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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 [No Fee Required]
For the transition period from to
Commission File No. 0-21519
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 06-1295986
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 High Ridge Road, 06905
Stamford, Connecticut (Zip Code)
(Address of principal executive offices)
(203) 329-3300 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this Chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of voting Common Stock held by nonaffiliates of
the registrant as of February 24, 1998:
Common Stock, $.01 par value -- $270,387,356.25
The number of shares outstanding of the issuer's common stock as of
February 24, 1998 (adjusted to reflect three-for-two stock split to be effected
on March 9, 1998):
Common Stock, $.01 par value -- 13,418,257 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the Annual Meeting of Stockholders
to be held April 13, 1998 are incorporated by reference into Part III of this
Report.
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Item 1--Business
ITDS is a leading provider of comprehensive transactional billing and
management information solutions to providers of wireless and satellite
telecommunications services. The Company uses its proprietary software
technology to develop billing solutions which address customer requirements as
they evolve, regardless of the market segment, geographic area or mix of
network features and billing options. Typically, the Company provides its
services under contracts with terms ranging from two to five years, and bills
customers monthly, on a per-subscriber basis. As a result, substantially all of
the Company's revenue is recurring in nature, and increases as a provider's
subscriber base grows.
In recent years, the telecommunications services industry has experienced
rapid growth and dramatic change, ranging from the introduction of such new
technologies as cellular, PCS and satellite communications, to new features and
services, in a wide variety of combinations and at a great diversity of prices.
The Company's systems are designed to respond to the dynamic requirements of
this market for cost-effective transactional billing solutions by drawing on
the Company's core technology and significant human resources. The Company's
software currently supports both of the two predominant cellular
telecommunications protocols, Advanced Mobil Phone Systems ("AMPS"), an analog
service predominant in the U.S., and the Global System for Mobile Communication
("GSM"), an international digital service, as well as other emerging digital
standards, such as TDMA and CDMA.
The Company's advanced billing and management information systems form the
foundation for its suite of applications that provide not only subscriber
billing and service support, but also the means to automate subscriber
activation, remittance processing, collections, data retrieval and reporting,
electronic funds transfer, credit management, inventory management and data
archiving. Its systems architecture permits providers to draw on those features
and functions most appropriate to their specific requirements. The Company's
software and services allow its customers to address the demands of a rapidly
evolving marketplace by enabling them to develop and support innovative rate
and feature offerings without the delay and cost associated with reconfiguring
their billing and information systems; to identify and respond to subscriber
demands through analysis of billing and subscriber databases; to reduce costs
with accurate and timely receivables information; and to manage the subscriber
relationship in a comprehensive and cost-effective manner.
Industry Background
General
The U.S. telecommunications services industry currently generates
approximately $222 billion in annual revenue and has experienced rapid change
and greatly increased competition in recent years. Deregulation and rapid
technological advances are resulting in convergence of previously separate
segments of the telecommunications market. Markets that were once rigidly
segmented by service within geographical areas are converging into a single,
world-wide communications market, which includes both traditional service
providers and a variety of new participants. Each segment of these converging
markets is experiencing significant growth, increased complexity in service
offerings and greater competition.
Rapidly evolving technical changes have dramatically increased the
features and services available to subscribers. These changes have ranged from
the evolution of entirely new communications media, such as satellite
transmission, to innovative services, such as PCS, to a rapidly evolving and
growing range of vertical services such as short message services, voice mail
and paging. For example, many cellular providers are now offering such
innovative features as group ringing, which initiates a call on all of an
individual's lines (whether business, personal or mobile) and connects the call
as soon as one line is answered, and cell site sensitive billing, which, for
example, enables carriers to apply local wireline rates for calls to or from a
telephone within the vicinity of the subscriber's home or business and apply
cellular rates elsewhere. Improved switching technology is permitting local
exchange telecommunications services providers to offer a variety of new
features and services to their subscribers such as call delivery beyond the
subscriber's home area, call waiting, voice mail and others.
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Internationally, privatization and deregulation are resulting in similar
increases in competition, the emergence of newly authorized telecommunications
providers, and the provision of additional features over a variety of media.
Wireless Communications
The Cellular Telecommunications Industry Association ("CTIA") estimates
that the number of cellular subscribers in the United States increased from
500,000 in June 1986 to 55.9 million in December 1997. In the twelve months
ended June 1997, wireless providers generated more than $26 billion in revenue
in the United States. In addition to growth in the cellular telephone market,
the emergence of new wireless communications technologies and services, such as
PCS and satellite-based telephony, is expected to increase the quality and
capabilities of wireless communications, including, to varying degrees,
seamless roaming, increased service coverage, improved signal quality and
greater data transmission capacity.
Other Segments
Other segments of the telecommunications services industry are
experiencing similar change and convergence. Wireline providers, including
providers of local, long-distance, network access and related services, provide
services to approximately 171 million customers in the U.S., generating more
than $196 billion of revenues in 1996. Deregulation has spurred the creation of
new entrants in both the local and long distance market, created an environment
for mergers and consolidation and has increased competitive pricing pressures
among all providers. Regional Bell Operating Companies (RBOCs) and
long-distance providers compete with providers of wireless services through the
purchase of cellular companies and PCS licenses, wireline providers are
pursuing opportunities in the cable market and wireless providers are examining
wireless local loop and the traditional long distance market. At the same time,
utility companies are leveraging their existing electrical and fiber optic
infrastructures to provide telecommunications services to their customers. In
addition, on-line service providers, including companies such as America Online
and CompuServe, have generated a large and rapidly growing market for the
provision of a range of services including electronic mail, news, and other
information, as well as home shopping and access to the Internet.
Traditional Transactional Billing
Transactional billing is the process of matching specific calling events
with a subscriber database. Historically, this was primarily a billing process,
used in order to generate invoices for wireless, long-distance and local
service by individual and business users. The Company believes that recurring
billing is the most significant interface with the subscriber, and is therefore
a critical element of attracting, communicating with, and retaining
subscribers.
Many telecommunications services providers in the U.S. have traditionally
used transactional billing systems developed internally or through cooperative
joint ventures for operation on a provider's mainframe computer. These systems
typically are difficult to maintain and modify, and often do not meet the
multiple and evolving needs of a service provider. Such systems often cannot be
integrated with other information sources within a provider's organization, or
databases outside an organization. Introduction of changes in parameters such
as price and service often requires significant reconfiguration or
reprogramming. These traditional means of billing and monitoring service,
referred to as "legacy systems," have proven inadequate to respond to the
evolving and dynamic requirements of the telecommunications services
marketplace. The enormous growth in the number of subscribers, and the
proliferation and range of services offered, require highly capable, flexible
and scalable support systems, which can adequately support the size and nature
of customer offerings on a cost effective basis.
Other service providers have elected to out-source billing and management
information-related functions because of the significant level of technological
expertise and capital resources required to implement systems successfully. In
addition, many emerging telecommunications services providers lack any
transactional billing infrastructure at all. One of the primary challenges that
these newer service providers face is to bring new services to market quickly.
They typically focus their capital resources on developing networking and
switching technology and on creating marketable services rather than on
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creating billing systems. These providers typically seek to outsource the
billing functions because efficient flexible billing solutions are often too
costly and time consuming to develop and staff internally.
Recent Developments
On January 2, 1998, the Company acquired the TRIS Division ("TRIS") of
Computer Sciences Corporation. TRIS provides billing and customer care services
to significant wireless telecommunications service providers. As a result of
the acquisition, TRIS, now known as ITDS Intelicom Services, Inc., is a
wholly-owned subsidiary of the Company ("ITDS Intelicom"). It is based in
Champaign, Illinois, employs approximately 320 people and operates on the same
service bureau billing model as the Company.
A portion of the cash portion of the purchase price for TRIS was obtained
by the Company under a Credit Agreement dated January 2, 1998, with certain
lenders and Lehman Commercial Paper, Inc., as Administrative Agent and Arranger
(the "Credit Agreement"), that provides for a $70 million term loan and a $30
million line of credit. Substantially all of the Company's assets secure the
Company's obligations under the Credit Agreement.
In February 1998, Paul K. Kothari assumed the role of Chief Financial
Officer of the Corporation, replacing Alan K. Greene. In addition, in February
1998, Lewis D. Bakes, Executive Vice President and Chief Operating Officer of
the Company, was named Chairman of the Board of Directors upon the retirement
of Charles L. Bakes.
In February 1998, the Company's Board of Directors approved a
three-for-two stock split, effected in the form of a stock dividend payable on
March 9, 1998 to persons who were holders of record of the Company's Common
Stock on February 23, 1998. The data related to the Company's stock and stock
prices contained in this report and in the financial statements contained
herein have been adjusted to reflect the stock split.
The ITDS Solution
The Company's solutions are based upon software systems that not only
provide reliable and accurate transactional billing and management information
support, but also include the means to automate subscriber activation,
remittance processing, collections, data retrieval and reporting, electronic
funds transfer, credit management, automation of inventory management, and data
archiving, running in either single or multiple telecommunications services
markets, including wireless, ESMR, paging and satellite. In comparison with
traditional solutions, the Company's software and services:
[bullet] permit providers to develop, validate, implement and support rate
changes without the corresponding requirement to develop or change
support systems, reducing the time to introduce new marketing or
sales strategies;
[bullet] permit providers to introduce new features or combinations of
features, either directly or with others, on a timely basis;
[bullet] assure that providers have immediate access to multiple databases on
an integrated basis, to improve marketing and sales planning;
[bullet] deliver accurate, timely and useful billing information to
customers, regardless of mix or change in level of service and
rates, to facilitate customer attraction and retention; and
[bullet] improve providers' cash flows and reduce bad debt by detecting fraud
and delivering accurate and timely receivable and collection
information across systems and service offerings.
Products and Services
Core Systems
The Company provides its customers with transactional billing and
management information solutions through the installation of its software
systems and the provision of billing services. The Company's software is
installed at a customer site to interface directly with the customer's systems
and generate relevant subscriber billing and other data, as well as to support
a wide range of transactional billing and subscriber management functions. The
Company processes the billing information through
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the use of its software, eliminating the need for customers to maintain their
own "back-office" data processing operation. Typically, customers contract for
the use of the Company's software and the provision of the Company's services
on a long-term basis, generally between two and five years, and are billed
monthly on a per-subscriber basis.
The Company's suite of applications allows customers the flexibility of
rapidly changing their billing services to implement, for example, immediate
rate plan changes for access, toll usage or toll discounts without the need for
programming. Drawing on its client/server architecture, the systems can be
integrated with a customer's other communication and data systems to provide
customers with the ability to generate up-to-date subscriber analysis and
reports. To further assure its operational flexibility and usefulness, the
systems support key industry standards such as the CIBER standard for the
wireless clearinghouse for AMPS, CDMA and TDMA wireless systems in the U.S. and
the TAP standard for international clearinghouse for GSM cellular systems. The
Company also interfaces with major U.S. credit bureaus, the Federal Reserve
system and various U.S. banks for electronic funds transfer and credit card
transactions. The Company's solutions include a complete library of billing and
financial reports for production as part of the month-end billing process.
These reports provide customers with critical transactional billing data and
can be modified or configured by customers to respond most appropriately to
their specific information requirements.
The Company's solutions perform the following transactional billing,
subscriber management and information functions, while updating the relevant
customer database on a real-time basis:
On-Line Subscriber Care and Management Support--Provides end-to-end
support for all subscriber interface requirements:
Subscriber Order Entry Credit Bureau Interface
Integrated Point of Sale Transactional Credit Card Billing
Phone Number Assignment Rate & Feature Assignment
Switch Provisioning Interface Equipment Inventory Assignment & Tracking
Lead Generation & Tracking Multiple Account Receivable Options
Automatic Clearinghouse for Automatic Call Credit Adjustments
Bank Draft Payments
Multi-tiered Security Systems Multiple Search Keys at Account or Phone Level
Automatic Notes and Reminders
Message Processing and Rating--Includes the collection of raw call detail
records from the customer s switch network, and the editing, formatting, rating
and guiding of all traffic events necessary to produce subscriber invoices,
traffic reports and other call related information:
<TABLE>
<S> <C>
Data Collection from all Switch Types Polling or Receipt of Near Real Time Records
Roamer In/Out Collect Processing Up to 999 Rate Plans per Market
Error Management & Reporting Rating, Re-rating and "Pseudo Roaming" Support
Discounts by Amount or Percentage Variable Time Periods for Air and/or Toll
Selective or Global Exceptions Unlimited Toll Plans On-line
</TABLE>
Billing & Invoicing--Application of rated messages to invoices, summary
files and reports:
Multiple Bill Cycles by Market FIFO Overdue Payment Application
Balance Forward Billing Invoice Format Options
Multiple Level Invoices Global, Group or Individual Messages
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Full Lockbox Support Federal Reserve Bank Interface
Currency Conversion Language Options
International Addressing Print Fulfillment Options
Although customers can perform their own on-site cycle-end rating and bill
processing by licensing the Company's batch billing software, most customers
elect to contract with the Company to perform those functions for them at the
Company's data center. Customers transmit call detail records from their
switching network or network provider directly to the Company's data center. In
addition, the Company can extract necessary data from the customer's file
server. The Company formats, guides, rates, and taxes the call records in
accordance with the appropriate subscriber parameters and produces print image
data output and various reports. The Company's bill verification personnel
provide an additional level of assurance that subscriber invoices and
management reports are accurate and timely. The Company then arranges with
third-party vendors for the printing and distribution of subscriber invoices on
a monthly basis.
In addition to the foregoing general features, the ITDS systems
incorporate a modular system architecture which can support a number of
complementary applications to meet a customer's specific requirements,
including:
[bullet] ITDS SwitchLink: ITDS SwitchLink is a direct multi-switch interface
between ITDS systems and all types of telecommunication switches,
including cellular, wireline, paging and voice mail platforms.
SwitchLink manages line and feature activation or deactivation in
connection with ITDS service order activity.
[bullet] ITDS CreditLink: ITDS CreditLink interfaces with several U.S.-based
credit bureaus to provide on-line credit analysis of potential
subscribers.
[bullet] ITDS Collections Module: The ITDS Collections module provides
support for dedicated collections personnel.
[bullet] ITDS PayScan: ITDS PayScan is an automated lockbox remittance
processing system that uses an easily installed scanning device to
create edited, balanced batches that may be transferred to ITDS
payment files.
[bullet] ITDS InventoryScan: ITDS InventoryScan is a complete inventory
management system which allows easy bar code scanning and on-line
inventory record maintenance from the physical receipt of equipment
to entry into the ITDS inventory subsystem.
[bullet] ITDS Report Writer: The ITDS Report Writer allows real-time data
from different sources within the system to be used to create
customized ad hoc subscriber reports.
New Products and Enhancements
The Company continues to refine its existing software and to introduce new
enhancements to meet evolving customer requirements. Enhancements currently
under development include incorporation into the ITDS solutions of a new
platform that has a Windows 95-compatible user interface and an Oracle
relational database management system; and provision for the ITDS solution to
operate with UNIX-based file servers, in order to address the needs of larger
customers on a scalable and interoperable basis.
Point of Sale System
In addition to the ITDS solutions and related products, the Company offers
a point of sale package (the "ITDS Point of Sale System"), a highly capable
sales tool designed to incorporate the entire sales process into a quick and
convenient on-line function. The system can be used in-store or as a mobile
unit, so that customers can market wireless products and services outside of
traditional store settings. The system enables sales clerks to quickly process
initial service applications, on-line credit checks, inventory updates,
assignment of telephone numbers, rate plan selection, invoicing and payments.
Upon credit verification, the system immediately creates an entry in the
customer's subscriber database and can activate telephone service at the
switch.
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Customers
As of December 31, 1997, the Company's solutions supported 35 customers,
serving a total of over a million subscribers. In the year ended December 31,
1997, the Company's customers included a broad range of wireless
telecommunications service providers, including Aliant Communications Co.,
Sygnet Communication, Dobson Cellular Systems, WorldCom, Inc. and Frontier
Cellular. As a result of the Company's acquisition of TRIS in January of 1998,
the Company has 17 new customers, several of which have substantially larger
subscriber bases than the Company's existing customers at the time of the
acquisition. It is likely that certain of the Company's new customers,
including Nextel Communications and Western Wireless will each represent over
10 percent of the Company's revenues in the future, and the loss of any such
customer could have a material adverse effect on the operating results of the
Company.
Customer Support
The Company provides support from the time a customer converts to the
Company's software, continuing through the on-going provision of transactional
billing services. The Company assigns to each new customer a dedicated
conversion team that specializes in facilitating the transition onto the
Company's solutions by applying an implementation methodology which includes
study of the customer's needs, definition of relevant conversion requirements,
and on-site installation and training. This is followed up by systematic
analysis of the implementation process, live conversion and follow-up training
as required to meet the customer's requirements.
Thereafter, the Company assigns a support team including a customer
service representative and a programmer/analyst for on-going support of the
customer's requirements, including implementation of additional functionality
if requested by the customer. In addition, the Company provides a fully-staffed
customer service department and 24-hour, 7 day a week access to customer
service representatives. The Company's service and support activities are
supplemented by the provision of on-going training classes to customers, free
of charge, to assist customers in utilizing the system capabilities more
effectively.
In February 1998, the Company's customer service and support department
consisted of 137 persons, with an additional 39 dedicated quality assurance
employees.
Sales and Marketing
The Company's strategy has been to establish and maintain long-term
customer relationships. As customers' subscriber bases grow and as customers
add systems features to their existing ITDS solutions, the Company generates
increased revenue. The Company's customer support programs enable it to
understand customer needs and offer strategic solutions from its suite of
products and features. In addition, the flexible and scalable architecture of
the Company's core technology enables the Company to maintain customer
relationships as customers enter into additional telecommunications markets.
System Development
The Company's research and development efforts are focused on enhancing
existing products and services as well as developing products, features and
services that can be integrated into the Company's core technology. The
Company's product development team reviews product and service development
proposals and establishes internal guidelines for efficient development. The
Company's research and development team also works closely with customers to
perform customization of products to meet specific needs. In addition to
internal development, the Company works with its strategic partners
Hewlett-Packard and Oracle to develop products compatible with their product
offerings. Currently, the Company has a number of new enhancements under
development to meet evolving customer requirements.
The Company actively participates in industry standards associations to
assure that its development efforts are in compliance with standards as they
evolve and to assure that the Company's software can be used on a fully open
and interoperable basis. For example, the Company works closely with a variety
of standards committees and working groups of CIBERNET, the standards body of
CTIA. The Company
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participates in the CIBERNET Advisory Committee, which evaluates proposed
changes to standards for wireless industry data exchange; the CIBERNET Net
Settlement Working Group, which evaluates proposed changes to the subscriber
net settlement process; and the CIBERNET Data Message Handler Working Group,
which focuses on billing aspects of the TIA IS-124 standard. In addition, the
Company participates in CTIA's International Forum for AMPS Standard, and the
Bellcore Ordering and Billing Forum.
In the years ended December 31, 1995, 1996 and 1997, the Company incurred
cash expenditures of $1,662,457, $2,974,132 and $5,782,729 respectively, on
systems development, of which $479,316, $858,827 and $2,872,397, respectively,
were capitalized as software development costs in each of such years. In
February 1998, including the employees of and consultants to ITDS Intelicom,
the Company employed 271 people in product and systems programming and
development and engaged 91 independent contractors in conjunction with the
continued development of its software products.
Competition
The market for billing and management information systems for the
telecommunications service industry is highly competitive and the Company
expects that the high level of growth within the telecommunications service
industry will encourage new entrants, both domestically and internationally, in
the future. The Company competes with both independent providers of
transactional systems and services and with internal billing departments of
telecommunications services providers. The Company believes its most
significant competitors in the wireless telecommunications segment are, within
the service bureau model, Alltel Information Systems, Inc. and Cincinnati Bell
Information Systems, Inc. ("CBIS"), and, within the licensing model, LHS Group,
Inc. and Amdocs, Ltd. In the future, the Company may compete in both the
wireless and wireline markets with additional companies that currently compete
in market segments other than wireless. In addition, the Company competes with
several international providers of billing and management information systems
and, as the Company continues to expand into international markets, it will
compete with additional providers abroad.
The Company believes that principal competitive factors include the
ability to provide timely products, features and services that are responsive
to evolving customer needs in an industry characterized by rapidly changing
technologies and ongoing deregulation. The Company must provide statement
accuracy, meet billing cycle deadlines, offer competitive pricing and maintain
high product and service quality. The Company believes that its architecture
enables it to compete favorably in the telecommunications services industry by
offering its customers a high degree of flexibility to quickly modify their
billing and management systems as their needs and the needs of their
subscribers change.
In addition, the Company believes that its ability to compete successfully
will depend in part on a number of factors outside its control, including the
development by others of software that is competitive with the Company's
products and services, the price at which others offer comparable products and
services, the extent of competitors' responsiveness to customer needs and the
ability of the Company's competitors to hire, retain and motivate key
personnel. Many of the Company's current and potential future competitors have
significant financial, technical and marketing resources and have greater name
recognition than does the Company. In addition, many of the Company's
competitors have established commercial relationships or joint ventures with
major cellular and other telecommunications services providers.
Proprietary Rights and Licenses
The Company relies in part on trademark, copyright and trade secret laws
to protect its proprietary rights. The Company distributes its products under
service and software license agreements which typically grant customers
non-exclusive licenses, subject to terms and conditions prohibiting
unauthorized reproduction, transfer or use. The Company believes that because
of the rapid pace of technological change in the telecommunications and
software industries, the technological expertise of its personnel, the
complexity of its system architecture and the frequency and timeliness of
product and service offerings are more significant than the legal protections
of its products. In addition, the Company enters into non-disclosure agreements
with each employee and consultant and each third-party to whom the Company
provides proprietary information. Access to the Company's core source code is
greatly restricted.
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The Company licenses from third parties technology that is important to
certain functionalities of its products. The Company is not aware of any patent
infringement or any violation of other proprietary rights claimed by any third
party relating to the Company or the Company's products.
Employees
In February 1998, including the employees of ITDS Intelicom, the Company
had a total of 539 employees, of whom 137 were engaged in customer service, 271
were engaged in systems programming and development, 39 in quality assurance,
38 in new customer conversions, 5 in sales and marketing and 49 in
administration and training. None of the Company's employees are represented by
labor unions. The Company believes that its employee relations are good.
Item 2--Properties
The Company subleases a 48,222 square foot facility in Stamford,
Connecticut and a 60,000 square foot facility in Champaign, Illinois for
systems and programming, client service, operations, quality assurance,
documentation and training, and administration. The Company's headquarters are
located at its Stamford facility. Substantially all of the Company's assets,
including its equipment and inventory, are subject to a security interest in
favor of the lenders who are parties to the Credit Agreement, which was entered
into in conjunction with the Company's acquisition of TRIS.
Item 3--Legal Proceedings
Neither ITDS nor any of its subsidiaries is currently party to any
material legal proceedings. However, ITDS Intelicom, a wholly-owned subsidiary
of the Company acquired in January 1998 from Computer Sciences Corporation
("CSC"), is party to litigation and has been threatened with litigation in
connection with the operation of its business prior to its acquisition by the
Company. Pursuant to the terms of the acquisition, CSC and certain of its
affiliates are obligated to defend and indemnify the Company against any
obligations arising out of such litigation or threatened litigation.
Item 4--Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
The following table sets forth the names, ages and positions of all
executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Peter P. Bassermann 48 President, Chief Executive Officer and Director
Paul K. Kothari 44 Chief Financial Officer
Lewis D. Bakes 40 Chairman, Executive Vice President, Chief Operating Officer,
Secretary and Director
Peter L. Masanotti 43 Executive Vice President of Operations--Stamford, General
Counsel and Director
Barry K. Lewis 42 Senior Vice President of Customer Services
Joseph A. Juliano 48 Executive Vice President of Strategic Product Management
Susan L. Yezzi 48 Executive Vice President of Operations--Champaign
</TABLE>
Peter P. Bassermann became President and Chief Executive Officer of the
Company in September 1997 and became a director in November 1997. From 1987
until he joined the Company, Mr. Bassermann served as President of SNET
Mobility, Inc., an affiliate of Southern New England Telecommunications
Corporation.
Paul K. Kothari became Chief Financial Officer of the Company in February
1998. From 1993 until he joined the Company, Mr. Kothari served as Vice
President of Finance for Bellcore, a software consulting and R&D operation
owned jointly by the seven Regional Bell Operating Companies. From 1989 until
1993, Mr. Kothari served as Vice President of Operations and Chief Financial
Officer of Greenwich Associates, a marketing research and consulting firm,
specializing in financial institutions.
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Lewis D. Bakes co-founded the Company in 1990 and has served as Executive
Vice President, Chief Operating Officer and a director since that time. He was
elected Chairman of the Company in February 1998. Mr. L. Bakes is also an
attorney, licensed to practice in Connecticut.
Peter L. Masanotti joined the Company in 1996 as Vice President and
General Counsel, and was appointed Executive Vice President of
Operations--Stamford and General Counsel in January 1998. Mr. Masanotti became
a director in August 1997. Prior to joining the Company, Mr. Masanotti served
as Managing Partner of the law firm Kleban & Samor, P.C., where he worked as an
attorney from 1980 until 1996.
Barry K. Lewis joined the Company in 1994, serving initially as the
Company's Vice President of the Wireless Division and later as the Senior Vice
President of Customer Services. From 1983 until he joined the Company, Mr.
Lewis worked for Auxton Computer Enterprise and CBIS, wireless software billing
vendors, ultimately serving as CBIS's Director of the Wireless Division.
Joseph A. Juliano joined the Company in November 1996 and has served as
Executive Vice President of Strategic Product Management since that time. Mr.
Juliano has been involved with the wireless industry since 1983. He served as
Industry Consultant-Wireless Strategies at GTE TSI, a service provider for
wireless carriers, from December 1995 to October 1996 and as Director Industry
Matters for SNET Cellular from 1983 until 1995. In recent years, Mr. Juliano
has been a participant in a number of industry advisory boards, including the
CIBERNET Advisory Committee, CIBERNET DMH Working Group, CTIA Roamer Committee,
CTIA Fraud Task Force (including as Chairperson of the Fraud Technology Working
Group), and CTIA Authentication Working Group. In addition, Mr. Juliano is a
Certified Management Accountant.
Susan L. Yezzi joined the Company in February 1998 as Executive Vice
President of Operations--Champaign. Prior to joining the Company, Ms. Yezzi
served as Vice President of Customer Billing for Bell Atlantic Corporation since
1996. Prior to that, Ms. Yezzi worked for NYNEX Corporation for 24 years, and
served as that Company's Assistant Vice President of Customer Billing.
PART II
Item 5--Market for Registrant's Common Stock and Related Stockholder Matters
Price Range of Common Stock
The Common Stock has been quoted on the Nasdaq National Market under the
symbol "ITDS" since the Initial Public Offering on October 24, 1996.
The following table sets forth the high and low sales prices of the Common
Stock on the Nasdaq National Market for the periods indicated (as adjusted to
reflect the three-for-two stock split to be effected on March 9, 1998).
High Low
---- ---
Fiscal Year Ended December 1996:
Fourth Quarter (from October 24, 1996) ............ $ 16.33 $ 10.00
Fiscal Year Ended December 1997:
First Quarter ..................................... $ 16.00 $ 10.67
Second Quarter .................................... $ 16.58 $ 6.92
Third Quarter ..................................... $ 20.17 $ 15.17
Fourth Quarter .................................... $ 21.33 $ 14.33
Fiscal Year Ending December 1998:
First Quarter (through February 24, 1998) ......... $ 29.00 $ 20.83
9
<PAGE>
On February 24, 1998, the last reported sale price for the Common Stock as
reported by the Nasdaq National Market was $27.50 per share (as adjusted to
reflect the three-for-two stock split to be effected on March 9, 1998). As of
February 24, 1998, there were approximately 83 holders of record of the Common
Stock.
Dividend Policy
In 1996, the Company paid cash dividends in the aggregate amount of
$36,000 to the holders of Class A Preferred Stock and in the aggregate amount
of $46,080 to the holder of Class C Convertible Preferred Stock. In 1997, the
Company paid no dividends. The Company currently intends to retain earnings, if
any, to support the development of its business and does not anticipate paying
cash dividends for the foreseeable future. Payment of future dividends, if any,
will be at the discretion of the Company's Board of Directors after taking into
account various factors, including the Company's earnings, financial condition,
operating results and current and anticipated cash needs as well as such
economic conditions as the Board of Directors may deem relevant.
Recent Sales of Unregistered Securities
Set forth in chronological order below is information regarding the number
of shares of Common Stock and Preferred Stock issued by the Registrant since
January 1, 1995. Also included is the consideration, if any, received by the
Registrant for such shares, and information relating to the section of the
Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed. No sale of securities involved the use of an underwriter and no
commissions were paid in connection with the sales of any securities.
On September 27, 1996 as part of the Company's recapitalization, (i) all
of the Company's Series A Preferred Stock was converted into an aggregate of
787,212 shares of Common Stock and promissory notes in the aggregate amount of
$450,000 and (ii) all of the Company's Series B Preferred Stock was converted
into an aggregate of 492,006 shares of Common Stock and promissory notes in the
aggregate amount of $375,000.
Upon the consummation of the Company's initial public offering of Common
Stock in October 1996, 129 shares of Class C Convertible Preferred Stock held
by Connecticut Innovations Incorporated converted into an aggregate of 154,800
shares of Common Stock.
On December 19, 1996, the Company loaned Mr. Masanotti and his wife
$50,000, which is due on June 18, 1998, and on April 10, 1997, the Company
loaned Mr. Masanotti and his wife $110,000, which is due on April 9, 1999. The
interest rate on both of the loans is 8 1/2% per annum. The indebtedness is
secured by a pledge in favor of the Corporation of Common Stock held by Mrs.
Masanotti.
On December 31, 1996 and January 1, 1997, the Company loaned Mr. Juliano,
an executive officer of the Company, an aggregate of $106,000, at an interest
rate of 8.5% per annum pursuant to three promissory notes. Of the total amount,
$40,000 was due on February 28, 1997 and was repaid in February 1997. Of the
remaining $66,000 outstanding, $54,000 is payable on November 2, 1998 and
$12,000 is payable on demand by the Company or the holder of the respective
promissory note. The $54,000 is secured by a pledge in favor of the Company of
36,000 shares of restricted Common Stock held by Mr. Juliano.
On April 11, 1997, the Company loaned to Mr. Lewis, an executive officer
of the Company, $32,000, which is due on April 10, 1999 and on December 15,
1997, the Company loaned Mr. Lewis $6,960, which is due on December 14, 1999.
The interest rate on both of the loans is 8 1/2% per annum. The indebtedness is
secured by a pledge in favor of the Corporation of Common Stock held by Mr.
Lewis.
On January 2, 1998, in connection with the Company's acquisition of all of
the issued and outstanding shares of capital stock of ITDS Intelicom from CSC
Domestic Enterprises, Inc. ("CSC Domestic"), an indirect subsidiary of Computer
Sciences Corporation, the Company issued to CSC Domestic 606,674 shares (the
"Purchase Shares") of Common Stock. The Purchase Shares represented $10,000,000
of the total purchase price of the acquired corporation.
10
<PAGE>
The shares of capital stock and securities issued in the above
transactions were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act or Regulation D or Rule
701 promulgated under the Securities Act, relative to sales by an issuer not
involving a public offering.
Use of Proceeds
The Registration Statement on Form S-1 (File No. 333-11045) relating to
the Company's initial public offering (the "Offering") was declared effective
on October 24, 1996. From the effective date of the Registration Statement
through December 31, 1997, the net Offering proceeds of $30,709,080 have been
used as follows: $3,165,343 for repayment of indebtedness, $312,269 for capital
expenditures, $1,494,836 for product development and $2,109,768 for working
capital purposes. All of such payments were direct or indirect payments to
persons other than directors, officers, general partners of the Company or
their associates; persons owning ten percent or more of any class of equity
securities of the Company; or affiliates of the Company.
11
<PAGE>
Item 6--Selected Consolidated Financial Data
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following selected financial information has been derived from the
Company's Consolidated Financial Statements, which have been audited by Ernst &
Young LLP, independent auditors, and, except for the statements of operations
for the years ended December 31, 1993 and 1994 and the balance sheets as of
December 31, 1993, 1994 and 1995, appear elsewhere in this Annual Report on
Form 10-K. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue .............................................. $3,146 $6,324 $10,821 $16,689 $23,429
Costs and expenses:
Operating expenses .................................. 834 1,647 2,788 4,283 5,617
General, administrative and selling expenses 1,575 2,410 4,601 6,523 6,760
Depreciation and amortization ....................... 242 406 641 1,054 1,596
Systems development and programming
costs ............................................... 298 755 1,183 2,115 2,911
------ ------ ------- ------- -------
Total cost and expenses .............................. 2,949 5,218 9,213 13,975 16,884
------ ------ ------- ------- -------
Operating income ..................................... 197 1,106 1,608 2,714 6,545
Other income ......................................... 50 29 49 316 1,702
Interest expense ..................................... (329) (390) (453) (416) (120)
------ ------ ------- ------- -------
Income (loss) before income tax expense .............. (82) 745 1,204 2,614 8,127
Income tax expense ................................... -- 37 378 1,112 3,326
------ ------ ------- ------- -------
Income (loss) before extraordinary item .............. (82) 708 826 1,502 4,801
Extraordinary loss (net of $158 tax benefit) ......... -- -- (224) -- --
------ ------ ------- ------- -------
Net income (loss) .................................... $ (82) $ 708 $ 602 $ 1,502 $ 4,801
====== ====== ======= ======= =======
Per common share data--Basic (1):
Income before extraordinary item ..................... $ .09 $ .15 $ .38
Extraordinary loss ................................... (.03) -- --
------- ------- -------
Net income ........................................... $ .06 $ .15 $ .38
------- ------- -------
Shares used in determining basic income per
common share ........................................ 9,291 9,890 12,728
======= ======= =======
Per common share date--Diluted (1):
Income before extraordinary item ..................... $ .09 $ .15 $ .36
Extraordinary loss ................................... (.03) -- --
------- ------- -------
Net income ........................................... $ .06 $ .15 $ .36
------- ------- -------
Shares used in determining diluted income per
common share ........................................ 9,291 10,109 13,193
======= ======= =======
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalent and short-term
investments ................................. $ 457 $ 512 $1,468 $4,487 $28,967
Securities available for sale at estimated
market value ................................ -- -- -- 25,023 --
Working capital .............................. 164 157 1,210 31,639 32,572
Current assets ............................... 971 1,457 3,117 33,942 34,936
Current liabilities .......................... 807 1,300 1,907 2,303 2,364
Total assets ................................. 1,917 2,651 5,434 38,398 44,452
Total long-term debt and capital lease
obligations ................................. 1,501 1,353 2,437 878 74
Redeemable Preferred Stock--Class C .......... -- -- 640 -- --
Total stockholders' equity (deficit) ......... (503) (186) 379 34,717 40,318
</TABLE>
- --------
(1) Computed on the basis described in Note 3 of Notes to Consolidated
Financial Statements.
13
<PAGE>
Item 7--Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
ITDS is a leading provider of comprehensive transactional billing and
management information solutions to providers of wireless and satellite
telecommunications services. The Company uses its proprietary software
technology to develop billing solutions which address customer requirements as
they evolve, regardless of the market segment, geographic area or mix of
network features and billing options. Typically, the Company provides its
services under contracts with terms ranging from two to five years, and bills
customers monthly, on a per-subscriber basis. As a result, substantially all of
the Company's revenue is recurring in nature, and increases as a provider's
subscriber base grows.
The Company derives revenue (i) primarily from service contracts, whereby
a customer contracts with the Company to operate and maintain its transactional
billing system and (ii) to a lesser extent, from the development of new
software and enhancement of existing installed systems together with the
provision of related customer maintenance and training, which is largely based
on a time and materials basis. Service revenue related to the operation of
customers billing systems accounted for 97.4%, 96.6% and 93.2% of total revenue
for 1995, 1996 and 1997, respectively. Services are generally billed monthly
and service revenue is recognized in the period in which the services are
provided.
License fees comprise the remainder of the Company's revenue and are
largely recognized upon execution of the licensing agreement at the time of
delivery of the software to the customer, provided that the Company has no
significant related obligations or collection uncertainties remaining. Where
there are significant obligations related to the development and enhancement of
the software, license fees are recorded over the expected installation period
or the term of the respective contract. As a result, the amount of revenue
realized by the Company from license fees in a particular period depends
largely on the number of product installations during that period, and the
extent to which any significant obligations are outstanding.
Driven by the requirements of the telecommunications services market, the
Company's revenues have grown rapidly in recent years, increasing from
approximately $10.8 million in 1995 to $16.7 million and $23.4 million in 1996
and 1997, respectively.
Operating expenses are comprised primarily of the salaries and benefits of
technical service representatives, operations personnel and quality assurance
representatives and costs to produce and distribute invoices for customers.
General, administrative and selling expenses consist mainly of the
salaries and benefits of management and administrative personnel and general
office administration expenses (rent and occupancy, telephone and other office
supply costs) of the Company.
The Company capitalizes software development costs incurred in the
development of software used in its product and service line only after
establishing commercial and technical viability and ceases when the product is
available for general release. The capitalized costs include salaries and
related payroll costs incurred in the development activities. Software
development costs are carried at cost less accumulated amortization.
Amortization is computed by using the greater of the amount that results from
applying the ratio that current revenue for the product bears to total revenue
for the product or the straight-line method over the remaining useful life of
the product. Generally, such deferred costs are amortized over five years.
On January 2, 1998, the Company acquired TRIS, a provider of billing and
customer care software and services, from Computer Sciences Corporation, by
acquiring all of the outstanding Capital Stock of CSC Intelicom Inc. (now known
as ITDS Intelicom Services, Inc.). The purchase price consisted of 606,674
shares of Common Stock of the Company valued at $10,000,000 and $75,826,777 in
cash. A portion of the cash purchase price for TRIS was obtained by the Company
under a Credit Agreement dated January 2, 1998, with certain lenders and Lehman
Commercial Paper, Inc., as Administrative Agent and Arranger (the "Credit
Agreement"), that provides for a $70 million term loan and a $30 million line
of credit.
14
<PAGE>
This acquisition positions the Company as the number two billing service
bureau provider for wireless carriers and re-sellers in the world, servicing 29
of the top 30 markets in the United States. The acquisition is expected to have
a favorable effect on the Company's earnings and more than double revenue for
the year ended December 31, 1998 compared to the year ended December 31, 1997.
However, management expects 1998 margins to decline when compared to 1997.
These lower margins are expected to improve during 1999 as efficiencies are
realized as a result of the acquisition.
This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements. These factors include, without limitation, those set forth below
under the caption "Certain Factors That May Affect Future Results."
