time of distribution requirements of Section 6.1 and the form
of distribution requirements of Section 6.2. The Participant or Beneficiary
must make an election under this Section 6.3 by filing his election form with
the Advisory Committee at any time before the Trustee otherwise would commence
to pay a Participant's Accrued Benefit in accordance with the requirements of
this Article VI, unless a provision of this Article VI would permit or require
the Advisory Committee to make a distribution to such Participant or
Beneficiary.
(A) PARTICIPANT ELECTIONS AFTER TERMINATION OF EMPLOYMENT. If the
present value of a Participant's Nonforfeitable Accrued Benefit exceeds $3,500,
he may elect to have the Trustee commence distribution as of the distribution
date in the Plan Year following the year of his Separation from Service, unless
Section 6.2 requires a later distribution commencement date. The Participant
may reconsider an election at any time prior to the annuity starting date and
may elect to commence distribution as of any other distribution date permitted
under the Plan, but not earlier than the date described in the first sentence
of this Paragraph (A). A Participant who has separated from Service may elect
distribution as of any distribution date following his attainment of Normal
Retirement Age, irrespective of the restrictions otherwise applicable under
this Section 6.3(A). Prior to January 1, 1996, if the Participant is partially
24.
<PAGE> 31
vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.8), must be in the form of a cash-out distribution (as
defined in Article V). For distributions that occur on and after January 1,
1996, if the Participant is partially vested in his Accrued Benefit, an
election under this Paragraph (A) to distribute prior to the Participant's
receiving a Forfeiture Break in Service shall be in the form of a cash-out
distribution only to the extent lump sum distributions are permitted for such
Plan Year under Section 6.2. A Participant may not receive a cash-out
distribution if, prior to the time the Trustee actually makes the cash-out
distribution, the Participant returns to employment with the Employer.
(B) PARTICIPANT ELECTIONS PRIOR TO TERMINATION OF EMPLOYMENT. After a
Participant attains Normal Retirement Age, the Participant, until he retires,
has a continuing election to receive all or any portion of his Accrued Benefit,
subject to Section 6.2. A Participant must make an election under this
Paragraph (B) on a form prescribed by the Advisory Committee at any time during
the Plan Year for which his election is to be effective. In his written
election, the Participant must specify the percentage or dollar amount he
wishes the Trustee to distribute to him. The Participant's election relates
solely to the percentage or dollar amount specified in his election form and
his right to elect to receive an amount, if any, for a particular Plan Year
greater than the dollar amount or percentage specified in his election form
terminates on the Accounting Date. The Trustee must make a distribution to a
Participant in accordance with his election under this Paragraph (B) within the
90 day period (or as soon as administratively practicable) after the
Participant files his written election with the Trustee. The Trustee will
distribute the balance of the Participant's Accrued Benefit not distributed
pursuant to his election(s) in accordance with the other distribution
provisions of this Plan. Effective January 1, 1996, any election made pursuant
to this Section 6.3(B) must be consistent with the other provisions of this
Article VI, particularly Section 6.2 and Section 6.4.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's
Beneficiary may elect to have the Trustee distribute the Participant's
Nonforfeitable Accrued Benefit within a period permitted under Section 6.1. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death. The form in which such
Accrued Benefits may be paid is subject to the requirements of Section 6.2
6.4 SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS. Unless the Participant
elects in writing to have the Trustee apply other distribution provisions of
the Plan, to the extent available, or unless other distribution provisions of
the Plan require earlier distribution of the Participant's Accrued Benefit, the
Trustee must distribute the Participant's Accrued Benefit no later than the
time prescribed by this Section 6.4, irrespective of any other provision of the
Plan. The distribution provisions of this Section 6.4 are subject to the
consent and form of distribution requirements of Articles V and VI of the Plan.
(a) If the Participant separates from Service by reason of the
attainment of Normal Retirement Age, death, or Disability, the Advisory
Committee will direct the Trustee
25.
<PAGE> 32
to commence distribution of the Participants Nonforfeitable Accrued Benefit not
later than one year after the close of the Plan Year in which that event
occurs.
(b) If the Participant separates from Service for any reason other than
by reason of the attainment of Normal Retirement Age, death or Disability, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Nonforfeitable Accrued Benefit not later than one year after the
close of the Plan Year which is the fifth Plan Year following the Plan Year in
which the Participant otherwise separates from Service. If the Participant
resumes employment with the Employer on or before the last day of the fifth
Plan Year following the Plan Year of his Separation from Service, the
distribution provisions of this paragraph (b) do not apply.
(c) To the extent installment distributions are required under the Plan,
distribution of the Participant's Accrued Benefit must be in substantially
equal periodic payments (not less frequently than annually) over a period not
longer than the greater of:
(i) Owe years or
(ii) in the case of a Participant with an Accrued Benefit in
excess of $500,000, five years plus one additional year (but not more than five
additional years) for each $100,000 or fraction thereof by which such balance
exceeds $500,000 (or such dollar amounts as adjusted from time-to-time by the
Secretary of Treasury).
For purposes of this Section 6.4, Employer Securities do not include any
Employer Securities acquired with the proceeds of an Exempt Loan until the
close of the Plan Year in which the borrower repays the Exempt Loan in full.
6.5 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained in
this Plan prevents the Trustee, in accordance with the direction of the
Advisory Committee, from complying with the provisions of a qualified domestic
relations order (as defined in Code Section 414(p)). This Plan specifically
permits distribution to an alternate payee under a qualified domestic relations
order at any time, irrespective of whether the Participant has attained his
earliest retirement age (as defined under Code Section 414(p)) under the Plan.
A distribution to an alternate payee prior to the Participant's attainment of
earliest retirement age is available only if: (1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,500, and the
order requires such consent, the alternate payee consents to any distribution
occurring prior to the Participant's attainment of earliest retirement age.
Nothing in this Section 6.5 permits a Participant a right to receive
distribution at a time otherwise not permitted under the Plan nor does it
permit the alternate payee to receive a form of payment not permitted under the
Plan. The Plan Administrator must establish reasonable procedures to determine
the qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Plan Administrator promptly will notify the Participant
and any alternate payee named in the order, in writing, of the receipt of the
order and the Plan's procedures for determining the qualified status of the
order. Within a reasonable
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period of time after receiving the domestic relations order, the Plan
Administrator must determine the qualified status of the order and must notify
the Participant and each alternate payee, in writing, of its determination. The
Plan Administrator must provide notice hereunder by mailing to the individual's
address specified in the domestic relations order, or in a manner consistent
with Department of Labor regulations. If any portion of the Participant's
Nonforfeitable Accrued Benefit is payable during the period the Plan
Administrator is making its determination of the qualified status of the
domestic relations order, the Advisory Committee must make a separate
accounting of amounts payable. If the Plan Administrator determines the order
is a qualified domestic relations order within 18 months of the date amounts
first are payable following receipt of the order, the Advisory Committee will
direct the Trustee to distribute the payable amounts in accordance with the
order. If the Plan Administrator does not make its determination of the
qualified status of the order within the 18 month determination period, the
Advisory Committee will direct the Trustee to distribute the payable amounts in
the manner the Plan would distribute if the order did not exist and will apply
the order prospectively if the Plan Administrator later determines the order is
a qualified domestic relations order. To the extent it is not inconsistent with
the provisions of the qualified domestic relations order, the Advisory
Committee may direct the Trustee to invest any partitioned amount in Federally
insured, interest-bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. A segregated
subaccount remains a part of the Trust, but it alone shares in any income it
earns, and it alone bears any expense or loss it incurs. The Trustee will make
any payments or distribution required under this Section 6.5 by separate
benefit checks or other separate distribution to alternate payee(s).
6.6 ROLLOVER DISTRIBUTIONS.
(A) APPLICATIONS. This Section applies to distributions made on or
about January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Section, a distributes may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(B) DEFINITIONS.
(a) Eligible rollover distribution. An eligible rollover distribution
is any distribution of all or any portion of the balance to the credit of the
distributee except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution
is required under Code Section 401(a)(9); and the portion of any distribution
that is not includible in gross income (determined without regard to the
exclusion of net unrealized appreciation with respect to employer securities).
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(b) Eligible retirement plan. An eligible retirement plan is an
individual retirement account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity plan described
in Code Section 403(a), or a qualified trust described in Code Section 401(a),
that accepts the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual retirement
annuity.
(c) Distributee. A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving spouse and
the employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest of the spouse or
former spouse.
(d) Direct rollover. A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the distributee.
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.1 INFORMATION TO COMMITTEE. The Employer must supply current
information to the Advisory Committee as to the name, date of birth, date of
employment, annual compensation, leaves of absence, Years of Service and date
of termination of employment of each Employee who is, or who will be eligible
to become, a Participant under the Plan, together with any other information
which the Advisory Committee considers necessary. The Employer's records as to
the current information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.2 NO LIABILITY. The Employer assumes no obligation or responsibility to
any of its Employees, Participants or Beneficiaries for any act of, or failure
to act, on the part of its Advisory Committee, (unless the Employer is the
Advisory Committee), the Trustee or the Plan Administrator (unless the Employer
is the Plan Administrator).
7.3 INDEMNITY OF COMMITTEE. The Employer indemnifies and saves harmless
the Plan Administrator and the members of the Advisory Committee, and each of
them, from and against any and all loss resulting from liability to which the
Plan Administrator and the Advisory Committee, or the members of the Advisory
Committee, may be subjected by reason of any act or conduct (except willful
misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.3 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.3, provided the
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letter agreement must be consistent with and must not violate ERISA. The
indemnification provisions of this Section 7.3 extend to the Trustee solely to
the extent provided by a letter agreement executed by the Trustee and the
Employer.
7.4 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to
direct the Trustee to the investment and re-investment of assets comprising the
Trust Fund only if the Trustee consents in writing to permit such direction. If
the Trustee consents to Employer direction of investment, the Trustee and the
Employer shall execute a letter agreement as a part of this Plan containing
such conditions, limitations and other provisions they deem appropriate before
the Trustee will follow any Employer direction as respects the investment or
reinvestment of any part of the Trust Fund.
7.5 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the right
to amend the vesting schedule at any time, the Advisory Committee will not
apply the amended vesting schedule to reduce the Nonforfeitable percentage of
any Participant's Accrued Benefit derived from Employer contributions
(determined as of the later of the date of the Employer adopts the amendment,
or the date the amendment become effective) to a percentage less than the
Nonforfeitable percentage computed under the Plan without regard to the
amendment. If the Employer makes a permissible amendment to the vesting
schedule, each Participant having at least 3 Years of Service with the Employer
may elect to have the percentage of his Nonforfeitable Accrued Benefit computed
under the Plan without regard to the amendment. The Participant must file his
election with the Plan Administrator within 60 days of the latest of (a) the
Employer's adoption of the amendment; and (b) the effective date of the
amendment; or (c) his receipt of a copy of the amendment. The Plan
Administrator, as soon as practicable, must forward a true copy of any
amendment to the vesting schedule to each affected Participant, together with
an explanation of the effect of the amendment, the appropriate form upon which
the Participant may make an election to remain under the vesting schedule
provided under the Plan prior to the amendment and notice of the time within
which the Participant must make an election to remain under the prior vesting
schedule. For purposes of this Section 7.5, an amendment to the vesting
schedule includes any Plan amendment which directly or indirectly affects the
computation of the Nonforfeitable percentage of an Employee's rights to his
Employer derived Accrued Benefit.
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.1 BENEFICIARY DESIGNATION. Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Accrued Benefit on event of his death and the
Participant may designate the form and method of payment. The Advisory
Committee will prescribe the form for the written designation of Beneficiary
and, upon the Participant's filing the form with the Advisory Committee, the
form effectively revokes all designations filed prior to that date by the same
Participant.
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A married Participant's Beneficiary designation is not valid unless the
Participant's spouse consents to the Beneficiary designation. The spousal
consent requirement in this paragraph does not apply if the Participant and his
spouse are not married throughout the one year period ending on the date of the
Participant's death, or if the Participant's spouse is the Participant's sole
primary Beneficiary.
8.2 NO BENEFICIARY DESIGNATION. If a Participant fails to name a
Beneficiary in accordance with Section 8.1, or if the Beneficiary named by a
Participant predeceases him or dies before complete distribution of the
Participant's Accrued Benefit as prescribed by the Participant's Beneficiary
form, then the Trustee will pay the Participant's Accrued Benefit in one, or
any combination, of the methods specified under Section 6.2 in the following
order of priority to: (a) the Participant's surviving spouse; (b) the
Participant's surviving children, including adopted children, in equal shares;
(c) the Participant's surviving parents, in equal shares, or (d) the legal
representative of the estate of the last to die of the Participant and his
Beneficiary. The Advisory Committee will direct the Trustee as to the method
and to whom the Trustee will make payment under this Section 8.2.
8.3 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of
a deceased Participant must furnish to the Advisory Committee such evidence,
data or information as the Advisory Committee considers necessary or desirable
for the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true and complete evidence, data
and information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.4 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant must file with the Advisory Committee from time to time,
in writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.5 ASSIGNMENT OR ALIENATION. Subject to Code Section 414(p) relating to
qualified domestic relations orders, neither a Participant nor a Beneficiary
may anticipate, assign or alienate (either at law or in equity) any benefit
provided under the Plan, and the Trustee will not recognize any such
anticipation, assignment or alienation. Furthermore, a benefit under the Plan
is not subject to attachment, garnishment, levy, execution or other legal or
equitable process.
8.6 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the time
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
request by ERISA to be furnished without charge.
8.7 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction may
authorize any appropriate equitable relief to redress violations of ERISA or to
enforce any provisions of
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ERISA or the terms of the Plan. A fiduciary may receive reimbursement of
expenses properly and actually incurred in the performance of his duties with
the Plan.
8.8 INFORMATION AVAILABLE. Any Participant in the Plan or any Beneficiary
may examine copies of the Plan description, latest annual report, any
bargaining agreement, this Plan and Trust, contract or any other instrument
under which the Plan was established or is operated. The Plan Administrator
will maintain all of the items listed in this Section 8.8 in his office, or in
such other place or places as he may designate from time to time in order to
comply with the regulations issued under ERISA, for examination during
reasonable business hours. Upon the written request of a Participant or
Beneficiary the Plan Administrator will furnish him with a copy of any item
listed in this Section 8.8. The Plan Administrator may make a reasonable charge
to the requesting person for a copy so furnished.
8.9 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Plan Administrator will
provide adequate notice in writing to any Participant or to any Beneficiary
("Claimant") whose claim for benefits under the Plan the Advisory Committee has
denied. The Plan Administrator's notice to the Claimant must set forth: (a) the
specific reason for the denial; (b) specific references to pertinent Plan
provisions on which the Advisory Committee based its denial; (c) a description
of any additional material and information needed for the Claimant to perfect
his claim and an explanation of why the material or information is needed; and
(d) that any appeal the Claimant wishes to make of the adverse determination
must be in writing to the Advisory Committee within 75 days after receipt of
the Plan Administrator's notice of denial of benefits. The Plan Administrator's
notice must further advise the Claimant that his failure to appeal the action
to the Advisory Committee in writing within the 75 day period will render the
Advisory Committee's determination final, binding and conclusive. If the
Claimant should appeal to the Advisory Committee, he, or his duly authorized
representative, may submit, in writing, whatever issues and comments he, or his
duly authorized representative, believes are pertinent. The Claimant, or his
duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60 day limit unfeasible, but in no event shall the Advisory Committee
render a decision respecting a denial for a claim for benefits later than 120
days after its receipt of a request for review. The Participant's notice of
denial of benefits must identify the name of each member of the Advisory
Committee and the name and address of the Advisory Committee member to whom the
Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. Except as provided in this
Section 8.10, a Participant does not have the right to direct the Trustee with
respect to the investment or reinvestment of the assets comprising the
Participant's individual Account. Each Qualified Participant may direct the
Trustee as to the investment of 25% of the value of the Participant's Accrued
Benefit attributable to the Employer Securities (the "Eligible Accrued
Benefit") within 90 days after the Accounting Date of each Plan Year (to the
extent a direction amount exceeds the amount to which a prior direction under
this Section 8.10 applies) during the Participant's
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Qualified Election Period. For the last Plan Year in the Participant's
Qualified Election Period, the Trustee will substitute "50%" for "25%" in the
immediately preceding sentence The Qualified Participant must make his
direction to the Trustee in writing, the direction may be effective no later
than 180 days after the close of the Plan Year to which the direction applies,
and the direction must specify which, if any, of the investment options the
Participant selects.
A Qualified Participant may chose one of the following investment
options:
(a) The distribution of the portion of his Eligible Accrued Benefit
covered by the election. The Trustee will make the distribution within 90 days
after the last day of the period during which the Qualified Participant may
make the election. The provisions of this Plan applicable to a distribution of
Employer Securities, including the put option requirements of Article XI, apply
to this investment option.
(b) The direct transfer of the portion of his Eligible Accrued
Benefit covered by the election to another qualified plan of the Employer which
accepts such transfers, but only if the transferee plan permits
employee-directed investment and does not invest in Employer Securities to a
substantial degree. The Trustee will make the direct transfer no later than 90
days after the last day of the period during which the Qualified Participant
may make the election.
For purposes of this Section 8.10, the following definitions apply:
(i) "Qualified Participant" means a Participant who has attained age
55 and who has completed at least 10 years of participation in the Plan. A
"year of participation" means a Plan Year in which the Participant was eligible
for an allocation of Employer contributions, irrespective of whether the
Employer actually contributed to the Plan for that Plan Year.
(ii) "Qualified Election Period" means the 6 Plan Year period
beginning with the Plan Year in which the Participant first becomes a Qualified
Participant.
ARTICLE IX
ADVISORY COMMITTEE DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.1 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint an
Advisory Committee to administer the Plan, the members of which may or may not
be Participants in the Plan, or which may be the Plan Administrator acting
alone. The members of the Advisory Committee will serve without compensation
for services as such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.2 TERM. Each member of the Advisory Committee serves until his
successor is appointed.
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9.3 POWERS. In case of vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred Upon the Advisory
Committee pending the filling of the vacancy.
9.4 GENERAL. The Advisory Committee has the following powers and duties:
(a) To select a secretary, who need not be a member of the Advisory
Committee;
(b) To determine the rights of eligibility of an Employee to
participate in this Plan, the value of a Participant's Accrued Benefit, and the
Nonforfeitable percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the
proper and efficient administration of the Plan provided the rules are not
inconsistent with the terms of this Agreement;
(d) To enforce the terms of the Plan and the rules and regulations it
adopts;
(e) To direct the Trustee as respects the crediting and distribution
of the Trust;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties;
(i) To engage the services of an investment manager or managers (as
defined in ERISA Section 3(38)), each of whom will have full power and
authority to manage, acquire or dispose (or direct the Trustee with respect to
acquisition or disposition) of any Plan asset under its control;
The Plan Administrator and Advisory Committee shall be vested with sole
discretionary authority (i) to construe and interpret the Plan and its Trust,
their terms and any rules and regulations promulgated thereunder, including
but not limited to resolving ambiguities, inconsistencies and omissions; (ii)
to construe and interpret the Federal and state laws and regulations that
relate to the Plan and Trust; (iii) to decide all factual questions arising in
connection with the Plan and Trust; and (iv) to decide all other questions
arising in connection with the Plan and Trust, including but not limited to
determination of eligibility, entitlement to benefits, and vesting. All
findings of the Plan Administrator or Advisory Committee shall be
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final and shall be binding and conclusive upon all persons having any interest
in the Plan or Trust.
The Advisory Committee must exercise all of its powers, duties, and
discretion under the Plan in a uniform and nondiscriminatory manner.
Loan Policy. The Advisory Committee will not make loans to Plan
Participants.