Results of Operations
The following table sets forth, for the periods indicated, certain
financial data as a percentage of revenue for the years ended December 31,
1995, 1996 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue ............................................... 100.0% 100.0% 100.0%
Costs and expenses:
Operating expenses ................................... 25.8 25.7 24.0
General, administrative and selling expenses ......... 42.5 39.1 28.9
Depreciation and amortization ........................ 5.9 6.3 6.8
Systems development and programming costs ............ 10.9 12.6 12.4
----- ----- -----
Total costs and expenses .............................. 85.1 83.7 72.1
----- ----- -----
Operating income ...................................... 14.9 16.3 27.9
Other income .......................................... 0.4 1.9 7.3
Interest expense ...................................... (4.2) (2.5) (0.5)
----- ----- -----
Income before income tax expense ...................... 11.1 15.7 34.7
Income tax expense .................................... 3.5 6.7 14.2
----- ----- -----
Income before extraordinary item ...................... 7.6 9.0 20.5
Extraordinary loss .................................... (2.0) -- --
----- ----- -----
Net income ............................................ 5.6% 9.0% 20.5%
===== ===== =====
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenue
Revenue increased 40.4% from $16,689,401 in 1996 to $23,428,810 in 1997,
due primarily to the addition of new customers and the growth of recurring
revenue from existing customers.
Operating expenses
Operating expenses increased 31.1% from $4,283,364 in 1996 to $5,617,245
in 1997, due primarily to the addition of new personnel required to support the
growth of the Company's business. As a percentage of revenue, such expenses
decreased from 25.7% in 1996 to 24.0% in 1997, due to the fixed nature of a
portion of the Company's operating expenses.
General, administrative and selling expenses
General, administrative and selling expenses increased 3.6% from
$6,522,900 in 1996 to $6,760,053 in 1997. This increase was primarily due to
increases in salaries and employee related expenses resulting primarily from
staff increases (other than senior management salaries and related expenses) of
$592,504, increases in outside programming consultant costs of $778,005,
increases in rent and office expenses
15
<PAGE>
of $322,379 and increases in marketing and trade show expenses of $205,492.
These and other less significant expense increases were partially offset by a
reduction in senior management costs of $1,818,790 resulting primarily from the
1996 charge ($909,548) related to two newly hired senior executives and the
full year benefit from the reduction in senior managements' salaries and
bonuses after the Company's IPO in October 1996.
Depreciation and amortization
Depreciation and amortization expenses increased 51.5% from $1,053,472 in
1996 to $1,595,706 in 1997 primarily due to the purchase of computer equipment
and the increased capitalization related to product development costs to
enhance the Company's solution system to support Unix based file servers and
further development of its integrated billing and management information
system. Depreciation and amortization expenses increased as a percentage of
revenue from 6.3% in 1996 to 6.8% in 1997.
Systems development and programming costs
Systems development and programming costs increased 37.6% from $2,115,305
in 1996 to $2,910,331 in 1997, primarily due to increased programming support
required by a larger customer base. As a percentage of revenue, system
development and programming costs decreased from 12.6% in 1996 to 12.4% in
1997. In addition, the Company capitalized $858,827 and $2,872,397 in software
development costs in 1996 and 1997, respectively.
Other income
Other income increased 439% from $315,914 in 1996 to $1,701,881 in 1997,
primarily due to an increase in investment income of $1,333,498.
Interest expense
Interest expense decreased 71.1% from $416,148 in 1996 to $120,355 in
1997, as a result of the Company reducing outstanding debt and capital leases
in the fourth quarter of 1996 and throughout 1997.
Income tax expense
The Company's effective tax rate decreased from 42.5% in 1996 to 40.9% in
1997. This reduction is partially a result of the elimination of non-deductible
expenses and reduced state income taxes.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenue
Revenue increased 54.2% from $10,820,815 in 1995, to $16,689,401 in 1996,
due primarily to the addition of new customers and the growth of recurring
revenue from existing customers.
Operating expenses
Operating expenses increased 53.7% from $2,787,687 in 1995, to $4,283,364
in 1996, due primarily to the addition of new personnel required to support the
growth of the Company's business. As a percentage of revenue, such expenses
decreased slightly from 25.8% in 1995 to 25.7% in 1996.
General, administrative and selling expenses
General, administrative and selling expenses increased 41.8% from
$4,601,242 in 1995, to $6,522,900 in 1996. This increase was primarily due to a
one time charge of $1,206,548, related to compensation paid to two newly hired
employees ($909,548), a lawsuit settlement ($97,000) and a payment to
Connecticut Innovations, Incorporated ("CII") ($200,000) as a fee associated
with the Company's initial public offering. Other changes from 1995 to 1996
relate to increased employee compensation benefits of $606,535, additional rent
expense of $260,815 and other administrative expenses resulting from the growth
of the Company. These expenses were partially offset by decreases in salaries
and bonuses paid to senior management after the Company's IPO in October 1996
of
16
<PAGE>
approximately $413,086. As a percentage of revenue, general, administrative and
selling expenses decreased from 42.5% in 1995 to 39.1% in 1996.
Depreciation and amortization
Depreciation and amortization expenses increased 64.4% from $640,917 in
1995 to $1,053,472 in 1996 primarily due to the purchase of computer equipment
and the increased spending on the enhancement of the Company's solution system
to support Unix based file servers and further development of its integrated
billing and management information system. Depreciation and amortization
expenses increased as a percentage of revenue from 5.9% in 1995 to 6.3% in
1996.
Systems development and programming costs
Systems development and programming costs increased 78.8% from $1,183,141
in 1995, to $2,115,305 in 1996, primarily due to increased programming support
required by the Company's customers. As a percentage of revenue, system
development and programming costs increased from 10.9% in 1995 to 12.6% in
1996. In addition, the Company capitalized $479,316 and $858,827 in software
development costs in 1995 and 1996, respectively.
Other income
Other income increased 539% from $49,477 in 1995 to $315,914 in 1996,
primarily due to the $292,863 increase in investment income.
Interest expense
Interest expense decreased 8.1% from $452,925 in 1995 to $416,148 in 1996,
as a result of lower average debt balances in 1996 as compared to 1995. This
was partially offset by an increase in capitalized leases in 1996.
Income tax expense
The Company's effective tax rate increased from 31.5% in 1995 to 42.5% in
1996 due primarily to debt consolidation expense benefits in 1995 which did not
recur in 1996.
Extraordinary loss
On June 30, 1995, the Company refinanced existing debt with CII and
recorded an extraordinary loss of $223,696, net of $158,038 in tax benefits.
Such extraordinary loss was due to the negotiated acceleration of payments in
connection with the early termination of the debt agreement.
Liquidity and Capital Resources
The Company has financed its operations to date primarily through the
placement of debt and equity securities, cash generated from operations and
equipment financing leases.
As of December 31, 1997, the Company had $28,967,173 of cash and cash
equivalents, $5,007,581 in net trade accounts receivable and $32,572,031 of
working capital.
During 1997, the Company generated $4,756,459 in net cash flow from
operating activities and $19,798,626 in net cash flow from investing activities
including the maturities and sale of securities for $53,799,533 in net
proceeds. The cash generated from operations and the net proceeds from the sale
of securities enabled the Company to fund its operations, apply $2,872,397 to
product development costs, purchase $28,390,912 of investments, and make
$2,737,598 in capital expenses.
As discussed above, on January 2, 1998, the Company acquired ITDS
Intelicom Services, Inc. for 606,674 shares of Common Stock of the Company and
$75,826,777 in cash. A portion of the cash purchase price for TRIS was obtained
by the Company under a Credit Agreement dated January 2, 1998, with certain
lenders and Lehman Commercial Paper, Inc., as Administrative Agent and Arranger
(the "Credit Agreement"), that provides for a $70 million term loan and a $30
million line of credit. The credit agreement contains normal covenants which
include meeting certain financial ratios which require the Company to pay
interest at LIBOR plus two and one quarter percent and requires payments of
interest only through March 30, 2000, at which time periodic principal payments
will become due.
17
<PAGE>
The Company believes that its existing capital resources as well as the
credit facility are adequate to meet its cash requirements for the foreseeable
future. There can be no assurance, however, that changes in the Company's plans
or other events affecting the Company's operations will not result in
accelerated or unexpected expenditures.
The Company may seek additional funding through public or private
financing. There can be no assurance, however, that additional financing will
be available from any of these sources or will be available on terms acceptable
to the Company.
To date, inflation has not had a significant impact on the Company's
operations.
Year 2000 Disclosure
The Company is preparing all of its software products and internal
computer systems to be Year 2000 compliant. A compliance task force has been
established, and is currently identifying and developing conversion strategies
for the Company's systems. The Company expects to replace some of its systems
and to upgrade others. The Company currently estimates the compliance effort,
including planning, implementation and testing, to cost approximately $2
million to $3 million, and expects that a substantial portion of this
expenditure will occur in 1998. Although the Company does not expect the cost
to have a material adverse effect on its business or future results of
operations, there can be no assurance that the Company will not be required to
incur significant unanticipated costs in relation to its compliance
obligations. The Company currently estimates that compliance with be achieved
in early 1999, however, there can be no assurances that the Company will be
able to complete the conversion in a timely manner or that third party software
suppliers will be able to timely provide Year 2000 compliant products for the
Company to install.
New Accounting Pronouncements
In 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) SFAS No. 130, "Reporting Comprehensive
Income" (FAS 130) and SFAS 131, "Disclosures About Segments of an Enterprise
and Related Information" (FAS 131). FAS 130 and FAS 131 are effective for
financial statements for fiscal years beginning after December 15, 1997. In
addition, in October 1997 AcSEC issued Statement of Position 97-2 "Software
Revenue Recognition" which is effective for transactions entered in fiscal
years beginning after December 15, 1997. The Company is studying the
application of the new standards to evaluate the effect on the Company's
financial statements.
Certain Factors That May Affect Future Results
The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements made in
this Annual Report on Form 10-K and presented elsewhere by management from time
to time.
Integration of TRIS
In January 1998, the Company acquired TRIS, and substantially increased
the size of the Company's operations. The future success of the Company will
depend in part upon whether the integration of the two companies' businesses is
achieved in an efficient and effective manner, and there can be no assurance
that this will occur. The successful combination of the two companies will
require, among other things, integration of the companies' respective product
offerings and platforms and coordination of their sales and marketing and
research and development efforts. There can be no assurance that integration
will be accomplished smoothly or successfully. The difficulties of such
integration may be increased by the necessity of coordinating geographically
separated organizations with distinct cultures. The integration of certain
operations has required, and will continue to require, the dedication of
management resources which may temporarily distract attention from the
day-to-day business of the combined company.
Rapidly Changing Telecommunications Market
Over the last decade, the market for telecommunications services has been
characterized by rapid technological developments, evolving industry standards,
dramatic changes in the regulatory
18
<PAGE>
environment and frequent new product introductions. The Company's success will
depend upon its ability to enhance its existing products and services, and to
introduce new products and services which will respond to these market
requirements as they evolve. To date, substantially all of the Company's
revenues are attributable to wireless customers. While the Company believes
that systems and services which it offers to address the needs of the wireless
market will also permit it to attract customers in other segments of the
telecommunications services industry, there can be no assurance that it will be
able to do so. In addition, technologies, services or standards may be
developed which could require significant changes in the Company's business
model, development of new products, or provision of additional services, at
substantial cost to the Company. Such developments may also result in the
introduction of additional competitors into the marketplace.
Management of Growth
The Company has experienced rapid growth and intends to continue to
aggressively expand its operations. The Company's total revenues have increased
from $3.1 million in 1993 to $23.4 million in 1997. In addition, the Company
substantially increased the size of its operations, as well as the number of
subscribers it serves, by acquiring TRIS in early January 1998. The growth in
the size and complexity of its business, as well as its customer base, has
placed and is expected to continue to place significant demands on the
Company's administrative, operational and financial personnel and systems.
Additional expansion by the Company may further strain the Company's
management, financial and other resources. The Company's future operating
results will depend on the ability of its officers and key employees to manage
changing business conditions and to implement and improve its operational,
financial control and reporting functions.
The number of the Company's employees has increased from 26 as of January
1993 to 538 as of February 1998. A substantial portion of the Company's current
employees joined the Company in January 1998, in conjunction with the Company's
acquisition of TRIS. The Company anticipates that continued growth will require
it to recruit and hire a substantial number of new development, managerial,
finance, sales and marketing support personnel. There can be no assurance that
the Company will be successful in hiring or retaining any of the foregoing
personnel. The Company's ability to compete effectively and to manage future
growth, if any, will depend on its ability to improve operational systems and
to expand, train, motivate and manage its workforce.
New Products and Rapid Technological Change
The market for the Company's products and services is characterized by
rapid technological change. The Company believes that its future success
depends in part upon its ability to enhance its current solutions and develop
new products and services that address the increasingly complex needs of its
customers. In addition, the introduction of new products or services by third
parties could render the Company's existing solutions obsolete or unmarketable.
The Company's ability to anticipate changes in technology and successfully
develop and introduce new or enhanced products incorporating such technology on
a timely basis will be significant factors in its ability to remain
competitive.
Dependence on Cellular Telephone Industry
Although the Company's products have been designed to adapt to a variety
of current and future technologies, a significant majority of its revenues to
date have been generated by sales of its solutions to service providers in the
cellular telephone industry. A decrease in the number of cellular service
subscribers served by the Company's customers could result in lower revenues
for the Company. Although the cellular market has experienced substantial
growth in the number of subscribers in the past, there can be no assurance that
such growth will be sustained.
Reliance On Significant Customers
For the year ended December 31, 1997, revenue from Aliant Communications
Co. and its affiliated companies represented approximately 18.4% of the
Company's total revenue, and revenue from Sygnet Communications represented
approximately 11.7% of the Company's total revenue. As a result of the
Company's acquisition of TRIS in January of 1998, the Company has several new
customers with
19
<PAGE>
substantially larger subscriber bases than its then existing customers. It is
likely that certain of the Company's new customers, including Nextel
Communications and Western Wireless will each represent over 10 percent of the
Company's revenues in the future. The Company has long-term contracts with all
of its significant customers, however the Company's relationships with its
largest customers have only been established since January 1998, in connection
with the Company's acquisition of TRIS. There can be no assurance that any such
customer will renew its contract with the Company at the end of the contract
term or may not seek to terminate its contract on the basis of alleged
contractual defaults or other grounds. Loss of all or a significant part of the
business of any of the Company's substantial customers would have a material
adverse effect on the Company's business, financial condition and results of
operations. Additionally, the acquisition by a third party of one of the
Company's substantial customers could result in the loss of that customer and
have a material adverse effect on the business, financial condition and results
of operations of the Company.
Dependence on Key Personnel; New Management
The Company's performance depends substantially on the performance of its
executive officers and key employees. The Company's long-term success will
depend upon its ability to recruit, retain and motivate highly skilled
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to attract, assimilate or retain highly
skilled personnel in the future. In addition, several members of the Company's
senior management team have only recently joined the Company. For example,
Peter P. Bassermann, the Company's President, joined the Company in September
1997, Paul K. Kothari joined the Company in late 1997 and began serving as the
Company's Chief Financial Officer in February 1998, and Susan Yezzi joined the
Company in late 1997 and assumed the role of the Company's Executive Vice
President of Operations--Champaign in February 1998. Although the Company
believes that the extensive industry experience of new members of management is
essential to the Company's growth and outweighs short employment histories with
the Company, there can be no assurances that the new officers will be
successful in assimilating into their managerial roles with the Company.
Competition
The market for billing and management information systems for the
telecommunications services industry is highly competitive and the Company
expects that the high level of growth within the telecommunications services
industry will encourage new entrants, both domestically and internationally, in
the future. The Company competes with independent providers of transactional
systems and services, with the billing services of management consulting
companies and with internal billing departments of telecommunications services
providers. The Company anticipates continued growth in competition in the
telecommunications services industry and consequently the entrance of new
competitors into its market in the future. In addition, merger or consolidation
of telecommunications services providers could result in the loss to the
Company of customers or sales opportunities to competitors.
Dependence on Proprietary Technology
The Company's success is dependent in part upon its proprietary software
technology. The Company relies on trademark, copyright and trade secret laws,
employee and third-party non-disclosure agreements and other methods to protect
its proprietary rights. There can be no assurance that its agreements with
employees, consultants and others who participate in the development of its
software will not be breached, that the Company will have adequate remedies for
any breach, or that the Company's trade secrets will not otherwise become known
to or independently developed by competitors. Furthermore, there can be no
assurance that the Company's efforts to protect its rights through trademark
and copyright laws will prevent the development and design by others of
products or technology similar to or competitive with those developed by the
Company.
Fluctuations in Quarterly Performance
The Company's revenues and operating results may fluctuate from quarter to
quarter due to a number of factors including the timing, size and nature of the
Company's contracts; the integration into the Company's consolidated financial
results of ITDS Intelicom and the lack of actual historical financial
20
<PAGE>
results as a combined entity; long sales cycles typically associated with large
customers, which require the Company to make a substantial investment in the
conversion process prior to the generation of revenue; the hiring of additional
staff; seasonal variations in cellular telephone subscriptions; the timing of
the introduction and the market acceptance of new products or product
enhancements by the Company or its competitors; changes in the Company's
operating expenses; and fluctuations in economic and financial market
conditions. Fluctuations in quarterly operating results may result in
volatility in the price of the Common Stock.
Item 7A--Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
21
<PAGE>
Item 8--Financial Statements and Supplementary Data
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Auditors ................................................. 23
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and 1997 ................... 24
Consolidated Statements of Income for the years ended
December 31, 1995, 1996 and 1997 .............................................. 26
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended
December 31, 1995, 1996 and 1997 .............................................. 27
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 .............................................. 29
Notes to Consolidated Financial Statements ..................................... 30
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
International Telecommunication Data Systems, Inc.
We have audited the accompanying consolidated balance sheets of International
Telecommunication Data Systems, Inc. as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Telecommunication Data Systems, Inc. at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 10, 1998,
except for information describing
the three-for-two stock split in Note 1
and Note 3 as to which the
date is February 23, 1998.
23
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 4,138,575 $28,967,173
Accounts receivable, net of allowance for doubtful
accounts of $52,370 and $486,422, respectively ............ 3,232,967 5,007,581
Securities available for sale, at market value .............. 25,023,454 --
Prepaid expenses and other current assets ................... 1,503,209 741,297
Deferred income taxes ....................................... 44,000 220,000
----------- -----------
Total current assets ................................... 33,942,205 34,936,051
Property and equipment:
Computers, including leased property under capital
leases of $1,863,103 and $1,104,507, respectively ......... 2,986,056 4,843,816
Furniture and fixtures, including leased property under
capital leases of $33,119 in 1996 and 1997 ................ 446,535 446,535
Equipment, including leased property under capital
leases of $53,508 in 1996 and 1997 ........................ 251,850 373,093
Leasehold improvements ...................................... 589,479 589,479
----------- -----------
4,273,920 6,252,923
Less: accumulated depreciation and amortization .............. 1,328,228 2,318,936
----------- -----------
2,945,692 3,933,987
Other assets:
Product development costs-at cost, net of accumulated
amortization of $586,215 and $1,104,613, respectively 1,343,727 3,697,726
Other ....................................................... 165,913 1,884,688
----------- -----------
1,509,640 5,582,414
----------- -----------
Total assets ........................................... $38,397,537 $44,452,452
=========== ===========
</TABLE>
See accompanying notes.
24
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--Continued
<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 685,739 $ 1,191,825
Accrued expenses ......................................... 806,772 560,861
Accrued compensation ..................................... 272,059 332,700
Current maturities of capital lease obligations .......... 538,238 278,634
----------- -----------
Total current liabilities ........................... 2,302,808 2,364,020
Capital lease obligations ................................. 878,432 73,532
Deferred income taxes ..................................... 407,000 1,667,000
Other ..................................................... 91,879 29,580
Commitments and contingencies (Note 7) .................... -- --
Stockholders' equity
Common Stock, $.01 par value; 40,000,000 shares
authorized, 12,654,756 shares issued and outstanding
as of December 31, 1996, 12,786,740 shares issued
and outstanding as of December 31, 1997 ................ 126,548 127,868
Additional paid-in capital ............................... 43,790,517 44,447,507
Retained deficit ......................................... (8,826,674) (4,026,055)
Unearned compensation .................................... (336,000) (231,000)
Unrealized loss on securities available for sale ......... (36,973) --
----------- -----------
Total stockholders' equity ................................ 34,717,418 40,318,320
----------- -----------
Total liabilities and stockholders' equity ................ $38,397,537 $44,452,452
=========== ===========
</TABLE>
See accompanying notes.
25
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue .................................................. $10,820,815 $16,689,401 $23,428,810
Costs and expenses:
Operating expenses ...................................... 2,787,687 4,283,364 5,617,245
General, administrative and selling expenses ............ 4,601,242 6,522,900 6,760,053
Depreciation and amortization ........................... 640,917 1,053,472 1,595,706
Systems development and programming costs ............... 1,183,141 2,115,305 2,910,331
------------ ------------ ------------
Total costs and expenses ................................. 9,212,987 13,975,041 16,883,335
------------ ------------ ------------
Operating income ......................................... 1,607,828 2,714,360 6,545,475
Other income ............................................. 49,477 315,914 1,701,881
Interest expense ......................................... (452,925) (416,148) (120,355)
------------ ------------ ------------
Income before income tax expense and
extraordinary item ...................................... 1,204,380 2,614,126 8,127,001
Income tax expense ....................................... 378,786 1,111,788 3,326,382
------------ ------------ ------------
Income before extraordinary item ......................... 825,594 1,502,338 4,800,619
Extraordinary loss (net of $158,038 tax benefit) ......... (223,696) -- --
------------ ------------ ------------
Net income ............................................... $ 601,898 $ 1,502,338 $ 4,800,619
============ ============ ============
Income per common share--basic:
Income before extraordinary item ........................ $ .09 $ .15 $ .38
Extraordinary loss ...................................... (.03) -- --
------------ ------------ ------------
Net income ............................................... $ .06 $ .15 $ .38
============ ============ ============
Shares used in computing basic income per
common share ............................................ 9,291,257 9,889,809 12,728,214
============ ============ ============
Income per common share--diluted:
Income before extraordinary item ........................ $ .09 $ .15 $ .36
Extraordinary loss ...................................... (.03) -- --
------------ ------------ ------------
Net income ............................................... $ .06 $ .15 $ .36
============ ============ ============
Shares used in computing diluted income per
common share ............................................ 9,291,257 10,109,121 13,192,830
============ ============ ============
</TABLE>
See accompanying notes.
26
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock
-------------------------------------------------------
Class A Class B Common Stock
--------------------------- --------------------------- -------------------------
Number Number Number
of Shares $25,000 of Shares $250 of Shares
Outstanding Par Value Outstanding Par Value Outstanding Par Value
------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994 as
previously reported 18 $400,400 1,500 $327,600 4,875,200 $51,248
Three-for-two stock
split effected in
the form of a
50% stock
dividend ................ 2,437,600 24,376
-- --------- ----- -------- --------- -------
Balance at
December 31,
1994 as restated
for the three-for-
two stock split ......... 18 400,400 1,500 327,600 7,312,800 75,624
Net income ...............
Preferred stock
dividends
declared ................
Balance at
December 31, 1995 18 400,400 1,500 327,600 7,312,800 75,624
Net income ...............
Preferred stock
dividends
declared ................
Retirement of
treasury stock .......... (2,496)
Recapitalization of
Class A & B
preferred stock ......... (18) (400,400) (1,500) (327,600) 1,279,218 12,792
Compensation paid
in common stock 106,152 1,062
Conversion of Class
C convertible
preferred stock ......... 154,800 1,548
Exercise of warrants 501,786 5,018
<CAPTION>
Unearned Net Unrealized
Additional Treasury Retained Compensation Gain (Loss)
Paid-in Stock at Earnings Restricted on Securities
Capital Cost (Deficit) Stock Awards Held for Sale Total
-------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994 as
previously reported $ 28,112 $(400,030) $ (593,600) $ -- $-- $(186,270)
Three-for-two stock
split effected in
the form of a
50% stock
dividend ................ (24,376) --
---------- --------- ----------- ---------- --- ---------
Balance at
December 31,
1994 as restated
for the three-for-
two stock split ......... 28,112 (400,030) (617,976) (186,270)
Net income ............... 601,898 601,898
Preferred stock
dividends
declared ................ (28,112) (8,482) (36,594)
----------- -------- ----------- ----------- --- ---------
Balance at
December 31, 1995 -- (400,030) (24,560) -- 379,034
Net income ............... 1,502,338 1,502,338
Preferred stock
dividends
declared ................ (79,236) (79,236)
Retirement of
treasury stock .......... (397,534) 400,030 --
Recapitalization of
Class A & B
preferred stock ......... 10,115,424 (10,225,216) (825,000)
Compensation paid
in common stock 969,487 (336,000) 634,549
Conversion of Class
C convertible
preferred stock ......... 638,452 640,000
Exercise of warrants 817,941 822,959
</TABLE>
See accompanying notes.
27
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--Continued
<TABLE>
<CAPTION>
Preferred Stock
---------------------------------------------------
Class A Class B Common Stock
------------------------- ------------------------- -------------------------
Number Number Number
of Shares $25,000 of Shares $250 of Shares
Outstanding Par Value Outstanding Par Value Outstanding Par Value
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sale of common
stock, net of
expenses .............. 3,300,000 33,000
Net unrealized loss
on securities
available for sale
-- --- -- --- ---------- --------
Balance at
December 31, 1996 -- -- -- -- 12,654,756 126,548
Net income .............
Secondary sale of
common stock .......... 75,000 750
Employee stock
purchase plan ......... 9,078 91
Exercise of stock
options ............... 47,906 479
Amortization of
unearned
compensation ..........
Net unrealized gain
on securities
available for sale
-- --- -- --- ---------- --------
Balance at
December 31, 1997 -- $-- -- $-- 12,786,740 $127,868
== === == === ========== ========
<CAPTION>
Unearned Net Unrealized
Additional Treasury Retained Compensation Gain (Loss)
Paid-in Stock at Earnings Restricted on Securities
Capital Cost (Deficit) Stock Awards Held for Sale Total
-------------- ---------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sale of common
stock, net of
expenses .............. 31,646,747 31,679,747
Net unrealized loss
on securities
available for sale (36,973) (36,973)
---------- -- ---------- -------- ------- ----------
Balance at
December 31, 1996 43,790,517 -- (8,826,674) (336,000) (36,973) 34,717,418
Net income ............. 4,800,619 4,800,619
Secondary sale of
common stock .......... 172,126 172,876
Employee stock
purchase plan ......... 113,113 113,204
Exercise of stock
options ............... 371,751 372,230
Amortization of
unearned
compensation .......... 105,000 105,000
Net unrealized gain
on securities
available for sale 36,973 36,973
----------- -- ------------ ---------- ------- ----------
Balance at
December 31, 1997 $44,447,507 -- $ (4,026,055) $ (231,000) -- $40,318,320
=========== == ============ ========== ======= ===========
</TABLE>
See accompanying notes.
28
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1995 1996 1997
------------- --------------- ---------------
<S> <C> <C> <C>
Operating activities
Income before extraordinary loss ........................ $ 825,594 $ 1,502,338 $ 4,800,619
Adjustments to reconcile income before extraordinary
loss to net cash provided by operating activities:
Depreciation and amortization .......................... 640,917 1,053,472 1,595,706
Amortization of unearned compensation .................. -- -- 105,000
Compensation paid in Common Stock ...................... -- 634,549 --
Loss (gain) on disposal of equipment ................... --
Deferred income taxes .................................. (93,960) 612,079 1,084,000
Change in operating assets and liabilities:
Accounts receivable .................................. (457,609) (1,884,180) (1,774,614)
Prepaid expenses and other current assets ............ (236,378) (875,072) 413,717
Accounts payable and accrued expenses ................ 781,049 390,831 320,816
Other assets and liabilities, net .................... (157,659) 11,775 (1,788,785)
---------- ----------- -------------
Net cash provided by operating activities ............... 1,301,954 1,445,792 4,756,459
Investing activities
Capital expenditures .................................... (17,358) (1,852,701) (2,737,598)
Proceeds from sale of equipment ......................... 13,500 -- --
Purchase of securities available for sale ............... (245,069) (25,060,427) (25,328,551)
Purchase of investments held to maturity ................ -- (353,126) (3,062,361)
Proceeds from maturities of investments ................. 99,286 300,000 3,410,556
Proceeds from maturities of securities available
for sale ............................................... -- -- 50,388,977
Product development costs ............................... (479,316) (858,827) (2,872,397)
---------- ----------- -------------
Net cash (used for) provided by investing activities..... (628,957) (27,825,081) 19,798,626
Financing activities
Principal payments on long-term debt .................... (276,507) (1,811,273) --
Payment to retire Preferred Stock ....................... -- (825,000) --
Principal payments on notes payable ..................... (76,001) (76,958) --
Principal payments on capital lease obligations ......... (166,297) (362,223) (384,558)
Proceeds from sale of Common Stock ...................... -- 32,502,706 658,071
Proceeds from sale of Preferred Stock ................... 640,000 -- --
Dividends paid .......................................... (33,750) (82,080) --
---------- ----------- -------------
Net cash provided by (used for) financing
activities ............................................. 87,445 29,345,172 273,513
Net increase in cash and cash equivalents ............... 760,442 2,965,883 24,828,598
Cash and cash equivalents at beginning of year .......... 412,250 1,172,692 4,138,575
---------- ----------- -------------
Cash and cash equivalents at end of year ................ $1,172,692 $ 4,138,575 $ 28,967,173
========== =========== =============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest .................. $ 447,241 $ 434,092 $ 120,355
Cash paid during the year for taxes ..................... $ 419,700 $ 819,897 $ 2,342,081
</TABLE>
Supplemental disclosure of noncash financing activities:
Capital lease obligations totaling $960,059 and $685,604 in the years ended
December 31, 1995 and 1996, respectively, were incurred for the acquisition of
new equipment. No leases were entered into in 1997.
See accompanying notes.
29
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
ITDS is a leading provider of comprehensive transactional billing and
management information solutions to providers of wireless and satellite
telecommunications services. The Company uses its proprietary software
technology to develop billing solutions which address customer requirements as
they evolve, regardless of the market segment, geographic area or mix of
network features and billing options. Typically, the Company provides its
services under contracts with terms ranging from two to five years, and bills
customers monthly, on a per-subscriber basis. As a result, substantially all of
the Company's revenue is recurring in nature, and increases as a provider's
subscriber base grows.
Basis of Presentation
Stock Split
The Company effected a three-for-two stock split in the form of a 50%
stock dividend, to be distributed on March 9, 1998 to stockholders of record on
February 23, 1998. Accordingly, all share and per share amounts have been
adjusted to reflect this split.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
assets.
The Company capitalizes software development costs incurred in the
development of software used in its product and service line only after
establishing commercial and technical viability and ceases when the product is
available for general release. The capitalized costs include salaries and
related payroll costs incurred in the development activities. Software
development costs are carried at cost less accumulated amortization.
Amortization is computed by using the greater of the amount that results from
applying the ratio that current revenue for the product bears to total revenue
for the product or the straight-line method over the remaining useful life of
the product. Generally, such deferred costs are amortized over five years.
During the years ended December 31, 1995, 1996 and 1997, $166,292, $300,105 and
$518,398, respectively, of capitalized software development costs were
amortized.
Revenue Recognition
Revenues and costs associated with the recurring process of providing
billing and other service/ software solutions are recognized at the time
services are performed. License fees and related costs are recognized upon
execution of the licensing agreement and delivery of the software to the
customer, provided that the Company has no significant related obligations or
collection uncertainties remaining. Where there are significant obligations
related to the development and enhancement of the software, license fees are
recorded over the expected installation period or the term of the respective
contract. As of December 31, 1997, other assets includes approximately $865,000
for installation and related services that are being recorded over the
installation period. In addition, accounts receivable at December 31, 1996 and
1997 include $1,278,412 and $2,296,451, respectively, for services rendered
prior to December 31 which were billed in January of the following year when the
billing cycles were complete.
In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("FAS 121"). FAS 121, which was adopted in 1996, requires companies to
investigate potential impairments of long-lived assets on an exception basis,
when there is evidence that events or changes in circumstances have made
recovery of an asset's carrying value unlikely. The adoption of FAS 121 has not
had a material effect on the Company's financial position or results of
operations.
30
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Consolidation
The financial statements include the accounts of ITDS and consolidated
subsidiaries after elimination of intercompany accounts and transactions.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expenses
for the years ended December 31, 1995, 1996, and 1997 were $115,835, $194,097,
and $233,673, respectively.
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 amounts and disclosures reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications:
Certain reclassifications were made to conform prior years' data to the
current year's presentation.
Major Customers
Revenues generated from two customers accounted for approximately 15.2%
and 12.7% of 1995 revenues, 19.1% and 12.5% of 1996 revenues and 18.4% and
11.7% of 1997 revenues.
New Accounting Pronouncements
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("FAS 130") and SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 130 and FAS 131 are effective for
financial statements for fiscal years beginning after December 15, 1997. In
addition, in October 1997 AcSEC issued Statement of Position 97-2 "Software
Revenue Recognition" which is effective for transactions entered in fiscal
years beginning after December 15, 1997. The Company is studying the
application of the new standards to evaluate the effect on the Company's
financial statements.
2. INVESTMENTS
Prepaid expenses and other current assets includes short-term investments
of $348,195 as of December 31, 1996. These investments are recorded at cost
plus accrued interest (approximates market) and consist of United States
Treasury Bills, maturing on or before April 3, 1997. These short-term
investments are classified as held to maturity.
Securities available for sale at December 31, 1996 consisted of United
Stated Treasury Notes with a 6% coupon rate maturing on August 15, 1999. These
securities are recorded at fair value. The unrealized gains or loss, net of tax
are reported in a separate component of stockholder equity. During 1997, these
investments were disposed of and invested in cash equivalents.
Other income for the years ended December 31, 1995, 1996 and 1997 includes
$20,269, $313,132 and $1,646,630, respectively, of investment income.
31
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. CAPITAL STOCK
Stock Split
The Company effected a three-for-two stock split, in the form of a 50%
stock dividend, distributed on March 9, 1998 to stockholders of record on
February 23, 1998. Accordingly, all share and per share amounts have been
adjusted to reflect this split.
Public Offerings
The Company completed its Initial Public Offering ("IPO") in October 1996.
The Company sold 3 million shares at $10.67 per share, resulting in proceeds to
the Company of approximately $28.7 million, after deducting expenses. In
addition, on November 18, 1996 the Company received approximately $3.0 million,
net of expenses, upon the exercise of the underwriters' over-allotment option
to purchase 300,000 shares of Common Stock from the Company in connection with
the IPO.
In connection with the IPO, the Company's Certificate of Incorporation was
amended to authorize the issuance of up to 40,000,000 shares of Common Stock,
$.01 par value per share and the issuance of up to 2,000,000 shares of
Preferred Stock, $.01 par value per share.
A portion of the proceeds from the Company's IPO were used to retire
substantially all of the Company's outstanding debt. In addition, the Company's
Class A and B Preferred Stock was retired and the holders of such shares were
issued an aggregate of 1,279,218 shares of the Company's Common Stock and were
paid an aggregate amount of $825,000. The distribution of the 1,279,218 shares
of the Company's Common Stock, valued at $8 per share, for an aggregate of
$10.2 million, resulted in a one-time, noncash charge to retained earnings and
a corresponding increase to additional paid-in-capital. Further, immediately
prior to the IPO, Connecticut Innovations Incorporated ("CII") exercised
outstanding warrants to purchase 501,786 shares of the Company's Common Stock
at an aggregate purchase price of $822,959. In addition, upon the closing of
the IPO all of the outstanding shares of Series C Preferred Stock of the
Company (all of which were held by CII) converted into an aggregate of 154,800
shares of Common Stock.
During April 1997, the Company received net proceeds of $172,876 from the
sale of 75,000 shares of its Common Stock in a follow-on offering.
Earnings Per Share
In February 1997, the FASB issued Statement of Financial Accounting
Standards SFAS No. 128, "Earnings Per Share" FAS 128, which revises the
methodology of calculating earnings per share. The Company adopted FAS 128 in
the fourth quarter of 1997. All earnings per share amounts for all periods have
been presented in accordance with and where appropriate, restated to conform to
the FAS No. 128 requirements.
32
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. CAPITAL STOCK (Continued)
The following table set forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Year ended December 31,
1995 1996 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings
per share--earnings before extraordinary
item ................................... $ 825,594 $ 1,502,338 $ 4,800,619
=========== =========== ===========
Denominator:
Denominator for basic earnings per
share--weighted-average shares ......... 9,291,257 9,889,809 12,728,214
Effect of dilutive securities:
Employee stock options ................ -- 219,312 464,616
----------- ----------- -----------
Denominator for diluted earnings per
share--adjusted weighted-average shares
and assumed conversions ................ 9,291,257 10,109,121 13,192,830
=========== =========== ===========
Basic income per common share before
extraordinary item ....................... $ .09 $ .15 $ .38
=========== =========== ===========
Diluted income per common share before
extraordinary item ....................... $ .09 $ .15 $ .36
=========== =========== ===========
</TABLE>
Income per common share for the years ended December 31, 1995 and 1996 is
calculated using the weighted average number of shares of common stock
outstanding after giving effect to the retirement of the Company's Class A and
B Preferred Stock and the conversion of the Series C Preferred Stock in
conjunction with the Company's IPO.
Supplemental earnings per share, assuming, at the beginning of the
respective periods, the exercise of the warrants, the redemption and conversion
of all outstanding preferred stock, and the sale of Common Stock, the proceeds
of which were used for debt retirement, are as follows:
Year ended December 31,
1995 1996
--------- ---------
Basic:
Income before extraordinary item ......... $ .11 $ .16
Extraordinary item ....................... (.02) --
------ -----
Net income ............................... $ .09 $ .16
====== =====
Diluted:
Income before extraordinary item ......... $ .09 $ .16
Extraordinary item ....................... (.02) --
------ -----
Net income ............................... $ .07 $ .16
====== =====
33
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. STOCK PLANS
The Company's 1996 and 1997 Stock Incentive Plans authorize the grant of
options to employees, directors and consultants for up to 1,500,000 shares and
1,125,000 shares, respectively, of the Company's Common Stock. All options
granted have 10 year terms and vest and become fully exercisable at the end of
4 years of continued employment. In addition, a total of 300,000 shares of
Common Stock have been authorized for issuance under the Company's 1996
Employee Stock Purchase Plan.
Under the employee stock purchase plan, shares of the Company's Common
Stock may be purchased at six-month intervals at 85% of the lower of the fair
market value on the first or the last business day of each six-month period.
Employees may purchase shares having a value not exceeding 10% of their gross
compensation, up to $25,000 of the fair market value of such Common Stock,
during an offering period.
A summary of the Company's activity in the stock options plans, and
related information for the years ended December 31, 1995, 1996, and 1997
follows:
<TABLE>
<CAPTION>
Weighted-Average
Options Exercise Price
------------ -----------------
<S> <C> <C>
Outstanding at December 31, 1995 ................. -- --
Granted .......................................... 590,550 $ 9.29
Forfeited ........................................ 2,250 $ 9.33
------- -------
Outstanding at December 31, 1996 ................. 588,300 $ 9.29
Granted .......................................... 2,607,643 $ 12.33
Exercised ........................................ 47,910 $ 7.77
Cancelled ........................................ 534,750 $ 7.78
Forfeited ........................................ 124,184 $ 7.88
--------- -------
Outstanding at December 31, 1997 ................. 2,489,099 $ 12.33
========= =======
Options exercisable at December 31, 1997 ......... 111,583 $ 9.19
Options exercisable at December 31, 1996 ......... 24,093 $ 12.24
</TABLE>
In May 1997, 534,750 options previously issued were exchanged for new
options covering an equal number of shares and an exercise price equal to the
then current market price. The previously issued options were included in the
number of shares granted for 1997.