9.5 FUNDING POLICY. The Advisory Committee will review, not less often
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan, and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to the
Plan investment manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.6 MANNER OF ACTION. The decision of a majority of the members appointed
and qualified controls.
9.7 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize any
one of its members, or its secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters,
or other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.8 INTERESTED MEMBER. No member of the Advisory Committee may decide or
determine any matter concerning the distribution, nature or method of
settlement of his own benefits under the Plan, except in exercising an election
available to that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory Committee
9.9 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or direct
the Trustee to maintain, a separate Account, or multiple Accounts, in the name
of each Participant to reflect the Participant's Accrued Benefit under the
Plan. The Advisory Committee must maintain one Account designated as the
Employer Securities Account to reflect a Participant's interest in Employer
Securities held by the Trust and another Account designated as the General
Investments Account to reflect the Participant's interest in the Trust Fund
attributable to assets other than Employer Securities. If a Participant
re-enters the Plan subsequent to his having a Forfeiture Break in Service (as
defined in Section 5.8), the Advisory Committee, or the Trustee, must maintain
a separate Account for the Participant's pre-Forfeiture Break in Service
Accrued Benefit and a separate Account for his post-Forfeiture Break in Service
Accrued Benefit unless the Participant's entire Accrued Benefit under the Plan
is 100% Nonforfeitable.
The Advisory Committee will make its allocations, or request the Trustee
to make its allocations, to the Accounts of the Participants in accordance with
the provisions of Section 9.11. The Advisory Committee may direct the Trustee
to maintain a temporary segregated investment Account in the name of a
Participant to prevent a distortion of income,
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gain or loss allocations Under Section 9.11. The Advisory Committee shall
maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account bears to the total net credit balance in the Accounts of all
Participants. For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date immediately
preceding the date of the distribution.
9.11 ALLOCATIONS TO PARTICIPANT'S ACCOUNTS. A "valuation date" under this
Plan is each Accounting Date and each interim valuation date determined under
Section 10.14. As of each valuation date the Advisory Committee must adjust
General Investment Accounts to reflect net income, gain or loss since the last
valuation date. The valuation period is the period beginning the day after the
last valuation date and ending on the current valuation date.
(A) EMPLOYER SECURITIES ACCOUNT. As of the Accounting Date of each
Plan Year, the Advisory Committee first will reduce Employer Securities
Accounts for any forfeitures arising under Section 5.9 and then will credit the
Employer Securities Account maintained for each Participant with the
Participant's allocable share of Employer Securities (including fractional
shares) purchased and paid for by the Trust or contributed in kind to the
Trust, with any forfeitures of Employer Securities and with any stock dividends
on Employer Securities allocated to his Employer Securities Account. The
Advisory Committee will allocate Employer Securities acquired with an Exempt
Loan under Section 10.3(C) in accordance with that Section. Except as otherwise
specifically provided in Section 10.3(C), the Advisory Committee will base
allocations to the Participants' Accounts on dollar values expressed as shares
of Employer Securities or on the basis of actual shares where there is a single
class of Employer Securities. In making a forfeiture reduction under this
Section 9.11, the Advisory Committee, to the extent possible, first must
forfeit from a Participant's General Investments Account before making a
forfeiture from his Employer Securities Account.
(B) GENERAL INVESTMENTS ACCOUNT.
Trust Fund Accounts. The allocation provisions of this paragraph
apply to all Participant General Investment Accounts other than segregated
investment Accounts. The Advisory Committee first will adjust the Participant
General Investment Accounts, as those Accounts stood at the beginning of the
current valuation period, by reducing the Accounts for any forfeitures arising
under Section 5.9 or under Section 9.14 for amounts charged during the
valuation period to the Accounts in accordance with Section 9.13 (relating to
distributions) and for the amount of any General Investment Account which the
Trustee has fully distributed since the immediately preceding valuation date.
The Advisory Committee then, subject to the restoration allocation requirements
of Section 5.4 or of Section 9.14, will allocate the net income, gain or loss
pro rata to the adjusted Participant General Investment Accounts. The allocable
net income, gain or loss is the net income (or net loss), including the
increase or decrease in the fair market value of assets, since the last
valuation date. In making its
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allocations under this Section 9.11 (B), the Advisory Committee ?????? Employer
Securities allocated to Employer Securities Accounts, stock dividends on
allocated Employer Securities and interest paid by the Trust on an Exempt Loan.
The Advisory Committee will include as income (available for payment on an
Exempt Loan) ANY cash dividends on Employer Securities except cash dividends
which the Advisory Committee has directed to the Trustee to distribute in
accordance with Section 10.8.
Segregated investment Accounts. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs. As of the
valuation date, the Advisory Committee must reduce a segregated Account for any
forfeiture arising under Section 5.9 after the Advisory Committee has made all
other allocations, changes or adjustments to the Account for the Plan Year.
Additional rules. An Excess Amount or suspense account described
in Part 2 of Article III does not share in the allocation of net income, gain or
loss described in this Section 9.11(B). This Section 9.11(B) applies solely
to the allocation of net income, gain or loss of the Trust. The Advisory
Committee will allocate the Employer contributions and Participant forfeitures,
if any, in accordance with Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting
Date of each Plan Year but within the time prescribed by ERISA and the
regulations under ERISA, the Plan Administrator will deliver to each
Participant (and to each Beneficiary) a statement reflecting the condition of
his Accrued Benefit in the Trust as of that date and such other information
ERISA requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Advisory Committee, has the right to inspect the records
reflecting the Account of any other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge all
distributions made to a Participant or to his Beneficiary from his Account
against the Account of the Participant when made.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either the
Trustee or the Advisory Committee to search for, or ascertain the whereabouts
of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts
known in writing to the Advisory Committee within 6 months from the date of
mailing of the notice, the Advisory Committee will treat the Participant's or
Beneficiary's unclaimed payable Accrued Benefit as forfeited and will
reallocate the unclaimed payable Accrued Benefit in accordance with Section
3.5. Where the benefit is distributable to the Participant, the forfeiture
under this paragraph occurs as of the last day of the notice period, if the
Participant's Nonforfeitable Accrued Benefit does not exceed $3,500, or as of
the first day
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of the benefit is distributable without the Participant's consent, if the
present value of the Participant's Nonforfeitable Accrued Benefit exceeds
$3,500. Where the benefit is distributable to a Beneficiary, the forfeiture
occurs on the date the notice period ends except, if the Beneficiary is the
Participant's spouse and the Nonforfeitable Accrued Benefit payable to the
spouse exceeds $3,500, the forfeiture occurs as of the first day the benefit is
distributable without the spouse's consent. Pending forfeiture, the Advisory
Committee, following the expiration of the notice period, may direct the
Trustee to segregate the Nonforfeitable Accrued Benefit in a segregated Account
and to invest that segregated Account in Federally insured interest bearing
savings accounts or time deposits (or in a combination of both), or in other
fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of his
Accrued Benefit under the provisions of the first paragraph of this Section
9.14 makes a claim, at any time, for his forfeited Accrued Benefit, the
Advisory Committee must restore the Participant's or Beneficiary's forfeited
accrued Benefit to the same dollar amount as the dollar amount of the Accrued
Benefit forfeited, unadjusted for any gains or losses occurring subsequent to
the date of the forfeiture. The Advisory Committee will make the restoration
during the Plan Year in which the Participant or Beneficiary makes the claim
first from the amount, if any, of Participant forfeitures the Advisory
Committee otherwise would allocate for the Plan Year, then from the amount, if
any, of the Trust Fund net income or gain for the Plan Year and then from the
amount, or additional amount, the Employer contributes to enable the Advisory
Committee to make the required restoration. The Advisory Committee will direct
the Trustee to distribute the Participant's or Beneficiary's restored Accrued
Benefit to him not later than 60 days after the close of the Plan Year in which
the Advisory Committee restores the forfeited Accrued Benefit. The forfeiture
provisions of this Section 9.14 apply solely to the Participant's or to the
Beneficiary's Accrued Benefit derived from Employer contributions.
ARTICLE X
TRUSTEE, POWERS AND DUTIES
10.1 ACCEPTANCE. The Trustee accepts the Trust created under the Plan and
agrees to perform the obligations imposed. The Trustee must provide bond for
the faithful performance of its duties under the Trust to the extent required
by ERISA.
10.2 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the Employer
for the funds contributed to it by the Employee but does not have any duty to
see that the contributions received comply with the provisions of the Plan. The
Trustee is not obliged to collect any contributions from the Employer, nor is
obliged to see that funds deposited with it are deposited according to the
provisions of the Plan.
10.3 FULL INVESTMENT POWERS.
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(A) TRUSTEE POWERS. The Trustee has full discretion and authority
with regard to the investment of the Trust Fund, except with respect to a Plan
asset under the control or direction of properly appointed Investment Manager
or with respect to a Plan asset subject to Employer, Participant or Advisory
Committee direction of investment. The Trustee must coordinate its investment
policy with Plan financial needs as communicated to it by the Advisory
Committee. The Trustee is authorized and empowered, but not by way of
limitation, with the following powers, rights and duties:
(a) To invest the Trust Fund primarily in Employer Securities
("primarily" meaning the authority to hold and to acquire not more than 100% of
the Trust Fund in Employer Securities) and to invest any part or all of the
Trust Fund in any common or preferred stocks, open-end or closed-end mutual
funds, put and call options traded on a national exchange, United States
retirement plan bonds, corporate bonds, debentures, convertible debentures,
commercial paper, U.S. Treasury bills, U.S. Treasury notes and other direct or
indirect obligations of the United States Government or its agencies, improved
or unimproved real estate situated in the United States, limited partnerships,
insurance contracts of any type, mortgages, notes or other property of any
kind, real or personal, and to buy or sell options on common stock on a
nationally recognized exchange with or without holding investments the Trustee
deems appropriate as a prudent man would do under like circumstances with due
regard for the purposes of this Plan. An investment made or retained by the
Trustee in good faith is proper but must be of a kind (with the exception of
Employer Securities) constituting a diversification considered by law suitable
for trust investments.
(b) To retain in cash so much of the Trust Fund as it may deem
advisable to satisfy liquidity needs of the Plan and to deposit any cash held
in the Trust Fund in a bank account at reasonable interest. If the Trustee is a
bank or similar financial institution supervised by the United States or by a
State, this paragraph (b) includes specific authority to invest in any type of
deposit of the Trustee (or of a bank related to the Trustee within the meaning
of Code Section 414(b)) at a reasonable rate of interest or in a common trust
fund (the provisions of which govern the investment of such assets and which
the Plan incorporates by this reference) as described in Code Section 584 which
the Trustee (or its affiliate, as defined in Code Section 1504) maintains
exclusively for the collective investment of money contributed by the bank (or
the affiliate) in its capacity as Trustee and which conforms to the rules of
the Comptroller of the Currency.
(c) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease for any
term even though commencing in the future or extending beyond the term of the
Trust, and otherwise deal with all property, real or personal, in such manner,
for such consideration and on such terms and conditions as the Trustee decides.
(d) To credit and distribute the Trust as directed by the
Advisory Committee. The Trustee is not obliged to inquire as to whether any
payee or distributee is entitled to any payment or whether the distribution is
proper or within the terms of the Plan, or as to the manner of making any
payment or distribution. The Trustee is accountable only to the
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Advisory Committee for any payment or distribution made by it in good faith on
the order or direction of the Advisory Committee.
(e) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(f) To compromise, contest, arbitrate or abandon claims and
demands, in its discretion.
(g) To vote, subject to Section 10.16, all voting stock held by
the Trust Fund.
(h) To lease for oil, gas and other mineral purposes and to
create mineral severances by grant or reservation; to pool or unitize interests
in oil, gas and other minerals; and to enter into operating agreements and to
execute division and transfer orders.
(i) To hold any securities or other property in the name of the
Trustee or its nominee, or in another form as it may deem best, with or without
disclosing the trust relationship.
(j) To perform any and all other acts in its judgment necessary
or appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(k) To retain any funds or property subject to any dispute
without liability for the payment of interest, and to decline to make payment
or delivery of the funds or property until final adjudication is made by a
court of competent jurisdiction.
(1) To file all tax returns required of the Trustee.
(m) To furnish to the Employer, the Plan Administrator, and the
Advisory Committee an annual statement of account showing the condition of the
Trust Fund and all investment, receipts, disbursements and other transactions
effected by the Trustee during the Plan Year covered by the statement and also
stating the assets of the Trust held at the end of the Plan Year, which
accounts are conclusive on all persons, including the Employer, the Plan
Administrator, and the Advisory Committee, except as to any act or transaction
concerning which the Employer, the Plan Administrator or the Advisory Committee
files with the Trustee written exceptions or objections within 90 days after
the receipt of the accounts or for which ERISA authorizes a longer period
within which to object.
(n) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the Trustee is not
obliged or required to do so unless indemnified to its satisfaction.
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(o) The Trustee will allocate any insurance proceeds received
from the purchase of insurance contracts under paragraph (a) to Participants'
Accounts in the same manner as the allocation under Section 3.4 of the Employer
contribution for the Plan Year in which the death of the insured Participant
occurs.
(B) PARTICIPANT LOANS. As provided by Section 9.4, the Trustee is not
authorized to make Participant loans.
(C) EXEMPT LOAN. This Section 10.3(C) specifically authorizes the
Trustee to enter into an Exempt Loan transaction. The following terms and
conditions will apply to any Exempt Loan:
(1) The Trustee will use the proceeds of the loan within a
reasonable time after receipt only for any or all of the following purposes:
(i) to acquire Employer Securities; (ii) to repay such loan; or (iii) to repay
a prior Exempt Loan. Except as provided in Sections 11.1 and 11.3, no Employer
Security acquired with the proceeds of an Exempt Loan may be subject to a put,
call or other option, or buy-sell or similar arrangement while held by and when
distributed from this Plan, whether or not the Exempt Loan is repaid or this
Plan is then an employee stock ownership plan.
(2) The interest rate of the loan may not be more than reasonable
rate of interest.
(3) Any collateral the Trustee pledges to the creditor must
consist only of the assets purchased by the borrowed fund and those assets
the Trust used as collateral on the price Exempt Loan repaid with the proceeds
of the current Exempt Loan.
(4) The creditor may have no recourse against the Trust under the
loan except with respect to such collateral given for the loan, contributions
(other than contributions of Employee Securities) that the Employer makes to the
Trust to meet it obligations under the loan, and earnings attributable to such
collateral and the investment of such contributions. The payment made with
respect to an Exempt Loan by the Plan during a Plan Year must not exceed an
amount equal to the sum of such contributions and earnings received during or
prior to the year less such payments in prior years. The Advisory Committee and
the Trustee must account separately for such contributions and earnings in the
books of account of the Plan until the Trust repays the loan.
(5) In the event of default upon the loan, the value of Plan
assets transferred in satisfaction of the loan must not exceed the amount of
the default, and if the lender is a Disqualified Person, the loan must provide
for transfer of Plan assets upon default only upon and to the extent of the
failure of the Plan to meet the payment schedule of the loan.
(6) The Trustee must add and maintain all assets acquired with
the proceeds of an Exempt Loan in a suspense Account. In withdrawing assets
from the suspense Account, the Trustee will apply the provisions of Treas. Reg.
Sections 54.4975(b)(8) and (15) .
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as if all securities in the suspense Account were encumbered. Upon the payment
of any portion of the loan, the Trustee will effect the release of assets in
the suspense Account from encumbrances. For each Plan Year during the duration
of the loan, the number of Employer Securities released must equal the number
of encumbered Employer Securities held immediately before release for the
current Plan Year multiplied by a fraction. The numerator of the fraction is
the amount of principal and interest (or principal only) paid for the Plan
Year. The denominator of the fraction is the sum of the numerator plus the
principal and interest (or principal only) to be paid for all future Plan
Years. The number of future Plan Years under the loan must be definitely
ascertainable and must be determined without taking into account any possible
extension or renewal periods. If the interest rate under the loan is variable,
the interest to be paid in future Plan Years must be computed by using the
interest rate applicable as of the end of the Plan Year. If the release from
encumbrance is determined solely with reference to principal payments, (i) the
Exempt Loan shall provide for annual payments of principal and interest at a
cumulative rate that is not less rapid at any time than level annual payments
of such amount for ten years, (ii) the interest included in any payment is
disregarded only to the extent that it would be determined to be interest under
standard loan amortization tables. The right to release Employer Securities
based on principal only and therefore the preceding sentence are not applicable
from the time that, by reason of renewal, extension, or refinancing, the sum of
the expired duration of the Exempt Loan, the renewal period, the extension
period, and the duration of a new Exempt Loan exceeds ten years. If collateral
includes more than one class of Employer Securities, the number of Employer
Securities of each class to be released for a Plan Year must be determined by
applying the same fraction to each such class. The Advisory Committee will
allocate assets withdrawn from the suspense Account to the Accounts of
Participants who otherwise share in the allocation of the Employer's
contribution for the Plan Year for which the Trustee has paid the portion of
the loan resulting in the release of the assets. The Advisory Committee
consistently will make this allocation as of each Accounting Date on the basis
of non-monetary units, taking into account the relative Compensation of all
such Participants for such Plan Year.
(7) The loan must be for a specific term and may not be payable at
the demand of any person except in the case of default.
(8) Notwithstanding the fact this Plan ceases to be an employee stock
ownership plan, Employer Securities acquired with the proceeds of an exempt
loan will continue after the Trustee repays the loan to be subject to the
provisions of Treas. Reg. Sections 54.4975(b)(4), (10), (11) and (12) relating
to put, call or other options and to buy-sell or similar arrangements, except
to the extent these regulations are inconsistent with Code Section 409(h).
(9) If Employer Securities acquired with the proceeds of an exempt
loan available for distribution consist of more than one class, a Participant
must receive substantially the same proportion of each such class.
10.4 RECORDS AND STATEMENTS. The records of the Trustee pertaining to the
Plan must be open to the inspection of the Plan Administrator, the Advisory
Committee, and the Employer at all reasonable times and may be audited from
time to time by any person or persons as the
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Employer, Plan Administrator or Advisory Committee may specify in writing. The
Trustee must furnish the Employer, Advisory Committee, or the Plan
Administrator with whatever information relating to the Trust Fund the Advisory
Committee or Plan Administrator considers necessary.
10.5 FEES AND EXPENSES FROM FUND. The Trustee will receive reasonable
annual compensation as may be agreed upon from time to time between the
Employer and the Trustee. The Trustee will pay all expenses reasonably incurred
by it in its administration of the Plan from the Trust Fund unless the Employer
pays the expenses. The Advisory Committee will not treat any fee or expense
paid, directly or indirectly, by the Employer as an Employer contribution,
provided the fee or expense relates to the ordinary and necessary
administration of the Fund. No person who is receiving All pay from the
Employer shall receive compensation for services as Trustee.
10.6 PARTIES TO LITIGATION. Except as otherwise provided by ERISA, only
the Employer, the Plan Administrator, the Advisory Committee, and the Trustee
are necessary parties to any court proceeding involving the Trustee or the
Trust Fund. No Participant, or Beneficiary, is entitled to any notice of
process unless required by ERISA. Any final judgment entered in any proceeding
will be conclusive upon the Employer, the Plan Administrator, the Advisory
Committee, the Trustee, Participants and Beneficiaries.
10.7 PROFESSIONAL AGENTS. The Trustee may employ and pay from the Trust
Fund reasonable compensation to agents, attorneys, accountants and other
persons to advise the Trustee as in its opinion may be necessary. The Trustee
may delegate to any agent, attorney, accountant or other person selected by it
any non-trustee power or duty vested in it by the Plan, and the Trustee may act
or refrain from acting on the advice or opinion of any agent, attorney,
accountant or other person so selected.