Options Outstanding
- --------------------------------------------------------------------------------
Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices as of 12/31/97 Contractual Life Exercise Price
- -------------------------- ---------------- ------------------ -----------------
$7.50--$10.00.......... 844,651 8.9 $ 7.75
$10.00--$12.50......... 198,750 9.4 11.50
$12.50--$15.00......... 0 0 0
$15.00--$17.50......... 1,445,698 9.9 15.48
--------- --- -------
2,489,099 9.5 $ 12.54
========= === =======
Exercise prices for options outstanding as of December 31, 1997 ranged
from $7.75 to $16 per share. The weighted average remaining contractual life of
those options is 9.5 years.
34
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. STOCK PLANS (Continued)
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, if the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of the
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Risk-free interest rate ................................ 5.0% 5.0%
Dividend yield ......................................... 0 0
Expected volatility of market price of company's
common stock .......................................... .71 .63
Expected option life ................................... 5 years 5 years
Weighted average fair value per share of options granted
during year ........................................... $4.86 $7.31
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
Pro forma net income .......................... $ 1,189,597 $ 3,441,094
=========== ===========
Pro forma earnings per share:
Pro forma basic earnings per share ............ $ .12 $ .27
Pro forma diluted earnings per share .......... $ .12 $ .26
</TABLE>
5. DEFERRED COMPENSATION
In accordance with the terms of his employment agreement, as amended on
September 30, 1996, an employee became entitled to receive a payment of
$275,000 on or before December 31, 1996 and, as a result of the public offering
of the Company's Common Stock, the right to purchase 27,500 shares of the
Company's Common Stock for $.01 per share. In addition, during 1996 an employee
was given the right to purchase 42,652 shares of the Company's Common Stock for
$.01 per share. During 1996, these employees acquired the shares and the
difference between the exercise price and the fair value on the date of grant
was charged to compensation expense. In connection with an employment
35
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. DEFERRED COMPENSATION (Continued)
agreement entered into during 1996, an employee was awarded 36,000 shares of
the Company's Common Stock with a fair value of $336,000 when awarded. The
shares vest 25% on April 1, 1997, 25% on October 31, 1998, 25% on October 31,
1999, and 25% on October 31, 2000. The fair value of the shares on the date of
award is being amortized as compensation expense over the vesting period.
6. CAPITALIZED LEASE OBLIGATIONS
The Company leases computer equipment and office furniture under capital
leases expiring in various years through 1999. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the asset. Depreciation of assets under
capital leases is included in depreciation expense.
Maturities of capital lease obligations are as follows as of December 31,
1997:
1998 ............................................ $322,030
1999 ............................................ 71,935
--------
Total lease obligations ......................... 393,965
Less: amount representing interest .............. 41,799
--------
Present value of minimum lease payments ......... $352,166
========
7. COMMITMENTS AND CONTINGENCIES
On June 11, 1996, the Company entered into a noncancelable lease expiring
on August 31, 2000 for 48,222 square feet of office space in Stamford,
Connecticut. In connection therewith, the Company obtained a letter of credit
in the initial amount of $362,000 as security for the lease. Minimum future
rental payments due under such lease are $723,330 per year.
The Company also leases Connecticut office facilities under a
noncancelable operating lease expiring in April 1999. The Company recognizes
rental expense on a straight line basis over the term of the lease. Rent
expense was $330,914, $591,729 and $738,582 for the years ended December 31,
1995, 1996 and 1997, respectively.
Minimum future rental payments due under such leases as of December 31,
1997 are as follows:
1998 .......................... $ 929,521
1999 .......................... 773,237
2000 .......................... 482,220
----------
2,184,978
Less: sublease income ......... (266,850)
----------
$1,918,128
==========
The Company is also obligated to pay utilities and property taxes above
the landlords' base year costs.
The Company has entered into employment contracts with various officers
and other employees. The contracts expire in one to four years and require the
Company to pay base compensation of approximately $2.1 million per year plus
benefits. The contracts provide for discretionary bonuses if
36
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. COMMITMENTS AND CONTINGENCIES (Continued)
approved by the Board of Directors. In addition, as of December 31, 1997, the
Company has loans to officers aggregating $264,653.
The Company maintains an employee savings plan that qualifies as a cash or
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating employees may defer up to 15% of their pre-tax
compensation, but not more than $9,500 and $10,000 for 1996 and 1997 calendar
years. The Company does not contribute to the plan.
8. EXTRAORDINARY ITEM
On June 30, 1995 the Company refinanced existing debt with CII. In doing
so, the Company recorded an extraordinary loss of $223,696 which is net of a
$158,038 tax benefit. Such extraordinary loss was due to a negotiated
acceleration of payments due to early termination of the debt agreement.
9. INCOME TAXES
Significant components of income tax expense (benefit) before
extraordinary item are as follows:
Year ended December 31,
-------------------------------------------
1995 1996 1997
----------- ------------- -------------
Current:
Federal .................. $344,360 $ 381,376 $1,667,132
State .................... 128,386 118,333 575,250
-------- ---------- ----------
472,746 499,709 2,242,382
-------- ---------- ----------
Deferred:
Federal .................. (62,640) 436,659 805,916
State .................... (31,320) 175,390 278,084
-------- ---------- ----------
(93,960) 612,079 1,084,000
-------- ---------- ----------
Total tax expense ......... $378,786 $1,111,788 $3,326,382
======== ========== ==========
A reconciliation of the applicable federal statutory rate to the Company's
effective tax (benefit) rate from income before income tax expense and
extraordinary item follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Statutory rate .............................. 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit .................................... 5.3 7.4 6.9
Debt consolidation expenses ................. (10.1) -- --
Other, net .................................. 2.3 1.1 --
----- ---- ----
31.5% 42.5% 40.9%
===== ==== ====
</TABLE>
37
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. INCOME TAXES (Continued)
Significant components of the Company's deferred tax assets and
liabilities are as follows:
December 31,
----------------------------
1996 1997
------------ -------------
Deferred tax liabilities:
Software development costs ............ $ 798,862 $1,965,598
Capitalized leases .................... 382,521 537,081
--------- ----------
Total deferred tax liabilities ......... 1,181,383 2,502,679
--------- ----------
Deferred tax assets:
Deferred charges ...................... 46,092 28,786
Depreciation and amortization ......... 719,748 819,855
Accrued compensation .................. 26,937 4,319
Reserve for doubtful accounts ......... 21,521 199,093
Interest .............................. 4,085 3,626
--------- ----------
Total deferred tax assets .............. 818,383 1,055,679
--------- ----------
Net deferred tax liability ............. $ 363,000 $1,447,000
========= ==========
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of
operations for the two years ended December 31, 1997 (in thousands, except
per-share data):
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
3/31/97 6/30/97 9/30/97 12/31/97
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue .............................. $5,270 $5,362 $6,039 $6,758
Gross profit ......................... 1,439 1,421 1,659 2,027
Net income ........................... 1,062 1,078 1,240 1,420
Basic net income per share ........... .08 .08 .10 .11
Diluted net income per share ......... .08 .08 .09 .11
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
3/31/96 6/30/96 9/30/96 12/31/96
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue ..................... $3,934 $3,931 $4,139 $4,685
Operating income ............ 1,054 877 (273) 1,056
Net income (loss) ........... 549 445 (240) 748
Basic net income (loss) per
share ...................... .06 .05 (.03) .07
Diluted net income (loss) per
share ...................... .06 .05 (.03) .07
</TABLE>
The sum of the quarters' net income per share may not equal the full year
per-share amounts due to rounding differences resulting from changes in the
number of shares of Common Stock outstanding.
During the third quarter of 1996, the Company incurred a one-time charge
for compensation related to two newly hired employees of $909,548 or $.07 per
share ($.07 per share--diluted). The fourth quarter of 1996 includes a one-time
charge associated with the IPO of $200,000 or $.02 per share ($.01 per
share--diluted).
38
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. SUBSEQUENT EVENTS
On January 2, 1998, the Company acquired TRIS, a provider of billing and
care software and services, from Computer Sciences Corporation, in a
transaction accounted for in accordance with the purchase method of accounting,
by acquiring all of the outstanding Capital Stock of CSC Intelicom Inc. (now
known as ITDS Intelicom Services, Inc.). The purchases price consisted of
606,674 shares of Common Stock of the Company valued at $10,000,000 and
$75,826,777 in cash. A portion of the cash purchase price for TRIS was obtained
by the Company under a Credit Agreement dated January 2, 1998, with certain
lenders and Lehman Commercial Paper, Inc., as Administrative Agent and Arranger
(the "Credit Agreement"), that provides for a $70 million term loan and a $30
million line of credit.
The credit agreement contains normal covenants which include meeting
certain financial ratios, requires the Company to pay interest at LIBOR plus
two and one quarter percent and requires payments of interest only through
March 30, 2000. At which time periodic principal, payments will become due.
The purchase price in excess of the fair market value of the assets
acquired of approximately $57 million will be amortized over 15 years. In
addition, purchased research and development costs of approximately $21 million
before income tax benefit and other indirect transaction related costs of
approximately $5 million before income tax benefit will be expensed in the
first quarter of 1998. The fair value of the purchased research and development
costs was determined based on an independent valuation. The $21 million and $5
million discussed above have been excluded from the pro forma calculation for
the year ended December 31, 1997.
Pro Forma Financial Information (Unaudited)
For the year ended March 28, 1997 and the nine months ended December 31,
1997, TRIS had revenues and net income (loss) of $42.2 million and $3.0 million
and $39.8 million and $(1.9) million, respectively. Assuming the acquisition
had occurred as of January 1, 1997, pro forma revenues, net income and basic
net income per share and diluted net income per share would have been $80.4
million, $4.7 million, $.35 per share and $.34 per share, respectively.
Two customers accounted for 36% and 11% of TRIS' total revenues for the
nine months ended December 31, 1997. For the year ended March 28, 1997, these
two customers accounted for 17% and 13% of TRIS' total revenues.
Legal Proceedings
Neither ITDS nor any of its subsidiaries is currently party to any
material legal proceedings. However, ITDS Intelicom Services, Inc., a
wholly-owned subsidiary of the Company acquired in January 1998 from Computer
Sciences Corporation ("CSC"), is party to litigation and has been threatened
with litigation in connection with the operation of its business prior to its
acquisition by the Company. Pursuant to the terms of the acquisition, CSC and
certain of its affiliates are obligated to defend and indemnify the Company
against any obligations arising out of such litigation or threatened
litigation.
39
<PAGE>
Item 9--Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10--Directors and Officers of the Registrant
The response to this item is contained in part under the caption
"Executive Officers of the Company" in Part I of this Annual Report on Form
10-K and in the Company's proxy statement for the annual meeting of
stockholders to be held on April 13, 1998 (the "1998 Proxy Statement") in the
section entitled "Election of Directors," which section is incorporated herein
by reference.
In addition, in February 1998, Charles L. Bakes resigned as Chairman and
director of the Company and Alan K. Greene resigned as Vice President and Chief
Financial Officer of the Company.
Item 11--Executive Compensation
The response to this item is contained in the 1998 Proxy Statement in the
section entitled "Election of Directors--Director Compensation" and
"--Compensation of Executive Officers" which sections are incorporated herein
by reference.
Item 12--Security Ownership of Certain Beneficial Owners and Management
The response to this item is contained in the 1998 Proxy Statement in the
section entitled "Security Ownership of Certain Beneficial Owners and
Management," which section is incorporated herein by reference.
Item 13--Certain Relationships and Related Transactions
The response to this item is contained in the 1998 Proxy Statement in the
section entitled "Election of Directors--Certain Transactions," which section
is incorporated herein by reference.
PART IV
Item 14--Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as a part of this Report on Form 10-K:
1. The following documents are included as part of this Annual Report on
Form 10-K:
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1996 and 1997
Consolidated Statements of Income for the years ended December 31, 1995,
1996 and 1997
Consolidated Statements of Stockholders' Equity (Deficiency) for the
years ended December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997
Notes to the Consolidated Financial Statements
2. Financial Statement Schedules
All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial
Statements or Notes thereto.
40
<PAGE>
3. Exhibits The exhibits filed as part of this Annual Report on Form 10-K
are as follows:
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------------- -----------------------------------------------------------------------------------------
<S> <C>
*2 Stock Purchase Agreement, dated as of December 29, 1997 by and among the
Registrant, CSC Intelicom, Inc. and CSC Domestic Enterprises, Inc.
**3.1 Certificate of Incorporation of the Registrant, as amended.
**3.2 By-Laws of the Registrant.
**+10.1 Form of 1996 Equity Incentive Plan.
**+10.2 1996 Employee Stock Purchase Plan.
+10.3 1997 Stock Incentive Plan, as amended.
+10.4 1998 Stock Incentive Plan.
+10.5 Amended and Restated Employment Agreement between the Registrant and
Barry K. Lewis, dated as of April 1997.
+10.6 Employment Agreement between the Registrant and Peter P. Bassermann, dated as of
September 3, 1997, and amendment thereto, dated as of January 1, 1998.
+10.7 Employment Agreement between the Registrant and Lewis D. Bakes, dated as of
January 1, 1998.
+10.8 Employment Agreement between the Registrant and Peter L. Masanotti, dated as of
January 1, 1998.
+10.9 Employment Agreement between the Company and Paul K. Kothari, dated as of
December 29, 1997.
+10.10 Employment Agreement between the Company and Susan Yezzi, dated as of
December 23, 1997.
**10.11 Stock Purchase Agreement dated December 11, 1995, as amended, between the
Registrant and Connecticut Innovations, Incorporated relating to Class C Convertible
Preferred Stock.
**10.12 Form of Lease between the Company and 969 Associates, dated December 1990.
**10.13 Sublease dated June 11, 1996 between the Registrant and Learning International, relating
to 225 High Ridge Road, Stamford, Connecticut.
10.14 Lease dated January 1996 between Par 3 Development, L.L.C. and CSC Intelicom, Inc.
(now known as ITDS Intelicom Services, Inc.)
10.15 Lease dated September 19, 1996 between Par 3 Development, L.L.C. and CSC Intelicom,
Inc. (now known as ITDS Intelicom Services, Inc.)
10.16 Credit Agreement dated as of January 2, 1998 among the Registrant, the Subsidiary
Guarantors Party thereto and Lehman Commercial Paper Inc.
10.17 Security Agreement, dated as of January 2, 1998 among the Registrant, each of the
subsidiaries of the Registrant, and Lehman Commercial Paper Inc.
10.18 Guarantee Assumption Agreement, dated as of January 2, 1998 by ITDS Intelicom
Services, Inc. in favor of Lehman Commercial Paper Inc.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to the Registrant's Report on Form 8-K originally
filed with the Securities and Exchange Commission on January 13, 1998.
** Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (File No. 333-11045), as amended, originally filed with the Securities
and Exchange Commission on August 29, 1996.
+ Management Contract or Compensatory Plan.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the last quarter of the Company's
fiscal year ended December 31, 1997.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
/s/ Peter P. Bassermann
-------------------------------------
Peter P. Bassermann
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- ---------------------------------------- --------------
<S> <C> <C>
/s/ Peter P. Bassermann
- ------------------------- President, Chief Executive Officer and
Peter P. Bassermann Director (Principal Executive Officer) March 5, 1998
/s/ Paul K. Kothari
- ------------------------- Chief Financial Officer (Principal
Paul K. Kothari Financial and Accounting Officer) March 5, 1998
/s/ Lewis D. Bakes
- -------------------------
Lewis D. Bakes Director March 5, 1998
/s/ Stuart L. Bell
- -------------------------
Stuart L. Bell Director March 5, 1998
/s/ Stephen J. Saft
- -------------------------
Stephen J. Saft Director March 5, 1998
/s/ Peter L. Masanotti
- -------------------------
Peter L. Masanotti Director March 5, 1998
</TABLE>
42
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------------- -----------------------------------------------------------------------------------------
<S> <C>
*2 Stock Purchase Agreement, dated as of December 29, 1997 by and among the
Registrant, CSC Intelicom, Inc. and CSC Domestic Enterprises, Inc.
**3.1 Certificate of Incorporation of the Registrant, as amended.
**3.2 By-Laws of the Registrant.
**+10.1 Form of 1996 Equity Incentive Plan.
**+10.2 1996 Employee Stock Purchase Plan.
+10.3 1997 Stock Incentive Plan, as amended.
+10.4 1998 Stock Incentive Plan.
+10.5 Amended and Restated Employment Agreement between the Registrant and
Barry K. Lewis, dated as of April 1997.
+10.6 Employment Agreement between the Registrant and Peter P. Bassermann, dated as of
September 3, 1997, and amendment thereto, dated as of January 1, 1998.
+10.7 Employment Agreement between the Registrant and Lewis D. Bakes, dated as of
January 1, 1998.
+10.8 Employment Agreement between the Registrant and Peter L. Masanotti, dated as of
January 1, 1998.
+10.9 Employment Agreement between the Company and Paul K. Kothari, dated as of
December 29, 1997.
+10.10 Employment Agreement between the Company and Susan Yezzi, dated as of
December 23, 1997.
**10.11 Stock Purchase Agreement dated December 11, 1995, as amended, between the
Registrant and Connecticut Innovations, Incorporated relating to Class C Convertible
Preferred Stock.
**10.12 Form of Lease between the Company and 969 Associates, dated December 1990.
**10.13 Sublease dated June 11, 1996 between the Registrant and Learning International, relating
to 225 High Ridge Road, Stamford, Connecticut.
10.14 Lease dated January 1996 between Par 3 Development, L.L.C. and CSC Intelicom, Inc.
(now known as ITDS Intelicom Services, Inc.)
10.15 Lease dated September 19, 1996 between Par 3 Development, L.L.C. and CSC Intelicom,
Inc. (now known as ITDS Intelicom Services, Inc.)
10.16 Credit Agreement dated as of January 2, 1998 among the Registrant, the Subsidiary
Guarantors Party thereto and Lehman Commercial Paper Inc.
10.17 Security Agreement, dated as of January 2, 1998 among the Registrant, each of the
subsidiaries of the Registrant, and Lehman Commercial Paper Inc.
10.18 Guarantee Assumption Agreement, dated as of January 2, 1998 by ITDS Intelicom
Services, Inc. in favor of Lehman Commercial Paper Inc.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to the Registrant's Report on Form 8-K originally
filed with the Securities and Exchange Commission on January 13, 1998.
** Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (File No. 333-11045), as amended, originally filed with the Securities
and Exchange Commission on August 29, 1996.
+ Management Contract or Compensatory Plan.
International Telecommunication Data Systems, Inc.
1997 STOCK INCENTIVE PLAN
(as amended on December 24, 1997)
1. Purpose
The purpose of this 1997 Stock Incentive Plan (the "Plan") of
International Telecommunication Data Systems, Inc., a Delaware corporation
(the "Company"), is to enhance the profitability of the Company for the
benefit of the stockholders by providing equity ownership opportunities and
performance-based incentives to attract, retain and motivate key employees,
consultants and others who make important contributions to the Company, and to
better align their interests with those of the stockholders. Except where
the context otherwise requires, the term "Company" shall include all present
and future subsidiaries of International Telecommunication Data Systems, Inc.
as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder (the "Code") (a "Subsidiary").
2. Eligibility
The persons eligible to be granted options, stock appreciation rights,
performance shares, restricted stock, or other stock based awards (each, an
"Award") under the Plan are (i) all of the Company's employees, consultants
and advisors (other than the officers and directors) and (ii) persons not
previously employed by the Company, as an inducement essential to the
individual's entering into an employment contract with the Company (including
officers and directors). Any person who has been granted an Award under the
Plan shall be deemed a "Participant".
3. Administration, Delegation
(a) Administration by Board of Directors. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time, to interpret the provisions of the Plan, and to correct any
defects in the Plan or an Award. No member of the Board shall be liable for any
action or determination relating to the Plan made in good faith. All decisions
by the Board shall be final and binding on all persons having or claiming any
interest in the Plan or in any Award.
<PAGE>
(b) Delegation to Executive Officers. To the extent permitted by applicable
law, the Board may delegate to one or more executive officers of the Company the
power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum amount of such
Awards to be made by such executive officers and a maximum amount for any one
Participant.
(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees, each consisting of not less than two members of the
Board (a "Committee"). If and when the common stock, $.01 par value per share,
of the Company (the "Common Stock") is registered under the Securities Exchange
Act of 1934 (the "Exchange Act"), the Board shall appoint one such Committee,
each member of which shall be a "outside director" within the meaning of Section
162(m) of Code ("Section 162(m)") and a "non-employee director" as defined in
Rule 16b-3 promulgated under the Exchange Act. All references to the Board in
the Plan shall mean a Committee or the Board or the Executive Officer referred
to in Section 3(b) to the extent of such delegation.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 4(c) below,
Awards may be made under the Plan for up to 750,000 shares of Common Stock. If
any Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan. Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c), for
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be [250,000] per calendar year. The per
Participant limit described in this Section 4(b) shall be construed and applied
consistent with Section 162(m).
(c) Adjustment to Common Stock. In the event that the Board, in its sole
discretion, determines that any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, split-up, spin-off or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board may equitably adjust any or all of (i)
the total number and kind of shares issuable under the Plan, (ii) the number and
kind of shares subject to Awards then outstanding, and (iii) the exercise,
conversion price or other terms with respect to any
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<PAGE>
outstanding Award. The number of shares resulting from any such adjustment shall
always be a whole number.
5. Stock Options
(a) General. Subject to the provisions of the Plan, the Board may grant
options to purchase Common Stock (an "Option") and determine the number of
shares of Common Stock to be covered by each Option, the exercise price of such
Option and the conditions and limitations applicable to the exercise of such
Option, including conditions relating to applicable federal or state securities
laws, as it considers necessary or advisable. No option that the Board intends
to be an "incentive stock option" as defined in Section 422 of the Code may be
granted.
(b) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(c) Duration of Options. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement.
(d) Exercise of Option. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(e) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise determine or provide in an
Option, delivery of an irrevocable and unconditional undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a broker to deliver promptly to the Company cash
or a check sufficient to pay the exercise price;
(3) to the extent permitted by the Board at or after the grant of the
Option (i) by delivery of shares of Common Stock owned by the Participant for at
least six months and valued at their fair market value as determined by the
Board in good faith ("Fair Market Value"), (ii) delivery of a promissory note of
the Participant to the Company on terms determined by the Board, or (iii)
payment of such other lawful consideration as the Board may determine; or
-3-
<PAGE>
(4) any combination of the above permitted forms of payment.
6. Stock Appreciation Rights
(a) Grant and Payment. The Board may grant Awards entitling recipients on
exercise of such Awards to receive an amount, in cash or Common Stock or a
combination thereof (such form to be determined by the Board), determined in
whole or in part by reference to appreciation in the Fair Market Value of the
Common Stock between the date of grant of the Award and the exercise of the
Award (a "Stock Appreciation Right" or an "SAR"). The Board in its sole
discretion shall determine the terms and conditions of any SAR.
(b) Grant of SARs in Tandem with Options. SARs may be granted in tandem
with, or independently of, Options granted under the Plan. If an SAR is granted
in tandem with an Option, the exercise of the Option shall cause a proportional
reduction in SARs outstanding to a Participant's credit which were granted in
tandem with the Option; and the payment of SARs shall cause a proportional
reduction of the shares of Common Stock under such Option.
7. Performance Shares
The Board may make Awards entitling recipients to acquire shares of Common
Stock on a future date upon the attainment of specified performance goals
("Performance Share Awards"). The Board may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Board in its sole discretion shall determine the performance goals,
the periods during which performance is to be measured, and all other terms and
conditions applicable to a Performance Share Award.
8. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price (or to require forfeiture of such
shares if issued at no cost) from the recipient in the event that conditions
specified by the Board in the applicable Award are not satisfied prior to the
end of the applicable restriction period or periods established by the Board for
such Award ("Restricted Stock Award").
(b) Terms and Conditions. The Board in its sole discretion shall determine
the terms and conditions of any such Restricted Stock Award, including the
conditions for repurchase (or forfeiture) and the issue price, if any. Any stock
certificates issued in respect of a Restricted Stock Award shall be registered
in the name of the Participant and, unless otherwise determined by the Board,
deposited by
-4-
<PAGE>
the Participant, together with a stock power endorsed in blank, with the Company
(or its designee). At the expiration of the restriction period, the Company (or
such designee) shall deliver such certificates to the Participant or if the
Participant has died, to the beneficiary designated by a Participant, in a
manner determined by the Board, to receive amounts due or exercise rights of the
Participant in the event of the Participant's death (the "Designated
Beneficiary"). In the absence of an effective designation by a Participant,
Designated Beneficiary shall mean the Participant's estate.
9. Other Stock Based Awards
The Board shall have the right to grant other Awards based upon the Common
Stock, including the grant of shares based upon certain conditions and the grant
of securities convertible into Common Stock.
10. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award under the Plan shall be evidenced by an
instrument in such form as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each type
of Award may be made alone, in addition to or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
-5-
<PAGE>
(e) Mergers, Etc.
(1) Consequences of Mergers, etc. Upon the occurrence of an Acquisition
Event (as defined below), all outstanding Awards shall terminate, provided that
at least 10 days prior to the effective date of such Acquisition Event, the
Board shall either (i) if there is a surviving or acquiring corporation,
arrange, subject to consummation of the Acquisition Event, to have that
corporation or an affiliate of that corporation grant to Participants
replacement Awards (or assume the Awards of the Company), or (ii) provide that
all outstanding Awards will become exercisable, realizable or vested in full
immediately prior to the effective date of such Acquisition Event. An
"Acquisition Event" shall mean (a) any merger or consolidation which results in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) less than fifty percent of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; (b) any sale
of all or substantially all of the assets of the Company or (c) the complete
liquidation of the Company.
(2) Assumption of Options Upon Mergers, etc. The Board may grant Awards
under the Plan in substitution for stock and stock based-awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in respect of Awards to such Participant under the Plan no later
than the date of the event creating the tax liability. In the Board's
discretion, and subject to such conditions as the Board may establish, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value. The Company may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to a Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization and accelerating the exercise or vesting of any Award, provided that
the Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
-6-
<PAGE>
(h) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws, stock exchange or stock market rules
and regulations, and (iii) the Participant has executed and delivered to the
Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws.
11. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder thereof.
(c) Effective Date and Term of Plan. The Plan shall become effective on the
date on which it is approved by the Board of Directors of the Company. No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of the date on which the Plan was adopted by the Board, but Awards
previously granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirements, including any securities laws, stock
exchange or stock market rules. Amendments requiring stockholder approval shall
become effective when adopted by the Board, but no Award granted after the date
of such amendment shall become exercisable or vested (to the extent that such
amendment to the Plan was required to grant such Award to a particular
Participant) unless and until such amendment shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Award granted on or
after the date of
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<PAGE>
such amendment shall terminate to the extent that such amendment to the Plan was
required to enable the Company to grant such Award to a particular Participant.
(e) Stockholder Approval. For purposes of this Plan, stockholder approval
shall mean approval by a vote of the stockholders in accordance with the bylaws
of the Company, unless otherwise required by applicable tax or regulatory laws,
including Sections 162(m) and 422 of the Code, securities laws, and stock
exchange and stock market rules.
(f) Governing Law. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.
Approved by Board of Directors
on November 23, 1997
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 1998 Stock Incentive Plan (the "Plan") of
International Telecommunication Data Systems, Inc., a Delaware corporation
(the "Company"), is to advance the interests of the Company's stockholders by
enhancing the Company's ability to attract, retain and motivate persons who
make (or are expected to make) important contributions to the Company by
providing such persons with equity ownership opportunities and
performance-based incentives and thereby better aligning the interests of such
persons with those of the Company's stockholders. Except where the context
otherwise requires, the term "Company" shall include any present or future
subsidiary corporations of International Telecommunication Data Systems, Inc.
as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder (the "Code").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
(a) Administration by Board of Directors. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by applicable
law, the Board may delegate to one or more executive officers of the Company the
power to make Awards and exercise such other powers under the Plan as the Board
<PAGE>
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). During the periods
when the common stock, $.01 par value per share, of the Company (the "Common
Stock") is registered under the Securities Exchange Act of 1934 (the "Exchange
Act"), the Board may appoint one such Committee of not less than two members,
each member of which shall be an "outside director" within the meaning of
Section 162(m) of the Code and a "non-employee director" as defined in Rule
16b-3 promulgated under the Exchange Act." All references in the Plan to the
"Board" shall mean the Board or a Committee of the Board or the executive
officer referred to in Section 3(b) to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or executive
officer.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 4(c), Awards may
be made under the Plan for up to 1,125,000 shares of Common Stock provided that
Awards for no more than 100,000 shares of Common Stock (other than options
granted with an exercise price equal to 100% of fair market value) may be issued
in any one calendar year. If any Award expires or is terminated, surrendered or
canceled without having been fully exercised or is forfeited in whole or in part
or results in any Common Stock not being issued, the unused Common Stock covered
by such Award shall again be available for the grant of Awards under the Plan,
subject, however, in the case of Incentive Stock Options (as hereinafter
defined), to any limitation required under the Code. Shares issued under the
Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c), the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 200,000 per calendar year. The
per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
(c) Adjustment to Common Stock. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted
- 2 -
<PAGE>
Stock Award, and (iv) the terms of each other outstanding stock-based Award
shall be appropriately adjusted by the Company (or substituted Awards may be
made, if applicable) to the extent the Board shall determine, in good faith,
that such an adjustment (or substitution) is necessary and appropriate. If this
Section 4(c) applies and Section 8(e)(1) also applies to any event, Section
8(e)(1) shall be applicable to such event, and this Section 4(c) shall not be
applicable.
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock (each, an
"Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement. No Option will be granted for a term in excess of 10 years.
(e) Exercise of Option. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an Option Agreement,
by (i) delivery of an irrevocable and unconditional undertaking by a
- 3 -
<PAGE>
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, (ii) delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price, or
(iii) delivery of shares of Common Stock owned by the Participant valued at
their fair market value as determined by the Board in good faith ("Fair Market
Value"), which Common Stock was owned by the Participant at least six months
prior to such delivery;
(3) to the extent permitted by the Board and explicitly provided in an
Option Agreement (i) by delivery of a promissory note of the Participant to the
Company on terms determined by the Board, or (ii) by payment of such other
lawful consideration as the Board may determine; or
(4) any combination of the above permitted forms of payment.
6. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into
- 4 -
<PAGE>
Common Stock and the grant of stock appreciation rights.
8. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each type
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Acquisition Events
(1) Consequences of Acquisition Events. Upon the occurrence of an
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall take any one or
more of the following actions with respect to then outstanding Awards: (i)
provide that outstanding Options shall be assumed, or equivalent Options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such Options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code; (ii) upon written notice to the Participants, provide that
all then unexercised Options will become exercisable in full as of a specified
time (the "Acceleration Time") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Participants between the Acceleration Time and the
consummation of such Acquisition Event; (iii) in the event of an Acquisition
Event under the terms of which holders of Common Stock will
- 5 -
<PAGE>
receive upon consummation thereof a cash payment for each share of Common Stock
surrendered pursuant to such Acquisition Event (the "Acquisition Price"),
provide that all outstanding Options shall terminate upon consummation of such
Acquisition Event and each Participant shall receive, in exchange therefor, a
cash payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options; (iv) provide that all Restricted Stock Awards then
outstanding shall become free of all restrictions prior to the consummation of
the Acquisition Event; and (v) provide that any other stock-based Awards
outstanding (A) shall become exercisable, realizable or vested in full, or shall
be free of all conditions or restrictions, as applicable to each such Award,
prior to the consummation of the Acquisition Event, or (B), if applicable, shall
be assumed, or equivalent Awards shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof).
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; or (c) the complete liquidation of the Company.
(2) Assumption of Options Upon Certain Events. The Board may grant
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization,
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<PAGE>
and converting an Incentive Stock Option to a Nonstatutory Stock Option,
provided that the Participant's consent to such action shall be required unless
the Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.
(h) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(i) Acceleration. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
9. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. The Plan shall become effective on the
date on which it is adopted by the Board, but no Award granted to a Participant
designated as subject to Section 162(m) by the Board shall become exercisable,
vested or realizable, as applicable to such Award, unless and until the Plan has
been approved by the Company's stockholders. No Awards shall be granted under
the Plan after the completion of ten years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the
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<PAGE>
Company's stockholders, but Awards previously granted may extend beyond that
date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.
(e) Stockholder Approval. For purposes of this Plan, stockholder approval
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.
(f) Governing Law. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement dated April __, 1997 between
Barry K. Lewis, an individual residing at 119 Albert's Hill Rd., Sandy Hook,
Conn. 06482 (the "Employee") and International Telecommunication Data Systems,
Inc., a Delaware corporation, with offices at 969 High Ridge Road, Suite 205,
Stamford, Connecticut 06905 (hereinafter referred to as "Corporation") amends
and restates in its entirety the Employment Agreement dated June 1994 between
the Employee and the Corporation (the "Original Agreement"). The Original
Agreement shall have no further force and effect.
WHEREAS, the Corporation desires to employ the Employee, and the Employee
desires to serve as an employee of Corporation on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and promises of the
parties hereto, the Corporation and the Employee agree as follows:
1. Employment: The Corporation hereby agrees to employ the Employee as
Senior Vice-President of Client Management and the Employee hereby agrees to
function as such Senior Vice-President of Client Management for the Corporation
on the terms and conditions hereinafter stated, subject to the directives of the
Chief Executive Officer and Board of Directors of the Corporation.
2. Term of Employment: The term of this Agreement shall begin on the date
hereof and shall continue in full force and effect until July 4, 1999, unless
sooner terminated as provided herein.
3. Compensation:
(a) During the term of this Agreement, for all services rendered by the
Employee under this Agreement, the Corporation shall pay the Employee an annual
base salary of $145,000.00 per annum, payable in arrears at a rate of $12,083.33
on the last day of each month. All compensation payable under this Agreement
shall be subject to applicable federal and state withholding tax requirements
and other deductions approved by the Employee. The Employee's base salary may be
increased on an annual basis, in the sole and absolute discretion of the Board
of Directors of the Corporation, on each anniversary date of the commencement of
this Agreement.
(b) Pursuant to the Corporation's 1996 Stock Incentive Plan (the
"Plan"), the Corporation hereby grants the Employee options to purchase 25,000
shares of Common Stock of Corporation at the exercise price of $14.75 per share,
vesting over a 4 year period, subject to the terms and conditions of the Plan.
<PAGE>
(c) The Employee may receive an annual year end performance bonus in the
sole and absolute discretion of the Board of Directors of the Corporation.
4. Fringe Benefits:
(a) During the term hereof, subject to the Employee's insurability,
Corporation shall provide the Employee and his immediate family, at no cost to
the Employee, with medical and hospitalization insurance coverage similar to
that offered to other officers of the Corporation. During the term hereof,
Corporation shall provide the Employee, at no cost to the Employee, with long
term disability insurance coverage similar to that offered to other officers of
the Corporation.
(b) During the term hereof, Corporation shall provide the Employee, at
no cost to the Employee, with term life insurance coverage on the Employee's
life. The amount of insurance currently provided by such policies on the
Employee's life equal $150,000.00. The proceeds of such life insurance policies
shall be payable to the Employee's named beneficiary.
(c) The Employee is authorized to incur on behalf of the Corporation
only reasonable expenses (including travel and entertainment) in connection with
the business of the Corporation. Any such expenses in excess of one thousand
dollars ($1,000.00) per month, in the aggregate, must be approved in advance by
Corporation, to the extent possible, but in all events written approval shall be
required for any such monthly expense in excess of two thousand five hundred
dollars ($2,500.00). Corporation shall reimburse Employee for all such
reasonable expenses incurred in connection with the business of Corporation upon
the presentation by Employee, from time to time, of an itemized account of such
expenditures, which account shall confirm, in form and substance, to applicable
rules and regulations of the Internal Revenue Service.
5. Duties and Extent of Services: Upon the execution of this Agreement and
throughout its term, the duties of the Employee shall include, but are not
limited to the following:
(a) Provide managerial and executive support to the Corporation;
(b) Provide marketing and sales support for the products of the
Corporation;
(c) Provide a research and development function for the Corporation with
regard to the mobile telecommunications industry;
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<PAGE>
(d) Develop information to provide support for the development of the
clients of the Corporation;
(e) Support and development of clients as directed by the Corporation;
and
(f) Such other duties and responsibilities as may be assigned by the
Board from time to time.
(g) The Employee will work exclusively for the Corporation during the
term of this Agreement. The Employee shall exert his best efforts and shall
devote no less than the greater of: (i) forty (40) hours per week, or (ii) the
amount of time necessary for the Employee to perform his duties with regard to
the business and affairs of the Corporation in accordance with this Agreement.
During the term of this Agreement, the Employee shall not, directly or
indirectly, alone or as a member of a partnership, or as an officer, director,
shareholder, owner, agent or the Employee of any other corporation, be engaged
in or concerned with any other compensable duties or pursuits whatsoever
requiring this personal services without the prior written consent of the
Corporation, which consent may be withheld for any reason or for no reason.
6. Vacation: During each year of the term of this Agreement, the Employee
shall be entitled to three (3) weeks vacation, the time of which shall be
determined after consultation with the Chief Executive Officer of the
Corporation. For purposes of this Section 6, the Employee shall be entitled to
carry forward any unused vacation time from one period to another.
7. Termination: The Employee's employment hereunder shall terminate on the
date set forth in Section 2 hereof, or sooner upon the occurrence of any of the
following events:
(a) The Employee's death;
(b) The termination of the Employee's employment hereunder by
Corporation, at its option, to be exercised by written notice from Corporation
to the Employee, upon the Employee's incapacity or inability to perform his
services as contemplated herein for a period of at least seventy-five (75)
consecutive days or an aggregate of one hundred (100) consecutive or
non-consecutive days during any twelve (12) month period during the term hereof
due to the fact that his physical or mental health shall have become impaired so
as to make it impossible or impractical for him to perform the duties and
responsibilities contemplated for him hereunder; or
(c) The termination of the Employee's employment for "cause" hereunder
by Corporation, at its option, to be exercised by written notice from
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<PAGE>
Corporation to the Employee. The term "cause," as used herein, shall mean: (i)
the Employee's inability or incapacity to perform his duties and/or services in
accordance with the reasonable expectations of the Corporation, (ii) the
Employee's willful misconduct or gross negligence in the performance of his
duties on behalf of the Corporation, or the Employees dishonesty in the
performance of his duties on behalf of the Corporation, (iii) the neglect,
failure or refusal of the Employee to carry out any reasonable request of the
Chief Executive Officer or Board of Directors of the Corporation for the
provision of services hereunder, (iv) the material breach of any provision of
the Agreement by the Employee or (v) the Employee's plea of guilty or nolo
contendere to, or conviction of any crime involving moral turpitude, common law
fraud, dishonesty, theft, or unethical conduct;
(d) Cessation of the Corporation's business.
In the event of any such termination, Corporation shall pay to the Employee
such portion of his annual base salary payable to the Employee to the date such
termination becomes effective, plus an amount equal to one week of annual base
salary for each completed year of service to the Corporation and thereafter the
Employee shall have no claim for any further compensation hereunder; provided
however, that in the event of the Employee's death, his death shall be deemed to
have occurred on the last day of the month in which he dies.
8. Restrictions On the Employee: During the period commencing on the date
hereof and ending two (2) years after the termination of the Employee's
employment by Corporation for any reason, the Employee shall not directly or
indirectly induce or attempt to induce any of the employees of Corporation to
leave the employ, of Corporation.
9. Covenant Not To Compete: During the period commencing on the date
hereof, and ending one (1) year after the termination of the Employee's
employment for any reason, the Employee shall not, except as a passive investor
in publicly held companies, directly or indirectly engage in, associate with, or
own or control any interest in, or act as principal, director, officer, agent,
or the Employee of, or consultant to: (i) CBIS, CSC, EDS, ALLTEL INFORMATION
SYSTEMS, LHS, AMS, DANET or their successors or assigns, or (ii) any person,
firm or corporation, located in the eastern third of the United States, whose
activity is (i) a venture or business, substantially similar to that of
Corporation and/or (ii) which is in competition with the Corporation.
Notwithstanding anything to the contrary contained herein, to the extent
Corporation (i) makes an absolute assignment of the bulk of its assets for the
benefit of creditors, (ii) consents to the appointment of a bankruptcy trustee,
(iii) institutes bankruptcy proceedings or (iv) experiences a cessation, the
provisions of this Section 9 shall lapse.
10. Proprietary Information:
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<PAGE>
(a) For purposes of this Agreement, "proprietary information" shall mean
any information relating to the business of Corporation or any entity in which
Corporation has an ownership interest that has not previously been publicly
released by duly authorized representatives of Corporation and shall include
(but shall not be limited to) information encompassed in all proposals,
marketing and sales plans, financial information, costs, pricing information,
computer programs, customer information, customer lists, and all methods,
concepts or ideas in or reasonably related to the business of Corporation or any
entity in which Corporation has an interest. The Employee agrees to regard and
preserve as confidential all proprietary information, whether he has such
information in his memory or in writing or other physical form. The Employee
will not, without written authority from Corporation to do so, directly or
indirectly use for his benefit or purposes, nor disclose to others, either
during the term of his employment hereunder or thereafter, except as required by
the conditions of his employment hereunder, any proprietary information. The
Employee agrees not to remove from the premises of Corporation or any subsidiary
or affiliate of Corporation, except as an employee of Corporation in pursuit of
the business of Corporation or any of its subsidiaries, affiliates or any entity
in which Corporation has an ownership interest, or except as specifically
permitted in writing by Corporation, any document or object containing or
reflecting any proprietary information. The Employee recognizes that all such
documents and objects, whether developed by him or by someone else during the
term of his employment with Corporation, are the exclusive property of
Corporation.
(b) All proprietary information and all of the Employee's interest in
trade secrets, trademarks, computer programs, customer information, customer
lists, employee lists, products, procedure, copyrights and developments
hereafter to the end of the period of employment hereunder developed by the
Employee as a result of, or in connection with, his employment hereunder, shall
belong to Corporation; and without further compensation, but at Corporation's
expense, forthwith upon request of Corporation, the Employee shall execute any
and all such assignments and other documents and take any and all such other
action as Corporation may reasonably request in order to vest in Corporation all
the Employee's right, title and interest in and all of the aforesaid items, free
and clear of liens, charges and encumbrances.
(c) The Employee expressly agrees that the covenants set forth in
Sections 8, 9, and 10 of this Agreement are being given to Corporation in
connection with the employment of the Employee by Corporation and that such
covenants are intended to protect Corporation against the competition by the
Employee, within the terms stated, to the fullest extent deemed reasonable and
permitted in law and equity. In the event that the foregoing limitations upon
the conduct of the Employee are beyond those permitted by law, such limitations,
both as to time and
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<PAGE>
geographical area, shall be, and be deemed to be, reduced in scope and effect to
the maximum extent permitted by law.
11. Injunctive Relief: The Employee acknowledges that the injury to
Corporation resulting from any violation by him of any of the covenants
contained in this Agreement will be of such a character that it cannot be
adequately compensated by money damages, and, accordingly, Corporation may, in
addition to pursuing its other remedies, obtain an injunction from any court
having jurisdiction of the matter restraining any such violation; and no bond or
other security shall be required in connection with such injunction.
12. Representation of the Employee: The Employee represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound, including, but not limited to, any
Cincinnati Bell Information Systems, Inc. employment agreement or covenant not
to compete.
13. Parties; Non-Assignability: As used herein, the term "Corporation"
shall mean and include Corporation and any subsidiary or affiliate thereof and
any successor thereto unless the context indicates otherwise. This Agreement and
all rights hereunder are personal to the Employee and shall not be assignable by
him and any purported assignment shall be null and void and shall not be binding
on Corporation.
14. Entire Agreement: This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated herein and
supersedes all previous representations, negotiations, commitments, and writing
with respect thereto.
15. Amendment or Alteration: No amendment or alteration of the terms of
this Agreement shall be valid unless made in writing and signed by all of the
parties hereto.
16. Choice of Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, except a provision of that
law which would refer resolution of any issue to another jurisdiction. The forum
for resolution of any dispute shall be the State of Connecticut.
17. Arbitration: Any controversy, claim, or breach arising out of or
relating to this Agreement or the breach thereof may, in the sole discretion of
the Corporation, be settled by arbitration in Stamford, Connecticut in
accordance with the rules of the American Arbitration Association and the
judgment upon the award rendered shall be entered by consent in any court having
jurisdiction thereof.
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<PAGE>
18. Waiver of Breach: The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any of the parties hereto.
19. Binding Effect: The terms of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective personal
representatives, heirs, administrators, successors, and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CORPORATION;
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
By /s/ Charles L. Bakes
------------------------------
Charles L. Bakes, President
EMPLOYEE:
By: /s/ Barry K. Lewis
-----------------------------
Barry K. Lewis
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 3rd day of September, 1997 between
Peter P. Bassermann, an individual residing at 18 Wellesley Dr., Branford, CT
06405 (hereinafter referred to as "Employee") and International
Telecommunication Data Systems, Inc., a Delaware corporation, with offices at
225 High Ridge Road, Stamford, Connecticut 06905 (hereinafter referred to as
"Corporation").
WHEREAS, the Corporation desires to employ the Employee, and the Employee
desires to serve as an employee of Corporation on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and promises of the
parties hereto, the Corporation and the Employee agree as follows:
1. Employment: The Corporation hereby agrees to employ the Employee as
President and Chief Executive Officer, and the Employee hereby agrees to
function as such for the Corporation on the terms and conditions hereinafter
stated, subject to the directives of the Board of Directors of the Corporation
(the "Board").
2. Term of Employment: The term of this Agreement shall begin on September
15, 1997 and shall continue in full force and effect until September 14, 2000,
unless sooner terminated as provided herein, or unless renewed for additional
one year terms by agreement of the parties.
3. Compensation:
(a) During the term of this Agreement, for all services rendered by
Employee under this Agreement, the Corporation shall pay the Employee an annual
Base Salary of Two Hundred and Twenty Thousand Dollars ($220,000.00) per annum,
payable in arrears at a rate of Eighteen Thousand Three Hundred and Thirty-Three
Dollars ($18,333.00) on the last day of each month or more frequently in the
discretion of the Board and further subject to increase from time to time as
deemed appropriate by the Board. All compensation payable under this Agreement
shall be subject to applicable federal and state withholding tax requirements
and other deductions approved by Employee.
(b) For each calendar year during the Term of Employment, Employee is
eligible to receive an annual bonus in the discretion of the Board subject to
the satisfaction of reasonable performance criteria as shall be established from
time to time.
(c) In addition to the annual base salary described in Section 3(a)
hereof, the Corporation grants Employee a right to immediately become eligible
to participate in the ITDS Employee Stock Incentive Plan and the Employee Stock
Purchase Plan (collectively the "Plan"), copies of which are attached hereto and
made a part hereof as Attachment "A," upon the commencement of this Agreement
with Corporation. On the execution of this Agreement, Employee shall be entitled
to receive options to purchase one hundred thousand (100,000) shares of Common
Stock of the Corporation, at market value on the date of grant, vesting over a 4
year period pursuant to the terms of the Plan.
4. Fringe Benefits:
(a) Subject to applicable waiting periods and Employee's insurability,
Corporation shall provide the Employee, at no cost to Employee, with medical and
hospitalization
<PAGE>
insurance coverage similar to that offered to other executive level employees of
the Corporation. Subject to applicable waiting periods, during the term hereof,
Corporation shall provide the Employee, at no cost to the Employee, with long
term disability insurance coverage similar to that offered to other executive
level employees of the Corporation.
(b) Subject to applicable waiting periods, and during the term hereof,
Corporation shall provide Employee, at no cost to Employee, with term life
insurance coverage on Employee's life equal to twice Employee's base salary to a
maximum of One Hundred and Fifty Thousand dollars ($150,000). The proceeds of
such life insurance policies shall be payable to Employee's named beneficiary.
(c) Subject to applicable waiting periods, Employee will be eligible to
participate in the Corporation's 401K plan.
(d) Corporation shall pay the reasonable cost of Employee's mobile
telephone service.
5. Duties and Extent of Services: Upon the execution of this Agreement and
throughout its term, the duties of the Employee shall include, but are not
limited to the following:
(a) Provide managerial and executive supervision and support to the
Corporation;
(b) Provide marketing and sales support for the products and services of
the Corporation, including but not limited to Customer site visits as required;
(c) Provide a market and customer development function for the
Corporation with regard to the mobile telecommunications industry;
(d) Such other duties and responsibilities as may be assigned by the
Board from time to time.
(e) Employee will work exclusively for the Corporation during the term
of this Agreement, Employee shall exert his best efforts and shall devote no
less than the greater of: (i) fifty (50) hours per week, or (ii) the amount of
time necessary for Employee to perform his duties with regard to the business
and affairs of the Corporation in accordance with this Agreement. During the
term of this Agreement, Employee shall not, directly or indirectly, alone or as
a member of the partnership, or as an officer, director, shareholder, owner,
agent or employee of any other corporation, be engaged in or concerned with any
other compensable duties or pursuits whatsoever requiring his personal services
without the prior written consent of the Board, which consent may not be
unreasonably withheld, provided, however, Employee is not prohibited from
participating in telecommunication industry boards or associations related to
his employment responsibilities.
6. Vacation: During each year of the term of this Agreement, the Employee
shall be entitled to three (3) weeks' vacation, the time of which shall be
determined after consultation with the Board. For purposes of this Section 6,
Employee shall be entitled to carry forward any unused vacation time from one
period to another.
7. Termination: The Employee's employment hereunder shall terminate on the
date set forth in Section 2 hereof, or sooner upon the occurrence of any of the
following events:
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<PAGE>
(a) The Employee's death;
(b) The termination of the Employee's employment hereunder by
Corporation, at its option, to be exercised by written notice from Corporation
to the Employee, upon the Employee's incapacity or inability to perform his
services as contemplated herein for a period of at least seventy-five (75)
consecutive days or an aggregate of one hundred twenty (120) consecutive or
non-consecutive days during any twelve (12) month period during the term hereof
due to the fact that his physical or mental health shall have become impaired so
as to make it impossible or impractical for him to perform the duties and
responsibilities contemplated for him hereunder; or
(c) written notice by the Employee to the Corporation of the termination
of the Employee's employment hereunder by the Employee after a Change of Control
(as hereinafter defined);
(d) The termination for "cause" of the Employee's employment hereunder
by Corporation, at its option, to be exercised by written notice from
Corporation to the Employee. The term "cause," as used herein, shall mean: (i)
the Employee's failure to perform his duties and/or services in accordance with
the goals and performance standards mutually agreed upon with the Board, (ii)
the Employee's willful misconduct or gross negligence in the performance of his
duties on behalf of the Corporation, or the Employee's dishonesty in the
performance of his duties on behalf of the Corporation, (iii) the neglect,
failure or refusal of the Employee to carry out any reasonable request of the
Board for the provision of services hereunder, (iv) the material breach of any
provision of the Agreement by the Employee or (v) the Employee's plea of guilty
or nolo contendere to, or conviction of any crime involving moral turpitude,
common law fraud, dishonesty, theft, or unethical conduct;
(e) Cessation of the Corporation's business.
In the event of any such termination, Corporation shall pay to Employee
such portion of his annual base salary payable to Employee to the date such
termination becomes effective, and thereafter Employee shall have no claim for
any further compensation hereunder.
8. Change in Control:
(a) In the event that the Employee's employment with the Corporation
terminates pursuant to clause (c) of Section 7 hereof and such termination
occurs within six (6) months following any Change in Control (as hereinafter
defined), (I) all unvested stock options and other benefits then held by the
Executive shall become fully vested and immediately exercisable and shall remain
so for a period of six (6) months thereafter or, if longer, for the period
during which such option or other benefit would otherwise be exercisable in
accordance with its terms or the terms of the applicable plan, and (ii) Employee
shall be entitled to thirty-six (36) months of Base Salary in a single lump sum
within thirty (30) calendar days after the Employee's termination of employment.
(b) Change in Control shall mean (I) any transfer or other transaction
whereby the right to vote more than fifty percent (50%) of the then issued and
outstanding capital stock of (A) the Corporation, or (B) any subsidiary of the
Corporation to which the Corporation shall have transferred all or substantially
all of its business, is transferred to any party or affiliated group of parties,
(ii) any merger or consolidation of the Corporation (or a subsidiary of the
Corporation of the type described in clause (i)(B) above) with any other
business entity, at the
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<PAGE>
conclusion of which transaction the persons who were holders of all the voting
stock of the Corporation immediately prior to the transaction hold less than
fifty percent (50%) of the total voting stock of the successor entity
immediately following the transaction, or (iii) any sale, lease, transfer or
other disposition of all or substantially all of the assets of the Corporation
(or a subsidiary of the type described in clause (i)(B) above); provided that a
Change of Control shall not include any such transaction resulting from the sale
of stocks pursuant to the Corporation's initial public offering of securities
under the Securities Act of 1933.
9. Restrictions On Employee: During the period commencing on the date
hereof and ending two (2) years after the termination of the Employee's
employment by Corporation for any reason, the Employee shall not directly or
indirectly induce or attempt to induce any of the employees of Corporation to
leave the employ of Corporation.
10. Covenant Not To Compete: During the period commencing on the date
hereof, and ending one (1) year after the termination of the Employee's
employment for any reason, the Employee shall not, except as a passive investor
in publicly held companies, directly or indirectly engage in, associate with, or
own or control any interest in, or act as principal, director, officer, agent,
or employee of, or consultant to: (i) Cincinnati Bell Information Systems,
Systematics, Saville Systems, Cable Services Group, Computer Sciences
Corporation, Electronic Data Systems, Alltel, Comsoft, LHS, Danet, Subscriber
Computing, H.O. Software, Baja Systems or their successors or assigns, or (ii)
any person, firm or corporation, located in the eastern third of the United
States, whose activity is (a) a venture or business, substantially similar to
that of Corporation and/or (b) which is in competition with the Corporation.
Notwithstanding anything to the contrary contained herein, to the extent
Corporation (i) makes an absolute assignment of the bulk of its assets for the
benefit of creditors, (ii) consents to the appointment of a bankruptcy trustee,
(iii) institutes bankruptcy proceedings or (iv) experiences a cessation of
business, the provisions of this Section 10 shall lapse.
11. Proprietary Information:
(a) For purposes of this Agreement, "proprietary information" shall mean
any information relating to the business of Corporation or any entity in which
Corporation has an ownership interest that has not previously been publicly
released by duly authorized representatives of Corporation and shall include
(but shall not be limited to) information encompassed in all proposals,
marketing and sales plans, financial information, costs, pricing information,
computer programs, customer information, customer lists, and all methods,
concepts or ideas in or reasonably related to the business of Corporation or any
entity in which Corporation has an interest. The Employee agrees to regard and
preserve as confidential all proprietary information, whether he has such
information in his memory or in writing or other physical form. The Employee
will not, without written authority from Corporation to do so, directly or
indirectly, use for his benefit or purposes, nor disclose to others, either
during the term of his employment hereunder or thereafter, except as required by
the conditions of his employment hereunder, any proprietary information. The
Employee agrees not to remove from the premises of Corporation or any subsidiary
or affiliate of Corporation, except as an employee of Corporation in pursuit of
the business of Corporation or any of its subsidiaries, affiliates or any entity
in which Corporation has an ownership interest, or except as specifically
permitted in writing by Corporation, any document or object containing or
reflecting any proprietary information. The Employee recognizes that all such
documents and objects, whether developed by him or by someone else during the
term of him employment with Corporation, are the exclusive property of
Corporation.
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<PAGE>
(b) All proprietary information and all of the Employee's interest in
trade secrets, trademarks, computer programs, customer information, customer
lists, employee lists, products, procedure, copyrights and developments
hereafter to the end of the period of employment hereunder developed by Employee
as a result of, or in connection with, his employment hereunder, shall belong to
Corporation; and without further compensation, but at Corporation's expense,
forthwith upon request of Corporation, Employee shall execute any and all such
assignments and other documents and take any and all such other action as
Corporation may reasonably request in order to vest in Corporation all
Employee's right, title and interest in and all of the aforesaid items, free and
clear of liens, charges and encumbrances.
(c) The Employee expressly agrees that the covenants set forth in
Sections 9, 10, and 11 of this Agreement are being given to Corporation in
connection with the employment of the Employee by Corporation and that such
covenants are intended to protect Corporation against the competition by the
Employee, within the terms stated, to the fullest extent deemed reasonable and
permitted in law and equity. In the event that the foregoing limitations upon
the conduct of the Employee are beyond those permitted by law, such limitations,
both as to time and geographical area, shall be, and be deemed to be, reduced in
scope and effect to the maximum extent permitted by law.
12. Injunctive Relief: The Employee acknowledges that the injury to
Corporation resulting from any violation by him of any of the covenants
contained in this Agreement will be of such a character that it cannot be
adequately compensated by money damages, and, accordingly, Corporation may, in
addition to pursuing its other remedies, obtain an injunction from any court
having jurisdiction of the matter restraining any such violation; and no bond or
other security shall be required in connection with such injunction.
13. Representation of Employee: The Employee represents and warrants that
neither the execution and delivery of this Agreement nor the performance of his
duties hereunder violates the provisions of any other agreement to which he is a
party or by which he is bound.
14. Parties; Non-Assignability: As used herein, the term "Corporation"
shall mean and include Corporation and any subsidiary or affiliate thereof and
any successor thereto unless the context indicates otherwise. This Agreement and
all rights hereunder are personal to the Employee and shall not be assignable by
him and any purported assignment shall be null and void and shall not be binding
on Corporation.
15. Entire Agreement: This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated herein and
supersedes all previous representations, negotiations, commitments, and writing
with respect thereto.
16. Amendment or Alteration: No amendment or alteration of the terms of
this Agreement shall be valid unless made in writing and signed by all of the
parties hereto.
17. Choice of Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, except a provision of that
law which would refer resolution of any issue to another jurisdiction. The forum
for resolution of any dispute shall be the State of Connecticut.
18. Waiver of Breach: The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any of the parties hereto.
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<PAGE>
19. Binding Effect: The terms of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective personal
representatives, heirs, administrators, successors, and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CORPORATION:
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
By /s/ Charles L. Bakes
-------------------------
Charles L. Bakes
President
EMPLOYEE:
/s/ Peter P. Bassermann
- -------------------------------
Peter P. Bassermann
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement dated as of September 3, 1997
between Peter P. Bassermann ("Employee") and International Telecommunication
Data Systems, Inc. ("Corporation") is hereby effective January 1, 1998 as
follows:
1. Section 2 is hereby deleted and replaced with the following:
"2. Term of Employment: The term of this Agreement shall begin on January
1, 1998 and shall continue in full force and effect until December 31, 2000,
unless sooner terminated as provided herein, or unless renewed for additional
one year terms by agreement of the parties."
2. Section 3(a) is hereby deleted and replaced with the following:
"(a) During the term of this Agreement, for all services rendered by
Employee under this Agreement, the Corporation shall pay the Employee an annual
Base Salary of Two Hundred and Seventy-Five Thousand Dollars ($275,000.00) per
annum, payable in arrears at a rate of Twenty-Two Thousand Nine Hundred and
Sixteen Dollars ($22,916.00) on the last day of each month or more frequently in
the discretion of the Board and further subject to increase from time to time as
deemed appropriate by the Board. All compensation payable under this Agreement
shall be subject to applicable federal and state withholding tax requirements
and other deductions approved by Employee."
3. Section 8 is hereby deleted and replaced with the following:
"8. Change in Control.
(a) In the event of a Change in Control (as hereinafter defined), (i) all
unvested stock options and other benefits shall become fully vested and
immediately exercisable and shall remain so for a period of six months
thereafter or, if longer, for the period during which such option or other
benefit would otherwise be exercisable in accordance with its terms or the terms
of the applicable plan and (ii) Employee shall be entitled to thirty-six (36)
months of Base Salary in a single lump sum payout within thirty (30) days after
the Change in Control; provided, however, that prior to the occurrence of the
Change in Control the Employee may elect to defer payment of any amounts payable
pursuant to this Section until the calendar year beginning at least 30 days
after the Change in Control.
(b) Change in Control shall mean (i) any transfer or other transaction
whereby the right to vote more than fifty percent (50%) of the then issued and
outstanding capital stock of (A) the Corporation or (B) any subsidiary of the
Corporation to which the Corporation shall have transferred all or substantially
all of its business, is transferred to any party or affiliated group of parties,
(ii) any merger or consolidation of the Corporation (or a subsidiary of the
Corporation of the type described in clause (i)(B) above) with any other
business entity, at the
<PAGE>
conclusion of which transaction the persons who were holders of all the voting
stock of the Corporation immediately prior to the transaction hold less than
fifty percent (50%) of the total voting stock of the successor entity
immediately following the transaction, or (iii) any sale, lease, transfer or
other disposition of all or substantially all the assets of the Corporation (or
a subsidiary of the type described in clause (i)(B) above).
(c) Notwithstanding any other provision of this Agreement, in the event
that any payment or benefit received or to be received by the Employee (i) is
deemed to be in connection with a Change in Control (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement with the
Corporation, its successors, any person whose actions result in a Change in
Control or any corporation ("Affiliates") affiliated (or which, as a result of
the completion of the transactions causing a Change in Control will become
affiliated) with the Corporation within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code") (collectively with the
payments and benefits pursuant to this Agreement if deemed to be paid pursuant
to a Change in Control, "Total Payments") and (ii) is determined by the
Corporation's independent certified accounting firm (the "Tax Advisor") that an
excise tax is payable by Employee under Section 4999 of the Code, then the
Corporation will pay to the Employee additional compensation which will be
sufficient to enable Employee to pay such excise tax as well as the income tax,
medicare tax and excise tax on such additional compensation, such that, after
the payment of income, medicare and excise taxes, Employee is in the same
economic position in which he would have been if the provisions of Section 4999
of the Code had not been applicable. The additional compensation required by
this Section 8(c) will be paid to Employee promptly after the date or dates on
which the amount of such additional compensation is determinable, in whole or in
part by the Tax Advisor."
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the 1st day of January, 1998.
INTERNATIONAL TELECOMMUNICATION EMPLOYEE
DATA SYSTEMS, INC.
By /s/ Charles L. Bakes /s/ Peter P. Bassermann
------------------------- ------------------------
Charles L. Bakes Peter P. Bassermann
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1998 by and between
International Telecommunication Data Systems, Inc., a Delaware corporation (the
"Company"), and Lewis D. Bakes (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive desire to enter into an employment
agreement, all in accordance with the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises hereof and the
mutual covenants contained herein, the parties hereto hereby covenant and agree
as follows:
1. Employment. The Company hereby employs the Executive as the Executive
Vice President and Chief Operating Officer, and the Executive hereby agrees to
function as such for the Company, for the period set forth in Section 2 hereof,
all upon the terms and conditions hereinafter set forth.
2. Term of Employment. (a) Unless (i) earlier terminated as provided in
Section 7 hereof or (ii) renewed as provided in Section 2(b) hereof, the term of
the Executive's employment under this Agreement shall be for a period beginning
on January 1, 1998 and ending on December 31, 2000 (the "Initial Term").
(b) The term of the Executive's employment under this Agreement shall be
automatically renewed for additional one-year terms (each, a "Renewal Term")
upon the expiration of the Initial Term or any Renewal Term unless the Company
or the Executive delivers to the other, at least 120 days prior to the
expiration of the Initial Term or the then current Renewal Term, as the case may
be, a written notice specifying that the term of the Executive's employment will
not be renewed at the end of the Initial Term or such Renewal Term, as the case
may be.
(c) The period from January 1, 1998 until December 31, 2000 or, in the
event that the Executive's employment hereunder is earlier terminated as
provided in Section 7 hereof or renewed as provided in Section 2(b) hereof, such
shorter or longer period, as the case may be, is hereinafter called the
"Employment Term".
(d) In the event that the Executive continues in the full-time employ of
the Company after the end of the Employment Term (it being expressly understood
and agreed that the Company does not now, nor hereafter shall have, any
obligation to
<PAGE>
continue the Executive in its employ whether or not on a full-time basis, after
the Employment Term ends), then the Executive's continued employment by the
Company shall, notwithstanding anything to the contrary expressed or implied
herein, be terminable by the Company at will.
3. Duties. The Executive shall be employed as Executive Vice President and
Chief Operating Officer of the Company and shall faithfully and competently
perform such duties as the Board of Directors of the Company shall from time to
time determine, which duties shall be consistent with such position. The
Executive shall perform his duties at the offices of the Company in Stamford,
Connecticut and/or Champaign, Illinois, with travel to such other locations from
time to time as the Board of Directors of the Company may reasonably prescribe.
Except as may otherwise be approved in advance by the Board of Directors of the
Company, and except during vacation periods and personal days and reasonable
periods of absence due to sickness, personal injury or other disability, the
Executive shall devote his full time throughout the Employment Term to the
services required of him hereunder. The Executive shall render his services
exclusively to the Company during the Employment Term and shall use his best
efforts, judgment and energy to improve and advance the business and interests
of the Company in a manner consistent with the duties of his position.
4. Compensation.
(a) Salary. As compensation for the complete and satisfactory performance
by the Executive of the services to be performed by the Executive hereunder
during the Employment Term, the Company shall pay the Executive a base salary at
the annual rate of $275,000 increased (but not reduced) from time to time in
such amounts as the Company may, in its reasonable discretion, deem to be
appropriate (said amount, together with any such increases, being hereinafter
referred to as the "Salary"). Any Salary payable hereunder shall be paid in
regular intervals in accordance with the Company's payroll practices from time
to time in effect. All compensation payable under this Agreement shall be
subject to applicable federal and state withholding tax requirements and other
deductions approved by the Executive.
(b) Bonus Payments. For each calendar year during the Employment Term, the
Executive is eligible to receive an annual bonus in the reasonable discretion of
the Board of Directors subject to the satisfaction of such reasonable
performance criteria as shall be established for him with respect to such year.
5. Benefits. During the Employment Term, the Executive shall:
(a) be eligible to participate in executive fringe benefits that may be
provided by the Company for its executive employees in accordance with the
provisions of any such plans, as the same may be in effect from time to time;
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<PAGE>
(b) be eligible to participate in any medical and health plans or other
executive welfare benefit plans that may be provided by the Company for its
executive employees in accordance with the provisions of any such plans, as the
same may be in effect from time to time;
(c) be entitled to annual paid vacation in accordance with the Company
policy that may be applicable to executive employees from time to time, such
vacation to be in no event less than two weeks in each calendar year.
(d) be entitled to sick leave and sick pay in accordance with any Company
policy that may be applicable to executive employees from time to time;
(e) be entitled to life insurance coverage (payable to his designated
beneficiary) of not less than $500,000 and long term disability insurance
coverage provided by the Company to executive employees; and
(f) be entitled to reimbursement for all reasonable and necessary
out-of-pocket business expenses incurred by the Executive in the performance of
his duties hereunder in accordance with the Company's policies for executive
employees, including, without limitation, the expense of maintaining memberships
in such federal, state and local professional and bar associations as agreed
upon by the Company and the Executive.
6. Stock Plans and Options. During the Employment Term, the Executive shall
be eligible to participate in any stock option, incentive and similar plans
established by the Company from time to time and at any time and the Company
shall grant to the Executive or cause to be granted to him stock options and
other benefits similar to the options and benefits granted to other executive
officers subject in all cases to the satisfaction by the Executive of the terms
and conditions of such plans and to the reasonable exercise by the Board of
Directors of any discretion granted to it or them thereunder.
7. Termination: Effect of Termination. (a) The Executive's employment
hereunder shall be terminated upon the occurrence of any of the following:
(i) death of the Executive;
(ii) termination of the Executive's employment hereunder by the Company
because of the Executive's inability to perform his duties on account of
disability or incapacity for a period of one hundred eighty (180) or more
days, whether or not consecutive, occurring within any period of twelve
(12) consecutive months;
(iii) written notice by the Company to the Executive of the termination
of his employment hereunder by the Company at any time "for cause,"
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<PAGE>
(iv) written notice by the Executive to the Company of the termination
of the Executive's employment hereunder by the Executive because of a
material diminution of the Executive's duties, authority or responsibility
or a materially impairment by action of the Company of his ability to
perform his duties or responsibilities, regardless of whether such
diminution of duties or impairment is accompanied by a change in the
Executive's title of Executive Vice President and Chief Operating Officer;
(v) written notice by the Executive to the Company of a material breach
by the Company of any provision of this Agreement if such breach continues
for thirty (30) days after written notice thereof to the Company; or
(vi) written notice by the Executive to the Company of the termination
of the Executive's employment hereunder by the Executive at any time for
any reason whatsoever (including, without limitation, resignation or
retirement) other than a breach of any provision of this Agreement by the
Company (as described in paragraph (v) above) or other than the occurrence
of any event described in clause (iv) above.
The following, and only the following, actions, failures or events by or
affecting the Executive shall constitute "cause" for termination within the
meaning of clause (iii) above:
(1) conviction of having committed a felony, (2) acts of dishonesty or moral
turpitude that are materially detrimental to the Company, (3) willful acts or
omissions which the Executive knew were likely to materially damage the business
of the Company, (4) failure by the Executive to obey the reasonable and lawful
orders of the Board of Directors, (5) willful breach by the Executive of his
obligations under this Agreement, or (6) failure by the Executive to perform
duties in accordance with the reasonable directions of the Board of Directors.
(b) In the event that the Executive's employment with the Company is
terminated by the Executive pursuant to the clause (v) above, then the Company
shall pay to the Executive, as severance pay in a single lump sum payment, an
amount equal to 36 months of Base Salary within thirty (30) days after the
Executive's termination of employment, based on the Executive's Base Salary
immediately preceding the event specified in clause (v), without reduction or
offset for any other monies which the Executive may thereafter earn or be paid.
(c) In the event that the Executive's employment with the Company
terminates pursuant to clauses (i), (ii) or (iii) above, then notwithstanding
anything to the contrary expressed or implied herein, except as required by
applicable law and Section 8 hereof, the Company shall not be obligated to make
any payments to the Executive or on his behalf of whatever kind or nature by
reason of the Executive's cessation of employment
-4-
<PAGE>
(including, without limitation, by reason of termination of the Executive's
employment by the Company for "cause"), other than (i) such amounts, if any, of
his Salary as shall have accrued and remained unpaid as of the date of said
cessation and (ii) such other amounts which may be then otherwise payable to the
Executive from the Company's benefit plans or reimbursement policies, if any.
8. Change in Control.
(a) In the event of a Change in Control (as hereinafter defined), (i) all
unvested stock options and other benefits shall become fully vested and
immediately exercisable and shall remain so for a period of six months
thereafter or, if longer, for the period during which such option or other
benefit would otherwise be exercisable in accordance with its terms or the terms
of the applicable plan and (ii) Executive shall be entitled to the compensation
provided in Section 7(b) hereof within thirty (30) days after the Change in
Control; provided, however, that prior to the occurrence of the Change in
Control the Executive may elect to defer payment of any amounts payable pursuant
to this Section until the calendar year beginning at least 30 days after the
Change in Control.
(b) Change in Control shall mean (i) any transfer or other transaction
whereby the right to vote more than fifty percent (50%) of the then issued and
outstanding capital stock of (A) the Company or (B) any subsidiary of the
Company to which the Company shall have transferred all or substantially all of
its business, is transferred to any party or affiliated group of parties, (ii)
any merger or consolidation of the Company (or a subsidiary of the Company of
the type described in clause (i)(B) above) with any other business entity, at
the conclusion of which transaction the persons who were holders of all the
voting stock of the Company immediately prior to the transaction hold less than
fifty percent (50%) of the total voting stock of the successor entity
immediately following the transaction, or (iii) any sale, lease, transfer or
other disposition of all or substantially all the assets of the Company (or a
subsidiary of the type described in clause (i)(B) above).
(c) Notwithstanding any other provision of this Agreement, in the event
that any payment or benefit received or to be received by the Executive (i) is
deemed to be in connection with a Change in Control (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement with the
Company, its successors, any person whose actions result in a Change in Control
or any corporation ("Affiliates") affiliated (or which, as a result of the
completion of the transactions causing a Change in Control will become
affiliated) with the Company within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code") (collectively with the payments
and benefits pursuant to this Agreement if deemed to be paid pursuant to a
Change in Control, "Total Payments") and (ii) is determined by the Company's
independent certified accounting firm (the "Tax Advisor") that an excise tax is
payable by Executive under Section 4999 of the Code, then the Company will pay
to
-5-
<PAGE>
the Executive additional compensation which will be sufficient to enable
Executive to pay such excise tax as well as the income tax, medicare tax and
excise tax on such additional compensation, such that, after the payment of
income, medicare and excise taxes, Executive is in the same economic position in
which he would have been if the provisions of Section 4999 of the Code had not
been applicable. The additional compensation required by this Section 8(c) will
be paid to Executive promptly after the date or dates on which the amount of
such additional compensation is determinable, in whole or in part by the Tax
Advisor.
9. Restrictions on Executive. During the period commencing on the date
hereof and ending one (1) year after the termination of the Executive's
employment by the Company for any reason, the Executive shall not directly or
indirectly induce or attempt to induce any of the employees of the Company to
leave the employ of the Company.
10. Covenant Not To Compete. During the period commencing on the date
hereof, and ending one (1) year after the termination of the Executive's
employment due to Sections 7(a)(iii) or 7(a)(vi) hereof, except if termination
is a result of a Change in Control, the Executive shall not, except as a passive
investor in publicly held companies, or directly or indirectly engage in,
associate with, or own or control any interest in, or act as principal,
director, officer, agent, or employee of, or consultant to any person, firm or
company, or any division or subsidiary, whose primary activity is in competition
with the Company. Notwithstanding anything to the contrary contained herein, to
the extent the Company (i) makes an absolute assignment of the bulk of its
assets for the benefit of creditors, (ii) consents to the appointment of a
bankruptcy trustee, (iii) institutes bankruptcy proceedings or (iv) experiences
a cessation, the provisions of this Section 10 shall lapse.
11. Proprietary Information.
(a) For purposes of this Agreement, "proprietary information" shall mean
any information relating to the business of Company or any entity in which
Company has an ownership interest that has not previously been publicly released
by duly authorized representatives of the Company and shall include (but shall
not be limited to) information encompassed in all proposals, marketing and sales
plans, financial information, costs, pricing information, computer programs,
customer information, customer lists, and all methods, concepts or ideas in or
reasonably related to the business of Company or any entity in which Company has
an interest. The Executive agrees to regard and preserve as confidential all
proprietary information, whether he has such information in his memory or in
writing or other physical form. The Executive will not, without written
authority from Company to do so, directly or indirectly, use for his benefit or
purposes, nor disclose to others, either during the term of his employment
hereunder or thereafter, except as required by the conditions of his employment
hereunder or as otherwise required by law, any proprietary information. The
Executive
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<PAGE>
agrees not to remove from the premises of the Company or any subsidiary or
affiliate of Company, except as an executive of the Company in pursuit of the
business of the Company or any of its subsidiaries, affiliates or any entity in
which the Company has an ownership interest, or except as specifically permitted
in writing by the Company, any document or object containing or reflecting any
proprietary information. The Executive recognizes that all such documents and
objects, whether developed by him or by someone else during the term of his
employment with the Company are the exclusive property of the Company.
(b) All proprietary information and all of the Executive's interest in
trade secrets, trademarks, computer programs, customer information, customer
lists, employee lists, products, procedure, copyrights and developments
hereafter to the end of the period of employment hereunder developed by
Executive as a result of, or in connection with, his employment hereunder, shall
belong to the Company; and without further compensation, but at the Company's
expense, forthwith upon request of the Company, Executive shall execute any and
all such assignments and other documents and take any and all such other action
as the Company may reasonably request in order to vest in the Company all
Executive's right, title and interest in and all of the aforesaid items, free
and clear of liens, charges and encumbrances.
(c) The Executive expressly agrees that the covenants set forth in Sections
9, 10, and 11 of this Agreement are being given to the Company in connection
with the employment of the Executive by the Company and that such covenants are
intended to protect the Company against the competition by the Executive, within
the terms stated, to the fullest extent deemed reasonable and permitted in law
and equity. In the event that the foregoing limitations upon the conduct of the
Executive are beyond those permitted by law, such limitations, both as to time
and geographical area, shall be, and be deemed to be, reduced in scope and
effect to the maximum extent permitted by law.
12. Injunctive Relief: The Executive acknowledges that the injury to the
Company resulting from any violation by him of any of the covenants contained in
this Agreement will be of such a character that it cannot be adequately
compensated by money damages, and, accordingly, the Company may, in addition to
pursuing its other remedies, obtain an injunction from any court having
jurisdiction of the matter restraining any such violation; and no bond or other
security shall be required in connection with such injunction.
13. Non-Assignability. (a) Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive, his beneficiaries, or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude the Executive from designating a
beneficiary to receive any benefit payable hereunder upon his death or
incapacity. Notwithstanding the foregoing, in the case of a Change in Control,
this Agreement and any right or interest of the Company hereunder shall be
assignable by the Company without the consent of the Executive;
-7-
<PAGE>
provided, however, that in the event of such an assignment without the consent
of the Executive, the Company shall remain liable for the payment of all amounts
payable to the Executive hereunder and the transferee shall agree to be bound by
all of the provisions hereof in a writing delivered to the Executive.
(b) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
14. Binding Effect. Without limiting or diminishing the effect of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, legal representatives and
assigns.
15. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and either delivered in person or
sent by first class certified or registered mail, postage prepaid, if to the
Company, at the Company's principal place of business, and if to the Executive,
at his home address or addresses as either party shall have designated in
writing to the other party hereto.