10.8 DISTRIBUTION OF TRUST FUND. The Trustee shall make all distributions
of a Participant's Nonforfeitable Accrued Benefit in whole shares of Employer
Securities valued at fair market value at the time of distribution unless,
effective January 1, 1993 through December 31, 1995, the Participant elects to
receive his or her accrued benefit entirely in cash. The Trustee will pay in
cash any fractional security share to which a Participant or his Beneficiary is
entitled. In the event the Trustee is to make a distribution in shares of
Employer Securities, the Trustee may apply any balance in a Participant's
General Investments Account to provide whole shares of Employer Securities for
distribution at the then fair market value.
If the Employer's charter or bylaws restrict ownership of substantially
all shares of Employer Securities to Employees and the Trust, as described in
Code Section 409(h)(2), the Trustee will make the distribution of a
Participant's Accrued Benefit entirely in cash.
Notwithstanding the preceding provisions of this Section 10.8, the
Trustee, if directed in writing by the Advisory Committee, will pay, in cash,
any cash dividends (which have been held by the Plan for less than two years)
on Employer Securities allocated, or allocable to Participants Employer
Securities Accounts, irrespective of whether a Participant is fully vested
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in his Employer Securities Account. The Advisory Committee's direction must
state whether the Trustee is to pay the cash dividend distributions currently,
or within the 90 day period following the close of the Plan Year in which the
Employer pays the dividends to the Trust. The Advisory Committee may request
the Employer to pay dividends on Employer Securities directly to Participants.
10.9 DISTRIBUTION DIRECTIONS. If no one claims a payment or distribution
made from the Trust, the Trustee must promptly notify the Advisory Committee
and shall dispose of the payment in accordance with the subsequent direction of
the Advisory Committee.
10.10 THIRD PARTY. No person dealing with the Trustee is obligated to see
to the proper application of any money paid or property delivered to the
Trustee, or to inquire whether the Trustee has acted pursuant to any of the
terms of the Plan. Each person dealing with the Trustee may act upon any
notice, request or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and is not liable to any person in so acting.
The certificate of the Trustee that it is acting in accordance with the Plan
will be conclusive in favor of any person relying on the certificate. The
decision of a majority of the Trustee(s) shall control with respect to any
decision regarding the administration or investment of the Trust Fund.
10.11 RESIGNATION. The Trustee may resign at any time as Trustee of the
Plan by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee.
10.12 REMOVAL. The Employer, by giving 30 days' written notice in advance
to the Trustee, may remove any Trustee. In the event of the resignation or
removal of a Trustee, the Employer must appoint a successor Trustee if it
intends to continue the Plan. If two or more persons hold the position of
Trustee, in the event of the removal of one such person, during any period the
selection of a replacement is pending, or during any period such person is
unable to serve for any reason, the remaining person or persons will act as the
Trustee.
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee
succeeds to the title to the Trust vested in his predecessor by accepting in
writing his appointment as successor Trustee and filing the acceptance with the
former Trustee and the Advisory Committee without the signing or filing of any
further statement. The resigning or removed Trustee, upon receipt of acceptance
in writing of the Trust by the successor Trustee, must execute all documents
and do all acts necessary to vest the title of record in any successor Trustee.
Each successor Trustee has and enjoys all of the powers, both discretionary and
ministerial, conferred under this Agreement upon his predecessor. A successor
Trustee is not personally liable for any act or failure to act of any
predecessor Trustee, except as required under ERISA. With the approval of the
Employer and the Advisory Committee, a successor Trustee, with respect to the
Plan, may accept the account rendered and the property delivered to it by a
predecessor Trustee without incurring any liability or responsibility for so
doing.
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10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of
each Accounting Date to determine the fair market value of each Participant's
Accrued Benefit in the Trust, and the Trustee also must value the Trust Fund on
such other dates, as directed by the Advisory Committee. With respect to
activities carried on by the Plan, an independent appraiser meeting
requirements similar to those prescribed by Treasury regulations under Code
Section 170(a)(1) must perform all valuations of Employer Securities which are
not readily tradeable on an established securities market.
10.15 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER APPOINTED. The
Trustee is not liable for the acts or omissions of any investment Manager or
Managers the Advisory Committee may appoint, nor is the Trustee be under any
obligation to invest or otherwise manage any asset of the Plan which is subject
to the management of a properly appointed Investment Manager. The Advisory
Committee, the Trustee and any properly appointed Investment Manager may
execute a letter agreement as a part of this Plan delineating the duties,
responsibilities and liabilities of the Investment Manager with respect to any
part of the Trust Fund under the control of the Investment Manager.
10.16 PARTICIPANT VOTING RIGHTS--EMPLOYER SECURITIES. With respect to the
voting of Employer Securities which are not part of a registration-type class
of securities (as defined in Code Section 409(e)(4)), a Participant (or
Beneficiary) has the right to direct the Trustee regarding the voting of such
Employer Securities allocated to his Employer Securities Account with respect
to any corporate matter which involves the approval or disapproval of any
corporate merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a trade or
business, or such similar transaction as the Treasury may prescribe in
regulations. As to any Employer Securities allocated to the Participant's
Employer Securities Account which are part of a registration-type class of
securities, the voting rights provided in this Section 10.16 extend to all
corporate matters requiring a vote of stockholders. The Trustee does not have
the right to vote any Employer Securities which a Participant (or Beneficiary)
fails to vote as authorized by this Section 10.16.
ARTICLE XI
REPURCHASE OF EMPLOYER SECURITIES
11.1 PUT OPTION. Employer Securities that are not readily tradable on an
established market when distributed shall be subject to the following put
option. The put option must:
(i) Be exercisable by a Participant or his donee or a
person, estate or distributee to whom the Employer
Security passes by reason of death (the "Optionor");
(ii) Permit the Optionor to put the Employer Securities to
the:
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(a) Employer provided, however, that the put option may
grant the Plan an option to assume the Employer's rights
and obligations at the time of exercise;
(b) A third party (for example, a Related Employer or a
non-Plan shareholder) that has substantial net worth at
the time the Exempt Loan is made and whose net worth is
reasonably expected to remain substantial if it is known
at the time an Exempt Loan is made that Federal or state
law shall be violated by the Employer's honoring such
put option;
(iii) if the Employer Securities were acquired with the
proceeds of an Exempt Loan, be exercisable at least
during a 15-month period which begins on the date the
Employer Securities subject to the put option are
distributed by the Plan, excluding any time when the
Optionor is unable to exercise the option because the
party in (ii) above is prohibited by law from honoring
it (subject to the notice provisions in Treasury
Regulation Section 54.4975-7(b)(1l)(ii) for publicly
traded securities which cease to be so during that
15-month period);
(iv) if the Employer Securities were not acquired with the
proceeds of an Exempt Loan, be exercisable for an
initial period of at least sixty (60) days following the
date of distribution of the Employer Securities, and if
necessary, for a second period of at least sixty (60)
days in the following Plan Year after the new
determination of the fair market value of the Employer
Securities by the Advisory Committee and notice to the
Optionor of the new fair market value;
(v) Exercised by the Optionor by notifying the Employer in
writing that the put option is being exercised;
(vi) Exercisable at the value of the Employer Securities as
determined under Section 11.6(a); and
(vii) Have payment terms as provided in Section 11.4.
Payment to the Optionor may be restricted only by the terms of an Exempt
Loan, unless otherwise required by state law.
11.2 RESTRICTION ON EMPLOYER SECURITIES. Except upon the prior written
consent of the Employer, no Participant (or Beneficiary) may sell, assign, give
pledge, encumber, transfer or otherwise dispose of any Employer Securities now
owned or subsequently acquired by him without complying with the terms of this
Article XI. If a Participant (or Beneficiary) pledges
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or encumbers any Employer Securities with the required prior written consent,
any security holder's rights with respect to such Employer Securities are
subordinate and subject to the rights of the Employer.
11.3 LIFETIME TRANSFER/RIGHT OF FIRST REFUSAL. If any Participant (or
Beneficiary) who receives Employer Securities under this Plan desires to
dispose of any of his Employer Securities for any reason during his lifetime
(whether by sale, assignment, gift or any other method of transfer), he first
must offer the Employer Securities for sale to the Employer. The Advisory
Committee may require a Participant (or beneficiary) entitled to a distribution
of Employer Securities to execute an appropriate stock transfer agreement
(evidencing the right of first refusal) prior to receiving a certificate for
Employer Securities.
In the case of an offer by a third party, the offer to the Employer is
subject to all the terms and conditions set forth in Section 11.4 based on the
price equal to the fair market value per share and payable in accordance with
the terms of Section 11.4 unless the selling price and terms offered to the
Participant by the third party are more favorable to the Participant than the
selling price and terms of Section 11.4, in the event the selling price and
terms of the offer of the third party apply. The Employer must give written
notice to the offering Participant of its acceptance of the Participant's offer
within 14 days after the Participant has given written notice to the Employer
or the Employer's rights under this Section 11.3 will lapse. The Employer may
grant the Trust the option to assume the Employer's rights and obligations with
respect to all or any part of the Employer Securities offered to the Employer
under this Section 11.3.
Employer Securities acquired with the proceeds of an Exempt Loan cannot
be publicly traded at the time the Employer's right may be exercised.
11.4 PAYMENT OF PURCHASE PRICE. If the Employer (or the Trustee, at the
direction of the Advisory Committee) exercises an option to purchase a
Participant's Employer Securities pursuant to an offer given under Section 11.3
or if the Employer Securities are not readily tradable on an established market
and the Participant exercises his right to a put option under Section 11.1, the
purchaser(s) must make payment in a lump sum or, if the distribution to the
Participant (or to his Beneficiary) constitutes a Total Distribution, in
substantially equal periodic payments (not less frequently than annually) over
a period not exceeding five years (and ten years for Employer Securities
acquired with the proceeds of an Exempt Loan). A "Total Distribution" to a
Participant (or to a Beneficiary) is the distribution, within one taxable year
of the recipient, of the entire balance to the Participant's credit under the
Plan. In the case of a distribution which is not a Total Distribution or which
is a Total Distribution with respect to which the purchaser(s) will make
payment in lump sum, the purchaser(s) must pay the Participant (or Beneficiary)
the fair market value of the Employer Securities repurchased no later than 30
days after the date the Participant (or Beneficiary) exercises the option. In
the case of a Total Distribution with respect to which the purchaser(s) will
make installment payments, the purchaser(s) must make the first installment
payment no later than 30 days after the Participant (or Beneficiary) exercises
the put option. For installment amounts not paid within 30 days of the exercise
of the put option, the purchaser(s) must evidence the balance of the purchase
price by executing a promissory note, delivered to the selling Participant at
the Closing. The note
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delivered at Closing must bear a reasonable rate of interest, determined as of
the Closing Date, and the purchaser(s) must provide adequate security. The note
must provide for substantially equal periodic payments (not less frequently
than annually) with interest payable with each installment, the first
installment being due and payable one year after the Closing Date. The note
further must provide for acceleration in the event of 30 days' default of the
payment on interest or principal and must grant to the maker of the note the
right to prepay the note in whole or in part at any time or times without
penalty; provided, however, the purchaser(s) may not have the right to make any
prepayment during the calendar year or fiscal year of the Participant
(Beneficiary) in which the Closing Date occurs.
11.5 Notice. A person has given Notice permitted or required under this
Article XI when the person deposits the Notice in the United States mail, first
class, postage prepaid, addressed to the person entitled to the Notice at the
address currently listed for him in the records of the Advisory Committee. Any
person affected by this Article XI has the obligation of notifying the Advisory
Committee of any change of address.
11.6 TERMS AND DEFINITIONS. For purposes of this Article XI:
(a) "Fair market value" means the value of the Employer Securities:
(i) determined as of the date of the exercise of an option if the exercise is
by a Disqualified Person; or (ii) in all other cases, determined as of the most
recent Accounting Date. The Advisory Committee must determine fair market value
of Employer Securities for all purposes of the Plan by engaging the services of
an independent appraiser and taking whatever other steps that are necessary to
arrive at the value in the case of a transaction between the Plan and a
Disqualified Person as provided in Treasury Regulation Section
54.4975-ll(d)(5). See Section 10.14.
(b) "Notice" means any offer, acceptance of an offer, payment or any
other communication.
(c) "Beneficiary" includes the legal representative of a deceased
Participant.
(d) "Closing" means the place, date and time ("Closing Date") to
which the selling Participant (or his Beneficiary) and purchaser may agree for
purposes of a sale and purchase under this Article XI, provided Closing must
take place not later than 30 days after the exercise of an offer under Section
11.1.
ARTICLE XII
MISCELLANEOUS
12.1 Evidence. Anyone required to give evidence under the terms of the
Plan may do so by certificate, affidavit, document or other information which
the person to act in reliance may consider pertinent, reliable and genuine, and
to have been signed, made or presented by the
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proper party or parties. Both the Advisory Committee and the Trustee are fully
protected in acting and relying upon any evidence described under the
immediately preceding sentence.
12.2 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee nor the
Advisory Committee has any obligation nor responsibility with respect to any
action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or
make any payment or contribution, or to otherwise provide any benefit
contemplated under this Plan. Furthermore, the Plan does not require the
Trustee or the Advisory Committee to collect any contribution required under
the Plan, or determine the correctness of the amount of any Employer
contribution. Neither the Trustee nor the Advisory Committee need inquire into
or be responsible for any action or failure to act on the part of the others.
Any action required of a corporate Employer must be by its Board of Directors
or its designate.
12.3 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee, the
Plan Administrator and the Employer in no way guarantee the Trust Fund from
loss or depreciation. The Employer does not guarantee the payment of any money
which may be or becomes due to any person from the Trust Fund. The liability of
the Advisory Committee and the Trustee to make any payment from the Trust Fund
at any time and all times is limited to the then available assets of the Trust.
12.4 WAIVER OF NOTICE. Any person entitled to notice under the Plan may
waive the notice.
12.5 SUCCESSORS. The Plan is binding upon all persons entitled to
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, it successors and assigns, and upon the Trustee, the Advisory
Committee, the Plan Administrator and their successors.
12.6 Word Usage. Words used in the masculine also apply to the feminine
where applicable, and wherever the context of the Plan dictates, the plural
includes the singular and singular includes the plural.
12.7 State Law. Colorado law shall determine all questions arising with
respect to the provisions of this Agreement except to the extent Federal
statutes supersede Colorado law.
12.8 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or with
respect to the establishment of the Trust, or any modification or amendment to
the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Participant, or any Beneficiary any right to
continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees,
or against the Plan Administrator, except as expressly provided by the Plan,
the Trust, ERISA or by a separate agreement.
48.
<PAGE> 55
ARTICLE XIII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.1 EXCLUSIVE BENEFIT. Except as provided under Article III, the
Employer has no beneficial interest in any asset of the Trust and no part of
any asset in the Trust shall ever revert to or be repaid to an Employer, either
directly or indirectly; nor prior to the satisfaction of all liabilities with
respect to the Participants and their Beneficiaries under the Plan, may any
part of the corpus of income of the Trust Fund, or any asset of the Trust, be
(at any time) used for, or diverted to, purposes other than the exclusive
benefit of the Participants or their Beneficiaries. However, if the
Commissioner of Internal Revenue, upon the Employer's request for initial
approval of this Plan, determines that the Trust created under the Plan is not
a qualified trust exempt from Federal income tax, then and only then the
Trustee, upon written notice from the Employer, will return the Employer's
contributions (and increment attributable to the contributions) to the
employer. The Trustee must make the return of the Employer contribution under
this Section 13.1 within one year of a final disposition of the Employer's
request for initial approval of the Plan. The Plan and Trust will terminate
upon the Trustee's return of the Employer's contributions.
13.2 AMENDMENT BY EMPLOYER. The Employer has the right at any time and
from time to time: (a) to amend this Agreement in any manner it deems necessary
or advisable in order to qualify (or maintain qualification of) this Plan and
the Trust created under it under the appropriate provisions of Code Section
401(a); and (b) to amend this Agreement in any other manner. No amendment may
authorize or permit any of the Trust Fund (other than the part required to pay
taxes and administration expenses) to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their Beneficiaries or
estates. No amendment may cause or permit any portion of the Trust Fund to
revert to or become a property of the Employer. The Employer also may not make
any amendment which affects the rights, duties or responsibilities of the
Trustee, the Plan Administrator, or the Advisory Committee without the written
consent of the affected Trustee, the Plan Administrator, or the affected member
of the Advisory Committee.
Code Section 411(d)(6) protected benefits. An amendment (including the
adoption of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code
Section 412(c)(8), and may not reduce or eliminate Code Section 411(d)(6)
protected benefits determined immediately prior to the adoption date (or, if
later, the effective date) of the amendment. An amendment reduces or eliminates
Code Section 411(d)(6) protected benefits if the amendment has the effect of
either (l) eliminating or reducing an early retirement benefit or a
retirement-type subsidy (as defined in Treasury regulations), or (2) except as
provided by Treasury regulations, eliminating an optional form of benefit. The
Advisory Committee must disregard an amendment to the extent application of the
amendment would fail to satisfy this paragraph. If the Advisory Committee must
disregard an amendment because the amendment would violate clause (1) or clause
(2), the Advisory Committee must maintain a schedule of the early retirement
option or other optional forms of
49.
<PAGE> 56
benefit the Plan must continue for the affected Participants. This paragraph
shall not apply to the extent that the Plan may be amended in accordance with
Code Section 411(d)(6)(C).
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively effective.
13.3 DISCONTINUANCE. THE Employer has the right, at any time, to suspend
or discontinue its contributions under the Plan, and to terminate, at any time,
this Plan and the Trust created under this Agreement. The Plan will terminate
upon the first occur of the following: (a) the date terminated by action of the
Employer; (b) the date the Employer shall be judicially declared bankrupt or
insolvent unless the proceeding authorized continued maintenance of the Plan;
(c) the dissolution, merger, consolidation or reorganization of the Employer or
the sale by the Employer of all or substantially all of its assets, unless the
successor or purchaser makes provision to continue the Plan, in which event the
successor or purchaser shall substitute itself as the Employer under this Plan.
13.4 FULL VESTING ON TERMINATION. Upon either full or partial termination
of the Plan, or, if applicable, upon the date of complete discontinuance of
stock bonus plan contributions to the Plan, an affected Participant's right to
his Accrued Benefit shall be 100% Nonforfeitable irrespective of the
Nonforfeitable percentage which otherwise would apply under Article V.
13.5 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be a
party to, any merger or consolidation with another plan, or to a transfer of
assets or liabilities to another plan unless immediately after the merger,
consolidation or transfer the surviving Plan provides each Participant a
benefit equal to or greater than the benefit each Participant would have
received had the Plan terminated immediately before the merger or consolidation
or transfer. The Trustee possesses the specific authority to enter into merger
agreements or direct transfer of assets agreements with the trustees of other
retirement plans described in Code Section 401(a), including an elective
transfer, and to accept the direct transfer of plan assets, or to transfer
assets as a party to any such agreement, provided the other retirement plan is
not subject to the joint and survivor annuity provisions of Code Section 417.
The Trustee may accept a direct transfer of plan assets on behalf of an
Employer prior to the date the Employee satisfies the Plan's eligibility
condition(s). If the Trustee accepts such a direct transfer of plan assets, the
Advisory Committee and the Trustee must treat the Employee as a Participant for
all purposes of the Plan except the Employee is not a Participant for purposes
of sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan. The Trustee may not
consent to, or be a party to a merger, consolidation or transfer of assets with
a defined benefit plan, except with respect to an elective transfer. The
Trustee will hold, administer and distribute the transferred assets as a part
of the Trust Fund and the Trustee must maintain a separate Employer
contribution Account for the benefit of the Employee on whose behalf the
Trustee accepted the transfer in order to reflect the value of the transferred
assets. Unless a transfer of assets to this Plan is an elective transfer, the
Plan will preserve all Code Section 411(d)(6) protected benefits with respect
to those transferred assets, in the manner described in Section 13.2. A
transfer is an elective transfer if: (1) the transfer satisfies the first
paragraph of this Section 13.5, (2) the transfer is voluntary, under a fully
informed election by
50.