16. No Set-Off. The Company will pay promptly when due all sums to be paid
the Executive under this Agreement without abatement, deduction or reduction of
any kind or without any kind of setoff against any such sums; it being the
intention of the parties that all such sums shall continue to be payable in all
events unless the Company's obligation to pay such sums shall be terminated
pursuant to the express provisions of this Agreement.
17. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
18. Severability. If any part of this Agreement is held by a court of
competent jurisdiction to be invalid, illegible or incapable of being enforced
in whole or in part by reason of any rule of law or public policy, such part
shall be deemed to be severed from the remainder of this Agreement for the
purpose only of the particular legal proceedings in question and all other
covenants and provisions of this Agreement shall in every other respect continue
in full force and effect and no covenant or provision shall be deemed dependent
upon any other covenant or provision.
19. Waiver. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
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<PAGE>
20. Entire Agreement; Modifications. This Agreement constitutes the entire
and final expression of the agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. This Agreement may be
modified or amended only by an instrument in writing signed by both parties
hereto.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. General Releases . The parties agree to exchange mutual general
releases in the event of a lump sum payment to the Executive pursuant to the
Change of Control provisions or Section 7(b).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
INTERNATIONAL TELECOMMUNICATION EXECUTIVE
DATA SYSTEMS, INC.
By /s/ Charles L. Bakes /s/ Lewis D. Bakes
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Charles L. Bakes Lewis D. Bakes
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1998 by and between
International Telecommunication Data Systems, Inc., a Delaware corporation (the
"Company"), and Peter L. Masanotti (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have previously entered into an
employment agreement dated July 5, 1996 and as amended effective August 1, 1997
("Prior Agreement"); and
WHEREAS, the Company and the Executive desire to amend and restate such
Prior Agreement, all in accordance with the terms and conditions set forth
below;
NOW, THEREFORE, for and in consideration of the premises hereof and the
mutual covenants contained herein, the parties hereto hereby covenant and agree
as follows:
1. Employment. The Company hereby employs the Executive as the Executive
Vice President Operations and General Counsel, and the Executive hereby agrees
to function as such for the Company, for the period set forth in Section 2
hereof, all upon the terms and conditions hereinafter set forth.
2. Term of Employment. (a) Unless (i) earlier terminated as provided in
Section 7 hereof or (ii) renewed as provided in Section 2(b) hereof, the term of
the Executive's employment under this Agreement shall be for a period beginning
on January 1, 1998 and ending on December 31, 2000 (the "Initial Term").
(b) The term of the Executive's employment under this Agreement shall be
automatically renewed for additional one-year terms (each, a "Renewal Term")
upon the expiration of the Initial Term or any Renewal Term unless the Company
or the Executive delivers to the other, at least 120 days prior to the
expiration of the Initial Term or the then current Renewal Term, as the case may
be, a written notice specifying that the term of the Executive's employment will
not be renewed at the end of the Initial Term or such Renewal Term, as the case
may be.
(c) The period from January 1, 1998 until December 31, 2000 or, in the
event that the Executive's employment hereunder is earlier terminated as
provided in Section
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7 hereof or renewed as provided in Section 2(b) hereof, such shorter or longer
period, as the case may be, is hereinafter called the "Employment Term".
(d) In the event that the Executive continues in the full-time employ of
the Company after the end of the Employment Term (it being expressly understood
and agreed that the Company does not now, nor hereafter shall have, any
obligation to continue the Executive in its employ whether or not on a full-time
basis, after the Employment Term ends), then the Executive's continued
employment by the Company shall, notwithstanding anything to the contrary
expressed or implied herein, be terminable by the Company at will.
3. Duties. The Executive shall be employed as Executive Vice President
Operations and General Counsel of the Company and shall faithfully and
competently perform such duties as the Board of Directors of the Company shall
from time to time determine, which duties shall be consistent with such
position. The Executive shall perform his duties at the offices of the Company
in Stamford, Connecticut and/or Champaign, Illinois, with travel to such other
locations from time to time as the Board of Directors of the Company may
reasonably prescribe. Except as may otherwise be approved in advance by the
Board of Directors of the Company, and except during vacation periods and
personal days and reasonable periods of absence due to sickness, personal injury
or other disability, the Executive shall devote his full time throughout the
Employment Term to the services required of him hereunder. The Executive shall
render his services exclusively to the Company during the Employment Term and
shall use his best efforts, judgment and energy to improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position.
4. Compensation.
(a) Salary. As compensation for the complete and satisfactory performance
by the Executive of the services to be performed by the Executive hereunder
during the Employment Term, the Company shall pay the Executive a base salary at
the annual rate of $250,000 increased (but not reduced) from time to time in
such amounts as the Company may, in its reasonable discretion, deem to be
appropriate (said amount, together with any such increases, being hereinafter
referred to as the "Salary"). Any Salary payable hereunder shall be paid in
regular intervals in accordance with the Company's payroll practices from time
to time in effect. All compensation payable under this Agreement shall be
subject to applicable federal and state withholding tax requirements and other
deductions approved by the Executive.
(b) Bonus Payments. For each calendar year during the Employment Term, the
Executive is eligible to receive an annual bonus in the reasonable discretion of
the Board of Directors subject to the satisfaction of such reasonable
performance criteria as shall be established for him with respect to such year.
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5. Benefits. During the Employment Term, the Executive shall:
(a) be eligible to participate in executive fringe benefits that may be
provided by the Company for its executive employees in accordance with the
provisions of any such plans, as the same may be in effect from time to time;
(b) be eligible to participate in any medical and health plans or other
executive welfare benefit plans that may be provided by the Company for its
executive employees in accordance with the provisions of any such plans, as the
same may be in effect from time to time;
(c) be entitled to annual paid vacation in accordance with the Company
policy that may be applicable to executive employees from time to time, such
vacation to be in no event less than two weeks in each calendar year.
(d) be entitled to sick leave and sick pay in accordance with any Company
policy that may be applicable to executive employees from time to time;
(e) be entitled to life insurance coverage (payable to his designated
beneficiary) of not less than $500,000 and long term disability insurance
coverage provided by the Company to executive employees; and
(f) be entitled to reimbursement for all reasonable and necessary
out-of-pocket business expenses incurred by the Executive in the performance of
his duties hereunder in accordance with the Company's policies for executive
employees, including, without limitation, the expense of maintaining memberships
in such federal, state and local professional and bar associations as agreed
upon by the Company and the Executive.
6. Stock Plans and Options. During the Employment Term, the Executive shall
be eligible to participate in any stock option, incentive and similar plans
established by the Company from time to time and at any time and the Company
shall grant to the Executive or cause to be granted to him stock options and
other benefits similar to the options and benefits granted to other executive
officers subject in all cases to the satisfaction by the Executive of the terms
and conditions of such plans and to the reasonable exercise by the Board of
Directors of any discretion granted to it or them thereunder.
7. Termination: Effect of Termination. (a) The Executive's employment
hereunder shall be terminated upon the occurrence of any of the following:
(i) death of the Executive;
(ii) termination of the Executive's employment hereunder by the Company
because of the Executive's inability to perform his duties on account of
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disability or incapacity for a period of one hundred eighty (180) or more days,
whether or not consecutive, occurring within any period of twelve (12)
consecutive months;
(iii) written notice by the Company to the Executive of the termination
of his employment hereunder by the Company at any time "for cause,"
(iv) written notice by the Executive to the Company of the termination
of the Executive's employment hereunder by the Executive because of a material
diminution of the Executive's duties, authority or responsibility or a
materially impairment by action of the Company of his ability to perform his
duties or responsibilities, regardless of whether such diminution of duties or
impairment is accompanied by a change in the Executive's title of Executive Vice
President Operations and General Counsel;
(v) written notice by the Executive to the Company of a material
breach by the Company of any provision of this Agreement if such breach
continues for thirty (30) days after written notice thereof to the Company; or
(vi) written notice by the Executive to the Company of the termination
of the Executive's employment hereunder by the Executive at any time for any
reason whatsoever (including, without limitation, resignation or retirement)
other than a breach of any provision of this Agreement by the Company (as
described in paragraph (v) above) or other than the occurrence of any event
described in clause (iv) above.
The following, and only the following, actions, failures or events by or
affecting the Executive shall constitute "cause" for termination within the
meaning of clause (iii) above:
(1) conviction of having committed a felony, (2) acts of dishonesty or moral
turpitude that are materially detrimental to the Company, (3) willful acts or
omissions which the Executive knew were likely to materially damage the business
of the Company, (4) failure by the Executive to obey the reasonable and lawful
orders of the Board of Directors, (5) willful breach by the Executive of his
obligations under this Agreement, or (6) failure by the Executive to perform
duties in accordance with the reasonable directions of the Board of Directors.
(b) In the event that the Executive's employment with the Company is
terminated by the Executive pursuant to the clause (v) above, then the Company
shall pay to the Executive, as severance pay in a single lump sum payment, an
amount equal to 36 months of Base Salary within thirty (30) days after the
Executive's termination of employment, based on the Executive's Base Salary
immediately preceding the event
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specified in clause (v), without reduction or offset for any other monies which
the Executive may thereafter earn or be paid.
(c) In the event that the Executive's employment with the Company
terminates pursuant to clauses (i), (ii) or (iii) above, then notwithstanding
anything to the contrary expressed or implied herein, except as required by
applicable law and Section 8 hereof, the Company shall not be obligated to make
any payments to the Executive or on his behalf of whatever kind or nature by
reason of the Executive's cessation of employment (including, without
limitation, by reason of termination of the Executive's employment by the
Company for "cause"), other than (i) such amounts, if any, of his Salary as
shall have accrued and remained unpaid as of the date of said cessation and (ii)
such other amounts which may be then otherwise payable to the Executive from the
Company's benefit plans or reimbursement policies, if any.
8. Change in Control.
(a) In the event of a Change in Control (as hereinafter defined), (i) all
unvested stock options and other benefits including any interest under the
Phantom Stock Agreement then held by the Executive shall become fully vested and
immediately exercisable and shall remain so for a period of six months
thereafter or, if longer, for the period during which such option or other
benefit would otherwise be exercisable in accordance with its terms or the terms
of the applicable plan and (ii) Executive shall be entitled to the compensation
provided in Section 7(b) hereof within thirty (30) days after the Change in
Control; provided, however, that prior to the occurrence of the Change in
Control the Executive may elect to defer payment of any amounts payable pursuant
to this Section until the calendar year beginning at least 30 days after the
Change in Control.
(b) Change in Control shall mean (i) any transfer or other transaction
whereby the right to vote more than fifty percent (50%) of the then issued and
outstanding capital stock of (A) the Company or (B) any subsidiary of the
Company to which the Company shall have transferred all or substantially all of
its business, is transferred to any party or affiliated group of parties, (ii)
any merger or consolidation of the Company (or a subsidiary of the Company of
the type described in clause (i)(B) above) with any other business entity, at
the conclusion of which transaction the persons who were holders of all the
voting stock of the Company immediately prior to the transaction hold less than
fifty percent (50%) of the total voting stock of the successor entity
immediately following the transaction, or (iii) any sale, lease, transfer or
other disposition of all or substantially all the assets of the Company (or a
subsidiary of the type described in clause (i)(B) above).
(c) Notwithstanding any other provision of this Agreement, in the event
that any payment or benefit received or to be received by the Executive (i) is
deemed to be in connection with a Change in Control (whether payable pursuant to
the terms of this
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Agreement or any other plan, arrangement or agreement with the Company, its
successors, any person whose actions result in a Change in Control or any
corporation ("Affiliates") affiliated (or which, as a result of the completion
of the transactions causing a Change in Control will become affiliated) with the
Company within the meaning of Section 1504 of the Internal Revenue Code of 1986,
as amended (the "Code") (collectively with the payments and benefits pursuant to
this Agreement if deemed to be paid pursuant to a Change in Control, "Total
Payments") and (ii) is determined by the Company's independent certified
accounting firm (the "Tax Advisor") that an excise tax is payable by Executive
under Section 4999 of the Code, then the Company will pay to the Executive
additional compensation which will be sufficient to enable Executive to pay such
excise tax as well as the income tax, medicare tax and excise tax on such
additional compensation, such that, after the payment of income, medicare and
excise taxes, Executive is in the same economic position in which he would have
been if the provisions of Section 4999 of the Code had not been applicable. The
additional compensation required by this Section 8(c) will be paid to Executive
promptly after the date or dates on which the amount of such additional
compensation is determinable, in whole or in part by the Tax Advisor.
9. Restrictions on Executive. During the period commencing on the date
hereof and ending one (1) year after the termination of the Executive's
employment by the Company for any reason, the Executive shall not directly or
indirectly induce or attempt to induce any of the employees of the Company to
leave the employ of the Company.
10. Covenant Not To Compete. During the period commencing on the date
hereof, and ending one (1) year after the termination of the Executive's
employment due to Sections 7(a)(iii) or 7(a)(vi) hereof, except if termination
is a result of a Change in Control, the Executive shall not, except as a passive
investor in publicly held companies, or except if employed as an attorney by any
company or firm, directly or indirectly engage in, associate with, or own or
control any interest in, or act as principal, director, officer, agent, or
employee of, or consultant to any person, firm or company, or any division or
subsidiary, whose primary activity is in competition with the Company.
Notwithstanding anything to the contrary contained herein, to the extent the
Company (i) makes an absolute assignment of the bulk of its assets for the
benefit of creditors, (ii) consents to the appointment of a bankruptcy trustee,
(iii) institutes bankruptcy proceedings or (iv) experiences a cessation, the
provisions of this Section 10 shall lapse.
11. Proprietary Information.
(a) For purposes of this Agreement, "proprietary information" shall mean
any information relating to the business of Company or any entity in which
Company has an ownership interest that has not previously been publicly released
by duly authorized representatives of the Company and shall include (but shall
not be limited to) information encompassed in all proposals, marketing and sales
plans, financial
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information, costs, pricing information, computer programs, customer
information, customer lists, and all methods, concepts or ideas in or reasonably
related to the business of Company or any entity in which Company has an
interest. The Executive agrees to regard and preserve as confidential all
proprietary information, whether he has such information in his memory or in
writing or other physical form. The Executive will not, without written
authority from Company to do so, directly or indirectly, use for his benefit or
purposes, nor disclose to others, either during the term of his employment
hereunder or thereafter, except as required by the conditions of his employment
hereunder or as otherwise required by law, any proprietary information. The
Executive agrees not to remove from the premises of the Company or any
subsidiary or affiliate of Company, except as an executive of the Company in
pursuit of the business of the Company or any of its subsidiaries, affiliates or
any entity in which the Company has an ownership interest, or except as
specifically permitted in writing by the Company, any document or object
containing or reflecting any proprietary information. The Executive recognizes
that all such documents and objects, whether developed by him or by someone else
during the term of his employment with the Company are the exclusive property of
the Company.
(b) All proprietary information and all of the Executive's interest in
trade secrets, trademarks, computer programs, customer information, customer
lists, employee lists, products, procedure, copyrights and developments
hereafter to the end of the period of employment hereunder developed by
Executive as a result of, or in connection with, his employment hereunder, shall
belong to the Company; and without further compensation, but at the Company's
expense, forthwith upon request of the Company, Executive shall execute any and
all such assignments and other documents and take any and all such other action
as the Company may reasonably request in order to vest in the Company all
Executive's right, title and interest in and all of the aforesaid items, free
and clear of liens, charges and encumbrances.
(c) The Executive expressly agrees that the covenants set forth in Sections
9, 10, and 11 of this Agreement are being given to the Company in connection
with the employment of the Executive by the Company and that such covenants are
intended to protect the Company against the competition by the Executive, within
the terms stated, to the fullest extent deemed reasonable and permitted in law
and equity. In the event that the foregoing limitations upon the conduct of the
Executive are beyond those permitted by law, such limitations, both as to time
and geographical area, shall be, and be deemed to be, reduced in scope and
effect to the maximum extent permitted by law.
12. Injunctive Relief: The Executive acknowledges that the injury to the
Company resulting from any violation by him of any of the covenants contained in
this Agreement will be of such a character that it cannot be adequately
compensated by money damages, and, accordingly, the Company may, in addition to
pursuing its other remedies, obtain an injunction from any court having
jurisdiction of the matter
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restraining any such violation; and no bond or other security shall be required
in connection with such injunction.
13. Non-Assignability. (a) Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive, his beneficiaries, or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude the Executive from designating a
beneficiary to receive any benefit payable hereunder upon his death or
incapacity. Notwithstanding the foregoing, in the case of a Change in Control,
this Agreement and any right or interest of the Company hereunder shall be
assignable by the Company without the consent of the Executive; provided,
however, that in the event of such an assignment without the consent of the
Executive, the Company shall remain liable for the payment of all amounts
payable to the Executive hereunder and the transferee shall agree to be bound by
all of the provisions hereof in a writing delivered to the Executive.
(b) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
14. Binding Effect. Without limiting or diminishing the effect of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, legal representatives and
assigns.
15. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and either delivered in person or
sent by first class certified or registered mail, postage prepaid, if to the
Company, at the Company's principal place of business, and if to the Executive,
at his home address or addresses as either party shall have designated in
writing to the other party hereto.
16. No Set-Off. The Company will pay promptly when due all sums to be paid
the Executive under this Agreement without abatement, deduction or reduction of
any kind or without any kind of setoff against any such sums; it being the
intention of the parties that all such sums shall continue to be payable in all
events unless the Company's obligation to pay such sums shall be terminated
pursuant to the express provisions of this Agreement.
17. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
18. Severability. If any part of this Agreement is held by a court of
competent jurisdiction to be invalid, illegible or incapable of being enforced
in whole or in part by reason of any rule of law or public policy, such part
shall be deemed to be severed from
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the remainder of this Agreement for the purpose only of the particular legal
proceedings in question and all other covenants and provisions of this Agreement
shall in every other respect continue in full force and effect and no covenant
or provision shall be deemed dependent upon any other covenant or provision.
19. Waiver. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
20. Entire Agreement; Modifications. This Agreement constitutes the entire
and final expression of the agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, oral and written, including
the prior Agreement between the parties hereto with respect to the subject
matter hereof. This Agreement may be modified or amended only by an instrument
in writing signed by both parties hereto.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. General Releases . The parties agree to exchange mutual general
releases in the event of a lump sum payment to the Executive pursuant to the
Change of Control provisions or Section 7(b).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
INTERNATIONAL TELECOMMUNICATION EXECUTIVE
DATA SYSTEMS, INC.
By /s/ Charles L. Bakes /s/ Peter L. Masanotti
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Charles L. Bakes Peter L. Masanotti
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 29th day of December, 1997 between Paul
K. Kothari, an individual residing at 74 Windsor Dr., Pine Brook, New Jersey
07058 (hereinafter referred to as "Employee"), and ITDS Intelicom Services,
Inc., a Delaware corporation which is a wholly owned subsidiary of International
Telecommunication Data Systems, Inc. with offices at 225 High Ridge Road,
Stamford, Connecticut 06905 (hereinafter referred to as "Corporation").
WHEREAS, the Corporation desires to employ the Employee, and the Employee
desires to serve as an employee of Corporation on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and promises of the
parties hereto, the Corporation and the Employee agree as follows:
1. Employment: The Corporation hereby agrees to employ the Employee as
Chief Financial Officer, and the Employee hereby agrees to function as such for
the Corporation on the terms and conditions hereinafter stated, subject to the
directives of the Chief Executive Officer and Board of Directors of the
Corporation (the "Board").
2. Term of Employment: The term of this Agreement shall begin on February
9, 1998 and shall continue in full force and effect until February 8, 2000,
unless sooner terminated as provided herein.
3. Compensation:
(a) During the term of this Agreement, for all services rendered by
Employee under this Agreement, the Corporation shall pay the Employee an annual
base salary of Two Hundred Third Thousand And 00/100 Dollars ($230,000.00) per
annum, payable in arrears at a rate of Nineteen Thousand One Hundred Sixty-Six
and 00/100 Dollars ($19,166.00) on the last day of each month or more frequently
in the discretion of the Board. All compensation payable under this Agreement
shall be subject to applicable federal and state withholding tax requirements
and other deductions approved by Employee.
(b) In addition to the base salary set forth above, the Corporation
shall pay the Employee a signing bonus in the amount of Two Hundred Thousand And
00/100 Dollars ($200,000.00), payable one month after the commencement of
employment. The Employee is also eligible to receive an annual bonus in an
amount to be determined by the Board of Directors.
(c) In addition to the annual base salary described in Section 3(a)
hereof and the signing bonus described in Section 3(b), the Corporation grants
Employee a right to immediately become eligible to participate in the ITDS
Employee
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Stock Option Plan and the Employee Stock Purchase Plan (collectively the
"Plan"), copies of which are attached hereto and made a part hereof as
Attachment "A," upon the commencement of this Agreement with the Corporation. On
the effective date of this Agreement, Employee shall be granted options to
purchase seventy-five thousand (75,000) shares of Common Stock of the
Corporation, at market value on the date of grant, vesting annually over a 4
year period pursuant to the terms of the Plan.
4. Fringe Benefits:
(a) Subject to applicable waiting periods and Employee's insurability,
Corporation shall provide the Employee, at no cost to Employee, with medical and
hospitalization insurance coverage similar to that offered to other employees of
the Corporation. Subject to applicable waiting periods, during the term hereof,
Corporation shall provide the Employee, at no cost to the Employee, with long
term disability insurance coverage similar to that offered to other employees of
the Corporation.
(b) Subject to applicable waiting periods and during the term hereof,
Corporation shall provide Employee, at no cost to Employee, with term life
insurance coverage on Employee's life equal to twice Employee's base salary to a
maximum of One Hundred Fifty Thousand And 00/100 Dollars ($150,000.00). The
proceeds of such life insurance policies shall be payable to Employee's named
beneficiary.
(c) Subject to applicable waiting periods, Employee will be eligible to
participate in the Corporation's 401K plan.
5. Duties and Extent of Services: Upon the execution of this Agreement and
throughout its term, the duties of the Employee shall include, but are not
limited to, the following:
(a) Provide managerial and executive supervision and support to the
Corporation's accounting personnel;
(b) Provide investor relations support and management;
(c) Provide financial supervision of all aspects of the Corporation's
business;
(d) Develop budgeting, accounting and management programs to support the
development and distribution of the products and services of the Corporation;
(e) Responsibility for the Corporation's financial reporting
obligations;
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(f) Such other duties and responsibilities as may be assigned by the
Board from time to time.
(g) Employee will work exclusively for the Corporation during the term
of this Agreement, Employee shall exert his best efforts and shall devote no
less than the greater of: (i) fifty (50) hours per week, or (ii) the amount of
time necessary for Employee to perform his duties with regard to the business
and affairs of the Corporation in accordance with this Agreement. During the
term of this Agreement Employee shall not, directly or indirectly, alone or as a
member of the partnership, or as an officer, director, shareholder, owner, agent
or employee of any other corporation, be engaged in or concerned with any other
compensable duties or pursuits whatsoever requiring his personal services
without the prior written consent of the Corporation, which consent may be
withheld for any reason or for no reason.
6. Vacation: During each year of the term of this Agreement, the Emplo yee
shall be entitled to three (3) weeks' vacation, the time of which shall be
determined after consultation with the Chief Executive Officer of the
Corporation. For purposes of this Section 6, Employee shall be entitled to carry
forward any unused vacation time from one period to another.
7. Termination: The Employee's employment hereunder shall terminate on the
date set forth in Section 2 hereof, or sooner upon the occurrence of any of the
following events:
(a) The Employee's death;
(b) The termination of the Employee's employment hereunder by
Corporation, at its option, to be exercised by written notice from Corporation
to the Employee, upon the Employee's incapacity or inability to perform his
services as contemplated herein for a period of at least seventy-five (75)
consecutive days or an aggregate of one hundred (100) consecutive or
non-consecutive days during any twelve (12) month period during the term hereof
due to the fact that his physical or mental health shall have become impaired so
as to make it impossible or impractical for him to perform the duties and
responsibilities contemplated for him hereunder; or
(c) The termination for "cause" of the Employee's employment hereunder
by Corporation, at its option, to be exercised by written notice from
Corporation to the Employee. The term "cause", as used herein, shall mean: (i)
the Employee's inability or incapacity to perform his duties and/or services in
accordance with the reasonable expectations of the Corporation, (ii) the
Employee's willful misconduct or gross negligence in the performance of his
duties on behalf of the Corporation, or the Employee's dishonesty in the
performance of his duties on behalf of the Corporation, (iii) the neglect,
failure or refusal of the Employee to carry out any reasonable request of the
Chief Executive Officer or Board for the provision of
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services hereunder, (iv) the material breach of any provision of the Agreement
by the Employee or (v) the Employee's plea of guilty or nolo contendere to, or
conviction of any crime involving moral turpitude, common law fraud, dishonesty,
theft, or unethical conduct.
8. Restrictions on Employee: During the period commencing on the date
hereof and ending two (2) years after the termination of the Employee's
employment by Corporation for any reason, the Employee shall not directly or
indirectly induce or attempt to induce any of the employees of Corporation to
leave the employ of Corporation.
9. Covenant Not To Compete: During the period commencing on the date
hereof, and ending one (1) year after the termination of the Employee's
employment for any reason, the Employee shall not, except as a passive investor
in publicly held companies, directly or indirectly engage in, associate with, or
own or control any interest in, or act as principal, director, officer, agent,
or employee of, or consultant to: (i) Cincinnati Bell Information Systems,
Systematics, Saville Systems, Cable Services Group, Computer Sciences
Corporation, Electronic Data Systems, Alltel, Comsoft, LHS, Danet, Subscriber
Computing, H.O. Software, Baja Systems or their successors or assigns, or (ii)
any person, firm or corporation, located in the eastern third of the United
States, whose activity is (a) a venture or business, substantially similar to
that of Corporation and/or (b) which is in direct competition with the
Corporation. Notwithstanding anything to the contrary contained herein, to the
extent Corporation (i) makes an absolute assignment of the bulk of its assets
for the benefit of creditors, (ii) consents to the appointment of a bankruptcy
trustee, (iii) institutes bankruptcy proceedings or (iv) experiences a
cessation, the provisions of this Section 9 shall lapse.
10. Proprietary Information:
(a) For purposes of this Agreement, "proprietary information" shall
mean any information relating to the business of Corporation or any entity in
which Corporation has an ownership interest that has not previously been
publicly released by duly authorized representatives of Corporation and shall
include (but shall not be limited to) information encompassed in all proposals,
marketing and sales plans, financial information, costs, pricing information,
computer programs, customer information, customer lists, and all methods,
concepts or ideas in or reasonably related to the business of Corporation or any
entity in which Corporation has an interest. The Employee agrees to regard and
preserve as confidential all proprietary information, whether she has such
information in her memory or in writing or other physical form. The Employee
will not, without written authority from Corporation to do so, directly or
indirectly, use for her benefit or purposes, nor disclose to others, either
during the term of her employment hereunder or thereafter, except as required by
the conditions of her employment hereunder, any proprietary information. The
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<PAGE>
Employee agrees not to remove from the premises of Corporation or any subsidiary
or affiliate of Corporation, except as an employee of Corporation in pursuit of
the business of Corporation or any of its subsidiaries, affiliates or any entity
in which Corporation has an ownership interest, or except as specifically
permitted in writing by Corporation, any document or object containing or
reflecting any proprietary information. The Employee recognizes that all such
documents and objects, whether developed by her or by someone else during the
term of her employment with Corporation, are the exclusive property of
Corporation.
(b) All proprietary information and all the Employee's interest in
trade secrets, trademarks, computer programs, customer information, customer
lists, employee lists, products, procedure, copyrights and developments
hereafter to the end of the period of employment hereunder developed by Employee
as a result of, or in connection with, her employment hereunder, shall belong to
Corporation; and without further compensation, but at Corporation's expense,
forthwith upon request of Corporation, Employee shall execute any and all such
assignments and other documents and take any and all such other action as
Corporation may reasonably request in order to vest in Corporation all
Employee's right, title and interest in and all of the aforesaid items, free and
clear of liens, charges and encumbrances.
(c) The Employee expressly agrees that the covenants set forth in
Sections 8, 9, and 10 of this Agreement are being given to Corporation in
connection with the employment of the Employee by Corporation and that such
covenants are intended to protect Corporation against the competition by the
Employee, within the terms stated, to the fullest extent deemed reasonable and
permitted in law and equity. In the event that the foregoing limitations upon
the conduct of the Employee are beyond those permitted by law, such limitations,
both as to time and geographical area, shall be, and be deemed to be, reduced in
scope and effect to the maximum extent permitted by law.
11. Injunctive Relief: The Employee acknowledges that the injury to
Corporation resulting from any violation by her of any of the covenants
contained in this Agreement will be of such a character that it cannot be
adequately compensated by money damages, and, accordingly, Corporation may, in
addition to pursuing its other remedies, obtain an injunction from any court
having jurisdiction of the matter restraining any such violation; and no bond or
other security shall be required in connection with such injunction.
12. Representation of Employee: The Employee represents and warrants that
neither the execution and delivery of this Agreement nor the performance of his
duties hereunder violates the provisions of any other agreement to which she is
a party or by which she is bound.
-5-
<PAGE>
13. Parties; Non-Assignability: As used herein, the term "Corporation"
shall mean and include Corporation and any subsidiary or affiliate thereof and
any successor thereto unless the context indicates otherwise. This Agreement and
all rights hereunder are personal to the Employee and shall not be assignable by
her and any purported assignment shall be null and void and shall not be binding
on Corporation.
14. Entire Agreement: This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated herein and
supersedes all previous representations, negotiations, commitments, and writing
with respect thereto.
15. Amendment or Alteration: No amendment or alteration of the terms of
this Agreement shall be valid unless made in writing and signed by all of the
parties hereto.
16. Choice of Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, except a provision of that
law which would refer resolution of any issue to another jurisdiction. The forum
for resolution of any dispute shall be the State of Connecticut.
17. Arbitration: Any controversy, claim, or breach arising out of or
relating to this Agreement or the breach thereof may, in the sole discretion of
the Corporation, be settled by arbitration in Stamford, Connecticut in
accordance with the rules of the American Arbitration Association and the
judgment upon the award rendered shall be entered by consent in any court having
jurisdiction thereof.
18. Waiver of Breach: The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any of the parties hereto.
19. Binding Effect: The terms of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective personal
representatives, heirs, administrators, successors, and permitted assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CORPORATION:
ITDS Intelicom Services, Inc.
By: /s/ Peter P. Bassermann
-------------------------------
Peter P. Bassermann, President
EMPLOYEE:
/s/ Paul K. Kothari
-------------------------------
Paul K. Kothari
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 23rd day of December, 1997 between
Susan Yezzi individual residing at 23 Norman Lane, Darien, CT 06820 (hereinafter
referred to as "Employee") and ITDS Intelicom Services, Inc. a Delaware
corporation (hereinafter referred to as "Corporation").
WHEREAS, the Corporation desires to employ the Employee, and the Employee
desires to serve as an employee of Corporation on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties hereto, the Corporation and the Employee agree as follows:
1. Employment: The Corporation hereby agrees to employ the Employee as
Executive Vice-President of Operations, and the Employee hereby agrees to
function as such for the Corporation on the terms and conditions hereinafter
stated, subject to the directives of the Board of Directors of the Corporation
(the "Board").
2. Term of Employment. The term of this Agreement shall begin on or about
February 1, 1998 (but no later than March 1, 1998) and shall continue in full
force and effect until January 31, 2001, unless sooner terminated as provided
herein.
3. Compensation:
(a) During the term of this Agreement, for all services rendered by
Employee under this Agreement, the Corporation shall pay the Employee an annual
base salary of Two Hundred and Twenty Five Thousand dollars ($225,000.00) per
annum, payable in arrears at a rate of Eighteen Thousand, Seven Hundred and
Fifty dollars ($18,750.00) on the last day of each month or more frequently in
the discretion of the Board. All compensation payable under this Agreement shall
be subject to applicable federal and state withholding tax requirements and
other deductions approved by Employee as well as an annual salary adjustment
based upon changes in the Consumer Price Index.
(b) In addition to the annual base salary described in Section 3(a)
hereof, the Corporation grants Employee a right to immediately become eligible
to participate in the ITDS Employee Stock Option Plan and the Employee Stock
Purchase Plan (collectively, the "Plan"), copies of which are attached hereto
and made a part hereof as Attachment "A," upon the commencement of this
Agreement with Corporation. On the execution of this Agreement, Employee shall
be entitled to receive options to purchase fifty thousand (50,000) shares of
Common Stock of the Corporation, at market value on the date of grant, vesting
over a 4 year period pursuant to the terms of the Plan.
<PAGE>
(c) In addition to the base salary and stock options as set forth above,
on February 1, 1997 the Employee shall receive a one time signing bonus equal to
One Hundred Twenty-Five Thousand Dollars ($125,000.00).
(d) In addition to the aforesaid benefits, Employee is eligible to
receive an annual bonus based on Employee and Corporation performance subject to
Board approval.
(e) The Corporation agrees to assume Employee's existing Flexible
Premium Adjustable Life Insurance Policy and pay associated premiums.
4. Fringe Benefits:
(a) Subject to applicable waiting periods and Employee's insurability,
Corporation shall provide the Employee, at no cost to Employee, with medical and
hospitalization insurance coverage similar to that offered to other
Vice-Presidents of the Corporation. Subject to applicable waiting periods,
during the term hereof, Corporation shall provide the Employee, at no cost to
the Employee, with long term disability insurance coverage similar to that
offered to other officers of the Corporation.
(b) Subject to applicable waiting periods, Employee will be eligible to
participate in the Corporation's 401K plan.
5. Duties and Extent of Services: Upon the execution of this Agreement and
throughout its term, the duties of the Employee shall include, but are not
limited to, the following:
(a) Provide managerial and executive supervision and support to the
Corporation;
(b) Responsibility for the delivery of all products and services of the
Corporation to customers pursuant to contractual obligations or otherwise;
(c) Provide day to day on site executive management of the Corporation's
operations in Champaign, Illinois;
(d) Such other duties and responsibilities as may be assigned by the
Board from time to time;
(e) Employee will work exclusively for the Corporation during the term
of this Agreement, Employee shall exert her best efforts and shall devote no
less than the greater of: (i) fifty (50) hours per week, or (ii) the amount of
time necessary for Employee to perform her duties with regard to the business
and affairs of the
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<PAGE>
Corporation in accordance with this Agreement. During the term of this
Agreement, Employee shall not, directly or indirectly, alone or as a member of
the partnership, or as an officer, director, shareholder, owner, agent or
employee of any other corporation, be engaged in or concerned with any other
compensable duties or pursuits whatsoever requiring her personal services
without the prior written consent of the Corporation, which consent may be
withheld for any reason or for no reason.
6. Vacation: During each year of the term of this Agreement, the Employee
shall be entitled to four (4) weeks' vacation, the time of which shall be
determined after consultation with the Board of the Corporation. For purposes of
this Section 6, Employee shall be entitled to carry forward any unused vacation
time from one period to another and any unused accrued vacation will be paid to
Employee upon termination.
7. Termination: The Employee's employment hereunder shall terminate on the
date set forth in Section 2 hereof, or sooner upon the occurrence of any of the
following events:
(a) The Employee's death;
(b) The termination of the Employee's employment hereunder by
Corporation, at its option, to be exercised by written notice from Corporation
to the Employee, upon the Employee's incapacity or inability to perform her
services as contemplated herein for a period of at least seventy-five (75)
consecutive days or an aggregate of one hundred (100) consecutive or
non-consecutive days during any twelve (12) month period during the term hereof
due to the fact that her physical or mental health shall have become impaired so
as to make it impossible or impractical for her to perform the duties and
responsibilities contemplated for him hereunder; or
(c) The termination for "cause" of the Employee's employment hereunder
by Corporation, at its option, to be exercised by written notice from
Corporation to the Employee. The term "cause," as used herein, shall mean: (i)
the Employee's inability or incapacity to perform her duties and/or services in
accordance with the reasonable expectation of the Corporation, (ii) the
Employee's willful misconduct or gross negligence in the performance of her
duties on behalf of the Corporation, or the Employee's dishonesty in the
performance of his duties on behalf of the Corporation, (iii) the neglect,
failure or refusal of the Employee to carry out any reasonable request of the
Board for the provision of services hereunder, (iv) the material breach of any
provision of the Agreement by the Employee or (v) the Employee's plea of guilty
or nolo contendere to, or conviction of any crime involving moral turpitude,
common law fraud, dishonesty, theft, or unethical conduct.
(d) Cessation of the Corporation's business.
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<PAGE>
In the event of any such termination, Corporation shall pay to Employee
such portion of his annual base salary payable to Employee to the date such
termination becomes effective, and thereafter Employee shall have no claim for
any further compensation hereunder.
8. Change in Control:
(a) In the event of a Change in Control, all unvested stock options and
other benefits then held by the Employee shall become fully vested and
immediately exercisable and shall remain so for a period of six (6) months
thereafter or, if longer, for the period during which such option or other
benefit would otherwise be exercisable in accordance with its terms or the terms
of the applicable plan,
(b) In the event that the Employee's employment with the Corporation
terminates within six (6) months following any Change in Control (as hereinafter
defined), Employee shall be entitled to twelve (12) months of Base Salary in a
single lump sum as soon as practicable after the Employee's termination of
employment.
(c) Change in Control shall mean (i) any transfer or other transaction
whereby the right to vote more than fifty percent (50%) of the then issued and
outstanding capital stock of (A) the Corporation, or (B) any subsidiary of the
Corporation to which the Corporation shall have transferred all or substantially
all of its business is transferred to any party or affiliated group of parties,
(ii) any merger or consolidation of the Corporation (or a subsidiary of the
Corporation of the type described in Clause (i)(B) above with any other business
entity at the conclusion of which transaction the persons who were holders of
all the voting stock of the Corporation immediately prior to the transaction
hold less than fifty percent (50%) of the total voting stock of the successor
entity immediately following the transaction, or (iii) any sale, lease, transfer
or other disposition of all or substantially all of the assets of the
Corporation (or a subsidiary of the type described in Clause (i)(B) above;
provided that a Change in Control shall not include any such transaction
resulting from the sale of stocks pursuant to the Corporation's initial public
offering of securities under the Securities Act of 1933.
9. Restrictions On Employee: During the period commencing on the date
hereof and ending two (2) years after the termination of the Employee's
employment by Corporation for any reason, the Employee shall not directly or
indirectly induce or attempt to induce any of the employees of Corporation to
leave the employ of Corporation.
10. Covenant Not to Compete: During the period commencing on the date
hereof, and ending one (1) year after the termination of the Employee's
employment
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<PAGE>
for any reason, the Employee shall not, except as a passive investor in publicly
held companies, directly or indirectly engage in, associate with, or own or
control any interest in, or act as principal, director, officer, agent, or
employee of, or consultant to: (i) Cincinnati Bell Information Systems,
Systematics, Saville Systems, Cable Services Group, Computer Sciences
Corporation, Electronic Data Systems, Alltel, Comsoft, LHS, Danet, Subscriber
Computing, H.O. Software, Baja Systems or their successors or assigns, or (ii)
any person, firm or corporation, located in the eastern third of the United
States, whose activity is (a) a venture or business, substantially similar to
that of Corporation, and/or (b) which is in competition with the Corporation.
Notwithstanding anything to the contrary contained herein, to the extent
Corporation (i) makes an absolute assignment of the bulk of its assets for the
benefit of creditors, (ii) consents to the appointment of a bankruptcy trustee,
(iii) institutes bankruptcy proceedings, or (iv) experiences a cessation, the
provisions of this Section 10 shall lapse.
11. Proprietary Information:
(a) For purposes of this Agreement, "proprietary information" shall mean
any information relating to the business of Corporation or any entity in which
Corporation has an ownership interest that has not previously been publicly
released by duly authorized representatives of Corporation and shall include
(but shall not be limited to) information encompassed in all proposals,
marketing and sales plans, financial information, costs, pricing information,
computer programs, customer information, customer lists, and all methods,
concepts or ideas in or reasonably related to the business of Corporation or any
entity in which Corporation has an interest. The Employee agrees to regard and
preserve as confidential all proprietary information, whether he has such
information in his memory or in writing or other physical form. The Employee
will not, without written authority from Corporation to do so, directly or
indirectly, use for his benefit or purposes, nor disclose to others, either
during the term of his employment hereunder or thereafter, except as required by
the conditions of his employment hereunder, any proprietary information. The
Employee agrees not to remove from the premises of Corporation or any subsidiary
or affiliate of Corporation, except as an employee of Corporation in pursuit of
the business of Corporation or any of its subsidiaries, affiliates or any entity
in which Corporation has an ownership interest, or except as specifically
permitted in writing by Corporation, any document or object containing or
reflecting any proprietary information. The Employee recognizes that all such
documents and objects, whether developed by him or someone else during the term
of his employment with Corporation, are the exclusive property of Corporation.
(b) All proprietary information and all of the Employee's interest in trade
secrets, trademarks, computer programs, customer information, customer lists,
employee lists, products, procedure, copyrights and developments hereafter to
the end of the period of employment hereunder developed by Employee as a result
of, or
-5-
<PAGE>
in connection with, her employment hereunder, shall belong to Corporation; and
without further compensation, but at Corporation's expense, forthwith upon
request of Corporation, Employee shall execute any and all such assignments and
other documents and take any and all such other action as Corporation may
reasonably request in order to vest in Corporation all Employee's right, title
and interest in and all of the aforesaid items, free and clear of liens, charges
and encumbrances.
(c) The Employee expressly agrees that the covenants set forth in Sections
9, 10 and 11 of this Agreement are being given to Corporation in connection with
the employment of the Employee by Corporation and that such covenants are
intended to protect Corporation against the competition by the Employee, within
the terms stated, to the fullest extent deemed reasonable and permitted in law
and equity. In the event that the foregoing limitations upon the conduct of the
Employee are beyond those permitted by law, such limitations, both as to time
and geographical area, shall be, and be deemed to be, reduced in scope and
effect to the maximum extent permitted by law.
12. Injunctive Relief: The Employee acknowledges that the injury to
Corporation resulting from any violation by him of any of the covenants
contained in this Agreement will be of such a character that it cannot be
adequately compensated by money damages, and, accordingly, Corporation may, in
addition to pursuing its other remedies, obtain an injunction from any court
having jurisdiction of the matter restraining any such violation; and no bond or
other security shall be required in connection with such injunction.
13. Representation of Employee: The Employee represents and warrants that
neither the execution and delivery of this Agreement nor the performance of his
duties hereunder violates the provisions of any other agreement to which he is a
party or by which he is bound.
14. Parties; Non-Assignability: As used herein, the term "Corporation"
shall mean and include Corporation and any subsidiary or affiliate thereof and
any successor thereto unless the context indicates otherwise. This Agreement and
all rights hereunder are personal to the Employee and shall not be assignable by
him and any purported assignment shall be null and void and shall not be binding
on Corporation.
15. Entire Agreement: This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated herein and
supersedes all previous representations, negotiations, commitments, and writing
with respect thereto.
-6-
<PAGE>
16. Amendment or Alteration: No amendment or alteration of the terms of
this Agreement shall be valid unless made in writing and signed by all of the
parties hereto.
17. Choice of Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, except a provision of that
law which would refer resolution of any issue to another jurisdiction. The forum
for resolution of any dispute shall be the State of Connecticut.
18. Arbitration: Any controversy, claim, or breach arising out of or
relating to this Agreement or the breach thereof may, in the sole discretion of
the Corporation, be settled by arbitration in Stamford, Connecticut in
accordance with the rules of the American Arbitration Association and the
judgment upon the award rendered shall be entered by consent in any court having
jurisdiction thereof.
19. Waiver of Breach: The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any of the parties hereto.
20. Binding Effect: The terms of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective personal
representatives, heirs, administrators, successors, and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CORPORATION:
ITDS Intelicom Services, Inc.
By /s/ Peter P. Bassermann
----------------------------
Peter P. Bassermann
President
EMPLOYEE:
/s/ Susan L. Yezzi
- ---------------------------------
Susan L. Yezzi
burkek/106246.109/emp_agts/yezzi.wpf
-7-
BLDG. A
LEASE
- --------------------------------------------------------------------------------
THIS LEASE is made and entered into this ________ day of January, 1996, by and
between PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability company, with
its principal office located at 1909 Fox Drive, Champaign, Illinois 61820
(hereinafter referred to as "Lessor") and CSC INTELICOM, INC., a Delaware
corporation, with its offices at Suite 1000, 6707 Democracy Boulevard, Bethesda,
Maryland 20817 (hereinafter referred to as "Lessee").
SECTION ONE
DEMISE AND DESCRIPTION OF PREMISES
Lessor leases to Lessee and Lessee leases from Lessor that certain office space
which is herein referred to as the "demised premises," consisting of
approximately Forty Thousand (40,000) square feet, located at _________________
Champaign, Illinois, the area, location, specifications, floor plan and
description of which are more particularly indicated and described on Exhibit A
attached hereto and incorporated by reference herein, together with all
improvements located thereon. The demised premises are a portion of the
Devonshire Corporate Centre II office complex, herein referred to as the
"commercial center," containing other office space, a parking area and common
facilities for the use and benefit of all tenants of such commercial center. The
parking area and common facilities for the building in which the demised
premises are located are shown on Exhibit B attached hereto and incorporated by
reference herein. It is understood that no representations or warranties are
made with respect to location of other office space as shown in the attached
exhibits or areas adjoining thereto or with respect to the time that such other
office space will be erected and occupied.
The term "common facilities" as used herein shall be construed to include those
facilities within the commercial center which are for the nonexclusive use of
Lessee in common with other authorized users, and shall include, but not be
limited to, sidewalks, parking areas, planted areas, open means of ingress and
egress and any signage advertising the common name given to the commercial
center.
SECTION TWO
CONSTRUCTION OF IMPROVEMENTS
A. Lessor's obligation. Lessor shall construct, at its sole expense, all of
the facilities of the commercial center as shown on Exhibit A and the
demised premises for Lessee's use and occupancy as shown on said Exhibit A,
such demised premises to be constructed in accordance with plans and
<PAGE>
specifications to be prepared by Lessor, at Lessor's sole expense, and
approved by Lessee.
B. Commencement of construction. Lessor will commence the construction of such
demised premises as soon as is reasonably possible after the plans and
specifications therefor have been completed and will diligently prosecute
such construction to completion.
Additions or changes to the previously agreed upon specifications or floor
plan further detailed on Exhibit A shall be paid for by Lessee at their
usual and customary value, and any change or addition shall be reduced to
writing and signed in duplicate by both parties. Such change orders shall
be in a form substantially similar to the attached Exhibit "C."
C. Construction delays and work stoppages. No delay in the completion of the
construction herein required of Lessor, caused by government regulations,
inability to procure labor or materials, strikes, acts of God, or other
causes similar or dissimilar beyond the control of Lessor shall be a basis
of a claim of lack of diligence on the part of Lessor.
SECTION THREE
PARKING AREA AND COMMON FACILITIES
A. Maintenance. Lessor, throughout the term of this lease, shall maintain and
keep the parking area and common facilities of the commercial center in
good order, condition and repair including adequate lighting, painting,
snow removal, drainage, supervision and the like and all costs and expenses
incurred in connection therewith, including, but not limited to, real
estate taxes, special assessments, repairs, garbage storage and garbage
removal expenses, and public liability and property insurance shall be paid
by Lessor when due subject, however, to reimbursement therefor by Lessee
pursuant to Section Four (B) herein below.
B. Use. Lessee and all those having business with it will, in common with the
other tenants and their customers and others having business with them,
have the right to use and enjoy the parking area and common facilities for
their intended purposes, except that no trucks belonging to Lessee, to
suppliers of Lessee, or to delivery agents of Lessee shall be allowed to
park in the parking area for more than one (1) hour at any time without
having first obtained Lessor's prior written consent not to be unreasonably
withheld.
C. Parking Facilities. The parking areas are shown on Exhibit A-1 which is
attached hereto. No charges will be made for parking. Lessor reserves the
right to rearrange or reallocate the parking and common facilities so long
as
2
<PAGE>
the number of parking spaces shown on Exhibit A-1 is not reduced by more
than one percent (1%).
D. Governing regulations. Lessee will comply and cause its employees, agents
and invitees to comply with all rules and regulations adopted by Lessor in
connection with the use of the parking area and common facilities, and with
all supplements thereto and amendments thereof which Lessor may hereafter
adopt. All such rules and regulations shall pertain to the safety, care,
use and cleanliness of the parking area and common facilities and the
preservation of good order therein and thereon. No rules or regulations now
in effect or hereafter adopted shall unreasonably interfere with Lessee's
use and enjoyment of the demised premises. All rules and regulations and
supplements thereto and amendments thereof which Lessor may adopt shall be
in writing, and a copy thereof shall be delivered to Lessee.
E. Violation of regulations. If Lessee shall fail within seventy-two (72)
hours after receipt of written notice of any material violation by Lessee
or its employees or agents of any such rules or regulations to cure such
violation such failure shall constitute a default under this lease.
SECTION FOUR
RENTAL AND RELATED CHARGES
A. Base Rent. Lessee shall pay Lessor as a fixed annual base rental for each
year during the term of this lease at 1909 Fox Drive, Champaign, Illinois
61820, or at such place as Lessor may from time to time designate, the
total sum of Four Hundred Sixteen Thousand Dollars ($416,000.00) payable in
twelve (12) equal monthly installments of Thirty-Four Thousand Six Hundred
Sixty-Six and 67/100 Dollars ($34,666.67) on the first day of each month
during each year of this lease. Notwithstanding the foregoing the first
month's rent shall be paid by Lessee upon execution of this lease by
Lessee.
The parties acknowledge and agree the base rental amount provided for
herein is based upon the specifications and floor plan further detailed on
Exhibit A. In the event the specifications or floor plan should be
modified, the parties acknowledge an equitable adjustment shall be made to
the subject base rental amount.
B. Additional Rent. Lessee shall pay Lessor for its pro rata share of
maintenance charges, insurance charges, real estate taxes and all other
expenses in connection with the parking areas and common facilities as set
forth hereinabove at Section Three (A) and late charges in accordance with
the terms of this lease on or before the first business day of each and
every month of this lease.
3
<PAGE>
C. Monthly Real Estate Tax and Expense Charges. Lessee shall pay Lessor real
estate tax and expense charges, which in the first year of this lease have
been estimated to be Thirty-Eight Thousand Dollars ($38,000.00), payable in
twelve (12) equal monthly installments of Three Thousand One Hundred
Sixty-Six and 67/100 Dollars ($3,166.67) simultaneously with the payment of
the base rent so that the aggregate payments due hereunder from Lessee
shall equal Thirty-Seven Thousand Eight Hundred Thirty-Three and 34/100
Dollars ($37,833.34) per month for the first year. The amount paid by
Lessee for taxes, maintenance and insurance shall be reconciled annually in
accordance with the provisions of this Section Four (C).
As soon as reasonably feasible after the expiration of each lease year, but
in any event no later than ninety (90) days after said expiration date,
during the term of this lease, including extensions thereof, Lessor will
furnish to Lessee a statement showing (i) the maintenance charges, real
estate taxes and expenses for the year, and (ii) the amount of additional
rent paid due or owed by Lessor. If the actual amount due from Lessor is
more than that paid, Lessee shall promptly pay the difference within thirty
(30) days; if said amount is less, Lessor shall pay the overage to Lessee
within thirty (30) days.
SECTION FIVE
TERM
The term of this lease shall be for a period of seven (7) years and shall
commence upon the date Lessor notifies Lessee that the demised premises is ready
for occupancy. The demised premises shall be ready for occupancy when all work
of construction has been substantially completed as determined by the
architectural firm of Russell A. Dankert & Associates, Champaign, Illinois. The
parties acknowledge that the anticipated date of commencement for this lease
shall be September 20, 1996, although the actual commencement date shall be
determined as stated herein.
When the commencement date of the term of this lease has been determined in the
manner above provided such date shall be inserted in the space provided below
and Lessee shall signify acceptance of such commencement date.
The commencement date of the term of this lease is _________________, 1996.
LESSOR: LESSEE:
BY: BY: /s/ Kevin P. Haggerty
--------------------------- ---------------------------
4
<PAGE>
If the commencement date of the term of this lease is other than the first day
of a calendar month this lease shall continue in full force and effect for a
period of seven (7) years from the first day of the calendar month next
succeeding the day of commencement. Upon actual commencement of the lease term
Lessee shall pay base rent and additional rent for any days of occupancy which
are less than a full month, on a per diem basis, using the base rent and
additional rent stated in Section Four to determine the amount due to Lessor.
In the event Lessee shall have faithfully performed all covenants of this lease
Lessor hereby grants Lessee the right and option to renew this lease for an
additional period of three (3) years. In the event Lessee desires to renew and
extend this lease it shall give Lessor written notice, at least one hundred
eighty (180) days prior to the expiration of the initial term, of its intent to
renew and extend, provided, however, that the following terms and conditions
shall be applicable to the additional term.
A. The provisions of this lease during said three (3) year extension period
shall be the same as provided in this lease.
SECTION SIX
[Deleted]
SECTION SEVEN
OCCUPANCY AND ACCEPTANCE OF PREMISES
By entering into and occupying the demised premises Lessee shall be deemed to
acknowledge that the demised premises is in good order and repair, subject to
latent defects, and to punchlist items agreed upon by Lessor and Lesse in
writing, and that the demised premises has been constructed substantially in
accordance with the plans and specifications therefor. LESSOR DISCLAIMS ANY
WARRANTIES OF HABITABILITY OR FITNESS FOR A PARTICULAR USE OTHER THAN THAT
STATED IN SECTION EIGHT WITH RESPECT TO THE DEMISED PREMISES.
5
<PAGE>
SECTION EIGHT
USE OF PREMISES
A. Purposes. Lessee shall use the demised premises for the purpose of
conducting thereon and therefrom a computer consulting business, a computer
support business and a data center, and no part of the demised premises
shall be used for any other purpose without the prior written consent of
Lessor.
B. Corporate name. The name of Lessee's corporation will be CSC Intellicom,
Inc. Lessee will be solely responsible for any costs of changing the name
as it is featured in any signs of the commercial center.
C. No retail sales. Lessee shall not conduct any retail sales at the
demised premises.
D. Public auctions. No sale at auction by Lessee or others shall be made in or
from the demised premises.
E. Maintenance of premises. Lessee shall at all times maintain the demised
premises in a clean, neat and orderly condition.
F. Compliance with insurance coverage. Lessee shall not use the demised
premises or any part thereof, or permit any part of the demised premises to
be used in any manner other than that stated in Section Eight, or permit
any act whatsoever to be done on the demised premises, in a manner that
will violate or make void or inoperative any policy of insurance held by
Lessor or Lessee.
G. Storage of inflammable materials. Lessee shall not keep or permit to be
kept at, in or about the demised premises any gasoline, distillate or other
petroleum product, or any other substance or material of an explosive or
inflammable nature, in such quantities as may endanger any part of the
demised premises without the written consent of all insurance companies
carrying fire or rent insurance on all of the commercial center or any part
thereof, or do any act or engage in any conduct which shall cause an
increase in the fire insurance rates covering the commercial center over
those charged for uses of the type and character permitted to Lessee under
this lease.
H. Use impairing structural strength or electrical capabilities. Lessee shall
not permit the demised premises or any part thereof to be used in any
manner that will impair the structural strength thereof or permit the
installation of any machinery or apparatus the weight or vibration of which
may tend to injure or impair the foundations or structural strength
thereof. Lessee shall not permit the installation of any computer or
electrical machinery or equipment which is
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beyond the electrical capabilities of the building as completed according
to final construction specifications and drawings.
I. Garbage disposal. Lessee shall not burn or incinerate any rubbish, garbage
or debris at, in or about the demised premises, and shall cause all
containers, rubbish, garbage and debris accumulated therein to be stored
within the dumpsters provided by Lessor in the commercial center.
J. Public regulations. In the conduct of its business in and about the demised
premises Lessee shall observe and comply with all laws, ordinances and
regulations of public authorities.
SECTION NINE
INSTALLATION AND MAINTENANCE OF FIXTURES
Lessee shall first obtain the written consent of Lessor prior to Lessee's
installation of any trade fixtures, lighting fixtures, floor covering, wall
covering or furnishings which are of a lesser grade or quality than that
presently installed in the demised premises. Any trade fixtures, lighting
fixtures, floor covering, or wall covering or furnishings which Lessee does
install shall be of first quality commensurate in appearance and in keeping with
the demised premises. Lessee, throughout the term of this lease, shall maintain
the same in good order, condition and repair at its own expense and any cost to
repair damage caused by the installation or removal of same shall be at Lessee's
sole expense.
SECTION TEN
SIGNS, EXTERIOR LIGHTING AND FIXTURES
Lessee may only install and maintain such signs at the demised premises as have
been approved in writing by the Lessor. Lessee may not install signs in its
windows or doors which are visible from the exterior of the demised premises nor
may Lessee maintain more than one (1) exterior sign at the commercial center;
provided, however, Lessee may stencil its corporate name on one (1) exterior
door to the demised premises so long as (i) the stencil is in white lettering;
and (ii) the design of the signage has been pre-approved in writing by Lessor.
Any such signs erected or placed in or on the demised premises by Lessee may
not, without Lessor's prior written consent, be removed by Lessee at the
expiration of the lease. In the event Lessor approves Lessee's removal of said
sign, all damage caused by the erection, maintenance and removal of any and all
such signs shall be fully repaired at the expense of Lessee.
Notwithstanding anything contained in this lease to the contrary, Lessor shall
install, at Lessor's expense, one (1) monument style sign upon the demised
premises
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consistent in form and size with the current monument style sign for McGladrey &
Pullen, L.L.P., located at 1806 Fox Drive, Champaign, Illinois.
Lessee acknowledges that the demised premises are part of an integrated and
uniform commercial center and that control of all exterior signs by Lessor is
essential in order to maintain uniformity and aesthetic values in the commercial
center.
Lessor shall select and install the interior window blinds to be used by Lessee
at the demised premises.
Lessee shall not install any lighting, plumbing facilities, shades, awnings or
similar devices or use any advertising medium which may be heard or experienced
outside of the demised premises such as loudspeakers, phonographs or radio
broadcasts without the Lessor's prior written consent. In no event shall event
shall Lessee use any portion of the common facilities for Lessee's exclusive use
without the express prior written consent of Lessor.
SECTION ELEVEN
ALTERATIONS, CHANGES AND ADDITIONS
No material changes, alterations or additions shall be made by Lessee to the
demised premises without the prior written consent of Lessor, which consent will
not be unreasonably withheld, conditioned or delayed, and any such change,
alteration or addition to or on the demised premises made with the aforesaid
written consent of Lessor shall remain for the benefit of and become the
property of Lessor, unless otherwise expressly provided in the written consent.
SECTION TWELVE
DEFECTS; DEFECTIVE CONDITION; WIND; ACTS OF THIRD PERSONS
A. Lessor's liability. Unless Lessor shall have acted in an intentional or
negligent manner, Lessor shall not be liable to Lessee for any damage or
injury to Lessee or Lessee's property occasioned by any defect of plumbing,
heating, air conditioning equipment and ducts, electrical wiring or
insulation thereof, gas pipes, or steam pipes, or from broken steps, or
from the backing-up of any sewer pipe, or from the bursting, leaking, or
running of any tank, tub, washstand, toilet, or waste pipe, drain, or any
other pipe or tank in, on, or about the demised premises, or from the
escape of steam or hot water from any boiler or radiator, or for any such
damage or injury occasioned by water being on or coming through the roof,
stairs, walks, doors or any other place on or near the demised premises, or
for any such damage or injury done or occasioned by the falling of any
fixture, plaster, or stucco, or for any such damage or injury caused by
wind or by the act, omission, or negligence of co-
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tenants or of other persons, occupants of the same building or of adjacent
buildings or contiguous property.
B. Waiver of claim against Lessor. All claims against Lessor for any damage or
injury as provided in paragraph A of this section are hereby expressly
waived by Lessee.
C. Waiver of right of recovery. Lessor and Lessee hereby release each other
from any and all liability or responsibility (to the other or anyone
claiming through or under them by way of subrogation or otherwise) for any
loss or damage to the demised premises suffered by or caused by any of the
perils covered by the insurance provided for in Section Seventeen A and D
of this lease, notwithstanding the fact that such peril shall have been
caused by the fault or negligence of the other party or anyone for whom
such party may be responsible.
SECTION THIRTEEN
CASUALTY DAMAGE; REPAIR; ABATEMENT OF RENT
A. Use of partially damaged premises. In the event of partial damage or
destruction of the demised premises Lessee shall continue to utilize the
premises for the operation of its business to the extent that it may be
practicable to do so.
B. Right to terminate on destruction of premises where damage exceeds one-half
of reconstruction cost. Either party hereto shall have the right to
terminate this lease if, during the last nine (9) months of the term
hereof, the demised premises are damaged to an extent exceeding one-half of
the reconstruction cost of such restored building as a whole; provided
that, in such an event, such termination of this lease shall be effected by
written notice to that effect to the other party delivered within thirty
(30) days of the happening of such casualty causing the damage.
C. Repairs by Lessor. If the demised premises shall, either prior to the
beginning of or during the term hereof, be damaged or destroyed by fire or
by any other cause whatsoever beyond Lessee's control, Lessor, except as
hereinafter otherwise provided, shall immediately on receipt of insurance
proceeds paid in connection with such casualty insurance, but in no event
later than ninety (90) days after such damage has occurred, proceed to
repair or rebuild same, including any additions or improvements made by
Lessor or by Lessee with Lessor's consent, on the same plan and design as
existed immediately before such damage or destruction occurred, subject to
such delays as may be reasonably attributable to governmental restrictions
or failure to obtain materials or labor, or other causes whether similar or
dissimilar, beyond the
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control of Lessor. Materials used in repair shall be nearly like original
materials as may be reasonably procured in regular channels of supply.
Notwithstanding the foregoing, all said repairs must be substantially
completed within two hundred seventy (270) days from the date of casualty
or Lessee has the right to terminate this lease. Lessee's right to
terminate this lease shall be exercised in writing on or before the two
hundred seventy-fifth (275th) day from the date of casualty or it shall
automatically be deemed to be waived.
Whenever a strike, act of God or cause, beyond the power of the party
affected to control, causes delay, the period of such delay so caused shall
be added to the period limited in this lease for the completion of such
work, reconstruction or replacement.
D. Reduction of rent during repairs. In the event Lessee continues to conduct
its business during the making of repairs, the fixed minimum monthly rental
will be equitably reduced in the proportion that the unusable part of the
demised premises bears to the whole thereof but no change shall be made in
the method of computing the additional rental and additional charges due
from Lessee under the terms of this lease.
No rent shall be payable while the demised premises are thirty percent
(30%) or more untenantable pending the repair of casualty damage.
E. Repair or replacement of fixtures. Lessee shall be responsible for the
replacement or repairs of its fixtures in the demised premises which may be
damaged or destroyed by fire or any other cause whatsoever.
SECTION FOURTEEN
REPAIRS GENERALLY
A. By Lessor. Lessor, throughout the term of this lease, shall maintain and
keep the exterior and structural parts of the building of the demised
premises in good repair at Lessor's initial sole expense subject, however,
to Lessee's reimbursement as is provided hereinabove in Section Four (B).
B. By Lessee. Lessee shall, at its own expense, keep and maintain the non-
structural interior of the demised premises in a clean and sightly
condition during the entire term of this lease, and shall specifically be
responsible for the maintenance, repair and/or replacement of all building
components including all Liebert systems. Notwithstanding the foregoing,
the parties agree Lessee shall have no obligation to replace any mechanical
systems, plumbing, electrical, roof or structural components. Lessee's
maintenance obligation shall include the cost of bi-annual inspections and
service, including all preventative
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maintenance, of the demised premises' heating, air conditioning and
ventilating system which shall be performed by (i) the contractor who
originally installed said system; or (ii) such other contractor who has
been pre-approved in writing by Lessor. Upon completion of said bi-annual
inspection and service, Lessee shall provide Lessor with written proof of
Lessee's compliance with the terms of this section. Lessee is responsible
for the replacement and repair of any plate glass and the providing of
janitorial services for the interior of the demised premises.
SECTION FIFTEEN
UTILITIES
Lessee shall pay before delinquency all charges for water, gas, heat,
electricity, power, telephone service and other similar charges incurred by
Lessee with respect to and during its occupancy of the demised premises.
SECTION SIXTEEN
TAXES
Lessee shall pay before delinquency all taxes levied or assessed on Lessee's
fixtures, equipment and personal property in and on the demised premises,
whether or not affixed to the real property.
If at any time after any tax or assessment has become due or payable, Lessee or
its legal representative neglects to pay such tax or assessment, Lessor shall be
entitled to pay the same at any time thereafter and such amount so paid by
Lessor shall be deemed to be additional rent for the leased premises, due and
payable by Lessee.
Lessor shall initially pay all general real estate taxes and special assessments
levied and/or assessed against the lot and building in which the demised
premises is situated, the parking areas and landscaped areas associated with
that building and the entire commercial center during the term of this lease,
subject, however, to Lessee's reimbursement of said charges as is provided in
Section Four of this lease.
SECTION SEVENTEEN
INSURANCE
A. Insurance companies. All policies of insurance to be kept and maintained in
force by the respective parties hereto shall be obtained from good and
solvent insurance companies reasonably satisfactory to Lessor with Lessor
named as an additional insured party under the liability insurance. Lessee
shall annually provide Lessor, on the anniversary date of this lease, with
a certificate naming Lessor as said additional insured party.
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B. Lessee to obtain liability insurance. Lessee shall, at its own expense, at
all times during the term of this lease, maintain in force a policy or
policies of insurance, written by one or more responsible insurance
carriers which will insure Lessor and Lessee against liability for injury
to or death of persons or loss of damage to property occurring in or about
the demised premises. The liability under such insurance shall not be less
than One Million Dollars ($1,000,000) for any one person killed or injured,
One Million Dollars ($1,000,000) for any one accident, and Five Hundred
Thousand Dollars ($500,000) property damage.
C. Lessee to obtain fire insurance on its fixtures and equipment. Lessee shall
maintain in force, at all times during the term of this lease, on all of
its fixtures and equipment in the demised premises, such policies as it
deems adequate for the repair and replacement thereof.
D. Lessor to obtain fire insurance on premises. Lessor shall maintain in force
and shall pay for, at all times the term of this lease, policies of
casualty insurance in such amounts as shall be determined solely by Lessor.
E. Lessee's waiver of Lessor's casualty insurance proceeds. In the event the
demised premises shall be damaged or destroyed by fire, or other casualty
so insured against, Lessee shall claim no interest in any insurance
settlement arising out of any such loss and shall execute any and all
documents required by Lessor or the insurance company or companies that may
be necessary for use in connection with settlement of any such loss by
Lessor.
SECTION EIGHTEEN
TRANSFER OR PLEDGE OF LEASEHOLD INTEREST
Lessee shall not assign this lease or any interest therein, or sublet the
demised premises or any part thereof, or license the use of any portion of the
demised premises or business conducted thereon or therein, or encumber or
hypothecate this lease, without first obtaining the written consent of Lessor,
which consent will not be unreasonably withheld, conditioned or delayed. Any
assignment, subletting, licensing, encumbering or hypothecating of this lease
without such prior written consent shall, at the option of Lessor, immediately
terminate this lease. Notwithstanding the foregoing, the parties agree (i)
Lessee may assign this lease or sublet the demised premises to any affiliate of
Lessee which has substantially common ownership as Lessee ("Affiliate") without
Lessor's written consent; and (ii) in the event Lessee assigns this lease or
sublets the demised premises to an Affiliate any profit derived by Lessee from
said assignment or sublet shall inure to the benefit of Lessee.
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SECTION NINETEEN
SURRENDER OF PREMISES
Lessee shall, at the termination of this lease, vacate the demised premises in
as good condition as it was at the time of entry thereon by Lessee, except for
reasonable use and wear thereof, acts of God, or damage by casualty beyond the
control of Lessee, and on vacating shall leave the demised premises free and
clear of all rubbish and debris.
SECTION TWENTY
INDEMNIFICATION OF LESSOR
A. Liens and encumbrances. Lessor and Lessee respectively (respectively, the
"Indemnifying Party") shall indemnify the other and the premises herein
demised and all improvements placed thereon against all claims, liens,
claims of lien, demands, charges, encumbrances or litigation arising
directly or indirectly out of or by reason of any work or activity of the
Indemnifying Party on the demised premises, and shall forthwith and within
fifteen (15) days after the filing of any lien for record fully pay and
satisfy the same, and shall reimburse the other party for all loss, damage
and expense, including reasonable attorneys' fees, which it may suffer or
be put to by reason of any such claims of lien, demands, charges,
encumbrances or litigation.
In the event the Indemnifying Party shall fail to pay and fully discharge
any claim, lien, claims of lien, demand, charge, encumbrance or litigation,
or should proceedings be instituted for the foreclosure of any lien or
encumbrance, the other party shall have the right, at its option, at any
time after the expiration of such 15-day period, to pay the same or any
portion thereof, with or without the costs and expenses claimed by such
claimant, and in making such payment the other party shall be the sole
judge of the legality thereof. All amounts so paid by the other party shall
be repaid by the Indemnifying Party to the other party on demand, together
with interest thereon at the rate of eighteen percent (18%) per annum, from
the date of payment by the other party until repayment is fully made.
B. Personal injuries, violation of law. Excluding intentional or negligent
acts of Lessor, Lessee shall indemnify Lessor and its members against any
cost, liability or expense arising out of any claims of any person or
persons whatsoever by reason of the use or misuse of the demised premises,
parking area or common facilities by Lessee or any person or persons
holding under Lessee, and shall indemnify Lessor against any penalty,
damage or charge incurred or imposed by reason of any violation of law or
ordinance by Lessee or any person or persons holding under Lessee, against
any costs, damage or
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expense arising out of the death of or injury to any person or persons
holding under Lessee.
SECTION TWENTY-ONE
SUBORDINATION OF LEASE
Upon receipt of a reasonably acceptable non-disturbance agreement, Lessee shall
execute any instrument permitting mortgages or deeds of trust to be placed on
the lot and building in which the demised premises is located or any part
thereof as security for any indebtedness, and subordinate this lease to such
mortgages or trust deeds, if required to do so by the secured party.
Lessee shall have the right to make payment of any defaults under any mortgage,
trust deeds or liens of record on the demised premises, and to receive
reimbursement for such payment by deduction and credit from and against rentals
becoming due hereunder.
SECTION TWENTY-TWO
ESTOPPEL CERTIFICATE
Lessee agrees to at any time and from time to time, within twenty (20) days
after Lessee's receipt of Lessor's written request, to execute, acknowledge and
deliver without charge to Lessor a written instrument, certifying the
commencement date of the term of this lease, that Lessee has accepted possession
of the demised premises and is open for business, that this lease is unmodified
and in full force and effect (or if there have been modifications, that it is in
full force and effect as modified and stating the modifications), the dates to
which base rent, additional rent and other charges have been paid in advance, if
any, and stating whether or not to the best knowledge of the signer of such
certificate, Lessor is in default in the performance of any covenant, agreement
or condition contained in this lease and, if so, specifying each such default of
which the signer may or should have knowledge, and certifying such other matters
as may be reasonably requested by Lessor ("Estoppel Certificate").
Lessee's failure to deliver an Estoppel Certificate to Lessor within twenty (20)
days after Lessor's written request therefor, shall at the option of Lessor, be
conclusive upon Lessee that: (1) this lease is in full force and effect without
modification except as may be represented by Lessor; (2) that there are no
uncured defaults in Lessor's performance; and (3) that no more than one (1)
month's rent has been paid in advance.
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SECTION TWENTY-THREE
LESSOR'S RIGHT OF INSPECTION
Upon notice, except in the case of emergencies, Lessor shall have access to the
demised premises, and each part thereof, during Lessee's regular business hours
and at any time thereafter for the purpose of inspecting the same, making
repairs and posting notices which Lessor may deem to be for the protection of
Lessor or the demised property.
SECTION TWENTY-FOUR
DEFAULT AND LATE CHARGES
A. Lessor's right to repossess, operate, or relet. If the rental reserved by
this lease or other charges to be paid hereunder by Lessee, or any part
thereof, are not paid when due and shall remain unpaid for a period of ten
(10) days after notice thereof in writing, or if Lessee shall fail to
promptly perform any other covenant, condition, or provision by it to be
performed hereunder and such failure shall continue for a period of ten
(10) days after receipt of notice in writing specifying the nature of such
failure, or if Lessee abandons the demised premises and ceases to pay rent,
then, and in any such event, Lessee shall be deemed to be in default and
Lessor, without further notice, may at its option re-enter and take
possession of the demised premises, including all improvements thereon and
fixtures and equipment owned or leased by Lessee and located at, in or
about the same, and take, operate or relet the same in whole or in part for
the account of Lessee at such rental and on such agreement and conditions
and to such tenant or tenants as Lessor in good faith may deem proper for a
term not exceeding the unexpired period of the full term of this lease.
Lessor shall receive all proceeds and rent accruing from such operation or
reletting of the demised premises or fixtures and equipment and shall apply
the same first to the payment of all costs and expenses incurred by Lessor
in obtaining possession and in the operation or reletting of the demised
premises or fixtures and equipment, including reasonable attorneys' fees,
commissions, and collection fees, and any alterations or repairs reasonably
necessary to enable Lessor to operate or relet the premises or fixtures and
equipment and to the payment of all such amounts as may be due or become
payable under the provisions of this lease, and the balance remaining, if
any, at the expiration of the full term of this lease or on the sooner
termination thereof by written notice of termination given by Lessor to
Lessee shall be paid over to Lessee. Upon three (3) days' notice to Lessee,
Lessor may dispose of any personal property of Lessee located at the
demised premises at the time of any default without incurring any liability
for such a disposition. Notwithstanding anything contained herein to the
contrary, it is understood and agreed that in the event Lessee's default
hereunder cannot be completely cured within said ten (10) day period but
Lessee has diligently
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commenced curing the subject default, Lessee may with reasonable diligence
and in good faith proceed to remedy or cure the subject default.
B. Late Charges. If the rental reserved by this lease or other charges to be
paid hereunder by Lessee, or any part thereof, are not paid when due, late
charges in the amount of five percent (5%) of the basic monthly rent shall
be immediately due for each ten-day period, commencing the first (1st) day
of the applicable month, that the rental or other charges, or any part
hereof, remain unpaid.
C. Repossession or reletting not a termination, Lessor's right to terminate
not forfeited. No re-entry, repossession, operation or reletting of the
demised premises or of fixtures and equipment shall be construed as an
election by Lessor to terminate this lease unless a written notice of such
intention is given by Lessor to Lessee, and notwithstanding any such
operation or reletting without terminating this lease, Lessor may at any
time thereafter elect to terminate this lease in the event at such time
Lessee remains at default hereunder.
D. Lessee's obligation to pay deficiencies. In the event the proceeds or
rentals received by Lessor under the provisions of this section are
insufficient to pay all costs and expenses and all amounts due and becoming
due hereunder, Lessee shall pay to Lessor on demand such deficiency as may
from time to time occur or exist.
E. Lessor's right to perform Lessee's duties at Lessee's cost. Notwithstanding
any provision as to notice contained in this lease, if in the judgment of
Lessor the continuance of any material default by Lessee, other than for
the payment of money, for the full period of the notice otherwise provided
for will jeopardize the premises or the rights of Lessor, Lessor may,
without notice, elect to perform those acts in respect of which Lessee is
in material default, at the expense of Lessee, and Lessee shall thereupon
reimburse Lessor, with interest at the rate of eighteen percent (18%) per
annum, on five (5) days notice by Lessor to Lessee.
F. Lessor's right to terminate lease. In the event of Lessee's material
default as stated herein, Lessor may, at its option, on five (5) days
notice, terminate this lease and any and all interest of Lessee hereunder,
and may thereupon immediately re-enter and take possession of the demised
premises.
G. Lessor's right on termination to recover amount equal to rent reserved. If
this lease is terminated by Lessor by reason of any material default by
Lessee, Lessor shall be entitled to recover from Lessee, at the time of
such termination, the excess, if any, of the amount of rent reserved in
this lease for the balance
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of the term thereof over the then reasonable rental value of the premises
for the same period. It is agreed that the "reasonable rental value" shall
be the amount of rental which Lessor can obtain as rent for the remaining
balance of the term.
H. Lessor's and Lessee's remedies cumulative. Each and all of the remedies
given to Lessor and Lessee in this lease or by law shall be cumulative, and
the exercise of one right or remedy by either party shall not impair that
party's right to exercise any other right or remedy it may possess.
I. Lessee's waiver of claims against Lessor. Lessee hereby waives all claim or
demand for damages that may be caused by Lessor in lawfully and rightfully
re-entering and taking possession of the demised premises as hereinabove
provided, and all claim or demand for damages which may result from the
destruction of or damage to the demised premises and all claim or demand
for damages or loss of property belonging to Lessee as may be in or on the
premises at the time of such re-entry, assuming Lessor has used reasonable
care when re-entering and taking possession of the demised premises.
J. Limitation of notice period by governmental order. Notwithstanding any
provision as to notice in this section, if Lessee is required to comply
with any governmental regulation or order within a period less than that to
which Lessee would otherwise be entitled to notice, Lessee shall not be
entitled to notice beyond the period within which such compliance may be
required by such regulation or order.
SECTION TWENTY-FIVE
EXPENSES OF ENFORCEMENT
Should Lessor or Lessee incur any expenses in enforcing any provision of this
lease the defaulting party shall pay to the non-defaulting party all expenses so
incurred, including reasonable attorneys' fees and court costs.