<PAGE> 57
the Participant; (3) the Participant has an alternative that retains his Code
Section 411(d)(6) protected benefits (including an option to leave his benefit
in the transferor plan, if that plan is not terminating); (4) the transfer
satisfies the applicable spousal consent requirements of the Code; (5) the
transferor plan satisfies the joint and survivor notice requirements of the
Code, if the Participant's transferred benefit is subject to those
requirements; (6) the Participant has a right to immediate distribution from
the transferor plan, in lieu of the elective transfer; (7) the transferred
benefit is at least the greater of the single sum distribution provided by the
transferor plan for which the Participant is eligible or the present value of
the Participant's accrued benefit under the transferor plan payable at that
plan's normal retirement age; (8) the Participant has a one hundred percent
(100%) Nonforfeitable interest in the transferred benefit; and (9) the transfer
otherwise satisfies applicable Treasury regulations. An elective transfer may
occur between two defined contribution plans, between qualified plans of any
type.
Distribution restrictions under Code Section 401(k). If the Plan receives
a direct Transfer (by merger or otherwise) of elective contributions (or
amounts treated as elective contributions) under a Plan with a Code Section
401(k) arrangement, the distribution restrictions of Code Sections 401(k)(2)
and 401(k)(10) continue to apply to those transferred elective contributions.
13.6 TERMINATION. Upon termination of the Plan, the distribution
provisions of Article VI remain operative, with the following exceptions: (1)
if the present value of the Participant's Nonforfeitable Accrued Benefit does
not exceed $3,500, the Advisory Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Accrued Benefit to him in lump sum as soon as
administratively practicable after the Plan terminates; and (2) if the present
value of the Participant's Nonforfeitable Accrued Benefit exceeds $3,500, the
Participant or the Beneficiary, in addition to the distribution events
permitted under Article VI, may elect to have the Trustee commence distribution
of his Nonforfeitable Accrued Benefit as soon as administratively practicable
after the Plan terminates. To liquidate the Trust, the Advisory Committee will
purchase a deferred annuity contract for each Participant which protects the
Participant's distribution rights under the Plan, if the Participant's
Nonforfeitable Accrued Benefit exceeds $3,500 and the Participant does not
elect an immediate distribution pursuant to clause (2) above. The Trust will
continue until the Trustee in accordance with the direction of the Advisory
Committee has distributed all of the benefits under the Plan. On each valuation
date, the Advisory Committee will credit any part of a Participant's Accrued
Benefit retained in the Trust with its proportionate share of the Trust's
income, expenses, gains and losses, both realized and unrealized. Upon
termination of the Plan, the amount, if any, in a suspense account under
Article III will revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accruals but otherwise to continue maintenance of the
Plan, is not a termination for purposes of this Section 13.6.
51.
<PAGE> 58
IN WITNESS WHEREOF, the Employer and the Trustee have executed this Plan
and Trust Agreement this 29th day of October, 1996.
EMPLOYERS
J. D. EDWARDS & CoMPANY
By: /s/ [ILLEGIBLE]
--------------------------------
President
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------
Secretary
TRUSTEE:
/s/ JACK THOMPSON
--------------------------------
Jack Thompson
/s/ GREG A. DIXON
--------------------------------
Greg A. Dixon
/s/ RICHARD E. ALLEN
--------------------------------
Richard E. Allen
52.
<PAGE> 59
[J. D. EDWARDS LETTERHEAD]
February 29, 1996
Richard E. Allen
Greg A. Dixon
Robert C. Newman
Jack L. Thompson
Advisory Committee Members and/or
Trustees of the
J.D. Edwards & Company Employee Stock
Ownership Plan and Trust
8055 East Tufts Avenue
Suite 1200
Denver, CO 80237
Re: Letter Agreement on Indemnification under Section 7.03 of the J.D. Edwards
ESOP
Dear Messrs. Allen, Dixon, Newman and Thompson:
As allowed by Section 7.03 of the J.D. Edwards & Company Employee Stock
Ownership Plan and Trust Agreement ("Plan"), the following shall serve as a
letter agreement delineating the extent and scope of indemnification provided to
the Trustees of the Plan's trust and the members of the Plan's Advisory
Committee (the "Committee") by J.D. Edwards & Company (the "Employer") in
consideration for the continued services of such Trustees and Advisory Committee
members.
AGREEMENT
1. To the fullest extent permitted by law, the Employer agrees and does
hereby indemnify and hold harmless the Trustee and the Committee, jointly and
severally, each member individually and in their representative capacities, and
their officers, directors, employees, agents, successors and assigns, or any one
or more of them (referred to as the "Indemnees"), from any and all manner of
claims, actions, demands, proceedings, suits, expenses, charges, damages,
liabilities or losses arising or which may arise in any way out of or in
connection with the Plan's acquisition, disposition and holding of Employer
stock, or any one or more of such acts, specifically including, without
limitation, any costs and expenses (including, without limitation, attorneys
fees and court costs) or other losses which may be suffered by the Trustee and
the Committee, jointly and severally, each member individually and in their
representative capacities, their officers, directors, employees, agents,
successors and assigns, or any one or more of them, by reason of investigating,
defending, preparing to defend, or settling any such claim, action, demand,
proceeding or suit (whether threatened, pending or completed litigation)
<PAGE> 60
Richard E. Allen
Greg A. Dixon
Robert C. Newman
Jack L. Thompson
February 29, 1996
Page 2
which may be brought by any person, organization or governmental body or agency,
in connection with or in any way related to or involving the Plan's acquisition,
disposition and holding of Employer stock (as defined in Department of Labor
Regulation Section 2550.408e(b) and (c)), or any one or more of such acts, as
aforesaid; provided, however, that no such indemnification by the Employer shall
be satisfied out of the assets of the Plan.
2. Further, to the fullest extent permitted by law, the Employer agrees and
does hereby indemnify and hold harmless the Indemnees, jointly and severally,
each individually and in their representative capacities, from any and all
manner of claims, actions, demands, proceedings, suits, expenses, charges,
damages, liabilities or losses arising or which may arise in any way out of or
in connection with any act or omission related to the Indemnee's performance of
duties with respect to the Plan, specifically including, without limitation, any
costs and expenses (including, without limitation, attorneys fees and court
costs) or other losses which may be suffered by the Indemnee by reason of
investigation, defending, preparing to defend, or settling any such claim,
action, demand, proceeding or suit (whether threatened, pending or completed
litigation) which may be brought by any person, organization or governmental
body or agency, in connection with or in any way related to an act or omission
of the Indemnee while serving as a member of the Committee or a Trustee;
provided, however, that no such indemnification of the Employer shall be
satisfied out of the assets of the Plan.
3. Further, the Employer hereby agrees to pay to the Trustee for deposit in
the Plan, in full and immediately upon written demand, cash equal to the full
amount of any claim by any person, organization or governmental body or agency,
against the Trustee and the Committee, jointly and severally, each member
individually and in their representative capacities, and against any of its
officers, directors, employees, agents, successors and assigns, or any one or
more of them, for any part or all of such property or amounts which the Trustee
or the Committee, in their sole discretion, considers to be colorable, arising
out of or in connection with the Plan's acquisition, disposition and holding of
Employer stock (as defined in Department of Labor Regulation Section
2550.408e(b) and (c)), or any one or more of such acts.
4. To the fullest extent permitted by law, the Employer does hereby
indemnify and hold harmless the Trustee and the Committee, jointly and
severally, each member individually and in their representative capacities, and
their officers, directors, employees, agents, successors and assigns, or any one
or more of them, for, and hereby agrees to reimburse the Trustee and the
Committee, jointly and severally, each member individually and in their
representative capacities, and their officers, directors, employees, agents,
successors and assigns, or any one or more of them, any taxes (including
interest and penalties) which may be imposed on or with respect to the income or
principal of the Plan for any year, under the laws of any jurisdiction, for
which the Trustee and the Committee, jointly and severally, each member
individually and
<PAGE> 61
Richard E. Allen
Greg A. Dixon
Robert C. Newman
Jack L. Thompson
February 29, 1996
Page 3
in their representative capacities, and their directors, employees, agents,
successors and assigns, or any one or more of them, is or at any time becomes
liable; provided, however, that such amounts due arise in any way out of or in
connection with the Plan's acquisition, disposition and holding of Employer
stock (as defined in Department of Labor Regulation Section 2550.408e(b) and
(c)), or any one or more of such acts; provided further however, that such
amounts shall be payable out of Plan assets only to the extent permitted by law.
5. The Employer also agrees to reimburse to the Trustee and the Committee,
jointly and severally, each member individually and in their representative
capacities, and their officers, directors, employees, agents, successors and
assigns, or any one or more of them, and does hereby jointly and severally, to
the fullest extent of the law, indemnify and hold harmless the Trustee and the
Committee, jointly and severally, each member individually and in their
representative capacious, and their officers, directors, employees, agents,
successors and assigns, or any one or more of them as aforesaid, for all costs
and expenses (including without limitation court costs and attorneys fees) which
may be incurred by them, or any one or more of them, by reason of the failure of
the Employer to pay to the Trustee and the Committee, jointly and severally,
each member individually and in their representative capacities, and their
officers, directors, employees, agents, successors and assigns, or any one or
more of them, promptly upon demand any and all amounts due under this Agreement;
provided, however, that no such indemnification by the Employer shall be
satisfied out of the assets of the Plan.
6. At the election of the Trustee and the Committee, jointly or severally,
each member individually and in their representative capacities, and their
officers, directors, employees, agents, successors and assigns, or any one or
more of them, the Employer shall tender a full, fair and competent defense for
such party or parties in the event that a claim contemplated by this Agreement
is brought, whether directly or by a counterclaim. If no such election is made,
the Employer agrees in pay in advance of the final disposition of a civil or
criminal action, suit or proceeding contemplated under Paragraph 1 above, any
and all expenses incurred in investigating, defending, preparing to defend, or
settling any such claim, action, demand, proceeding or suit (whether threatened,
pending or completed litigation).
7. All of the recitations contained in this Agreement shall be considered a
part of this Agreement.
8. This Agreement shall be binding on the Employer and on the Trustee and
Committee, each member individually and in their representative capacities, and
on their respective heirs, executors, administrators, personal representatives,
officers, directors, employees, agents, successors and assigns, and shall inure
to the benefit of the Trustees and
<PAGE> 62
Richard E. Allen
Greg A. Dixon
Robert C. Newman
Jack L. Thompson
February 29, 1996
Page 4
Committee, each member individually and in their representative capacities, and
their officers, directors, employees, agents, successors and assigns.
9. This Agreement shall be interpreted in conjunction with the Plan as in
existence on the date this Agreement becomes effective and any successor plan
thereto. In event of a conflict between this Agreement and the Plan, whichever
provides the broadest protection to the Trustee and the Committee shall control.
Nothing in this Agreement shall relieve any party or parties of any liability
for any breach of their fiduciary responsibilities or liability for any
responsibility, obligation or duty under Part 4 of Subtitle B of Subchapter I of
the Employee Retirement Income Security Act of 1974, as amended.
10. If any provision of this Agreement is held invalid, it shall not affect
the validity of any other provision of this Agreement or of this Agreement as a
whole, which shall continue to be given full force and effect as if such invalid
provision were never included herein. Furthermore, the invalid provision shall
be construed so as to give it the maximum possible effect in order to carry out
the intent of the Company in extending this indemnification and remaining in
compliance with the requirements of applicable law. This documents may be signed
in separate counterparts, which, together, shall be taken as one and the same
document.
11. This indemnification agreement shall automatically be extended to any
other persons who become members of the Committee or Trustees of the Plan's
trust in the future, including but not limited to individuals who at the time of
such services are employees of the Employer. Notwithstanding the foregoing,
under no circumstances shall this letter agreement cover any financial
institution (such as a bank, trust company, or similar entity) which may in the
future serve as the Trustee of the Plan's trust.
Sincerely,
J.D. EDWARDS & COMPANY
/s/ C. EDWARD MCVANEY
-------------------------------
C. Edward McVaney
<PAGE> 1
EXHIBIT 10.16
J. D. EDWARDS & COMPANY
1992 INCENTIVE STOCK OPTION PLAN
<PAGE> 2
J. D. EDWARDS & COMPANY
1992 INCENTIVE
STOCK OPTION PLAN
ARTICLE 1
PURPOSE
THIS 1992 INCENTIVE STOCK OPTION PLAN (the "Plan") was adopted by the
Board and approved by the shareholders of J. D. EDWARDS & COMPANY, a Colorado
corporation, (the "Company"), with an effective date of ____________, 1992, in
order that certain employees of the Company who are responsible for the conduct
and management of the Company's business or who are involved in endeavors
significant to its success may be given an inducement to acquire a proprietary
interest in the Company, to gain an added incentive to advance the interests of
the Company, and to remain affiliated with the Company. Accordingly, the
Company will offer to sell shares of Common Stock as provided in this Plan to
such individuals as are designated in accordance with the provisions of the
Plan. The term "Company" also includes any parent or subsidiary corporation as
provided by Section 422 of the Code and applicable regulations.
ARTICLE 2
DEFINITIONS
2.1 "Board" means the board of directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "Common Stock" means authorized but unissued shares or treasury
shares, or any combination thereof, of Common Stock ($.01 par value each), of
the Company, and includes Common Stock to be issued as outstanding shares
pursuant to exercise of a stock option.
2.4 "Disinterested Person" means a director who qualifies as a
disinterested person for purposes of disinterested administration pursuant to
Rule 16b-3 as in effect with respect to the Plan from time to time.
2.5 "Fair Market Value" of a share of Common Stock on any date shall
mean the price determined under Article 5.1.
2.6 "Grant Date" means the date and time when Common Stock is offered
for sale to an Optionee under a Stock Option, as determined under Article 6.3
hereof.
2.7 "Option Stock" or "Optioned Stock" means shares of Common Stock for
which options to purchase have been granted under the Plan.
2.8 "Plan" means any reference to this J.D. Edwards & Company 1992
Incentive Stock Option Plan, as it may be amended.
2.9 "Optionee" means a key employee (including any officer or director
who is an employee) of the
-1-
<PAGE> 3
Company whose judgment, initiative, and continued efforts are expected to
contribute to the successful conduct of the business of the Company, as
determined by the Committee, and to whom the Committee has granted a Stock
Option.
2.10 "Stock Option" means the right granted under the Plan to an
Optionee to acquire the number of shares of Common Stock pursuant to the
Optionee's Stock Option Agreement.
2.11 "Stock Option Price" means the exercise price established by the
Committee with respect to an Optionee's Stock Option, determined as not less
than the Fair Market Value of a share of Common Stock on the Grant Date.
Notwithstanding the preceding sentence, the Optionee owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company on the Grant Date, the Stock Option Price shall be at least 110% of
such Fair Market Value on the Grant Date.
2.12 "Stock Option Agreement" means the contract under which an
Optionee is given the right to acquire Common Stock pursuant to this Plan.
2.13 "1933 Act" means the Securities Act of 1933, as amended.
2.14 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 3
TAX STATUS
3.1 Tax Status. The Stock Options granted under this Plan are intended
to be options that qualify as "incentive stock options" under Section 422 of
the Code. Under current law, no federal income tax is payable upon the grant
or upon exercise of an incentive stock option. Generally, any tax liability on
stock appreciation is deferred until disposition of the stock, and is subject
to the more favorable capital gain rates. However, failure to meet certain
holding period requirements can result in a disqualifying disposition, causing
ordinary compensation income upon such disposition. In addition, the exercise
of a qualified stock option generally causes the spread between stock value and
option price to be treated as an item of alternative minimum taxable income.
Optionees are urged to consult with their own tax advisors with respect to the
federal and state income taxation of the grant, exercise and disposition of
Stock pursuant to a Stock Option.
3.2 Interpretation. This Plan, and all questions arising under it
(including any Stock Option Agreement), shall be interpreted and answered in
the manner necessary to comply with Section 422 of the Code and applicable
United States of America Treasury Department Regulations ("Treasury
Regulations") relating to qualified "incentive stock options." With respect to
persons subject to Section 16 of the 1934 Act, transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 promulgated
thereunder ("Rule 16b-3") or its successors. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
ARTICLE 4
ADMINISTRATION
4.1 Committee. The Plan shall be administered by a committee of three
or more directors, each of whom is a Disinterested Person (the "Committee"),
appointed by the Board.
-2-
<PAGE> 4
4.2 Authority of Committee. Subject to further direction from the
Board, the Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and to
adopt such rules and regulations for administering the Plan as it may deem
necessary in order to comply with the requirements of the Plan, or in order to
conform to any regulation or to any change in any law or regulation applicable
thereto. In addition, the Committee is authorized to:
(a) direct the grant of Stock Options;
(b) determine the identity of key employees, which of them shall
be granted Stock Options, and the number of shares of Common Stock to be
covered by such Stock Options;
(c) determine the Fair Market Value of the Option Stock covered
by each Stock Option and the Stock Option Price;
(d) determine the nature and amount of consideration for the
Option Stock;
(e) determine the manner and the times at which the Stock
Options shall be exercisable, including the discretion to accelerate the
time of the exercise of such Stock Options;
(f) determine other conditions and limitations, if any, on each
Stock Option granted under the Plan (which need not be identical, but
which shall comply with the terms of this Plan);
(g) prescribe the form or forms of the instruments evidencing
the Stock Options and any restrictions imposed on the Option Stock and
of any other instruments required under the Plan to change such forms
from time to time;
(h) waive compliance (either generally or in any one or more
particular instances) by an Optionee with the requirements of any rule
or regulation with respect to a Stock Option, subject to the Plan
provisions or other applicable requirements;
(i) waive any restrictions imposed with respect to the
transferability of shares acquired by the exercise of Stock Options; and
(j) decide all questions and settle all controversies and
disputes which may arise in connection with the Plan.
4.3 Actions of Committee. All actions taken and all interpretations
and determinations made by the Committee in good faith (including
determinations of Fair Market Value) shall be final and binding upon all
Optionees, the Company, and all other interested persons.
4.4 Indemnification. In addition to any other rights of
indemnification, each Committee member shall be indemnified by the Company
against reasonable expenses (including attorneys' fees) actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal) to which such person may be a
party by reason of an action taken, or any failure to act, in connection with
this Plan and any Stock Option granted under it and the Company shall pay for
or reimburse the reasonable expenses incurred by a Committee member who is a
party to a proceeding in advance of the final disposition of the proceeding to
the full extent and as provided in the Colorado
-3-
<PAGE> 5
Corporation Code. This indemnification shall further extend to all amounts
paid by any Committee member either in a settlement approved by independent
legal counsel selected by the Committee or pursuant to a judgment in any such
action, suit or proceeding, provided that the Committee member acted in good
faith and in a manner he or she reasonably believed to be in the best interests
of the Company. Any action taken by the Committee under this Plan may be taken
without notice or meeting if the action is evidenced by a writing signed by all
members of the Committee. This Article shall not be interpreted to limit in
any manner any indemnification of the Company may be required to pay pursuant
to the Colorado Corporation Code, any court order, or any contract, resolution
or other commitment which is legally valid.