SECTION TWENTY-SIX
EFFECT OF BANKRUPTCY
If at any time during the term of this lease there shall be filed by or against
Lessee in any court, pursuant to any statute either of the United States or any
state, petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Lessee's property,
or if Lessee makes an assignment for the benefit of creditors, Lessee shall have
breached this lease, and this lease, at the option of Lessor exercised after
expiration of the period provided below, may be cancelled and terminated,
provided such petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee shall continue for a
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period of ten (10) days. In such event neither Lessee, nor any person claiming
through or under Lessee by virtue of any statute or of any statute or of an
order of any court, shall be entitled to possession or to remain in possession
of the demised premises, but shall forthwith quit and surrender the premises.
SECTION TWENTY-SEVEN
EMINENT DOMAIN
A. Over certain percentage taken. In the event twenty-five percent (25%) or
more of the area of the demised premises shall be taken for a public or
quasi-public use this lease shall terminate as of the date of the actual
physical taking, and the parties shall thereupon be released from any and
all further liability hereunder.
B. Less than a certain percentage taken. In the event of a partial taking of
less than twenty-five percent (25%) of the area of the demised premises,
Lessor shall, with reasonable diligence, proceed at its own expense to
reconstruct or repair the demised premises and place the same in a
tenantable condition within ninety (90) days after the date of the actual
physical taking, provided, however, that if fifty percent (50%) or more of
the area of the commercial center as a whole is taken, Lessor alternatively
may elect to terminate this lease notwithstanding that less than
twenty-five percent (25%) of the area of the demised premises were taken.
In the event of such termination the parties hereto shall be released from
any and all further liability under this lease.
C. Abatement of rent. During any reconstruction or repairing as hereinabove
provided, Lessee shall be required to pay only that proportion of the fixed
minimum monthly rental herein reserved as the area of the demised premises
remaining in a tenantable condition during such reconstruction or repairing
bears to the entire area herein leased. On completion of such
reconstruction or repairing, the fixed minimum monthly rental herein
reserved shall be adjusted in the proportion that the reconstructed demised
premises bear to the original demised premises, and thereafter Lessee shall
be required to pay such adjusted fixed minimum monthly rental in accordance
with the provisions of this lease.
There shall be no abatement of any rental due until such time as there
shall be an actual physical possession of that portion of the demised
premises taken, and in no event shall there be any change made in the
method of computing the percentage rental, and there shall be no reduction
of percentage rental.
D. Right to condemnation award. Any award made in any condemnation proceeding
for the taking of any part or all of the demised premises shall be the sole
property of and be paid to Lessor.
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SECTION TWENTY-EIGHT
QUIET ENJOYMENT
Lessor hereby covenants and warrants that, subject to any trust deeds or
mortgages now of record or hereafter placed on record, it is the owner of the
demised premises and that Lessee, on payment of rents herein provided for and
performance of the provisions hereof on its part to be performed, shall and may
peacefully possess and enjoy the demised premises during the term hereof without
any interruption or disturbance.
SECTION TWENTY-NINE
WAIVER OF BREACH
No waiver of any breach or breaches of any provision of this lease shall be
construed to be a waiver of any preceding or succeeding breach of such provision
or of any other provision hereof.
SECTION THIRTY
TIME OF THE ESSENCE
Time is of the essence of each and every provision hereof.
SECTION THIRTY-ONE
HEADINGS FOR CONVENIENCE ONLY
The headings used herein are for convenience and shall not be resorted to for
purposes of interpretation or construction hereof.
SECTION THIRTY-TWO
PRONOUNS
Feminine or neuter pronouns shall be substituted for those of masculine form or
vice versa, and the plural shall be substituted for the singular number or vice
versa in any place or places in which the context may require such substitution
or substitutions.
SECTION THIRTY-THREE
AMENDMENTS TO BE IN WRITING
This lease may be modified or amended only by a writing duly authorized and
executed by both Lessor and Lessee. It may not be amended or modified by oral
agreements or understandings between the parties unless the same shall be
reduced to writing duly authorized and executed by both Lessor and Lessee.
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SECTION THIRTY-FOUR
PARTIES BOUND
Each and every provision of this lease shall bind and shall inure to the benefit
of the parties hereto and their legal representatives. The term "legal
representatives" is used in this lease in its broadest possible meaning and
includes, in addition to executors and administrators, every person,
partnership, corporation or association succeeding to the interest or to any
part of the interest in or to this lease or in or to the leased premises, of
either Lessor or Lessee herein, whether such succession results from the act of
a party in interest, occurs by operation of the law or is the effect of the
operation of law together with the act of such party. Each and every agreement
and condition of this lease by Lessee to be performed shall be binding on all
assignees, subtenants, concessionaires, and/or licensees of Lessee; provided
however, that this provision shall not be deemed to supersede the restrictions
on assignment, subletting or licensing imposed by Section Eighteen entitled
"Transfer or Pledge of Leasehold Interest."
SECTION THIRTY-FIVE
HOLDING OVER
No holding over and continuation of any business by Lessee after the expiration
of the term hereof shall be considered to be a renewal or extension of this
lease unless written approval of such holding over and a definite agreement to
such effect is signed by Lessor defining the length of such additional term. Any
holding over without the consent of Lessor shall be considered to be a
day-to-day tenancy at a rental of one hundred fifty percent (150%) of the fixed
minimum monthly rental provided herein, computed on the basis of a 30-day month.
SECTION THIRTY-SIX
NOTICES
All notices or demands of any kind which Lessor may be required or may desire to
serve on Lessee under the terms of this lease shall be served on Lessee by
mailing a copy thereof by registered or certified mail, postage prepaid,
addressed to Lessee at: Suite 1000, 6707 Democracy Boulevard, Bethesda, Maryland
20817, ATTN: General Counsel, with a copy to: Thomas P. Murphy, Suite 2600, 10
S. LaSalle Street, Chicago, Illinois 60603, or at such other address or
addresses as may from time to time be designated by Lessee in writing to Lessor.
Service shall be deemed complete upon receipt. All notices and demands from
Lessee to Lessor may be similarly served on Lessor at 1909 Fox Drive, Champaign,
Illinois 61820, or at such other address as Lessor may in writing designate to
Lessee.
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SECTION THIRTY-SEVEN
STRICT CONSTRUCTION
The language used in this lease shall be deemed to be the language approved by
all parties to this lease to express their mutual intent, and no rule of strict
construction shall be applied against any party.
SECTION THIRTY-EIGHT
DELAY IN LEASE COMMENCEMENT
In the event the commencement date of this lease, as determined in accordance
with the provisions of Section Five of this lease, is after October 25, 1996
Lessor agrees to credit Lessee against Lessee's future payment of base rent
hereunder the sum of Six Hundred Sixty-Six and 67/100 Dollars ($666.67) per day
for each day the actual commencement date of this lease is delayed after said
October 25, 1996 date.
SECTION THIRTY-NINE
EXPANSION OPTION
During the initial four (4) years of the term of this lease Lessor shall retain
sufficient acreage adjacent to the demised premises, as further detailed on
Exhibit A, upon which to (i) construct a ten thousand (10,000) square foot
addition to the demised premises; and (ii) provide an additional sixty-three
(63) surface parking spaces for Lessee's use (the "Expansion Premises"). Lessee
shall notify Lessor in writing at least thirty (30) days prior to the last day
of the fourth (4th) year of the term of this lease as to whether Lessee intends
to expand its operations onto the Expansion Premises. In the event Lessee elects
to expand its operations onto the Expansion Premises the parties shall negotiate
in good faith an addendum to this lease reflecting the terms upon which Lessor
shall lease the Expansion Premises to Lessee including Lessee's payment of rent
to Lessor beginning on October 1, 2003. In the event Lessee declines to expand
its operations onto the Expansion Premises or fails to timely notify Lessor as
to Lessee's intent. Lessor shall have no further obligation to Lessee as to the
Expansion Premises and Lessee shall have no further interest in or to the
Expansion Premises.
SECTION FORTY
COMMISSION
Lessor and Lessee each warrant to the other that no real estate broker or agent
has been used or consulted in connection with this lease except JSQ Real Estate
Consulting Company, whose commission is the subject of a separate agreement
between Lessor and JSQ Real Estate Consulting Company and shall be paid by
Lessor.
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SECTION FORTY-ONE
CONSENTS
At any time Lessor's or Lessee's approval hereunder is required, such approval
shall not be unreasonably withheld, conditioned or delayed.
SECTION FORTY-TWO
HAZARDOUS MATERIALS
A. During the term of the lease, Lessor and Lessee shall fully comply with any
laws or rules and regulations promulgated thereunder relating to the
demised premises, including, but not limited to, Occupational Safety and
Health Act, 29 U.S.C. Sections 651, et seq.; the Toxic Substances Control
Act, 15 U.S.C. Sections 2601, et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901 et seq.; the Clean Air Act, 42 U.S.C.
Sections 7901, et seq.; the Clean Water Act, 33 U.S.C. Sections 1251, et
seq.; the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 and the 1986 Superfund Amendments and Reauthorization Act, 42
U.S.C. Sections 9601, et seq.; the National Environmental Policy Act, 42
U.S.C. Sections 4231, et seq.; the Refuse Act, 33 U.S.C. Sections 407, et
seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 300(f), et seq.; the
Emergency Planning and Community Right- to-Know Act, 42 U.S.C. Sections
11001, et seq.; or any other federal, state or local law, ordinance and/or
regulation promulgated under each of those statutes and any amendments
thereto, as well as applicable Department of Transportation regulations
relating to environmental matters (collectively "Environmental Laws").
Lessee shall notify Lessor immediately if Lessee receives any notice of
non-compliance with any laws or rules and regulations promulgated
thereunder, including, but not limited to, those enumerated above. Lessor
shall notify Lessee immediately if Lessor receives any notice of
non-compliance with any laws or rules and regulations promulgated
thereunder, including, but not limited to, those enumerated above.
Lessee shall not cause or permit Lessee's business in the demised premises
to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process hazardous substances, or
other dangerous or toxic substances, or solid waste, except in compliance
with all applicable federal, state and local laws or regulations. Lessor
and Lessee shall each notify the other immediately if either learns of any
non-compliance or of any facts (such as the existence of any release or
threat of release of hazardous substances at, on, from or beneath the
surface of the demised premises) which could rise to a claim of
non-compliance with such laws or rules and regulations promulgated
thereunder.
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B. During the term of the lease, Lessee shall obtain, shall fully comply with,
and shall maintain in full force and effect all governmental licenses,
permits, registrations and approvals (federal, state, local, county and
foreign) necessary to conduct its business including, but not limited to,
those required by the statutes enumerated above in paragraph A.
Lessee warrants and represents that if during the term of the lease any
violations are recorded or any notices are received with respect to any of
such licenses, permits, registrations and approvals or if a proceeding is
commenced or threatened to revoke or limit any of them, Lessee shall notify
Lessor immediately.
C. Lessor is, to the best of its knowledge, as of the date of the execution of
this lease, not aware of the presence of any materials on the demised
premises which may require remedial action under any applicable
Environmental Laws or may pose a threat to human health or the environment.
Lessor shall protect, defend, indemnify and hold harmless Lessee from and
against any and all liability, claims, actions, causes of action,
proceedings, demands, costs, penalties, fines and expenses, including
without limitation reasonable attorney fees, consultant's fees, and
clean-up costs, resulting from the generation, storage, treatment,
handling, transportation, disposal or release, of any materials on the
demised premises caused by Lessor, its agents, employees, officers, or
directors acts or omissions in violation of any applicable Environmental
Laws. The obligations of this paragraph shall survive the expiration or
termination of this lease.
Lessee shall protect, defend, indemnify and hold harmless Lessor from and
against any and all liability, law suits, claims, actions, causes of
action, proceedings, demands, costs, penalties, fines and expenses,
including without limitation reasonable attorney fees, consultant's fees,
and clean-up costs, resulting from the generation, storage, treatment,
handling, transportation, disposal or release, of any materials on the
demised premises caused by Lessee, its agents, employees, officers, or
directors acts or omissions in violation of any applicable Environmental
Laws. The obligations of this paragraph shall survive the expiration or
termination of this lease.
IN WITNESS WHEREOF, the parties have executed this lease at Champaign, Illinois
the day and year first above written.
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C. CSC INTELICOM, INC.,
an Illinois limited liability company a Delaware corporation
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BY: FOX DEVELOPMENT
CORPORATION,
an Illinois corporation, its
managing member
BY: BY: /s/ Kevin P. Haggerty
--------------------------- ----------------------------
MELINDA J. PARKER, KEVIN P. HAGGERTY,
Its President Its Vice President
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EXHIBIT A-1
[Diagram]
25
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1
Revised 1/16/96 Exhibit A-2
PROJECT DESCRIPTION
CSC INTELICOM, INC.
CHAMPAIGN, ILLINOIS
November 1995
1. GENERAL
1.1 Summary of Work
1.1.1 The Scope of Work anticipated includes design and
construction of a building as described within this Project
description at Par 3 property, Champaign, Illinois.
1.1.2 The building will be comprised of the following areas:
Office Area......................... 40,000 sf
Total............................... 40,000 sf
1.2 Building Features
1.2.1 A finish ceiling height of 10' +/- is anticipated for the
main office area.
1.2.2 Design of the project will provide for future expansion as
shown on the preliminary drawings.
1.3 Drawings and Specifications
1.3.1 Complete "Working Drawings and Specifications" will be
prepared from the preliminary design documents and will be
furnished to the owner.
1.4 Design
1.4.1 All structural design shall be in accordance with BOCA Code
requirements unless noted otherwise.
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2
1.4.2 All concrete work is to be completed in accordance with the
applicable standards of the American Concrete Institute
(ACI).
1.4.3 Structural steel beams, columns, and lintels will be
designed in accordance with the Steel Construction Manual of
the American Institute of Steel Construction specifications
for the design of hot-formed structural members.
1.4.4 The bar joist framing will be designed in accordance with
the requirements and guidelines of the Steel Joist
Institute.
1.4.5 Asphalt work is to conform to applicable requirements as
established by the Illinois Department of Transportation
IDOT.
1.5 Definitions & Terms
1.5.1 Where the word "Client" appears it shall mean CSC Intelicom,
Inc.
1.5.2 Where the word "Architect" appears it shall mean Dankert and
Associates.
1.5.3 Where the word "Contractor" appears it shall mean Dodds
Company and/or an associated subcontractor.
2. SITEWORK
2.1 Earthwork
2.1.1 All trees, stumps, and brush that interfere with new
construction are to be removed and properly disposed of
off-site.
2.1.2 Topsoil which is stripped to accommodate new construction
will be retained on site for use in landscaping or for
construction of earth berms.
2.1.3 All debris will be removed from site and properly disposed
of.
2.1.4 Site areas which are to be occupied by the building or
surface improvements will be rough and fine graded as
necessary to meet engineered elevations and grades and to
provide for proper surface drainage.
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3
2.1.5 All cutting, filling and rough grading is to be completed to
proper subgrade elevations for finish floor, pavement and
landscaped areas.
2.1.6 The site is anticipated to consist of suitable soils that
permit the site to be cut, filled and balanced without a
need to import additional fill.
2.1.7 Site areas which are to be occupied by the new building or
pavement will be proof-rolled to compact the existing
subbase to 95% maximum density.
2.1.8 A minimum of 2" compacted granular material will be provided
under all concrete slabs on grade and will consist of
approved material as excavated from sources on-site or
obtained from approved, off-site sources.
2.1.9 Fill material will be compacted to 95% maximum density.
2.1.10 (2) masonry dumpster enclosures.
2.1.11 Free standing sign.
2.2 Storm Drainage
2.2.1 Storm water runoff from the roof will be directed to roof
sumps which will then carry runoff for discharge through
interior roof conductors.
2.2.2 Paved and landscaped areas will be contoured and sloped to
permit an engineered rate of storm water runoff into site
system
2.3 Sanitary Sewer
2.3.1 A Sanitary Sewer System will be completed to accommodate the
domestic plumbing needs of the facility.
2.3.2 Sanitary drainage piping will be extended from the building
to an existing municipal lead.
2.3.3 Sanitary sewer piping inside of the building shall be PVC
and/or cast iron.
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4
2.3.4 The proposal provides a 4" sanitary entering the
building underground near the office toilet room
area. Underground sanitary capacity is available
for the sewer system.
2.4 Watermain
2.4.1 Watermain work will be completed to satisfy the domestic,
process, and fire protection related needs of the facility.
2.4.2 A watermain is to be extended on site and into the building
from an existing municipal main.
2.4.3 Watermain work for fire protection shall be sized in
accordance with flow test and design requirements by NFPA
and insurance regulators.
2.5 Natural Gas
2.5.1 Service is to be extended from an existing lead.
2.6 Electrical/Telephone Service
2.6.1 The incoming electrical service will be a 2000 amp 120/208
volt utility company pad mounted transformer, positioned
adjacent to the service side of the proposed facility at the
site indicated on the drawing.
2.6.2 The incoming telephone service is to be (2) 4" PVC
underground conduit with pullstring.
2.6.3 Building electrical service to be secondary, metered by the
utility company.
2.7 Site Concrete
2.7.1 Site concrete will consist of those items shown on the
drawings.
2.7.2 Sidewalk(s) will be provided as indicated on the drawings
and will be 4" thick.
2.7.3 All sidewalks abutting paving will have a 6" raised face.
2.7.4 The concrete mix will be designed to accomplish a strength
of 3500 PSI at a 28 day test and will include air
entrainment.
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5
2.7.5 Drive approach area(s) will be completed as shown and will
be constructed in accordance with the requirements of the
governing agencies having jurisdiction.
2.7.6 All exterior flat slabs will be steel troweled and then
finished with a broom finish.
2.8 Asphalt Paving and Concrete Drives
2.8.1 Asphalt paving for on-site traffic and parking areas will be
provided as shown on the drawings. (250 spaces)
2.8.2 Car parking areas and drive will consist of 3" asphalt
wearing surface on an 8" thick compacted stone.
2.8.3 Parking areas will be completed with painted striping as
shown on parking plan.
2.8.4 No asphalt curbs or car bumpers are included.
2.9 Landscaping
2.9.1 Landscaping work is included and will be consistent with the
Devonshire Corporate Centre I.
3. CONCRETE WORK
3.1 Foundations
3.1.1 Reinforced concrete foundation work will be completed in
accordance with the applicable codes and will accommodate
all building live and dead loads.
3.1.2 Soil bearing pressure at 3'-6" below finish grade will be at
least 1800 p.s.f.
3.1.3 Soil is to be of sufficient cohesiveness to permit soil
forming where appropriate.
3.1.4 Concrete strength will be 3000 PSI per drawings at 28 days.
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6
3.2 Interior Flatwork
3.2.1 Interior flatwork is included for the completion of all
concrete slabs on grade, supported slabs.
3.2.2 The Office Area floor slab on grade will be 4" thick, and
reinforced with one (1) layer of 6 x 6 No. 10 wire mesh with
steel troweled finish.
3.2.3 Concrete strength to be 3000 PSI per drawings at 28 days.
3.2.4 Control joints will be provided as required by American
Concrete Institute requirements.
3.2.5 Perimeter insulation consisting of 2" thick x 24" wide rigid
board insulation will be laid flat below floor slabs at all
exterior walls.
4. MASONRY
4.1 Exterior Masonry
4.1.1 The exterior of the building will be 100% face brick, with
"punch" windows approximately 30' in length, separated by
full height brick panels approximately 10' in length, so as
to band the entire perimeter of the building.
5. METALS
5.1 Structural Steel
5.1.1 The structural framing system will consist of suitably sized
beams, columns, bar joists and metal deck to accommodate the
loading as previously noted.
5.2 Miscellaneous Metals
5.2.1 Miscellaneous metal items are to be provided where necessary
and are to include the following: roof screens.
6. WOOD LAMINATES
6.1 Rough Carpentry and Wood Doors
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7
6.1.1 Wood nailers and pressure treated blocking materials are to
be installed for the membrane roof areas.
6.2 Millwork and Laminates
6.2.1 Cabinets shelving, millwork and laminates are to be provided
where shown on the drawings or finish schedule and as
described here. Approximately 50 lineal feet of Merrilat
base and upper cabinets are included (Rutland).
7. THERMAL AND MOISTURE PROTECTION
7.1 Roofing
7.1.1 The roofing system will be a single-ply membrane roof
ballasted as installed over rigid insulation.
7.1.2 A standard sheet membrane similar or equal to that as
manufactured by Goodyear or Firestone or equal - .45 mil
thickness.
7.1.3 Roof insulation will be provided as required for an overall
R value of 20 using one layer of insulation.
7.1.4 All required cants, saddles, flashings, copings and trims
will be provided.
7.1.5 Roof area walk pads are not included.
7.1.6 The roof system will include a manufacturer's and roofing
contractor's 10-year written warranty.
8. DOORS, WINDOWS AND GLASS
8.1 Hollow metal
8.1.1 Hollow metal doors and frames will be provided in all
masonry walls.
8.1.2 All frames will be fabricated of 16 gauge, steel welded
jambs and head pieces.
8.1.3 All steel doors will be of a 3'-0" x 1 3/4" thick unless
noted otherwise, and are to be constructed of 18 gauge
steel.
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8
8.1.4 All doors are to be complete with hardware sets appropriate
for the use of each door as required.
8.1.5 All exterior doors will be insulated with thresholds and
weatherstripping.
8.1.6 Interior office area doors will be 3'-0" x 7'-0", 1 3/4"
thick, solid core, prefinish veneer doors.
8.1.7 All wood doors are to be installed in hollow metal door
frames.
8.1.8 Hardware to be 80% passage sets, and 20% locksets, lever
type.
8.2 Finish Hardware
8.2.1 Finish hardware is included for hollow metal and wood door
hardware sets, using aluminum color, Schlage "D" series.
8.3 Aluminum Frames, Doors and Windows
8.3.1 Exterior windows (banking the perimeter of the building) of
the Office Area will be same as Devonshire Corp. Centre I,
i.e., bronze tinted.
8.3.2 Aluminum framing for window system to be a nominal 2" x 4",
bronze anodized finish with thermal breaks for maximum
energy efficiency.
8.3.3 Glass inserts will be safety glazing where required by local
code.
8.3.4 Aluminum doors and frames will utilize manufacturer's
standard surface mounted hardware.
8.4 Overhead Doors
8.4.1 One (1) 10 x 12 overhead door - manual.
9. FINISHES
9.1 Drywall
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9
9.1.1 Interior partitions of the Office Areas will be constructed
of ceiling height metal stud framing at 24" on center and
5/8" thick gypsum drywall. approximately 2400 lin. ft.
9.2 Acoustical Ceiling
9.2.1 Acoustical ceilings to be 2'x4' suspended system (second
Look type) ceiling throughout at 10 ft +/- from finished
floor.
9.3 Resilient Flooring
9.3.1 Floor in the storage, printer/copier, mail room & breakroom
areas will be finished with a 1/8" thick commercial quality
resilient tile flooring (approximately 2400 sq. ft.).
9.3.2 All areas which are to be finished with resilient tile will
be trimmed out and completed with a standard, 4" high,
curved or straight vinyl base.
9.4 Carpet and floor covering
9.4.1 Carpet I, private office, main conference room, corridor and
reception consisting of approximately 11,000 sq. ft. will
receive tufted cut pile 42 oz. carpet. Carpet will be Shaw
Commercial Carpets Bay Hill II 50428 direct glue with top
set carpet base, 4".
9.4.2 Carpet II - small conference rooms, open office, library and
training will receive Graphic Loop Pile 30 oz. Shaw
Commercial Carpets Wild Creek 50639 direct glue with top set
carpet base, 4" approximately 21,500 sq. ft.
9.4.3 Ceramic Tile - All restrooms will receive 1" x 1" unglazed
tile by Dal-Tile approximately 1150 sq. ft/
9.4.4 Raised Access Flooring - Data room to receive Tate Access
Flooring stringer type one foot above slab with 200 lbs/psf
approximately 2210 sq. ft.
9.5 Painting
9.5.1 Interior drywall surfaces throughout area to be finished
with one (1) application of primer and one (1) finish coat
of latex paint, eggshell finish.
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10
9.5.2 Hollow metal doors and exposed miscellaneous steel items
will be finish painted with one (1) coat of semi-gloss alkyd
enamel paint over shop applied primer.
9.5.3 Interior carpentry items that are not factory finished will
be finished with one (1) coat of stain and two (2) finish
applications of stain finish polyurethane.
9.5.4 Interior surfaces of exposed structural steel (shop primed
grey) and metal deck (manufacturer grey).
9.5.5 Wall covering # 1 54" wide fabric by Maharam Tek wall/4
approximately 4250 sq. ft.
9.5.6 Wall covering # 2 Vinyl wallcovering 20 oz./lineal yard by
Genon approximately 1655 sq. ft.
9.5.7 Wall covering #3 Wall carpet wainscoat (4' high) in print
room 20' by 20' Vertex 24 oz. (80 lin. ft.)
9.5.8 All window openings shall be fitted with horizontal mini
blinds, to match mullion color.
10. MISCELLANEOUS SPECIALTIES
10.1 Toilet partitions
10.1.1 Toilet partitions and urinal screens will be provided as
shown or as required by code and where applicable, will
conform to the State's Barrier Free Access requirements.
10.1.2 Partitions will be floor mounted and overhead braced urinal
screens will be wall hung.
10.1.3 Partition panels will be flush metal type with baked enamel
finish.
10.2 Toilet Accessories
10.2.1 36" mirrors are to be provided at each vanity.
10.2.2 Grab bars are to be provided in each handicap accessible
toilet compartment.
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11
10.2.3 Double roll toilet paper dispensers are to be provided
within each toilet compartment.
11. EQUIPMENT
11.1 Dock Equipment
11.1.1 Each truckwell door opening will be completed with a
standard dock shelter or seal, one (1) wide range.
11.1.2 One (1) scissor lift.
12. MECHANICAL
12.1 Plumbing
12.1.1 The office, break and room areas domestic plumbing system is
to consist of the following fixtures and accessory type
items per drawings:
Water closets
Wall-hung lavatories with standard faucet code approved.
One (1) floor level mop basin with utility type faucet
Stainless steel kitchen sinks for lunch room counter-top.
Two (2) electric water coolers
Two (2) seventeen (17) gallon water heaters.
Two (2) toilet area floor drains
Four (4) exterior frost free hose bibs
Domestic, water and sanitary piping system as specified.
Gas piping system as specified.
Minimum of 2 showers
One (1) dishwasher & disposal
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12
12.1.2 The plumbing work for the entire facility is to conform to
the following per drawings:
Plumbing fixtures to be similar or equivalent to those as
manufactured by Kohler, American Standard or Elger.
Floor drains to be similar or equivalent to those as
manufactured by Wade, Josam or Zurn.
Water heater(s) to be similar or equivalent to those as
manufactured by Lochinvar or A. O. Smith.
Water Cooler(s) to be similar or equivalent to those as
manufactured by Oasis, Coroley, or Halsey Taylor.
Gas piping is to be extended from a utility company supplied
meter.
Work is to be completed in a neat, workmanlike manner.
All services are to be made complete and functional with
final connections having been made to existing utilities.
Miscellaneous piping and other items of work as might be
required to complete the plumbing system will be provided.
Sanitary sewer system is to be complete with fixtures as
noted, underground piping and venting.
12.2 Heating, Ventilating and Air Conditioning
12.2.1 Design parameters for the office area heating, ventilation
and air conditioning (HVAC) system are as per specs:
Heat to 72 degree fahrenheit (F) dry bulb inside when 0
degree F outside.
Cool to 75 degree F dry bulb inside at 95 degree F.
All ventilation to be in accordance with ASHRAE standards.
12.2.2 The description for the heating, ventilation and air
conditioning systems is as follows per specs:
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13
The office area HVAC equipment will be packaged roof mounted
heating (gas fire electronic starters) and air conditioning
unit(s) which sit on pre-fabricated roof curbs. The system
will be complete with programmable room thermostats, and
economizer cycle (on units larger than five (5) ton
capacity). The units will supply conditioned air through
overhead supply ductwork which will discharge into the
office areas through ceiling mounted diffusers.
The toilet areas will be provided with an air exhaust system
to conform to local code requirements. Additionally,
conference and lunch rooms will be provided with air exhaust
system(s) complete with wall mounted switch(s) to facilitate
intermittent use.
Data center to have (2) 20 ton Liebert, air cooled down
draft units with humidification and de-humidification and
(1) 20 ton Liebert chilled water producing system.
12.3 The HVAC equipment and materials will be selected from the following:
The packaged roof-top conditioning unit with accessories
shall be Trane or equal.
12.4 FIRE PROTECTION
12.4.1 Design parameters for the fire protection system are based
on the following:
The Office area fire protection system design is based upon
use of non-combustible roofing and a Light Hazard Occupancy
as specified.
There shall be sprinklers throughout the building. The
system for the Data Center Area shall be pre-action type.
12.4.2 General notes for clarifying the fire protection system
design are as follows:
The municipal water supply (flow & pressure) is adequate and
available.
This proposal provides for the fire protection work as
outlined per specs.
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14
This proposal has no provision for a ground storage tank.
This proposal is based on workmanship and methods which
conform to N.F.P.A. criteria and for system design
parameters as noted.
Sprinkler heads to be aligned within industry standards but
will not necessarily be centered in the ceiling tiles.
12.4.3 The equipment and materials for the fire protection system
will consist of the following:
Provide a wet type of automatic spray sprinkler system with
distribution piping, sprinkler heads and automatic sprinkler
riser(s) as required.
Provide check valves, fire department connections, flow
switch, flow switch alarms, inspector test connectors as
required for a complete and operable system.
Computer Room to be equipped with independent pre-action
suppression system.
13. ELECTRICAL
13.1 Service and distribution
13.1.1 The incoming secondary electrical service work will include
conduit, panel, switchgear, and cable work.
13.1.2 One (1) 2000 AMP 120/208 volt, three-phase, secondary
service switchboard will be provided, installed and
energized.
13.1.3 One (1) 1000 amp 120/208 volt panel for computer room.
13.1.4 One (1) 200 AMP (277/480) volt, three-phase, four-wire
lighting panel to be provided at selected location for
general illumination.
13.2 Lighting
13.2.1 In the general office area lighting to be through the use of
2'-0" x 4'-0" recessed, commercial fluorescent fixtures,
lay-in type with paracube lens.
<PAGE>
15
13.2.2 In the private office areas lighting to be through the use
of 2'-0" x 4'-0", recessed, commercial fluorescent fixtures,
lay-in type with paracube lens.
13.2.3 In the conference room area lighting to be through the use
of 2'- 0" x 4"-0", recessed commercial fluorescent fixtures,
lay-in type with paracube lens, to give 75 foot candles.
(20) recessed incandescent fixtures 75R20 Lightolier or
equal.
13.2.4 Provide and install necessary emergency battery operated
(dual lamp) packs for lighting on night light circuits in
the office area as required.
13.2.5 Provide exit lighting as required by code.
13.3 Convenience Outlets
13.3.1 Each private office shall have two (2) quadraplex outlets.
13.3.2 System furniture will have one junction box per four (4)
cubicles with the following circuit configuration:
One 20-amp dedicated circuit per junction box.
Three 20-amp circuits per (2) junction boxes.
13.4 Miscellaneous Electrical
13.4.1 Provide power wiring for HVAC equipment as outlined under
mechanical trades per drawings.
13.4.2 Provide telephone data outlets and conduit stubs into
ceiling area.
13.5 Site and Exterior Electrical
13.5.1 Provide 2.5 lumens for the parking lot.
13.6 General Notes
13.6.1 The electrical work as described is further clarified
through the following notes:
<PAGE>
16
All the above provisions include labor and material for a
complete electrical installation, done in a neat workmanlike
manner.
All electrical work shall conform to the current edition of
the National Electrical Code and Local Code where
applicable.
Footcandle figures given are intended to represent
approximate average intensities based on the lumen or zonal
cavity method of calculation and are based on an open area
with no obstructions (machines, equipment, racks, bins,
etc.)
Each private office, systems cubicle and all other rooms
shall have (1) telephone and data outlet per space. All
systems furniture will be floor fed through conduits where
they are not adjacent to convenient walls or columns.
Junction boxes and conduit stubs into ceiling areas are to
be provided as previously noted for telephone communication
data. Telephone incoming cabling, individual telephone sets
or wiring telephone communications system is to be provided
by the Client.
This proposal includes underground conduit from transformer
to building. Secondary conduit furnished and installed by
utility.
This proposal includes provisions for a security system,
with 4 card reader access pads at entrances and 250 card
keys.
13.7 Equipment and Materials
13.7.1 The incoming service equipment will be selected from the
following:
All materials and installation methods to conform to local
utility company standards.
The electrical switchgear and panels will be similar or
equivalent to those as manufactured by Square "D".
13.7.2 One (1) Microwave
One (1) Oven
One (1) Refrigerator
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17
One (1) Dishwasher
One (1) Garbage Disposal
14. CLARIFICATIONS, QUALIFICATIONS AND EXCLUSIONS
14.1 Clarifications
14.1.1 The amount to be paid for permits, review fees, inspection
fees, tap fees, assessments or other municipal fees is
included.
14.1.2 Quality control and testing fees are included in the base
proposal.
14.2 Qualifications
14.2.1 Materials will be new unless noted otherwise.
14.2.2 Items and work indicated as being furnished or performed by
the Client are not included in the Cost of the Work.
14.2.3 The Contractor will obtain the building permit. The amounts
to be paid for permits, inspection fees, assessments, tap-in
charges or other municipal fees are included in the Cost of
the Work.
14.2.4 The facility will be delivered in a broom-clean condition
and all glass will be cleaned.
14.2.5 Client will be assisted by the Contractor in obtaining the
Certificate of Occupancy from the municipality.
14.2.6 Should conditions be encountered that differ from the basis
of preliminary design and result in a change to the Scope of
Work, the Client will be responsible for any subsequent
changes as might be necessary to be made to the Cost of
Work.
14.2.7 Should a governing body require that changes be made to any
phase of the working drawings or specifications as they were
prepared from preliminary documents, any additional cost for
these changes will be paid for by the Client.
14.2.8 Building Code conformance for the Scope of Work is
anticipated to be governed by Building Officials and Code
Administration (BOCA) 1990, the National Electric Code (NEC)
and the National Fire Protection Association (NFPA).
<PAGE>
18
14.2.9 The Contractor is to assume responsibility for zoning and
regulations governing use of the site and building.
14.2.10 Sprinkler for computer room is wet.
14.2.11 Power and electrical requirements for Furniture, Fixtures
and Equipment as provided by CSC is $6,800.00.
14.2.12 Client to provide and install the systems furniture and its
installation (with the exception of 17.3.1) is excluded.
14.2.13
<PAGE>
19
Exhibit A-3
[Diagram]
<PAGE>
20
Exhibit B
[Diagram]
<PAGE>
21
EXHIBIT C
(Optional)
Change Order No._____
- --------------------------------------------------------------------------------
This Change Order is made this ___ day of ________________, 19__, by and between
PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability company, and CSC
INTELICOM, INC., a Delaware corporation. The parties agree that the following
(change, addition, deletion) shall be made to the tenant improvements located in
Suite _____ in the building at ____________________, Champaign, Illinois 61820,
and that the same shall be done for the sum of ________________
($_______________), to be (added to, deleted from) the original contract price
of _____________________, ($___________________).
- --------------------------------------------------------------------------------
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C., CSC INTELICOM, INC.,
an Illinois limited liability company a Delaware corporation
BY: FOX DEVELOPMENT CORPORATION, an
Illinois corporation, its managing member
BY: _______________________________ BY: _____________________
MELINDA J. PARKER, KEVIN P. HAGGERTY,
Its President Its Vice President
- --------------------------------------------------------------------------------
<PAGE>
22
BLDG. B
LEASE
This lease is made and entered into this 19th day of September, 1996, by and
between PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability company, with
its principal office located at 1909 Fox Drive, Champaign, Illinois, 61820
(hereinafter referred to as "Lessor") and CSC INTERLICOM, INC., a Delaware
corporation, with its offices at Suite 1000, 6707 Democracy Boulevard, Bethesda,
Maryland, 20817 (hereinafter referred to as "Lessee").
SECTION ONE
DEMISE AND DESCRIPTION OF PREMISES
Lessor leases to Lessee and Lessee leases from Lessor that certain office space
which is herein referred to as the "demised premises," consisting of
approximately Twenty Thousand Four Hundred (20,400) square feet, located at 2102
Fox Drive, Champaign, Illinois, the area, location, specifications, floor plan
and description of which are more particularly indicated and described on
Exhibit A attached hereto and incorporated by reference herein, together with
all improvements located thereon. The demised premises are a portion of the
Devonshire Corporate Centre II office complex, herein referred to as the
"commercial center," containing other office space, a parking area and common
facilities for the use and benefit of all tenants of such commercial center. The
parking area and common facilities for the building in which the demised
premises are located are shown on Exhibit B attached hereto and incorporated by
reference herein. It is understood that no representations or warranties are
made with respect to location of other office space as shown in the attached
exhibits or areas adjoining thereto or with respect to the time that such other
office space will be erected and occupied.
The term "common facilities" as used herein shall be construed to include those
facilities within the commercial center which are for the nonexclusive use of
Lessee in common with other authorized users, and shall include, but not be
limited to, sidewalks, parking areas, planted areas, open means of ingress and
egress and any signage advertising the common name given to the commercial
center.
SECTION TWO
CONSTRUCTION OF IMPROVEMENTS
A. Lessor's Obligation. Lessor shall construct, at its sole expense, all of
the commercial center as shown on Exhibit A and the demised premises for
Lessee's use and occupancy as shown on said Exhibit A, such demised
premises to be constructed in accordance with plans and specifications to
be prepared by Lessor, at Lessor's sole expense, and approved by Lessee.
B. Commencement of Construction. Lessor will commence the construction of such
demised premises as soon as is reasonably possible after the plans
<PAGE>
and specifications therefor have been completed and will diligently
prosecute such construction to completion.
Additions or changes to the previously agreed upon specifications or floor
plan further detailed on exhibit A shall be paid for by Lessee at their
usual and customary value, and any change or addition shall be reduced to
writing and signed in duplicate by both parties. Such change orders shall
be in a form substantially similar to the attached Exhibit C. The parties
acknowledge and agree the specifications attached hereto as part of Exhibit
A include a change order in the amount of Forty-nine Thousand Seven Hundred
Dollars ($49,700.00) which sum shall be paid in full by Lessee, in addition
to any other payments required of Lessee hereunder, upon the commencement
date of this Lease as said date is determined in accordance with Section
Five of this Lease.
C. Construction Delays and Work Stoppages. No delay in the completion of the
construction herein required of Lessor, caused by Government regulations,
inability to procure labor or materials, strikes, acts of God, or other
causes similar or dissimilar beyond the control of Lessor shall be a basis
of a claim of lack of diligence on the part of Lessor.
SECTION THREE
PARKING AREA AND COMMON FACILITIES
A. Maintenance. Lessor, throughout the term of this Lease, shall maintain and
keep the parking area and common facilities of the commercial center in
good order, condition and repair including adequate lighting, painting,
snow removal, drainage, supervision and the like and all costs and expenses
incurred in connection therewith, including, but not limited to, real
estate taxes, special assessments, repairs, garbage storage and garbage
removal expenses, and public liability and property insurance shall be paid
by Lessor when due subject, however, to reimbursement therefor by Lessee
pursuant to Section Four (B) herein below.