ARTICLE 5
FAIR MARKET VALUE
5.1 Determination. To qualify as an incentive stock option under the
Code, the Stock Option Price on the Grant Date must bear the relationship to
the Stock's Fair Market Value as set forth in Article 2.11. The Committee
shall make a good faith determination of Fair Market Value of Common Stock as
of the Grant Date in accordance with the provisions of Article 5.2 if there is
no established market in which the Common Stock is traded and the provisions of
Article 5.3 if there is an established market in which the Common Stock is
traded and in the manner necessary to comply with Section 422 of the Code and
applicable Treasury Regulations.
5.2 No Market. If there is no established market in which the Common
Stock is traded, the Committee may use any reasonable valuation method to make
a good faith determination of Fair Market Value. The objective shall be to set
the value at the price at which a share of Stock would change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy
or to sell and both having reasonable knowledge of relevant facts, determined
without regard to any restriction other than a restriction which, by its terms,
will never lapse.
5.3 Established Market. If there is an established market in which the
Stock is traded (whether on a national or regional stock exchange including the
National Association of Securities Dealers, Inc. Automated Quotation System or
in an over-the-counter market), the Fair Market Value of a share of Common
Stock shall be the mean between the highest and lowest selling prices on the
Grant Date as quoted in a composite listing selected by the Committee. If no
sales occurred on the Grant Date, the Fair Market Value of a share of Common
Stock shall be the mean between the bid and asked prices on such date. If such
price information is not available for the Grant Date, the relevant date shall
be the next preceding trading day on which a quotation of selling prices or bid
and asked prices was available.
ARTICLE 6
PARTICIPATION, STOCK OPTION PRICE, AND STOCK OPTION LIMITATIONS
6.1 Stock Subject to Plan. Subject to adjustment for capital changes
under Article 8, the number of shares available for issue under this Plan shall
not exceed _______________________ shares of Common Stock. All shares for
which a Stock Option is granted under this Plan, which for any reason are not
exercised prior to Stock Option expiration, or which are otherwise canceled or
forfeited, shall be available for the granting of further Stock Options under
this Plan.
6.2 Participation. Grants of Stock Options may be made to any key
employee of the Company, as determined by the Committee except that no Stock
Options may be granted under this Plan to a member of the Committee or, during
the year prior to service on the Committee, to a person designated to serve on
the
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Committee. In determining Optionees in its discretion, the Committee shall
consider granting Stock Options to those individuals whose judgment, initiative
and continued efforts are expected to contribute to the successful conduct of
the Company's business. Individuals who have been granted Stock Options may,
if otherwise eligible, be granted additional Stock Options.
6.3 Grant Date of Stock Option. The Grant Date of a Stock Option under
the Plan shall be the date on which the Committee makes the determination
granting such Stock Option, or the date of shareholder approval of the Plan if
later, and no grant shall be deemed effective prior to such date. If the
Committee specifically determines that the Common Stock shall be offered to an
Optionee at a date and time subsequent to Committee and shareholder approval or
if there is an unreasonable delay in giving Notice of the grant of a Stock
Option to the Optionee, the Grant Date shall be the date of the offer to the
Optionee.
6.4 Notice. Notice of the grant of a Stock Option shall be given to
the Optionee within a reasonable time.
6.5 Agreement. Each Stock Option shall be evidenced by a written Stock
Option Agreement, signed on behalf of the Company containing such terms and
provisions as the Committee may determine, subject to the provisions of this
Plan. If the Optionee fails to sign and deliver an original of the Stock
Option Agreement to the Company within thirty (30) days after such agreement
has been delivered to the Optionee, the Stock Option granted by such Stock
Option Agreement shall automatically terminate at the end of such thirty-day
period (unless the Committee otherwise determines).
6.6 Period of Grant. No Stock Option shall be granted under this Plan
after ten (10) years from the date this Plan is adopted by the Board or
approved by the shareholders of the Company (whichever is earlier). Stock
Options outstanding ten (10) years or more after the effective date of the Plan
shall continue to be governed by the provisions of this Plan.
6.7 Other Limitations. The Committee may impose such other limitations
upon the exercise of a Stock Option as the Committee shall deem appropriate, in
its discretion, including but not limited to Stock Option vesting provisions,
period for exercise of Stock Options, limitations on transferability of Stock
Options, and manner of exercise of Stock Options, and any such limitations
shall be provided in the Stock Option Agreement between the Company and an
Optionee for such Stock Option.
6.8 Maximum Option Value. In any calendar year, no Optionee may be
granted Stock Options for which the Fair Market Value (determined as of the
time the Stock Options are granted) of the Stock with respect to which Stock
Options are exercisable for the first time by the Optionee shall exceed
$100,000. For these purposes, the Fair Market Value of Stock shall be
determined as of the Grant Date, and Stock Options shall be applied in the
order in which they were granted and determined with reference to all such
plans of the Company.
ARTICLE 7
EXERCISE OF STOCK OPTIONS
7.1 Time of Exercise. Stock Options granted under this Plan shall be
exercisable at any time or times within the period prescribed in the Stock
Option Agreement, as determined by the Committee, which period shall not be
more than ten (10) years from the Grant Date; provided, however, if at the time
a Stock Option is granted to an Optionee who owns more than ten percent (10%)
of the total combined voting
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power of all classes of stock of the Company, the Stock Option may not be
exercisable after the expiration of five (5) years from the Grant Date. The
provisions on exercise of the Stock Option, including any provision on earlier
termination, shall be as determined by the Committee. If any Stock Option is
not exercised during the applicable exercise period, it shall be deemed to have
been forfeited as of the expiration of such period and shall be of no further
force or effect.
7.2 Manner of Exercise. Each exercise of a Stock Option, in whole or
in part, shall be made by the Optionee's delivery of written notice of such
exercise to the Company. Such notice shall be signed by the Optionee and shall
set forth the number of shares of Option Stock with respect to which the Stock
Option is being exercised and the Company's offer accepted, and shall specify
the date on which payment will be made. The date of payment shall be at least
five (5), but no more than thirty (30), days after the giving of such notice
unless an earlier date shall have been agreed upon by the Optionee and the
Company.
7.3 Enforceable Contract. The Optionee's written notice of exercise
shall constitute the Optionee's acceptance of the Company's offer under this
Plan, and shall create personal liability on the Optionee with respect to such
person's contractual promise. Upon such acceptance by the Optionee, all legal
remedies to enforce such contractual promise shall be available to both the
Company and the Optionee, including rights to damages or specific performance.
7.4 Closing. On the date specified in the notice of exercise and
conditioned upon the Optionee's payment of the Stock Option Price for all
Common Stock being acquired, the Company shall deliver (or cause to be
delivered) to the Optionee, or designee, one or more stock certificates for the
number of shares of Option Stock with respect to which the Stock Option is
being exercised and if deemed necessary by counsel to the Company, bearing a
legend to evidence any commitments given or restrictions imposed. The Stock
Option Price shall be paid as provided in the Stock Option Agreement. (This
event is referred to as the "Closing.") The shares issued upon exercise of a
Stock Option shall be issued fully paid, non-assessable and shall be registered
in the name of the Optionee or pursuant to his direction. The Stock Option
shall continue with respect to any remaining shares subject to the Stock Option
as to which exercise and payment has not yet been made, subject to the terms of
the applicable Stock Option Agreement.
7.5 Stock Issuance and Payment.
(a) Issuance. The Company shall not be obligated to deliver any
Optioned Stock unless and until, in the opinion of the Company's counsel, there
has been compliance with all applicable federal and state laws and regulations
and only when all other legal matters in connection with the issuance and
delivery of such stock have been approved by the Company's counsel. Without
limitation, the Committee may require from the Optionee such investment
representation or other agreement as the Company's counsel may consider
necessary or desirable in order to comply with the 1933 Act and any state
securities law. In addition, the Committee may require that the Optionee agree
that any sale of the Common Stock obtained by exercise of a Stock Option will
be made only in such manner as is permitted by the Committee, and that the
Optionee will notify the Company when such person makes any disposition of the
Common Stock (whether by sale, gift or otherwise). The Company shall use its
best efforts to effect any such compliance, and the Optionee shall take any
such action reasonably requested by the Committee.
(b) Payment in Cash. Unless the Stock Option Agreement otherwise
provides, or unless the Committee otherwise determines, the acquisition price
shall be paid by the Optionee in cash, by personal check or at the Committee's
discretion by bank cashier's check or certified check, in all cases in funds
immediately available in Denver, Colorado.
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(c) Payment in Shares. The Committee, in its sole discretion and
pursuant to such terms and conditions as it determines, may permit an Optionee
to surrender to the Company shares of Common Stock previously acquired by the
Optionee as part or full payment for the exercise of a Stock Option. Such
surrendered shares shall be valued at their Fair Market Value on the date of
exercise.
(d) Cashless Exercise. Payment may be made through delivery of a
properly executed exercise notice together with such other documentation as the
Committee and the broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds of the
Common Stock required to pay the Stock Option Price.
(e) Shareholder Rights. An Optionee shall have the rights of a
shareholder of the Company only as to shares actually issued to such person
under this Plan.
7.6 Employment Termination.
(a) General. If an Optionee's employment with the Company shall
terminate for any reason other than the Optionee's disability, any Stock Option
then held by the Optionee, to the extent then exercisable under the applicable
Stock Option Agreement, shall remain exercisable for one month after such
termination of employment or for a lesser period of time as specified in the
applicable Stock Option Agreement.
(b) Death. In the event of Optionee's death, the limitation imposed by
Section 7.6(a) is waived and exercise of the Stock Option may be made by the
deceased Optionee's personal representative, administrator or other person who
acquired the Option by bequest, inheritance or under the laws of descent and
distribution by reason of the Optionee's death (and any reference in this Plan
to the Optionee shall be a reference to such person). Any exercise of this
Stock Option after the Optionee's death shall be accompanied by letters
testamentary or other proof, satisfactory to the Company, of such personal
representative's (or other person's) right to exercise the Stock Option.
(c) Disability. If an Optionee's employment with the Company shall
terminate because of the disability of the Optionee, any Stock Option then held
by the Optionee, to the extent then exercisable under the applicable Stock
Option Agreement, shall remain exercisable for one year after the date of such
termination of employment because of the Optionee's disability or for a lesser
period of time as specified in the applicable Stock Option Agreement.
7.7 Leave of Absence. For purposes of this Plan, employment of an
Optionee shall be treated as continuing intact while such person is on sick
leave, military leave or other bona fide leave of absence if the period of
such leave does not exceed one hundred eighty (180) days. If such person's
leave exceeds one hundred eighty (180) days, employment shall be treated as
terminated for purposes of this Plan on the one hundredth eighty-first day of
such leave unless such person's right of continued employment is guaranteed
either by statute or contract.
7.8 Re-load Option. Without in any way limiting the authority of the
Committee to make grants hereunder, and in order to induce officers and other
key employees to retain ownership of shares in the Company, the Committee shall
have the authority (but not an obligation) to include within any Stock Option
Agreement a provision entitling the Optionee to a further option (a "Re-load
Option") in the event the Optionee exercises the option evidenced by the Stock
Option Agreement, in whole or in part, by
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surrendering other shares of the Company in accordance with this Plan and the
terms and conditions of the Option Agreement. Any such Re-load Option shall be
for a number of shares equal to the number of surrendered shares, shall become
exercisable in the event the purchased shares are held for a minimum period of
time not less than three (3) years, and shall be subject to such other terms
and conditions as the Committee may determine.
7.9 Disposition of Forfeited Stock Options. Any shares of Common Stock
subject to Stock Options forfeited by an Optionee shall not thereafter be
eligible for a purchase by the Optionee but may be made subject to Stock
Options granted to other Optionees.
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ARTICLE 8
CAPITAL CHANGES
.1 Stock Changes. In the event of a change to the shares of Common
Stock by reason of recapitalization, stock dividend, stock split, combination
of shares, exchange of shares, change in corporate structure or otherwise,
appropriate adjustments shall be made in:
(a) the number of shares of Common Stock theretofore made
subject to Stock Options and in the purchase price of said shares; and
(b) the aggregate number of shares which may be made subject to
Stock Options.
Such adjustments shall be made by the Committee, in its sole discretion,
if any of the foregoing adjustment shall result in a fractional share, the
fraction shall be disregarded, and the Company shall have no obligation to make
any cash or other payment with respect to such a fractional share.
.2 Acquisition Event. As used in Article 8.3, "Acquisition Event"
means:
(a) any merger or consolidation of the Company with one or more other
corporations, whether or not the Company is the surviving corporation;
(b) any sale or other disposition of all or substantially all of the
assets of the Company pursuant to a plan which provides for the liquidation of
the Company;
(c) any exchange by the holders of more than fifty percent (50%) of the
outstanding shares of Common Stock for securities issued by another entity, or
in whole or in part for cash or other property, pursuant to a plan of exchange
approved by the holders of a majority of such outstanding shares;
(d) a change in the majority of the members of the Board other than by
voluntary resignation; or
(e) any transaction to which Code Section 424(a) applies and to which
the Company is a party.
.3 Substitution or Cancellation Upon Acquisition. In connection with
any Acquisition Event and upon such terms and conditions as the Committee may
establish:
(a) The Optionee may be given the opportunity to make a final
settlement for the entire unexercised portion of any Stock Option
granted under this Plan, including any portion not then currently
exercisable, in any one or more of the following manners:
(1) Surrender such unexercised portion for cancellation
in exchange for the payment in cash of an amount not less than
the difference between the value per share of Common Stock as
measured by the value to be received by the holders of the
outstanding shares of Common Stock pursuant to the terms of the
Acquisition Event, as determined by the Committee in its
discretion, and the Stock Option Price at which such Stock Option
is or would become exercisable, multiplied by the number of
shares represented by such unexercised portion.
(2) Exercise such Stock Option, including any portion not
then otherwise
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currently exercisable, prior to the Acquisition Event so that the
Optionee would be entitled, with respect to shares thereby
acquired, to participate in the Acquisition Event as a holder of
Common Stock.
(3) Surrender such Stock Option for cancellation in
exchange for a substitute Stock Option, providing substantially
equal benefits are granted or are to be granted by an employer
corporation, or a parent or subsidiary of such an employer
corporation, which corporation after the Acquisition Event, is
expected to continue to conduct substantially the same business
as that acquired from the Company pursuant to the Acquisition
Event.
If the Optionee is given one or more of such opportunities with respect
to the entire unexercised portion of any Stock Option granted under this Plan,
the Stock Option may be canceled by the Company upon the occurrence of the
Acquisition Event and thereafter the Optionee will be entitled only to receive
the appropriate benefit pursuant to clause (1), (2) or (3) above, whichever may
be applicable.
The provisions of this Article are not intended to be exclusive of any
other arrangements that the Committee might approve for settlement of all
outstanding Stock Options in connection with an Acquisition Event or otherwise.
.4 Exercise Upon Initial Public Offering. As of the date of the
adoption of this Plan, the Company is contemplating effecting an initial public
offering (the "IPO") of the Company by offering to the public shares of stock
in a firm commitment underwriting. For purposes of this Plan, the IPO shall be
deemed effected as of the date the Company enters into an Underwriting
Agreement with an underwriter on a firm commitment basis for offering Company
shares pursuant to a Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933. Upon such effective
date, each Optionee who holds an unexercised option under this Plan, regardless
of whether his right to exercise has vested in whole, in part, or not at all on
the effective date of such IPO, shall be entitled to exercise his option in
whole or in part at any time, subject to further limitations of the Plan, and
in connection therewith to exercise all rights of an Optionee under Article 8
hereunder.
ARTICLE 9
GENERAL PROVISIONS
.1 Constructive Ownership. In determining whether an Optionee owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, any stock attribution rules required by
Section 422 of the Code shall apply. At the effective date of this Plan, any
Optionee would be treated as owning the stock owned, directly or indirectly, by
or for such person's brothers and sisters (whether by the whole or half blood),
spouse, ancestors and lineal descendants. In addition, the stock owned
directly or indirectly, by or for a corporation, partnership, estate or trust
would be treated as owned proportionately by or for its shareholders, partners
or beneficiaries. However, Common Stock that an Optionee may acquire under
outstanding Stock Options shall not be treated as owned by the Optionee.
.2 Parent and Subsidiary. In order to comply with Section 422 of the
Code, any reference to the Company includes its parent or a subsidiary
corporation. At the effective date of this Plan, the Code provides that [a]
the term "parent corporation" means any corporation (other than the employer
corporation if, at the time of the granting of the option, each of the
corporations other than the employer corporation owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain, and [b] the term
"subsidiary corporation" means any
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corporation (other than the employer corporation) in an unbroken chain of
corporations beginning with the employer corporation if, at the time of the
granting of the option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combining voting power of all classes of stock in one of the
other corporations in such chain.
.3 Disability. In determining whether an Optionee is disabled, the
definition specified in Section 422 of the Code shall apply. At the effective
date of the Plan, the Code provides that an Optionee is disabled if such person
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. A person shall not be considered
to be disabled unless such person furnishes proof as may be required by the
Code and applicable Treasury Regulations.
.4 No Contract of Employment. Nothing in this Plan shall confer upon
the Optionee the right to continue in the employ of the Company, nor shall it
interfere in any way with the right of the Company to discharge the Optionee at
any time for any reason whatsoever, with or without cause. Neither the
existence of the Plan nor the grant of any Stock Option hereunder shall be
taken into account in determining any damages to which an Optionee may be
entitled upon his or her termination of employment.
.5 No Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any shares of Common Stock subject to Stock
Options granted him under the Plan. Except as provided in Article 8, no
adjustment shall be made in the number of shares of Common Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of exercise of the
Optionee's Stock Option.
.6 Transferability, Restrictions. No Stock Option, Option Stock, nor
any other rights acquired by an Optionee under this Plan, shall be assignable
or transferable by an Optionee, other than by will or the laws of descent and
distribution and are exercisable, during his or her lifetime, only by the
Optionee. In the event of the Optionee's death, the Stock Option may be
exercised only as provided in Article 7.7(b). Any such assignments, transfer,
pledge, hypothecation or other disposition of any Stock Option contrary to the
provisions of the Plan, and any levy of any attachment or similar process upon
a Stock Option will be without effect, and the Committee may, in its
discretion, upon the occurrence of such an event, terminate the Stock Option.
.7 Disqualifying Disposition. Neither the grant nor the exercise of a
Stock Option that meets the requirements of Section 422 of the Code and
applicable regulations results in taxable income to the Optionee. However, if
the Optionee disposes of the Stock acquired pursuant to this Plan within two
(2) years from the Grant Date or within one (1) year after the transfer of the
Stock to such person, then the Optionee recognizes ordinary income in the
taxable year in which the disqualifying disposition occurs (based on the excess
of the lesser of the amount realized or the Fair Market Value of the Stock on
the date of exercise over the Stock Option Price). Within thirty (30) days
following any disqualifying disposition under the Code, the Optionee shall give
written notice to the Company of the time and manner of any such transaction,
including the amount realized upon disposition of the Stock.
.8 Delivery. Delivery of any notice or document shall occur upon
actual delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following mailing by
U.S. certified mail, postage prepaid, return receipt requested, addressed to
the
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recipient's then current mailing address. Any corporate officer or other
authorized agent may receipt for any notice or document on behalf of the
Company.
.9 Amendment. Subject to shareholder approval if required by Article
9.10, the Board may from time to time alter, amend, suspend or discontinue this
Plan (including any amendment deemed necessary or advisable to comply with the
requirements of "incentive stock options" under the Code and applicable
Treasury Regulations). However, no such action shall adversely affect the
rights and obligations with respect to Stock Options which are then outstanding
under this Plan.
.10 Shareholder Approval. This Plan shall become effective only if
approved by the Company's shareholders in the manner required by its articles
of incorporation and bylaws and the Colorado Corporation Code, and in
compliance with Rule 16b-3(b). In addition the requisite shareholder approval
shall be obtained for any amendment of this Plan for which such approval is
required in order to remain in compliance with Rule 16b-3(b).
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EXHIBIT 10.17
J. D. EDWARDS & COMPANY
1992 NONQUALIFIED STOCK OPTION PLAN
<PAGE> 2
J. D. EDWARDS & COMPANY
1992 NONQUALIFIED
STOCK OPTION PLAN
ARTICLE 1
PURPOSE
THIS 1992 NONQUALIFIED STOCK OPTION PLAN (the "Plan") was adopted by
the Board and approved by the shareholders of J. D. EDWARDS & COMPANY, a
Colorado corporation, (the "Company") in order that selected persons who are
responsible for the conduct and management of the Company's business or who are
involved in endeavors significant to its success may be given an inducement to
acquire a proprietary interest in the Company, to gain an added incentive to
advance the interests of the Company, and to remain affiliated with the
Company. Accordingly, the Company will offer to sell shares of Common Stock as
provided in this Plan to such individuals as are designated in accordance with
the provisions of the Plan.
ARTICLE 2
DEFINITIONS
.1 "Board" means the board of directors of the Company.
.2 "Code" means the Internal Revenue Code of 1986, as amended.
.3 "Common Stock" means authorized but unissued shares or treasury
shares, or any combination thereof, of Common Stock, ($.01 par value each), of
the Company, and includes Common Stock to be issued as outstanding shares
pursuant to exercise of a stock option.
.4 "Disinterested Person" means a director who qualifies as a
disinterested person for purposes of disinterested administration pursuant to
Rule 16b-3 as in effect with respect to the Plan from time to time.
.5 "Fair Market Value" of a share of Common Stock on any date shall
mean the price determined under Article 5.1.
.6 "Grant Date" means the date and time when Common Stock is offered
for sale to an Optionee under a Stock Option, as determined under Article 6.3
hereof.
.7 "Option Stock" or "Optioned Stock" means shares of Common Stock
for which options to purchase have been granted under the Plan.
.8 "Plan" means any reference to this J. D. Edwards & Company 1992
Nonqualified Stock Option Plan, as it may be amended.
.9 "Optionee" means any individual (including any officer or any
director who is an employee) or non-employee director, consultant or
independent contractor of the Company) whose judgment, initiative, and
continued efforts are expected to contribute to the successful conduct of the
business of the Company,
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as determined by the Committee, and to whom the Committee has granted a Stock
Option.
.10 "Stock Option" means the right granted under the Plan to an
Optionee to acquire Common Stock pursuant to the Optionee's Stock Option
Agreement.
.11 "Stock Option Price" means the exercise price established by the
Committee with respect to an Optionee's Stock Option.
.12 "Stock Option Agreement" means the contract under which an
Optionee is given the right to acquire Common Stock pursuant to this Plan.
.13 "1933 Act" means the Securities Act of 1933, as amended.
.14 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 3
TAX STATUS
.1 Tax Status. The Stock Options granted under this Plan are
nonqualified stock options (that is, options that do not qualify as incentive
stock options under the Code). Under current law, no federal income tax is
payable upon the grant of a nonqualified option (unless the option itself has a
readily ascertainable fair market value). However, compensation income is
recognized on option exercise, measured by the excess of the fair market value
of the stock acquired over the option price. An exception applies if the stock
acquired is subject to a substantial risk of forfeiture (for example, if
ownership of the stock is conditioned upon the future performance of
substantial services). If the exception applies, the taxable event is deferred
until the forfeiture risk disappears. Optionees are urged to consult with
their own tax advisors with respect to the federal and state income taxation of
the grant, exercise and disposition of Common Stock pursuant to a Stock Option.
.2 Interpretation. This Plan, and all questions arising under it
(including any Stock Option Agreement), shall be interpreted and answered in
the manner consistent with the Code and applicable United States of America
Treasury Department Regulations ("Treasury Regulations") relating to
nonqualified stock options. With respect to persons subject to Section 16 of
the 1934 Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 promulgated thereunder ("Rule 16b-3") or
its successors. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
ARTICLE 4
ADMINISTRATION
.1 Committee. The Plan shall be administered by a committee of three
or more directors each of whom is a Disinterested Person (the "Committee")
appointed by the Board.
.2 Authority of Committee. Subject to further direction from the
Board, the Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and to
adopt such rules and regulations for administering the Plan as it may deem
necessary in order to comply with the requirements of the Plan, or in order to
conform to any regulation or to any change in any
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<PAGE> 4
law or regulation applicable thereto. In addition, the Committee is authorized
to:
(a) direct the grant of Stock Options;
(b) determine the identity of individuals who shall be
granted Stock Options, and the number of shares of Common Stock to be
covered by such Stock Options;
(c) determine the Fair Market Value of the Option Stock
covered by each Stock Option and the Stock Option Price;
(d) determine the nature and amount of consideration for the
Option Stock;
(e) determine the manner and the times at which the Stock
Options shall be exercisable, including the discretion to accelerate
the time of the exercise of such Stock Options;
(f) determine other conditions and limitations, if any, on
each Stock Option granted under the Plan (which need not be identical,
but which shall comply with the terms of this Plan);
(g) prescribe the form or forms of the instruments evidencing
the Stock Options and any restrictions imposed on the Option Stock and
of any other instruments required under the Plan and to change such
forms from time to time;
(h) waive compliance (either generally or in any one or more
particular instances) by an Optionee with the requirements of any rule
or regulation with respect to a Stock Option, subject to the Plan
provisions or other applicable requirements;
(i) establish restrictions on transfer and waive any
restrictions imposed with respect to the transferability of shares
acquired by the exercise of Stock Options; and
(j) decide all questions and settle all controversies and
disputes which may arise in connection with this Plan.
.3 Actions of Committee. All actions taken and all interpretations
and determinations made by the Committee in good faith (including
determinations of Fair Market Value) shall be final and binding upon all
Optionees, the Company, and all other interested persons.
.4 Indemnification. In addition to any other rights of
indemnification, each Committee member shall be indemnified by the Company
against reasonable expenses (including attorneys' fees) actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal) to which such person may be a
party by reason of an action taken, or any failure to act, in connection with
this Plan and any Stock Option granted under it and the Company shall pay for
or reimburse the reasonable expenses incurred by a Committee member who is a
party to a proceeding in advance of the final disposition of the proceeding to
the full extent and as provided in the Colorado Corporation Code. This
indemnification shall further extend to all amounts paid by any Committee
member either in a settlement approved by independent legal counsel selected by
the Committee or pursuant to a judgment in any such action, suit or proceeding,
provided that the Committee member acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the Company. Any action
taken by the Committee under this Plan may be taken without notice or meeting
if the action is evidenced
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by a writing signed by all members of the Committee. This Article shall not be
interpreted to limit in any manner any indemnification the Company may be
required to pay pursuant to the Colorado Corporation Code, any court order, or
any contract, resolution or other commitment which is legally valid.
ARTICLE 5
FAIR MARKET VALUE
.1 Determination. Any Stock Option granted under this Plan must set
forth a Stock Option price not less than the percentage of Fair Market Value
specified in Article 2.11. Fair Market Value also has relevance in determining
the amount of compensation income recognized by an Optionee. In making the
determination of Fair Market Value with respect to a share of Common Stock, the
provisions of Article 5.2 shall apply if there is no established market in
which the Common Stock is traded and the provisions of Article 5.3 shall apply
if there is an established market in which the Common Stock is traded.
.2 No Market. If there is no established market in which the Common
Stock is traded, the Committee may use any reasonable valuation method to make
a good faith determination of Fair Market Value. The objective shall be to set
the value at the price at which a share of Stock would change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy
or to sell and both having reasonable knowledge of relevant facts, determined
without regard to any restriction other than a restriction which, by its terms,
will never lapse.
.3 Established Market. If there is an established market in which
the Common Stock is traded (whether on a national or regional stock exchange,
including the National Association of Securities Dealers, Inc. Automated
Quotation System, or in an over-the-counter market), the Fair Market Value of a
share of Common Stock shall be the mean between the highest and lowest selling
prices on the Grant Date as quoted in a composite listing selected by the
Committee. If no sales occurred on the Grant Date, the Fair Market Value of a
share of Common Stock shall be the mean between the bid and asked prices on
such date. If such price information is not available for the Grant Date, the
relevant date shall be the next preceding trading day on which a quotation of
selling prices or bid and asked prices was available.
ARTICLE 6
PARTICIPATION, STOCK OPTION PRICE, AND STOCK OPTION LIMITATIONS
.1 Stock Subject to Plan. Subject to adjustment for capital changes
under Article 8, the number of shares available for issue under this Plan shall
not exceed __________ shares of Common Stock. All shares for which a Stock
Option is granted under this Plan, which for any reason are not exercised prior
to Stock Option expiration, or which are otherwise cancelled or forfeited,
shall be available for the granting of further Stock Options under this Plan.
.2 Participation. Grants of Stock Options may be made to any
individual as determined by the Committee except that no Stock Option may be
granted under this Plan to a member of the Committee or during the year prior
to service on the Committee, to a person designated to serve on the Committee.
In determining Optionees in its discretion, the Committee shall consider
granting Stock Options to those individuals whose judgment, initiative and
continued efforts are expected to contribute to the successful conduct of the
Company's business. Individuals who have been granted Stock Options may, if
otherwise eligible, be granted additional Stock Options.
.3 Grant Date of Stock Option. The Grant Date of a Stock Option
under the Plan shall be the date
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<PAGE> 6
on which the Committee makes the determination granting such Stock Option, or
the date of shareholder approval of the Plan if later, and no grant shall be
deemed effective prior to such date. If the Committee specifically determines
that the Common Stock shall be offered to an Optionee at a date and time
subsequent to Committee and shareholder approval or if there is an unreasonable
delay in giving notice of the grant of a Stock Option to the Optionee, the
Grant Date shall be the date of the offer to the Optionee.
.4 Notice. Notice of the grant of a Stock Option shall be given to
the Optionee within a reasonable time.
.5 Agreement. Each Stock Option shall be evidenced by a written
Stock Option Agreement, signed on behalf of the Company containing such terms
and provisions as the Committee may determine, subject to the provisions of
this Plan. If the Optionee fails to sign and deliver an original of the Stock
Option Agreement to the Company within thirty (30) days after such agreement
has been delivered to the Optionee, the Stock Option granted by such Stock
Option Agreement shall automatically terminate at the end of such thirty-day
period (unless the Committee otherwise determines).
.6 Period of Grant. No Stock Option shall be granted under this Plan
after ten years after the date this Plan is adopted by the Board or approved by
the shareholders of the Company (whichever is earlier). Stock Options
outstanding ten years or more after the effective date of the Plan shall
continue to be governed by the provisions of this Plan.
.7 Other Limitations. The Committee may impose such other
limitations upon the exercise of a Stock Option as the Committee shall deem
appropriate, in its discretion, including but not limited to Stock Option
vesting provisions, period for exercise of Stock Options, limitations on
transferability of Stock Options, and manner of exercise of Stock Options, and
any such limitations shall be provided in the Stock Option Agreement between
the Company and an Optionee.
ARTICLE 7
EXERCISE OF STOCK OPTIONS
.1 Time of Exercise. Stock Options granted under this Plan shall be
exercisable at any time or times within the period prescribed in the Stock
Option Agreement, as determined by the Committee, (and in no event shall be
exercisable after ten years after the Grant Date), unless such Stock Option is
terminated earlier, as provided in this Plan. The provisions on exercise of
the Stock Option, including any provision on earlier termination, shall be as
determined by the Committee. If any Stock Option is not exercised during the
applicable exercise period, it shall be deemed to have been forfeited as of the
expiration of such period and shall be of no further force or effect.
.2 Manner of Exercise. Each exercise of a Stock Option, in whole or
in part, shall be made by the Optionee's delivery of written notice of such
exercise to the Company. Such notice shall be signed by the Optionee and shall
set forth the number of shares of Option Stock with respect to which the Stock
Option is being exercised and the Company's offer accepted, and shall specify
the date on which payment will be made. The date of payment shall be at least
five (5), but not more than thirty (30), days after the giving of such notice
unless an earlier date shall have been agreed upon by the Optionee and the
Company.
.3 Enforceable Contract. The Optionee's written notice of exercise
shall constitute the Optionee's acceptance of the Company's offer under this
Plan, and shall create personal liability on the Optionee with respect to such
person's contractual promise. Upon such acceptance by the Optionee, all legal
remedies to
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<PAGE> 7
enforce such contractual promise shall be available to both the Company and the
Optionee, including rights to damages or specific performance.
.4 Closing. On the date specified in the notice of exercise and
conditioned upon the Optionee's payment of the Stock Option Price for all
Common Stock being acquired, the Company shall deliver (or cause to be
delivered) to the Optionee, or designee, one or more stock certificates for the
number of shares of Option Stock with respect to which the Stock Option is
being exercised and, if deemed necessary by counsel to the Company, bearing a
legend to evidence any commitments given or restrictions imposed. The Stock
Option Price shall be paid as provided in the Stock Option Agreement. (This
event is referred to as the "Closing.") The shares issued upon exercise of a
Stock Option shall be issued fully paid, non-assessable and shall be registered
in the name of the Optionee or pursuant to his direction. The Stock Option
shall continue with respect to any remaining shares subject to the Stock Option
as to which exercise and payment has not yet been made, subject to the terms of
the applicable Stock Option Agreement.
.5 Stock Issuance and Payment.
(a) Issuance. The Company shall not be obligated to deliver any
Optioned Stock unless and until, in the opinion of the Company's counsel, there
has been compliance with all applicable federal and state laws and regulations
and only when all other legal matters in connection with the issuance and
delivery of such stock have been approved by the Company's counsel. Without
limitation, the Committee may require from the Optionee such investment
representation or other agreement as the Company's counsel may consider
necessary or desirable in order to comply with the 1933 Act and any state
securities law. In addition, the Committee may require that the Optionee agree
that any sale of the Common Stock obtained by exercise of a Stock Option will
be made only in such manner as is permitted by the Committee, and that the
Optionee will notify the Company when such person makes any disposition of the
Common Stock (whether by sale, gift or otherwise). The Company shall use its
best efforts to effect any such compliance, and the Optionee shall take any
such action reasonably requested by the Committee.
(b) Payment in Cash. Unless the Stock Option Agreement otherwise
provides, or unless the Committee otherwise determines, the acquisition price
shall be paid by the Optionee in cash, by personal check or at the Committee's
discretion by bank cashier's check or certified check, in all cases in funds
immediately available in Denver, Colorado.
(c) Payment in Shares. The Committee, in its sole discretion and
pursuant to such terms and conditions as it determines, may permit an Optionee
to surrender to the Company shares of Common Stock previously acquired by the
Optionee as part or full payment for the exercise of a Stock Option. Such
surrendered shares shall be valued at their Fair Market Value on the date of
exercise.
(d) Cashless Exercise. Payment may be made through delivery of a
properly executed exercise notice together with such other documentation as the
Committee and the broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds of the
Common Stock required to pay the Stock Option Price.
.6 Employment Termination.
(a) General. If an Optionee's employment with the Company shall
terminate for any reason other than the Optionee's disability, any Stock Option
then held by the Optionee, to the extent then exercisable under the applicable
Stock Option Agreement, shall remain exercisable for one month after such
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<PAGE> 8
termination of employment or for a lesser period of time as specified in the
applicable Stock Option Agreement.
(b) Death. In the event of Optionee's death, the limitation imposed
by Section 7.6(a) is waived and exercise of the Stock Option may be made by the
deceased Optionee's personal representative, administrator or other person who
acquired the Option by bequest, inheritance or under the laws of descent and
distribution by reason of the Optionee's death (and any reference in this Plan
to the Optionee shall be a reference to such person). Any exercise of this
Stock Option after the Optionee's death shall be accompanied by letters
testamentary or other proof, satisfactory to the Company, of such personal
representative's (or other person's) right to exercise the Stock Option.
(c) Disability. If an Optionee's employment with the Company shall
terminate because of the disability of the Optionee, any Stock Option then held
by the Optionee, to the extent then exercisable under the applicable Stock
Option Agreement, shall remain exercisable for one year after the date of such
termination of employment because of the Optionee's disability or for a lesser
period of time as specified in the applicable Stock Option Agreement.
.7 Leave of Absence. For purposes of this Plan, employment of an
Optionee shall be treated as continuing intact while such person is on sick
leave, military leave or other bona fide leave of absence if the period of such
leave does not exceed one hundred eighty (180) days. If such person's leave
exceeds one hundred eighty (180) days, employment shall be treated as
terminated for purposes of this Plan on the one hundredth eighty-first day of
such leave unless such person's right of continued employment is guaranteed
either by statute or contract.
.8 Re-load Option. Without in any way limiting the authority of the
Committee to make grants hereunder, and in order to induce Optionees to retain
ownership of shares in the Company, the Committee shall have the authority (but
not an obligation) to include within any Stock Option Agreement a provision
entitling the Optionee to a further option (a "Re-load Option") in the event
the Optionee exercises the option evidenced by the Stock Option Agreement, in
whole or in part, by surrendering other shares of the Company in accordance
with this Plan and the terms and conditions of the Option Agreement. Any such
Re-load Option shall be for a number of shares equal to the number of
surrendered shares, shall become exercisable in the event the purchased shares
are held for a minimum period of time not less than three (3) years, and shall
be subject to such other terms and conditions as the Committee may determine.
.9 Disposition of Forfeited Stock Options. Any shares of Common
Stock subject to Stock Options forfeited by an Optionee shall not thereafter be
eligible for a purchase by the Optionee but may be made subject to Stock
Options granted to other Optionees.
ARTICLE 8
CAPITAL CHANGES
.1 Stock Changes. In the event of a change to the shares of Common
Stock by reason of recapitalization, stock dividend, stock split, combination
of shares, exchange of shares, change in corporate structure or otherwise,
appropriate adjustments shall be made in:
(a) the number of shares of Common Stock theretofore made
subject to Stock Options and in the purchase price of said shares; and
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<PAGE> 9
(b) the aggregate number of shares which may be made subject
to Stock Options.
Such adjustment shall be made by the Committee, in its sole
discretion. If any of the foregoing adjustment shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have no
obligation to make any cash or other payment with respect to such a fractional
share.
.2 Acquisition Event. As used in Article 8.3, "Acquisition Event"
means:
(a) any merger or consolidation of the Company with one or more other
corporations, whether or not the Company is the surviving corporation;
(b) any sale or other disposition of all or substantially all of the
assets of the Company pursuant to a plan which provides for the liquidation of
the Company;
(c) any exchange by the holders of more than fifty percent (50%) of
the outstanding shares of Common Stock for securities issued by another entity,
or in whole or in part for cash or other property, pursuant to a plan of
exchange approved by the holders of a majority of such outstanding shares;
(d) a change in the majority of the members of the Board other than
by voluntary resignation; or
(e) any transaction to which Code Section 424(a) applies and to which
the Company is a party.
.3 Substitution or Cancellation Upon Acquisition. In connection with
any Acquisition Event and upon such terms and conditions as the Committee may
establish:
(a) The Optionee may be given the opportunity to make a final
settlement for the entire unexercised portion of any Stock Option
granted under this Plan, including any portion not then currently
exercisable, in any one or more of the following manners:
(1) Surrender such unexercised portion for
cancellation in exchange for the payment in cash of an amount
not less than the difference between the value per share of
Common Stock as measured by the value to be received by the
holders of the outstanding shares of Common Stock pursuant to
the terms of the Acquisition Event, as determined by the
Committee in its discretion, and the Stock Option Price at
which such Stock Option is or would become exercisable,
multiplied by the number of share represented by such
unexercised portion.
(2) Exercise such Stock Option, including any
portion not then otherwise currently exercisable, prior to the
Acquisition Event so that the Optionee would be entitled, with
respect to shares thereby acquired, to participate in the
Acquisition Event as a holder of Common Stock.
(3) Surrender such Stock Option for cancellation in
exchange for a substitute Stock Option, providing
substantially equal benefits are granted or are to be granted
by an employer corporation, or a parent or subsidiary of such
an employer corporation, which corporation after the
Acquisition Event, is expected to continue to conduct
substantially the same business as that acquired from the
Company pursuant to the Acquisition Event.
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<PAGE> 10
If the Optionee is given one or more of such opportunities with
respect to the entire unexercised portion of any Stock Option granted under
this Plan, the Stock Option may be cancelled by the Company upon the occurrence
of the Acquisition Event and thereafter the Optionee will be entitled only to
receive the appropriate benefit pursuant to clause (1), (2) or (3) above,
whichever may be applicable.
The provisions of this Article are not intended to be exclusive of any
other arrangements that the Committee might approve for settlement of all
outstanding Stock Options in connection with an Acquisition Event or otherwise.
ARTICLE 9
GENERAL PROVISIONS
.1 Section 83(b) Election. Whenever shares of Common Stock
transferred to an Optionee are subject to a substantial risk of forfeiture (as
that term is defined under Section 83 of the Code and applicable Treasury
Regulations), the Optionee may elect under Section 83(b) of the Code to include
in gross income (as compensation) the excess, if any, of the Fair Market Value
of such Stock over the Stock Option Price. If this Section 83(b) election is
made, no compensation income is subsequently recognized when the risk of
forfeiture lapses. Any Optionee who makes a Section 83(b) election shall give
timely notice to the Company of the statement required by the Treasury
Regulations under Section 83 of the Code.
.2 Withholding. Whenever compensation income is recognized by an
Optionee with respect to a Stock Option, the Company may require (as a
condition of Option exercise) the Optionee to make a withholding tax payment to
the Company. The amount of such payment shall equal the amount of federal and
state income tax that the Company is required to withhold with respect to the
issuance of such Common Stock. To the extent the required withholding tax
payment is not timely made by the Optionee, the Company may either withhold
such payment from the Optionee's cash compensation or make such other
arrangements as the Committee determines.
.3 Parent and Subsidiary. Any reference to the Company includes its
parent or a subsidiary corporation as defined in Section 422 of the Code. At
the effective date of this Plan, the Code provides that [a] the term "parent
corporation" means any corporation (other than the employer corporation if, at
the time of the granting of the option, each of the corporations other than the
employer corporation owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain, and [b] the term "subsidiary corporation" means any
corporation (other than the employer corporation) in an unbroken chain of
corporations beginning with the employer corporation if, at the time of the
granting of the option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
.4 Disability. In determining whether an Optionee is disabled, the
definition specified in Section 422 of the Code shall apply. At the effective
date of the Plan, the Code provides that an Optionee is disabled if such person
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. A person shall not be considered
to be disabled unless such person furnishes proof of the existence of such
disability in such form and manner, and at such times, as may be required by
the Code, and applicable Treasury Regulations.
.5 No Contract of Employment. Nothing in this plan shall confer upon
the Optionee the right to
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<PAGE> 11
continue in the employ of the Company, nor shall it interfere in any way with
the right of the Company to discharge the Optionee at any time for any reason
whatsoever, with or without cause. Neither the existence of the Plan nor the
grant of any Stock Option hereunder shall be taken into account in determining
any damages to which an Optionee may be entitled upon his or her termination of
employment.
.6 No Rights as a Shareholder. Prior to exercise of the Stock Option
and the transfer of Common Stock to such Optionee, an Optionee shall have no
rights as a shareholder with respect to any shares of Common Stock subject to
Stock Options granted under this Plan. Except as provided in Article 8, no
adjustment shall be made in the number of shares of Common Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of exercise of the
Optionee's Stock Option.
.7 Transferability, Restrictions. No Stock Option, Option Stock, nor
any other rights acquired by an Optionee under this Plan, shall be assignable
or transferable by an Optionee, other than by will or the laws of descent and
distribution, and are exercisable, during his or her lifetime, only by the
Optionee. In the event of the Optionee's death, the Stock Option may be
exercised only as provided in Article 7.6(b). Any such assignments, transfer,
pledge, hypothecation or other disposition of any Stock Option contrary to the
provisions of the Plan, and any levy of any attachment or similar process upon
a Stock Option will be without effect, and the Committee may, in its
discretion, upon the occurrence of such an event, terminate the Stock Option.
.8 Delivery. Delivery of any notice or document shall occur upon
actual delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following mailing by
U.S. certified mail, postage prepaid, return receipt requested, addressed to
the recipient's then current mailing address. Any corporate officer or other
authorized agent may receipt for any notice or document on behalf of the
Company.
.9 Amendment. Subject to shareholder approval if required by Article
9.10, the Board may from time to time alter, amend, suspend or discontinue this
Plan. However, no such action shall adversely affect the rights and
obligations with respect to Stock Options which are then outstanding under this
Plan.
.10 Shareholder Approval. This Plan shall become effective only if
approved by the Company's shareholders in the manner required by its articles
of incorporation and bylaws and the Colorado Corporation Code, and in
compliance with Rule 16b-3(b). In addition, the requisite shareholder approval
shall be obtained for any amendment of this Plan for which such approval is
required in order to remain in compliance with Rule 16b-3(b).
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<PAGE> 1
EXHIBIT 10.18
RESTRICTED STOCK GRANT PLAN FOR EMPLOYEES
OF
J.D. EDWARDS & COMPANY
1. Purpose of Plan. The purposes of this Restricted Stock Grant Plan for
Employees of J.D. Edwards & Company (the "Stock Plan") are to provide eligible
employees of J.D. Edwards & Company, a Colorado corporation (the "Company"),
with the opportunity to be granted shares of voting common stock (the "Stock")
of the Company and to provide the terms of the restrictions, the lifting of
such restrictions or vesting of the shares and the conditions under which the
Stock granted to the employees may be purchased by the Company and certain
other persons.
2. Employees Eligible to Participate. The employees of the Company who are
eligible to be granted Stock of the Company in accordance with this Stock Plan
are such employees as are designated in writing by the Company after the
effective date of this Stock Plan and who enter into an Employee Restricted
Stock Agreement with the Company (the "Employee"). If an Employee decides to
accept the Stock granted to such Employee, the Employee must accept at least 50
percent of the shares granted.
3. Stock Valuation. For the Company's internal purposes, the value per
share of Stock granted shall be equal to the fair market value of the Stock as
determined by the Board of Directors in its sole discretion based upon the
appraised value of the Company as of the last day of the immediately preceding
fiscal year of the Company, as determined in an independent appraisal by an
investment banking institution specializing in the information technology
industry, divided by the number of issued and outstanding shares of common
stock of the Company as of the last day of the immediately preceding fiscal
year of the Company, as determined on that date by reference to the Company's
stock record book.
4. Number of Shares to be Offered. The total number of shares to be
granted shall not exceed 41,000 shares. The number of shares of Stock which an
Employee shall be granted shall be as designated in writing by the Company
determined by the Board of Directors.
5. Prohibitions on Transfer. For a period of ten (10) years from the date
set forth on the certificates of the shares of Stock granted to Employee
pursuant to this Stock Plan, subject to earlier termination as provided in the
last two sentences of this Section 5, none of the shares of Stock, nor any
right, title or interest therein, shall be sold, assigned, transferred, pledged
or otherwise disposed of or encumbered, voluntarily or
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<PAGE> 2
involuntarily, by the Employee or by operation of law, except pursuant to
Sections 8, 9, 10, 11 and 12 of this Stock Plan. Upon termination of employment
with the Company other than for retirement (as described in the last sentence
of this Section 5), disability (as described in the last sentence of this
Section 5) or death, the Employee is obligated to offer the shares of stock for
purchase by the Company and certain shareholders as set forth in Sections 8 and
9 below. Any attempted disposition or encumbrance of any of the shares of
Stock during such ten (10) year period in violation of the provisions of this
Section 5 shall be void. Notwithstanding anything to the contrary set forth
herein, the restrictions on transfer described in this Section 5 shall not
apply to any transfer being made pursuant to the Company's right of purchase
set forth in Section 8 below, made pursuant to the exercise of the right of
purchase of certain holders of common stock set forth in Section 9 below, made
after the Company or those certain holders of common stock fail to exercise
their right of purchase, or on or after a change in ownership of fifty percent
or more of the shares of the Company's common stock outstanding as of the
effective date of this Stock Plan, including upon the occurrence of such a
change resulting from the closing of a public offering: pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), but excluding changes in ownership of fifty percent or
more of the shares of the Company's outstanding common stock resulting from one
or more sales or reallocations of outstanding common stock among the
shareholders identified in Section 9 or resulting from the death of one or more
of such shareholders ("Change in Control"). In addition the restrictions on
transfer described in this Section 5 shall no longer apply to any shares of
Stock held by the Employee who voluntarily retires upon reaching retirement age
in accordance with the Company's policies, who is partially or totally disabled
to the extent the Employee can no longer perform the duties of his job on a
regular basis as determined by the Company's Board of Directors in its sole
discretion or upon the death of the Employee, even though the ten (10) year
period has not expired at the time of such retirement, disability or death.
6. Employee's Rights as Shareholder. Subject to the prohibitions on
transfer set forth in this Stock Plan, an Employee who is granted Stock of the
Company shall have all of the rights of a shareholder of the Company.
7. Stock Certificate Endorsement. All certificates representing the Stock
of the Company issued in accordance with this Stock Plan shall be endorsed as
follows:
The shares of Stock represented by this certificate are subject to the
provisions of the Restricted Stock Grant Plan for Employees of J.D. Edwards
& Company (the "Company") dated July 13, 1990 (the "Plan") and an
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<PAGE> 3
agreement entered into between the registered owner of such shares and the
Company (the "Agreement") which prohibits any sale, assignment, transfer,
pledge or other disposition or encumbrance of the shares represented by
this certificate, or any right, title or interest therein, whether
voluntary or involuntary, by act of the holder or by operation of law, for
a period of ten (10) years from the date of this certificate, except as
otherwise expressly permitted by the Plan. The shares represented by this
certificate are also subject to a right of purchase in favor of the Company
and/or in favor of certain stockholders contained in the Plan. A copy of
the Plan and Agreement are on file in the office of the secretary of the
Company.
8. Company's Right of Purchase.
Except to the extent and in the manner permitted by this Agreement, the
Employee may not sell, assign, transfer, pledge or otherwise dispose of any of
his shares of Stock until such time as the Company's right of purchase in this
Section 8 and the right of purchase of certain stockholders in Section 9 shall
have expired.
(a) All of the shares of Stock shall be subject to a right of the
Company to purchase those shares at its sole option after termination of the
Employee's full-time employment with the Company within certain time periods
described below.
(b) If the Employee voluntarily terminates employment, is
involuntarily terminated, is disabled (as described in the last sentence of
Section 5 above) or retires upon reaching retirement age in accordance with the
Company's policies before the expiration of the ten (10) year restriction
period, as set forth in Section 5 above, the Company shall have the option to
repurchase all or any portion of the shares of Stock at the net book value for
such shares of Stock as of the last day of the fiscal quarter immediately
preceding the date of the termination. The Company's auditors shall determine
the book value of the Company (assets minus liabilities of the Company divided
by the number of issued and outstanding shares of common stock of the Company
as of the last day of the immediately preceding fiscal quarter of the Company,
as determined on that date by reference to the Company's stock record book) in
accordance with generally accepted accounting principles consistently applied.
(c) If the Employee's employment with the Company is terminated due
to a personal tragedy or other unusual circumstances, the Board of Directors in
its discretion may make special arrangements concerning the sale of Employee's
Stock to the Company, notwithstanding any of the foregoing provisions.
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<PAGE> 4
(d) If the Company elects to exercise its right of purchase hereunder,
it shall so notify the Employee within sixty (60) days after the Employee's
termination, disability or retirement, specifying the number of shares of
Stock, manner of payment and time and place for tender of certificates
representing such shares. All shares of Stock which the Company has elected to
purchase hereunder shall be tendered at the principal office of the Company at
a reasonable date and time specified by it (in any event within thirty (30)
days after the Company's election to purchase) by delivery of certificates
representing such shares of Stock endorsed in blank and in proper form for
transfer against payment of the purchase price. The purchase price shall be
payable in cash or by certified or bank check.
(e) If any transfer of shares of Stock is made or attempted contrary
to the provisions of this Section 8, or if the shares of Stock are not tendered
to the Company for its purchase as required herein, the Company shall have the
right to purchase the shares of Stock from the owners thereof or his transferee
at any time before or after the transfer, as herein provided. In the event that
the Company elects to exercise its right of purchase, it may do so by canceling
the certificates representing the shares of Stock so purchased and depositing
the purchase price determined hereunder in a bank account for the benefit of
the Employee or the Employee's successor in interest, whereupon all such shares
of Stock shall be for all purposes canceled, and neither the Employee nor any
other transferee shall have any rights as one of its stockholders for any
purpose, including, without limitation, dividend and voting rights, until there
has been compliance with all applicable provisions of this Agreement. In
addition to any other legal or equitable remedies which it may have, the
Company may enforce its rights by actions for specific performance to the
extend permitted by law.
(f) Notwithstanding anything in the foregoing, the Company shall not
have any right to repurchase any shares of Stock from the Employee on and after
a Change in Control of the Company.
9. Right of Purchase of Certain Holders of Common Stock.
In the event the Company fails to exercise its purchase right pursuant to
Section 8 above, any sale assignment, transfer or disposal of by the Employee
of his or her shares of Stock shall be subject to the rights provided in this
Section 9.
(a) Upon termination of the Employee's full-time employment with the
Company within certain time periods described below all of the shares of Stock
shall be subject to a right of certain holders of Stock of the Company, namely
Messrs. C. Edward McVaney, Jack L. Thompson and Robert C. Newman and the
Trustees
-4-
<PAGE> 5
of the Employee Stock Ownership Plan of the Company (the "Offeree
Stockholders"), to purchase those shares at their sole option after the
Company's right to purchase the Stock as set forth in Section 8 above either
expires or the Company earlier notifies the Employee that it will not exercise
such option.
(b) If the Employee voluntarily terminates employment, is
involuntarily terminated, is disabled (as described in the last sentence of
Section 5 above) or retires upon reaching retirement age in accordance with the
Company's policies before the expiration of the ten (10) year restriction
period, as set forth in Section 8 above, and the Company's right to purchase
the Stock as set forth in Section 8 above either expires or the Company earlier
notifies the Employee that it will not exercise such option, the Offeree
Shareholders shall have the option to repurchase all or any portion of the
shares of Stock at the net book value for such shares of Stock as of the last
day of the fiscal quarter immediately preceding the date of the termination.
The Company's auditors shall determine the book value of the Company in
accordance with Section 8(b) above.
(c) If the Offeree Shareholders elect to exercise their right of
purchase hereunder, it shall so notify the Employee within sixty (60) days
after the Company's right to purchase either expires or the Company earlier
notifies the Employee that it will not exercise such options specifying the
number of shares of Stock, manner of payment and time and place for tender of
certificates representing such shares. All shares of Stock which the Offeree
Shareholders have elected to purchase hereunder shall be tendered at the
principal office of the Company at a reasonable date and time specified by them
(in any event within thirty (30) days after the Offeree Shareholders election
to purchase) by delivery of certificates representing such shares of Stock
endorsed in blank and in proper form for transfer against payment of the
purchase price. The purchase price shall be payable in cash or by certified or
bank check.
(d) If any transfer of shares of Stock is made or attempted contrary
to the provisions of this Section 9, or if the shares of Stock are not tendered
to the Offeree Shareholders for their purchase as required herein, the Offeree
Shareholders shall have the right to purchase the shares of Stock from the
owners thereof or his transferee at any time before or after the transfer, as
herein provided. In the event that the Offeree Shareholders elect to exercise
their right of purchase, they may do so by requesting that the Company cancel
the certificates representing the shares of Stock so purchased and depositing
the purchase price determined hereunder in a bank account for the benefit of
the Employee or the Employee's successor in interest, whereupon all such shares
of Stock shall be for all purposes canceled, and neither the Employee nor any
other transferee shall have any rights as one of its stockholders for any
purpose,
-5-
<PAGE> 6
including, without limitation, dividend and voting rights, until there has been
compliance with all applicable provisions of this Agreement. In addition to any
other legal or equitable remedies which it may have, the Offeree Shareholders
may enforce its rights by actions for specific performance to the extend
permitted by law.
(e) Notwithstanding anything in the foregoing, the Offeree
Shareholders shall not have any right to repurchase any shares of Stock from
the Employee on and after a Change in Control of the Company.
10. Death or Bankruptcy of Employee.
(a) In the event of the death of an Employee who holds shares of
Stock in accordance with this Stock Plan, the Company shall have the first
option, and failure of the Company to exercise such option, the Offeree
Shareholders shall have the second option, to purchase all or a portion of the
shares of stock from a personal representative of the estate of the deceased
Employee at the purchase price indicated in Section 11 below and in accordance
with the terms and conditions provided for in Section 12 below. The Company's
option shall be exercisable by written notice to the deceased Employee's
personal representative within sixty (60) days following notification to the
Company of such death, and exercisable by the Offeree Shareholders by written
notice to the deceased Employee's personal representative within sixty (60)
days following the expiration of the Company's right to purchase or earlier
notification that it will not exercise such purchase option. Neither the
Company, nor the Offeree Shareholders upon the Company's failure to exercise
this option, be required to make such purchase.
(b) In the event that an Employee who owns Stock pursuant to this
Stock Plan declares bankruptcy, the Company shall have the first option, and
the Offeree Shareholders shall have the second option, to purchase all or a
portion of the shares of Stock from the bankrupt estate at the purchase price
indicated in Section 11 below and in accordance with the terms and conditions
provided for in Section 12 below. The option of the Company shall be
exercisable by written notice to the Employee's bankrupt estate within sixty
(60) days following notification to the Company of such bankruptcy, and by the
Offeree Shareholders by written notice to the Employee's bankrupt estate within
sixty (60) days following the expiration of the Company's right to purchase or
earlier notification that it will not exercise such purchase option. Neither
the Company nor the Offeree Shareholders upon the Company's failure to exercise
its option, be required to make such purchase. An Employee who becomes subject
to a proceeding in bankruptcy, whether voluntary
-6-
<PAGE> 7
or involuntary, shall be required to give notice to the Company of such.
11. Purchase Price of Stock. The purchase price per share of Stock of any
Employee to be paid by the Company or by the Offeree Shareholders, whichever is
applicable, in accordance with Sections 9 or 10, shall be the most recently
determined purchase price in accordance with Section 8(b) above prior to: (a)
the date of death of the Employee; or (b) the date of the bankruptcy of the
employee, whichever is applicable.
12. Payment of Purchase Price and Closing.
(a) Method of Payment. The purchase price for the shares of Stock to
be purchased pursuant to Section 10 shall be payable by the Company or by the
Offeree Shareholders, whichever is applicable, to the Employee or to the
personal representative of the estate of the deceased Employee, whichever is
applicable, in cash or cashier's check at the date of closing as set forth in
this Section 12 below.
(b) Place. Unless then agreed to the contrary by the parties hereto,
the closing of the sale and purchase of the Stock of the Employee shall take
place at the office of the Company.
(c) Time. Unless then agreed to the contrary by the parties hereto,
in the case of a purchase of the Stock by the Company from the personal
representative of a deceased Employee's estate, the closing shall take place on
such date as the Company shall specify but, in any event, no later than six (6)
months after the death of the Employee. Unless then agreed to the contrary by
the parties hereto, in the case of a purchase of the Stock by the Company from
the Employee during the life time of the Employee, the closing shall take place
on such date as the Company shall specify but, in any event, no later than six
(6) months after the date of the Employee's termination of employment with the
Company, disability, death or bankruptcy.
(d) Closing Matters. Upon the closing of the sale and purchase, the
Employee (or the personal representative of the deceased Employee's estate, as
the case may be) and the Company shall execute and deliver to each other the
various documents which shall be required to carry out their undertakings
hereunder.
13. Securities Law Matters. The Stock will be issued without registration
under the Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state or other jurisdiction and the transferability of
the Stock is therefore subject to restrictions imposed by those laws, in
addition to the other restrictions set forth in this Stock Plan. Accordingly,
the Employee may not offer for sale, sell or
-7-
<PAGE> 8
otherwise transfer the Stock unless it is registered under the Securities Act
and other applicable securities laws or unless exemptions from the registration
requirements thereof are available for the transaction, as established to the
satisfaction of the Company by opinion of counsel or otherwise. Accordingly,
the Employee understands that the certificates representing the Stock will bear
a legend substantially as follows:
The shares of stock represented by this certificate have been issued
without registration under the Securities Act of 1933 or any state or other
jurisdiction's securities laws and may not be sold or offered for sale
unless registered under such Act and other applicable securities laws or
unless exemptions from the registration requirements thereof are available
for the transaction as established to the satisfaction of the Company by
opinion of counsel or otherwise.
14. Notices. All notices provided for in this Stock Plan shall be made in
writing (a) either by actual delivery of the notice to the party entitled
thereto; or (b) by registered mail, return receipt requested, to the last known
address of the party entitled thereto. The notice shall be deemed to be
received in case (a) on the date of its actual receipt by the party entitled
thereto, and in case (b) on the date of its mailing.
15. Withholding Taxes. The Company may take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company is
required by any law or regulation of any governmental authority, whether
federal, state or local, to withhold in connection with the grant of the shares
of Stock to the Employee, including, but not limited to, the withholding of
such taxes from any amounts otherwise payable by the Company to the Employee.
16. Effective Date. The effective date of this Stock Plan shall be July
13, 1990.
17. Miscellaneous.
(a) Amendment or Discontinuance of the Stock Plan. The Company shall
have the right to amend, modify or terminate this Stock Plan at any time
without notice to the Employees.
(b) Copy of Stock Plan. A copy of this Stock Plan shall be given to
each Employee of the Company who is eligible to receive Stock of the Company in
accordance with Section 2 above.
(c) Stock Plan Administrator. The Board of Directors of the Company
shall designate the plan administrator of this Stock Plan. The plan
administrator shall have the authority to
-8-
<PAGE> 9
control and manage the operation and administration of the Stock Plan. The
Board of Directors may from time to time designate a new plan administrator.
(d) Headings. All headings set forth in this Stock Plan are intended
for convenience only and shall not control or affect the meaning, construction
or effect of this Stock Plan or of any of the provisions thereof.
(e) Remedies. The shares of Stock subject to this Stock Plan are a
unique chattel and the parties hereto shall have the remedies which are
available to them for the violation of any of the terms of this Stock Plan,
including, but not limited to, the equitable remedy of specific performance.
(f) Law. This Stock Plan shall be governed, construed and interpreted
according to the laws of the State of Colorado. The parties hereto acknowledge
that a Colorado corporation may purchase its own shares only in accordance with
the provisions contained in Colorado Revised Statutes Section 7-3-102 and
Section 7-6-102.
(g) Construction. Throughout this Stock Plan, the masculine gender
shall include the feminine or neuter, and the singular shall include the plural
and vice versa, wherever the context and facts require such construction. Any
reference herein to the "parties hereto" shall also be deemed to include the
personal representative of the estate of a deceased Employee, if applicable.
(h) Separability. Each provision of this Stock Plan is declared to be
separable from every other provision. If any provision is held invalid, such
invalidity shall not affect any other provision and all other provisions shall
remain in full force and effect as if the invalid provision had not been
included herein.
(i) Effect of the Stock Plan. The provisions of this Stock Plan shall
be binding upon the parties hereto, their heirs, personal representatives, and
assigns, and the parties hereto do covenant and agree that they themselves and
their heirs, personal representatives, and assigns will execute any and all
instruments, releases, assignments and consents that may be required of them
in accordance with the provisions of this Stock Plan. Notwithstanding the
foregoing however, the successors or assignees, if any, of the Offeree
Stockholders (except of the ESOP) shall not have any rights to repurchase or
otherwise acquire the stock pursuant to Section 9 of this Stock Plan.
-9-
<PAGE> 1
EXHIBIT 10.19
STOCK PLAN FOR EMPLOYEES
OF
J. D. EDWARDS & COMPANY
1. Purposes of Plan. The purposes of this Stock Plan (the "Plan") are
to provide eligible employees of J. D. Edwards & Company, a Colorado
corporation (the "Company"), with the opportunity to purchase shares of voting
common stock (the "stock") of the Company and to provide that, upon the
termination of employment by such employees with the Company or upon the death
of such employees, the stock purchased by the employees shall be repurchased by
the Company.
2. Employees Eligible to Participate. The employees of the Company
who are eligible to purchase stock of the Company in accordance with this Plan
are such employees as are designated in writing by the Company as of June 1 of
each year after the effective date of this Plan.
3. Purchase Price for Stock. The purchase price per share of stock
shall be equal to the net book value (assets minus liabilities) of the stock of
the Company as of the last day of the immediately preceding fiscal year of the
Company, based upon the financial statements prepared as of that date by the
Company's independent certified public accountants in accordance with generally
accepted accounting principles, divided by the number of issued and outstanding
shares of common stock of the Company as of the last day of the immediately
preceding fiscal year of the Company, as determined on that date by reference
to the Company's stock record book.
4. Number of Shares to be Offered. The number of shares of stock
which an eligible employee shall be entitled to purchase each
<PAGE> 2
year shall be as designated in writing by the Company as of June 1 of each year
after the effective date of this Plan.
5. Method of Payment. Payment for the shares of stock shall be made
by the eligible employees to the Company in cash, which payment shall be made
no later than July 1 of the year of purchase by the eligible employees. Upon
receipt by the Company of the purchase price from an eligible employee, a
certificate of stock for the designated number of shares shall be issued by the
Company to the employee.
6. Employee's Rights as Shareholder. An employee who purchases stock
of the Company shall have all of the rights as a shareholder of the Company;
provided, however, the employee shall not encumber or use any of the stock as
collateral for any purpose.
7. Stock Certificate Endorsement. All certificates representing the
stock of the Company issued in accordance with this Plan shall be endorsed as
follows:
"The shares of stock represented by this certificate are
subject to the provisions of the Stock Plan for Employees of
J. D. Edwards Company dated May 1, 1984, and the shares of
stock are not assignable except as provided in that Plan."
8. Death of Employee. In the event of the death of an employee who
has purchased stock of the Company in accordance with this Plan, all of the
employee's shares of stock in the Company shall be sold to the Company by the
personal representative of the estate of the deceased employee and the Company
shall purchase the stock from the personal representative of the estate of the
deceased employee at the purchase price indicated in Paragraph 11. below and in
accordance with the terms and conditions provided for in Paragraph 12. below.
-2-
<PAGE> 3
9. Termination of Employment. In the event of the termination of
employment with the Company of an employee who has purchased stock of the
Company in accordance with this Plan, all of the employees' shares of stock in
the Company shall be sold to the Company by the employee and the Company shall
purchase the stock from the employee at the purchase price indicated in
Paragraph 11. below and in accordance with the terms and conditions provided
for in Paragraph 12. below.
10. Sale of Stock by Employee. In the event that an employee who has
purchased stock of the Company in accordance with this Plan desires to sell or
otherwise transfer all or any portion of the stock, the employee shall by
written notice delivered to the Company first offer the stock for sale to the
Company at the purchase price indicated in Paragraph 11. below and in
accordance with the terms and conditions provided in Paragraph 12. below, the
Company to have one (1) month within which to exercise the option to purchase
the stock. In determining whether the Company will exercise the option to
purchase the stock of the employee, the employee shall not be entitled to vote
on such determination, either as a director or as a stockholder. If the Company
shall by written notice delivered to the Employee not desire to purchase the
stock or shall fail to exercise the option to purchase the stock within the one
(1) month period, the employee shall be free to sell or otherwise transfer the
employee's stock to whomever the employee may choose and upon such terms as
the employee shall desire; provided, however, that if a sale or transfer of the
stock by the employee to a purchaser or other transferee is not completed
within one (1) month after the expiration of the one
-3-
<PAGE> 4
(1) month option period which the Company possesses hereunder, the employee
must again comply with the provisions of this Paragraph 10. before such a sale
or transfer can be made free from the provisions of this Plan.
11. Purchase Price of Stock. The purchase price per share of stock of
an employee to be paid by the Company, in accordance with Paragraphs 8., 9.,
and 10. above, shall be the most recently determined purchase price in
accordance with Paragraph 3. above prior to: (a) the date of death of the
employee; (b) the date of the termination of employment with the Company by the
employee; or (c) the date of the delivery of the written notice of the desire
of the employee to sell or otherwise transfer the stock, whichever is
applicable.
12. Payment of Purchase Price. In the event that the purchase price of
the shares of stock of the employee to be paid by the Company is less than
Twenty-Five Thousand Dollars ($25,000), then the purchase price shall be
payable by the Company to the employee or to the personal representative of the
estate of the deceased employee, whichever is applicable, in cash at the date
of closing, as specified in Paragraph 15.b. below. In the event that the
purchase price of the shares of stock of the employee to be paid by the Company
is greater than Twenty-Five Thousand Dollars ($25,000), then the purchase price
shall be payable by the Company to the employee or to the personal
representative of the estate of the deceased employee, whichever is applicable,
at the date of closing, as specified in Paragraph 15.b. below, in cash or, at
the option of the Company, by delivery of the Company's unsecured promissory
note dated as of the date of closing to the employee or to the personal
representative of
-4-
<PAGE> 5
the estate of a deceased employee, whichever is applicable. The note: (a) shall
be due five (5) years after the date thereof; (b) shall be payable in equal
amortized monthly installments from the date thereof, including principal and
interest at the rate of nine percent (9%) per annum as to any unpaid principal
balance; and (c) may be paid in full or in part by the Company at any time after
its delivery, without the payment of a prepayment penalty and interest on the
note shall only accrue to the date of such payment in full. The note shall
provide that upon the default of any payment of principal or interest, the
entire balance of principal and accrued interest shall become immediately due
and payable. Upon the cash payment or the delivery of the note, as the case may
be, the Company shall be entitled to receive the stock of the employee as
properly endorsed by the employee or the personal representative of the estate
of a deceased employee, whichever is applicable.
13. Notices. All notices provided for in this Plan shall be made in
writing (a) either by actual delivery of the notice to the party entitled
thereto; or (b) by registered mail, return receipt requested, to the last known
address of the party entitled thereto. The notice shall be deemed to be
received in case (a) on the date of its actual receipt by the party entitled
thereto, and in case (b) on the date of its mailing.
14. Indebtedness of Employee. Notwithstanding any other provisions to
the contrary in this Plan, in the event that, at the time of a purchase of the
stock of the employee by the Company, the employee is indebted to the Company
for any reason whatsoever, the employee shall not be entitled to payment of any
portion of the purchase price
-5-
<PAGE> 6
for the stock until such indebtedness has been satisfied in full, irrespective
of the terms and provisions of the indebtedness. At such time as the
indebtedness has been so satisfied in full, the Company shall execute and
deliver to the employee any needed documents in order to evidence the full
satisfaction of the indebtedness.
15. Closing.
a. Place. Unless then agreed to the contrary by the parties hereto,
the closing of the sale and purchase of the stock of the employee shall take
place at the office of the Company.
b. Time. Unless then agreed to the contrary by the parties hereto,
in the case of a purchase of the stock by the Company from the personal
representative of a deceased employee's estate, the closing shall take place on
such date as the Company shall specify but, in any event, no later than six (6)
months after the death of the employee. Unless then agreed to the contrary by
the parties hereto, in the case of a purchase of the stock by the Company from
the employee during the lifetime of the employee, the closing shall take place
on such date as the Company shall specify but, in any event, no later than six
(6) months after the date of the employee's written notice of the desire to
sell in Paragraph 10. above or the date of the employee's termination of
employment with the Company, whichever is applicable.
c. Closing Matters. Upon the closing of the sale and purchase, the
employee (or the personal representative of the deceased employee's estate, as
the case may be) and the Company shall execute and deliver to each other the
various documents which shall be required to carry out their undertakings
hereunder.
-6-
<PAGE> 7
16. Effective Date. The effective date of this Plan shall be May 1,
1984.
17. Miscellaneous.
a. Amendment or Discontinuance of the Plan. The Company shall have
the right to amend, modify, or terminate this Plan at any time without notice
to the employees.
b. Copy of Plan. A copy of this Plan shall be given to each employee
of the Company who is eligible to purchase shares of stock of the Company in in
accordance with Paragraph 2. above.
c. Plan Administrator. The secretary of the Company shall act as the
plan administrator of this Plan. The plan administrator shall have the
authority to control and manage the operation and administration of the Plan.
d. Headings. All headings set forth in this Plan are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Plan or of any of the provisions thereof.
e. Remedies. The shares of stock subject to this Plan are a unique
chattel and the parties hereto shall have the remedies which are available to
them for the violation of any of the terms of this Plan, including, but not
limited to, the equitable remedy of specific performance.
f. Law. This Plan shall be governed, construed and interpreted
according to the laws of the State of Colorado. The parties hereto acknowledge
that a Colorado corporation may purchase its own shares only in accordance with
the provisions contained in Colorado Revised Statutes Section 7-3-102 and
Section 7-6-102. The par-
-7-
<PAGE> 8
ties hereto agree for themselves, their heirs, personal representatives, and
assigns to take all necessary action and to execute all documents reasonably
appropriate to comply with the those statutes.
g. Construction. Throughout this Agreement, the masculine gender
shall include the feminine or neuter, and the singular shall include the plural
and vice versa, wherever the context and facts require such construction. Any
reference herein to the "parties hereto" shall also be deemed to include the
personal representative of the estate of a deceased employee, if applicable.
h. Separability. Each provision of this Plan is declared to be
separable from every other provision. If any provision is held invalid, such
invalidity shall not affect any other provision and all other provisions shall
remain in full force and effect as if the invalid provision had not been
included herein.
i. Effect of Plan. The provisions of this Plan shall be binding upon
the parties hereto, their heirs, personal representatives, and assigns, and the
parties hereto do covenant and agree that they themselves and their heirs,
personal representatives, and assigns will execute any and all instruments,
releases, assignments, and consents that may be required of them in accordance
with the provisions of this Plan.
-8-
<PAGE> 1
Exhibit 11.1
J.D. EDWARDS & COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
----------------------------------------- ------------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income $ 12,063 $ 18,209 $ 26,326 $ 5,941 $ 7,178
--------- --------- --------- --------- --------
Shares outstanding
Weighted average number of
common shares outstanding 80,872 79,139 79,044 79,039 79,102
Assuming exercise of stock options 11,397 15,140 19,935 20,358 19,761
Assuming repurchase of treasury stock (11,324) (13,083) (12,620) (13,718) (6,257)
--------- --------- --------- --------- --------
Net incremental shares(1) 73 2,057 7,315 6,640 13,504
Assuming exercise of stock options
considered cheap stock 810 810 810 810 810
--------- --------- --------- --------- --------
Weighted average number of
common shares outstanding as adjusted 81,755 82,006 87,169 86,489 93,416
--------- --------- --------- --------- --------
Primary earnings per common share $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
--------- --------- --------- --------- --------
FULLY DILUTED EARNINGS PER SHARE(2)
Net income $ 12,063 $ 18,209 $ 26,326 $ 5,941 $ 7,178
--------- --------- --------- --------- --------
Shares outstanding
Weighted average number of
common shares outstanding 80,872 79,139 79,044 79,039 79,102
Assuming exercise of stock options 11,397 15,140 19,935 20,358 19,761
Assuming repurchase of treasury stock (11,310) (12,726) (11,873) (12,223) (5,717)
--------- --------- --------- --------- --------
Net incremental shares(1) 87 2,414 8,062 8,135 14,044
Assuming exercise of stock options
considered cheap stock 810 810 810 810 810
--------- --------- --------- --------- --------
Weighted average number of
common shares outstanding as adjusted 81,769 82,363 87,916 87,984 93,956
--------- --------- --------- --------- --------
Primary earnings per common share $ 0.15 $ 0.22 $ 0.30 $ 0.07 $ 0.08
--------- --------- --------- --------- --------
</TABLE>
- --------------------
(1) Application of the treasury stock method results in a repurchase of less
than 20% of weighted average shares outstanding for all periods presented;
therefore, no adjustments to net income or shares outstanding are required
pursuant to the modified treasury stock method as prescribed by APB 15
paragraph 28 and footnote 13.
(2) This calculation is submitted in accordance with Securities Exchange Act of
1994 Release No. 5083 although not required by footnote 2 to paragraph 14 of
APB No. 15 because it results in dilution of less than 3%.
<PAGE> 1
EXHIBIT 16.1
July 3, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen and Ladies:
We have read the section entitled "Change in Accountants" included in the
attached Form S-1 dated July 3, 1997, of J. D. Edwards & Co. to be filed
with the Securities and Exchange Commission and are in agreement with the
statements contained therein.
Very truly yours,
/s/ ARTHUR ANDERSEN, LLP
Arthur Andersen, LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 22, 1996,
relating to the financial statements of J.D. Edwards & Company, which appears in
such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended October 31, 1996 listed
under Item 16(b) of the Registration Statement when such schedule is read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included this schedule. We also consent to the
references to us under the headings "Selected Consolidated Financial Data" and
"Experts" in such Prospectus. However, it should be noted that Price Waterhouse
LLP has not prepared or certified such "Selected Consolidated Financial Data."
PRICE WATERHOUSE LLP
Boulder, Colorado
July 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AT OCTOBER 31, 1996 AND APRIL 30, 1997 AND STATEMENTS OF INCOME FOR THE
FISCAL YEAR AND SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM S-1.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> OCT-31-1996 OCT-31-1997
<PERIOD-START> NOV-01-1995 NOV-01-1996
<PERIOD-END> OCT-31-1996 APR-30-1997
<CASH> 25,554 29,907
<SECURITIES> 0 0
<RECEIVABLES> 126,336 164,369
<ALLOWANCES> 5,600 6,700
<INVENTORY> 0 0
<CURRENT-ASSETS> 166,584 199,939
<PP&E> 81,309 86,796
<DEPRECIATION> 29,954 36,161
<TOTAL-ASSETS> 243,786 276,421
<CURRENT-LIABILITIES> 146,015 171,192
<BONDS> 0 0
47,024 99,076
0 0
<COMMON> 89 89
<OTHER-SE> 4,209 3,651
<TOTAL-LIABILITY-AND-EQUITY> 243,786 276,421
<SALES> 180,366 92,063
<TOTAL-REVENUES> 478,048 268,675
<CGS> 27,443 17,084
<TOTAL-COSTS> 212,289 126,390
<OTHER-EXPENSES> 222,132 129,355
<LOSS-PROVISION> 1,387 1,984
<INTEREST-EXPENSE> 899 500
<INCOME-PRETAX> 41,954 11,439
<INCOME-TAX> 15,628 4,261
<INCOME-CONTINUING> 26,326 7,178
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 26,326 7,178
<EPS-PRIMARY> .30 .08
<EPS-DILUTED> .30 .08
</TABLE>