B. Use. Lessee and all those having business with it will, in common with the
other tenants and their customers and others having business with them,
have the right to use and enjoy the parking area and common facilities for
their intended purposes, except that no trucks belonging to Lessee, to
suppliers of Lessee, or to delivery agents of Lessee shall be allowed to
park in the parking area for more than one (1) hour at any time without
having first obtained Lessor's prior written consent not to be unreasonably
withheld.
C. Parking Facilities. The parking areas are shown on Exhibit A-1 which is
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<PAGE>
attached hereto. No charges will be made for parking. Lessor reserves the
right to rearrange or reallocate the parking and common facilities so long
as the number of parking spaces shown on Exhibit A-1 is not reduced by more
than one percent (1%).
D. Governing Regulations. Lessee will comply and cause its employees, agents
and invitees to comply with all rules and regulations adopted by Lessor in
connection with the use of the parking area and common facilities, and with
all supplements thereto and amendments thereof which Lessor may hereafter
adopt. All such rules and regulations shall pertain to the safety, care,
use and cleanliness of the parking area and common facilities and the
preservation of good order therein and thereon. No rules or regulations now
in effect or hereafter adopted shall unreasonably interfere with Lessee's
use and enjoyment of the demised premises. All rules and regulations and
supplements thereto and amendments thereof which Lessor may adopt shall be
in writing, and a copy thereof shall be delivered to Lessee.
E. Violation of Regulations. If Lessee shall fail within seventy-two hours
after receipt of written notice of any material violation by Lessee or its
employees or agents of any such rules or regulations to cure such violation
such failure shall constitute a default under this Lease.
SECTION FOUR
RENTAL AND RELATED CHARGES
A. Base Rent. Lessee shall pay Lessor as a fixed annual base rental for each
year during the term of this Lease at 1909 Fox Drive, Champaign, Illinois
61820, or at such place as Lessor may from time to time designate, the
total sum of Two Hundred Fifteen Thousand Two Hundred Twenty Dollars
($215,200.00) payable in twelve (12) equal monthly installments of
Seventeen Thousand Nine Hundred Thirty-five Dollars ($17,935.00) on the
first day of each month during each year of this Lease. Notwithstanding,
the foregoing the first month's rent shall be paid by Lessee upon execution
of this Lease by Lessee.
The parties acknowledge and agree the base rental amount provided for
herein is based upon the specifications and floor plan further detailed on
Exhibit A. In the event the specifications or floor plan should be
modified, the parties acknowledge an equitable adjustment shall be made to
the subject base rental amount.
B. Additional Rent. Lessee shall pay Lessor for its pro rata share of
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<PAGE>
maintenance charges, insurance charges, real estate taxes and all other
expenses in connection with the parking area and common facilities as set
forth hereinabove at Section Three (A) and late charges in accordance with
the terms of this Lease on or before the first business day of each and
every month of this Lease.
C. Monthly Real Estate Tax and Expense Charges. Lessee shall pay Lessor real
estate tax and expense charges, which in the first year of this Lease have
been estimated to be Nineteen Thousand Three Hundred Eighty Dollars
($19,380.00), payable in twelve (12) equal monthly installments of One
Thousand Six Hundred Fifteen Dollars ($1,615.00) simultaneously with the
payment of the base rent so that the aggregate payments due hereunder from
Lessee shall equal Nineteen Thousand Five Hundred Fifty Dollars
($19,550.00) per month for the first year. The amount paid by Lessee for
taxes, maintenance and insurance shall be reconciled annually in accordance
with the provisions of this Section Four (C).
As soon as reasonably feasible after the expiration of each lease year, but
in any event no later than ninety (90) days after said expiration date,
during the term of this Lease, including extensions thereof, Lessor will
furnish to Lessee a statement showing (i) the maintenance charges, real
estate taxes and expenses for the year, and (ii) the amount of additional
rent paid, due or owed by Lessor. If the actual amount due from Lessor is
more than that paid, Lessee shall promptly pay the difference within thirty
(30) days; if said amount is less, Lessor shall pay the overage to Lessee
within thirty (30) days.
SECTION FIVE
TERM
The term of this Lease shall be for a period of approximately eighty-one (81)
months and shall commence upon the date Lessor notifies Lessee that the demised
premises is ready for occupancy. Notwithstanding anything contained herein to
the contrary, it is the intent of Lessor and Lessee that this Lease terminate on
the same date as the termination date of that certain Lease dated January 29,
1996, by and between Lessor and Lessee concerning the real estate commonly known
as 2109 Fox Drive, Champaign, Illinois (hereinafter referred to as the "2109 Fox
Drive Lease"). The termination date of the 2109 Fox Drive Lease is seven (7)
years from the date the improvements currently being constructed upon the 2109
Fox Drive real estate are ready for occupancy which is currently anticipated to
be September 20, 1996. The demised premises shall be ready for occupancy when
all work of construction has been substantially completed as determined by the
architectural firm of Russell A. Dankert & Associates, Champaign, Illinois. The
parties acknowledge that the anticipated date of commencement for this Lease
shall be December 15, 1996, although the actual commencement date shall be
determined as stated herein.
4
<PAGE>
The commencement date of the term of this Lease is _______________________,
1996.
LESSOR: LESSEE:
By:_____________________________ By:__________________________________
Upon actual commencement of the lease term Lessee shall pay base rent and
additional rent for any days of occupancy which are less than a full month, on a
per diem basis, using the base rent and additional rent stated in Section Four
to determine the amount due to Lessor. In the event Lessee shall have faithfully
performed all covenants of this Lease and Lessee has exercised Lessee's right to
renew the 2109 Fox Drive Lease for an additional three (30) year term, Lessor
hereby grants Lessee the right and option to renew this Lease for thirty-six
(36) months, it being the intention of Lessor and Lessee that the renewal term
under this Lease terminate on the same date as the renewal term under the 2109
Fox Drive Lease. In the event Lessee desires to renew and extend this Lease it
shall give Lessor written notice, at least one hundred eight (180) days prior to
the expiration of the initial term, of its intent to renew and extend; provided,
however, that the following terms and conditions shall be applicable to the
additional term.
A. The provisions of this Lease during said extension period shall be the same
as provided in this Lease.
SECTION SIX
[Deleted]
SECTION SEVEN
OCCUPANCY AND ACCEPTANCE OF PREMISES
By entering into and occupying the demised premises Lessee shall be deemed to
5
<PAGE>
acknowledge that the demised premises is in good order and repair, subject to
latent defects, and to punch list items agreed upon by Lessor and Lessee in
writing, and that the demised premises has been constructed substantially in
accordance with the plans and specifications therefor. LESSOR DISCLAIMS ANY
WARRANTIES OF HABITABILITY OR FITNESS FOR A PARTICULAR USE OTHER THAN THAT
STATED IN SECTION EIGHT WITH RESPECT TO THE DEMISED PREMISES.
SECTION EIGHT
USE OF PREMISES
A. Purposes. Lessee shall use the demised premises for the purpose of
conducting thereon and therefrom a computer consulting business, a computer
support business and a data center, and no part of the demised premises
shall be used for any other purpose without the prior written consent of
Lessor.
B. Corporate Name. The name of Lessee's corporation will be CSC Interlicom,
Inc. Lessee will be solely responsible for any costs of changing the name
as it is featured in any signs of the commercial center.
C. No Retail Sales. Lessee shall not conduct any retail sales at the demised
premises.
D. Public Auctions. No sale at auction by Lessee or others shall be made in or
from the demised premises.
E. Maintenance of Premises. Lessee shall at all times maintain the demised
premises in a clean, neat and orderly condition.
F. Compliance with Insurance Coverage. Lessee shall not use the demised
premises or any part thereof, or permit any part of the demised premises to
be used in any manner other than that stated in Section Eight, or permit
any act whatsoever to be done on the demised premises, in a manner that
will violate or make void or inoperative any policy of insurance held by
Lessor or Lessee.
G. Storage of Inflammable Materials. Lessee shall not keep or permit to be
kept at, in or about the demised premises any gasoline, distillate or other
petroleum product, or any other substance or material of an explosive or
inflammable nature, in such quantities as may endanger any part of the
demised premises without the written consent of all insurance companies
carrying fire or rent insurance on all of the commercial center or any part
thereof, or do any act or engage in any conduct which shall cause an
increase in the first insurance rates covering the commercial center over
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<PAGE>
those charges for uses of the type and character permitted to Lessee
under this Lease.
H. Use Impairing Structural Strength or Electrical Capabilities. Lessee shall
not permit the demised premises or any part thereof to be used in any
manner that will impair the structural strength thereof or permit the
installation of any machinery or apparatus the weight or vibration of which
may tend to injure or impair the foundations or structural strength
thereof. Lessee shall not permit the installation of any computer or
electrical machinery or equipment which is beyond the electrical
capabilities of the building as completed according to final construction
specifications and drawings.
I. Garbage Disposal. Lessee shall not burn or incinerate any rubbish, garbage
or debris at, in or about the demised premises, and shall cause all
containers, rubbish, garbage and debris accumulated therein to be stored
within the dumpsters provided by Lessor in the commercial center.
J. Public Regulations. In the conduct of its business in and about the demised
premises Lessee shall observe and comply with all laws, ordinances, and
regulations of public authorities.
SECTION NINE
INSTALLATION AND MAINTENANCE OF FIXTURES
Lessee shall first obtain the written consent of Lessor prior to Lessee's
installation of any trade fixtures, lighting fixtures, floor covering, wall
covering or furnishings which are of a lesser grade or quality than that
presently installed in the demised premises. Any trade fixtures, lighting
fixtures, floor covering, or wall covering or furnishings which Lessee does
install shall be of first quality commensurate in appearance and in keeping with
the demised premises. Lessee, throughout the term of this Lease, shall maintain
the same in good order, condition and repair at its own expense and any cost to
repair damage caused by the installation or removal of same shall be at Lessee's
sole expense.
SECTION TEN
SIGNS, EXTERIOR LIGHTING AND FIXTURES
Lessee may only install and maintain such signs at the demised premises as have
been approved in writing by the Lessor. Lessee may not install signs in its
windows or doors which are visible from the exterior of the demised premises nor
may Lessee maintain more than one (1) exterior sign at the commercial center,
provided, however, Lessee may stencil its corporate name on one (1) exterior
door to the demised premises so long as (i) the stencil is in white lettering;
and (ii) the design of the signage has been pre-approved in writing by Lessor.
Any such signs erected or placed in or on the demised
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premises by Lessee may not, without Lessor's prior written consent, be removed
by Lessee at the expiration of the lease. In the event Lessor approves Lessee's
removal of said sign, all damage caused by the erection, maintenance and removal
of any and all such signs shall be fully repaired at the expense of Lessee.
Lessee acknowledges that the demised premises are part of an integrated and
uniform commercial center and that control of all exterior signs by Lessor is
essential in order to maintain uniformity and aesthetic values in the commercial
center.
Lessor shall select and install the interior window blinds to be used by Lessee
at the demised premises.
Lessee shall not install any lighting, plumbing facilities, shades, awnings or
similar devices or use any advertising medium which may be heard of experienced
outside of the demised premises such as loudspeakers, phonographs or radio
broadcasts without the Lessor's prior written consent. In no event shall Lessee
use any portion of the common facilities for Lessee's exclusive use without the
express prior written consent of Lessor.
SECTION ELEVEN
ALTERATIONS, CHANGES AND ADDITIONS
No material changes, alterations or additions shall be made by Lessee to the
demised premises without the prior written consent of Lessor, which consent will
not be unreasonably withheld, conditioned or delayed, and any such change,
alteration or addition to or on the demised premises made with the aforesaid
written consent of Lessor shall remain for the benefit of and become the
property of Lessor, unless otherwise expressly provided in the written consent.
SECTION TWELVE
DEFECTS; DEFECTIVE CONDITION, WIND; ACTS OF THIRD PERSONS
A. Lessor's Liability. Unless Lessor shall have acted in an intentional or
negligent manner, Lessor shall not be liable to Lessee for any damage or
injury to Lessee or Lessee's property, occasioned by any defect of
plumbing, heating, air cooling, air conditioning equipment and ducts,
electrical wiring or insulation thereof, gas pipes, or steam pipes, or from
broken steps, or from the backing-up of any sewer pipe, or from the
bursting, leaking, or running of any tank, tub, washstand, toilet, or waste
pipe, drain, or any other pipe or tank in, on, or about the demised
premises, or from the escape of steam or hot water from any boiler or
radiator, or for any such damage or injury occasioned by water being on or
coming through the roof, stairs, walks, doors or any other place on or near
the demised premises, or for any such damage or injury done or
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occasioned by the falling of any fixture, plaster, or stucco, or for any
such damage or injury caused by wind or by the act, omission, or negligence
of co-tenants or of other persons, occupants of the same building or of
adjacent buildings or contiguous property.
B. Waiver of Claim Against Lessor. All claims against Lessor for any damage or
injury as provided in paragraph A of this section are hereby expressly
waived by Lessee.
C. Waiver of Right of Recovery. Lessor and Lessee hereby release each other
from any and all liability or responsibility (to the other or anyone
claiming through or under them by way of subrogation or otherwise) for any
loss or damage to the demised premises suffered by or caused by any of the
perils covered by the insurance provided for in Section Seventeen (C) and
(D) of this Lease, notwithstanding the fact that such peril shall have been
caused by the fault or negligence of the other party or anyone for whom
such party may be responsible.
SECTION THIRTEEN
CASUALTY DAMAGE; REPAIR; ABATEMENT OF RENT
A. Use of Partially Damaged Premises. In the event of partial damage or
destruction of the demised premises Lessee shall continue to utilize the
premises for the operation of its business to the extent that it may be
practicable to do so.
B. Right to Terminate on Destruction of Premises Where Damage Exceeds One-half
of Reconstruction Cost. Either party hereto shall have the right to
terminate this Lease if, during the last nine (9) months of the term
hereof, the demised premises are damaged to an extent exceeding one-half of
the reconstruction cost of such restored building as a whole; provided
that, in such an event, such termination of this Lease shall be effected by
written notice to that effect to the other party delivered within thirty
(30) days of the happening of such casualty causing the damage.
C. Repairs by Lessor. If the demised premises shall, either prior to the
beginning of or during the term hereof, be damaged or destroyed by fire or
by any other cause whatsoever beyond Lessee's control, Lessor, except as
hereinafter otherwise provided, shall immediately on receipt of insurance
proceeds paid in connection with such casualty insurance, but in no event
later than ninety (90) days after such damage has occurred, proceed to
repair or rebuild same, including any additions or improvements made by
Lessor or by Lessee with Lessor's consent, on the same plan and design as
existed immediately before such damage or
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destruction occurred, subject to such delays as may be reasonably
attributable to governmental restrictions or failure to obtain materials or
labor, or other causes whether similar or dissimilar, beyond the control of
Lessor. Materials used in repair shall be nearly like original materials as
may be reasonably procured in regular channels of supply. Notwithstanding
the foregoing, all said repairs must be substantially completed within two
hundred seven (270) days from the date of casualty or Lessee has the right
to terminate this Lease. Lessee's right to terminate this Lease shall be
exercised in writing on or before the two hundred seventy-fifth (275th) day
from the date of casualty or it shall automatically be deemed to be waived.
Whenever a strike, act of God or cause, beyond the power of the party
affected to control, causes delay, the period of such delay so caused shall
be added to the period limited in this Lease for the completion of such
work, reconstruction or replacement.
D. Reduction of Rent During Repairs. In the event Lessee continues to conduct
its business during the making of repairs, the fixed minimum monthly rental
will be equitably reduced in the proportion that the unusable part of the
demised premises bears to the whole thereof but no change shall be made in
the method of computing the additional rental and additional charges due
from Lessee under the terms of this Lease.
No rent shall be payable while the demised premises are thirty percent
(30%) or more untenantable pending the repair of casualty damage.
E. Repair or Replacement of Fixtures. Lessee shall be responsible for the
replacement or repairs of its own fixtures in the demised premises which
may be damaged or destroyed by fire or any other cause whatsoever.
SECTION FOURTEEN
REPAIRS GENERALLY
A. By Lessor. Lessor, throughout the term of this Lease, shall maintain and
keep the exterior and structural parts of the building of the demised
premises in good repair at Lessor's initial sole expense subject, however,
to Lessee's reimbursement as is provided hereinabove in Section Four (B).
B. By Lessee. Lessee shall, at its own expense, keep and maintain the
non-structural interior of the demised premises in a clean and sightly
condition during the entire term of this Lease, and shall specifically be
responsible for the maintenance, repair and/or replacement of all building
components. Notwithstanding the foregoing, the parties
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agree Lessee shall have no obligation to replace any mechanical systems,
plumbing, electrical, roof of structural components. Lessee's maintenance
obligation shall include the cost of bi-annual inspections and service,
including all preventative maintenance, of the demised premises' heating,
air-conditioning and ventilating system which shall be performed by (i) the
contractor who originally installed said system; or (ii) such other
contractor who has been pre-approved in writing by Lessor. Upon completion
of said bi-annual inspection and service, Lessee shall provide Lessor with
written proof of Lessee's compliance with the terms of this section. Lessee
is responsible for the replacement and repair of any plate glass and the
providing of janitorial services for the interior of the demised premises.
SECTION FIFTEEN
UTILITIES
Lessee shall pay before delinquency all charges for water, gas, heat,
electricity, power, telephone service and other similar charges incurred by
Lessee with respect to and during its occupancy of the demised premises.
SECTION SIXTEEN
TAXES
Lessee shall pay before delinquency all taxes levied or assessed on Lessee's
fixtures, equipment and personal property in and on the demised premises,
whether or not affixed to the real property.
If at any time after any tax or assessment has become due or payable, Lessor or
its legal representative neglects to pay such tax or assessment, Lessor shall be
entitled to pay the same at any time thereafter and such amount so paid by
Lessor shall be deemed to be additional rent for the leased premises, due and
payable by Lessee.
Lessor shall initially pay all general real estate taxes and special assessments
levied and/or assessed against the lot and building in which the demised
premises is situated, the parking areas and landscaped areas associated with
that building and the entire commercial center during the term of this Lease,
subject, however, to Lessee's reimbursement of said charges as is provided in
Section Four of this Lease.
SECTION SEVENTEEN
INSURANCE
A. Insurance Companies. All policies of insurance to be kept and maintained in
force by the respective parties hereto shall be obtained from good and
solvent insurance companies reasonably satisfactory to Lessor with Lessor
named as an additional insured party under the liability insurance. Lessee
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shall annually provide Lessor, on the anniversary date of this Lease, with
a certificate naming Lessor as said additional insured party.
B. Lessee to Obtain Liability Insurance. Lessee shall, at its own expense, at
all times during the term of this Lease, maintain in force a policy or
policies of insurance, written by one or more responsible insurance
carriers which will insure Lessor and Lessee against liability for injury
to or death of persons or loss of damage to property occurring in or about
the demised premises. The liability under such insurance shall not be less
than One Million Dollars ($1,000,000) for any one person killed or injured,
One Million Dollars ($1,000,000) for any one accident, and Five Hundred
Thousand Dollars ($500,000) property damage.
C. Lessee to Obtain Fire Insurance on Its Fixtures and Equipment. Lessee shall
maintain in force, at all times, during the term of this Lease, on all of
its fixtures and equipment in the demised premises, such policies as it
deems adequate for the repair and replacement thereof.
D. Lessor to Obtain Fire Insurance on Premises. Lessor shall maintain in force
and shall pay for, at all times during the term of this Lease, policies of
casualty insurance in such amounts as shall be determined solely by Lessor.
E. Lessee's Waiver of Lessor's Casualty Insurance Proceeds. In the event the
demised premises shall be damaged or destroyed by fire, or other casualty
so insured against, Lessee shall claim no interest in any insurance
settlement arising out of any such loss and shall execute any and all
documents required by Lessor or the insurance company or companies that may
be necessary for use in connection with settlement of any such loss by
Lessor.
SECTION EIGHTEEN
TRANSFER OR PLEDGE OF LEASEHOLD INTEREST
Lessee shall not assign this Lease or any interest therein, or sublet the
demised premises or any part thereof, or license the use of any portion of the
demised premises or business conducted thereon or therein, or encumber or
hypothecate this Lease, without first obtaining the written consent of Lessor,
which consent will not be unreasonably withheld, conditioned or delayed. Any
assignment, subletting, licensing, encumbering or hypothecating of this Lease
without such prior written consent shall, at the option of Lessor, immediately
terminate this Lease. Notwithstanding the foregoing, the parties agree (i)
Lessee may assign this Lease or sublet the demised premises to any affiliate of
Lessee which has substantially common ownership as Lessee ("Affiliate") without
Lessor's written consent; and (ii) in the event Lessee assigns this Lease or
sublets the
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demised premises to an Affiliate any profit derived by Lessee from said
assignment or sublet shall inure to the benefit of Lessee.
SECTION NINETEEN
SURRENDER OF PREMISES
Lessee shall, at the termination of this Lease, vacate the demised premises in
as good condition as it was at the time of entry thereon by Lessee, except for
reasonable use and wear thereof, acts of God, or damage by casualty beyond the
control of Lessee, and on vacating shall leave the demised premises free and
clear of all rubbish and debris.
SECTION TWENTY
INDEMNIFICATION OF LESSOR
A. Liens and Encumbrances. Lessor and Lessee respectively (respectively, the
"Indemnifying Party") shall indemnify the other and the premises herein
demised and all improvements placed thereon against all claims, liens,
claims of lien, demands, charges, encumbrances or litigation arising
directly or indirectly out of or by reason of any work or activity of the
Indemnifying Party on the demised premises, and shall forthwith and within
fifteen (15) days after the filing of any lien for record fully pay and
satisfy the same, and shall reimburse the other party for all loss, damage
and expense, including reasonable attorneys' fees, which it may suffer or
be put to by reason of any such claims of lien, demands, charges,
encumbrances or litigation.
In the event the Indemnifying Party shall fail to pay and fully discharge
any claim, lien, claims of lien, demand, charge, encumbrance or litigation,
or should proceedings be instituted for the foreclosure of any lien or
encumbrance, the other party shall have the right, at its option, at any
time after the expiration of such fifteen (15) day period, to pay the same
or any portion thereof, with or without the costs and expenses claimed by
such claimant, and in making such payment the other party shall be the sole
judge of the legality thereof. All amounts so paid by the other party shall
be repaid by the Indemnifying Party to the other party on demand, together
with interest thereon at the rate of eighteen percent (18%) per annum, from
the date of payment by the other party until repayment is fully made.
B. Personal Injuries, Violation of Law. Excluding intentional or negligent
acts of Lessor, Lessee shall indemnify Lessor and its members against any
cost, liability or expense arising out of any claims of any person or
persons whatsoever by reason of the use or misuse of the demised premises,
parking area or common facilities by Lessor or any person or persons
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holding under Lessee, and shall indemnify Lessor against any penalty,
damage or charge incurred or imposed by reason of any violation of law or
ordinance by Lessee or any person or persons holding under Lessee, against
any costs, damage or expense arising out of the death of or injury to any
person or persons holding under Lessee, against any costs, damage or
expense arising out of the death or injury to any person or persons holding
under Lessee.
SECTION TWENTY-ONE
SUBORDINATION OF LEASE
Upon receipt of a reasonably acceptable non-disturbance agreement, Lessee shall
execute any instrument permitting mortgages or deeds of trust to be placed on
the lot and building in which the demised premises is located or any part
thereof as security for any indebtedness, and subordinate this Lease to such
mortgages or trust deeds, if required to do so by the secured party.
Lessee shall have the right to make payment of any defaults under any mortgage,
trust deeds or liens of record on the demised premises, and to receive
reimbursement for such payment by deduction and credit from and against rentals
becoming due hereunder.
SECTION TWENTY-TWO
ESTOPPEL CERTIFICATE
Lessee agrees to at any time and from time to time, within twenty (20) days
after Lessee's receipt of Lessor's written request, to execute, acknowledge and
deliver without charge to Lessor a written instrument, certifying the
commencement date of the term of this Lease, that Lessee has accepted possession
of the demised premises and is open for business, that this Lease is unmodified
and in full force and effect (or if there have been modifications, that it is in
full force and effect as modified and stating the modifications), the dates to
which base rent, additional rent and other charges have been paid in advance, if
any, and stating whether or not to the best knowledge of the signer of such
certificate, Lessor is in default in the performance of any covenant, agreement
or condition contained in this Lease and, if so, specifying each such default of
which the signer may or should have knowledge, and certifying such other matters
as may be reasonably requested by Lessor ("Estoppel Certificate").
Lessee's failure to deliver an Estoppel Certificate to Lessor within twenty (20)
days after Lessor's written request therefor, shall, at the option of Lessor, be
conclusive upon Lessee that (i) this Lease is in full force and effect without
modification except as may be represented by Lessor; (ii) that there are no
uncured defaults in Lessor's performance; and (iii) that no more than one (1)
month's rent has been paid in advance.
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SECTION TWENTY-THREE
LESSOR'S RIGHT OF INSPECTION
Upon notice, except in the case of emergencies, Lessor shall have access to the
demised premises, and each part thereof, during Lessee's regular business hours
and at any time thereafter for the purpose of inspecting the same, making
repairs and posting notices which Lessor may deem to be for the protection of
Lessor or the demised property.
SECTION TWENTY-FOUR
DEFAULT AND LATE CHARGES
A. Lessor's Right to Repossess, Operate or Relet. If the rental reserved by
this Lease or other charges to be paid hereunder by Lessee, or any part
thereof, are not paid when due and shall remain unpaid for a period of ten
(10) days after notice thereof in writing, or if Lessee shall fail to
promptly perform any other covenant, condition, or provision by it to be
performed hereunder and such failure shall continue for a period of ten
(10) days after receipt of notice in writing specifying the nature of such
failure, or if Lessee abandons the demised premises and ceases to pay rent,
then, and in any such event, Lessee shall be deemed to be in default and
Lessor, without further notice, may at its option re-enter and take
possession of the demised premises, including all improvements thereon and
fixtures and equipment owned or leased by Lessee and located at, in or
about the same, and take, operate or relet the same in whole or in part for
the account of Lessee at such rental and on such agreement and conditions
and to such tenant or tenants as Lessor in good faith may deem proper for a
term not exceeding the unexpired period of the full term of this Lease.
lessor shall receive all proceeds and rent accruing from such operation or
reletting of the demised premises or fixtures and equipment and shall apply
the same first to the payment of all costs and expenses incurred by Lessor
in obtaining possession and in the operation of reletting of the demised
premises or fixture and equipment, including reasonable attorneys' fees,
commissions, and collection fees, and any alterations or repairs reasonably
necessary to enable Lessor to operate or relet the demised premises or
fixtures and equipment and to the payment of all such amounts as may be due
or become payable under the provisions of this Lease, and the balance
remaining, if any, at the expiration of the full term of this Lease or on
the sooner termination thereof by written notice of termination given by
Lessor to Lessee shall be paid over to Lessee. Upon three (3) days' notice
to Lessee, Lessor may dispose of any personal property of Lessee located at
the demised premises at the time of any default without incurring any
liability for such a disposition. Notwithstanding anything contained herein
to the contrary, it is understood and agreed that in the event Lessee's
default hereunder cannot be completely cured within said ten (10) day
period but Lessee has diligently
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commenced curing the subject default, Lessee may with reasonable diligence
and in good faith proceed to remedy or cure the subject default.
B. Late Charges. If the rental reserved by this Lease or other charges to be
paid hereunder by Lessee, or any part thereof, are not paid when due, late
charges in the amount of five percent (5%) of the basic monthly rent shall
be due on the fifth (5th) day after written notice is received by Lessee
for each ten (10) day period, commencing the first day of the applicable
month, that the rental or other charges, or any part thereof, remain
unpaid.
C. Repossession of Reletting Not a Termination, Lessor's Right to Terminate
Not Forfeited. No re-entry, repossession, operation or reletting of the
demised premises or of fixtures and equipment shall be construed as an
election by Lessor to terminate this Lease unless a written notice of such
intention is given by Lessor to Lessee, and notwithstanding any such
operation or reletting without terminating this Lease, Lessor may at any
time thereafter elect to terminate this Lease in the event at such time
Lessee remains at default hereunder.
D. Lessee's Obligation to Pay Deficiencies. In the event the proceeds or
rentals received by Lessor under the provisions of this section are in
sufficient to pay all costs and expenses and all amounts due and becoming
due hereunder, Lessee shall pay to Lessor on demand such deficiency as may
from time to time occur or exist.
E. Lessor's Right to Perform Lessee's Duties at Lessee's Cost. Notwithstanding
any provision as to notice contained in this Lease, if in the judgment of
Lessor the continuance of any material default by Lessee, other than for
the payment of money, for the full period of the notice otherwise provided
for will jeopardize the premises or the rights of Lessor, Lessor may,
without notice, elect to perform those acts in respect of which Lessee is
in material default, at the expense of Lessee, and Lessee shall thereupon
reimburse Lessor, with interest at the rate of eighteen percent (18%) per
annum, on five (5) days notice by Lessor to Lessee.
F. Lessor's Right to Terminate Lease. In the event of Lessee's material
default as stated herein, Lessor may, at its opinion, on five (5) days
notice, terminate this Lease and any and all interest of Lessee hereunder,
and may thereupon immediately re-enter and take possession of the demised
premises.
G. Lessor's Right on Termination to Recover Amount Equal to Rent Reserved. If
this Lease is terminated by Lessor by reason of any material default by
Lessee, Lessor shall be entitled to recover from Lessee, at the time of
such termination, the excess, if any, of the amount of rent reserved in
this Lease for the balance
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of the term thereof over the then reasonable rental value of the premises
for the same period. It is agreed that the "reasonable rental value" shall
be the amount of rental which Lessor can obtain as rent for the remaining
balance of the term.
H. Lessor's and Lessee's Remedies Cumulative. Each and all of the remedies
given to Lessor and Lessee in this Lease or by law shall be cumulative, and
the exercise of one right or remedy by either party shall not impair that
party's right to exercise any other right or remedy it may possess.
I. Lessee's Waiver of Claims Against Lessor. Lessee hereby waives all claim or
demand for damages that may be caused by Lessor in lawfully and rightfully
re-entering and taking possession of the demised premises as hereinabove
provided, and all claim or demand for damages which may result from the
destruction of or damage to the demised premises and all claim or demand
for damages or loss of property belonging to Lessee as may be in or on the
premises at the time of such re-entry, assuming Lessor has used reasonable
care when re-entering and taking possession of the demised premises.
J. Limitation of Notice Period by Governmental Order. Notwithstanding any
provision as to notice in this section, if Lessee is required to comply
with any governmental regulation or order within a period less than that to
which Lessee would otherwise be entitled to notice, Lessee shall not be
entitled to notice beyond the period within which such compliance may be
required by such regulation or order.
SECTION TWENTY-FIVE
EXPENSES OF ENFORCEMENT
Should Lessor or Lessee incur any expenses in enforcing any provision of this
Lease the defaulting party shall pay to the non-defaulting party all expenses so
incurred, including reasonable attorneys' fees and court costs.
SECTION TWENTY-SIX
EFFECT OF BANKRUPTCY
If at any time during the term of this Lease there shall be filed by or against
Lessee in any court, pursuant to any statute either of the United States or any
state, petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Lessee's property,
or if Lessee makes an assignment for the benefit of creditors, Lessee shall have
breached this Lease, and this Lease, at the option of Lessor exercised after
expiration of the period provided below, may be cancelled and terminated,
provided such petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee shall continue for a
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period of ten (10) days. In such event neither Lessee, nor any person claiming
through or under Lessee by virtue of any statute or of any court, shall be
entitled to possession or to remain in possession of the demised premises, but
shall forthwith quit and surrender the premises.
SECTION TWENTY-SEVEN
EMINENT DOMAIN
A. Over Certain Percentage Taken. In the event twenty-five percent (25%) or
more of the area of the demised premises shall be taken for a public or
quasi-public use this Lease shall terminate as of the date of the actual
physical taking, and the parties shall thereupon be released from any and
all further liability hereunder.
B. Less Than a Certain Percentage Taken. In the event of a partial taking of
less than twenty-five (25%) of the area of the demised premises, Lessor
shall, with reasonable diligence, proceed at its own expense to reconstruct
or repair the demised premises and place the same in a tenantable condition
within ninety (90) days after the date of the actual physical taking,
provided, however, that if fifty percent (50%) or more of the area of the
commercial center as a whole is taken, Lessor alternatively may elect to
terminate this Lease notwithstanding that less than twenty-five percent
(25%) of the area of the demised premises were taken. In the event of such
termination the parties hereto shall be released from any and all further
liability under this Lease.
C. Abatement of Rent. During any reconstruction or repairing as hereinabove
provided, Lessee shall be required to pay only that proportion of the fixed
minimum monthly rental herein reserved as the area of the demised premises
remaining in a tenantable condition during such reconstruction or repairing
bears to the entire area herein leased. On completion of such
reconstruction or repairing, the fixed minimum monthly rental herein
reserved shall be adjusted in the proportion that the reconstructed demised
premises bear to the original demised premises, and thereafter Lessee shall
be required to pay such adjusted fixed minimum monthly rental in accordance
with the provisions of this Lease.
There shall be no abatement of any rental due until such time as there
shall be an actual physical possession of that portion of the demised
premises taken, and in no event shall there be any change made in the
method of computing the percentage rental, and there shall be no reduction
of percentage rental.
D. Right to Condemnation Award. Any award made in any condemnation proceeding
for the taking of any part or all of the demised premises shall be the sole
property of and be paid to Lessor.
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SECTION TWENTY-EIGHT
QUITE ENJOYMENT
Lessor hereby covenants and warrants that, subject to any trust deeds or
mortgages now of record or hereafter on record, it is the owner of the demised
premises and that Lessee, on payment of rents herein provided for and
performance of the provisions hereof on its part to be performed, shall and may
peacefully possess and enjoy the demised premises during the term hereof without
any interruption or disturbance.
SECTION TWENTY-NINE
WAIVER OF BREACH
No waiver of any breach or breaches of any provision of this Lease shall be
construed to be a waiver of any preceding or succeeding breach of such
provisions or of any other provisions hereof.
SECTION THIRTY
TIME OF THE ESSENCE
Time is of the essence of each and every provision hereof.
SECTION THIRTY-ONE
HEADINGS FOR CONVENIENCE ONLY
The heading used herein are for convenience and shall not be resorted to for
purposes of interpretation or construction hereof.
SECTION THIRTY-TWO
PRONOUNS
Feminine or neuter pronouns shall be substituted for those of masculine form or
vice versa, and the plural shall be substituted for the singular number or vice
versa in any place or places in which the context may require such substitution
or substitutions.
SECTION THIRTY-THREE
AMENDMENTS TO BE IN WRITING
This Lease may be modified or amended only by a writing duly authorized and
executed by both Lessor and Lessee. It may not be amended or modified by oral
agreements or understandings between the parties unless the same shall be
reduced to writing duly authorized and executed by both Lessor and Lessee.
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SECTION THIRTY-FOUR
PARTIES BOUND
Each and every provision of this Lease shall bind and shall inure to the benefit
of the parties hereto and their legal representatives. The term "legal
representatives" is used in this Lease in its broadest possible meaning and
includes, in addition to executors and administrators, every person,
partnership, corporation or association succeeding to the interest or to any
part of the interest in or to this Lease or in or to the leased premises, of
either Lessor or Lessee herein, whether such succession results from the act of
a party in interest, occurs by operation of law or is the effect of the
operation of law together with the act of such party. Each and every agreement
and condition of this Lease by Lessee to be performed shall be binding on all
assignees, subtenants, concessionaires, and/or licenses of Lessee; provided
however, that this provisions shall not be deemed to supersede the restrictions
on assignment, subletting or licensing imposed by Section Eighteen entitled
"Transfer or Pledge of Leasehold Interest."
SECTION THIRTY-FIVE
HOLDING OVER
No holding over and continuation of any business by Lessee after the expiration
of the term hereof shall be considered to be a renewal or extension of this
Lease unless written approval of such holding over and a definite agreement to
such effect is signed by lessor defining the length of such additional term. Any
holding over without the consent of Lessor shall be considered to be a
day-to-day tenancy at a rental of one hundred fifty percent (150%) of the fixed
minimum monthly rental provided herein, computed on the basis of a thirty (30)
day month.
SECTION THIRTY-SIX
NOTICES
All notices or demands of any kind which Lessor may be required or may desire to
serve on Lessee under the terms of this Lease shall be served on Lessee by
mailing a copy thereof by registered or certified mail, postage prepaid,
addressed to Lessee at: Suite 1000, 6707 Democracy Boulevard, Bethesda, Maryland
20817, Attention: General Counsel, or at such other address or addresses as may
from time to time be designated by lessee in writing to Lessor. Service may be
deemed complete upon receipt. All notices and demands from Lessee to Lessor may
be similarly served on Lessor at 1909 Fox Drive, Champaign, Illinois 61820, or
at such other address as Lessor may in writing designate to Lessee.
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SECTION THIRTY-SEVEN
STRICT CONSTRUCTION
The language used in this Lease shall be deemed to be the language approved by
all parties to this Lease to express their mutual intent, and no rule of strict
construction shall be applied against any party.
SECTION THIRTY-EIGHT
DELAY IN LEASE COMMENCEMENT
In the event the commencement date of this Lease, as determined in accordance
with the provisions of Section Five of this Lease, is after January 31, 1997,
Lessor agrees to credit Lessee against Lessee's future payment of base rent
hereunder the sum of Five Hundred Eighty-Six and 11/100 Dollars ($586.11) per
day for each day the actual commencement date of this Lease is delayed after
said January 31, 1997, date.
SECTION THIRTY-NINE
EXPANSION OPTION
[Deleted]
SECTION FORTY
COMMISSION
Lessor and Lessee each warrant to the other that no real estate broker or agent
has been used or consulted in connection with this Lease.
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SECTION FORTY-ONE
CONSENTS
At any time Lessor's or Lessee's approval hereunder is required, such approval
shall not be unreasonably withheld, conditioned or delayed.
SECTION FORTY-TWO
HAZARDOUS MATERIALS
A. During the term of the lease, Lessor and Lessee shall fully comply with any
laws or rules and regulations promulgated thereunder relating to the
demised premises, including, but not limited to, Occupational Safety and
Health Act, 29 U.S.C. Sections 651, et seq.; the Toxic Substances Control
Act, 15 U.S.C. Sections 2601, et seq.; the Resources Conservation and
Recovery Act, 42 U.S.C. Sections 9601, et seq.; the National Environmental
Policy Act, 42 U.S.C. Sections 4231, et seq.; the Refuse Act, 33 U.S.C.
Sections 407, et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections
300(f), et seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Sections 11001, et seq.; or any federal, state or local law,
ordinance and/or regulation promulgated under each of those statutes and
any amendments thereto, as well as applicable Department of Transportation
regulations relating to environmental matters (collectively "Environmental
Laws"). Lessee shall notify Lessor immediately if Lessee receives any
notice of non-compliance with any law or rules and regulations promulgated
thereunder, including, but not limited to, those enumerated above. Lessor
shall notify Lessee immediately if Lessor receives any notice of
non-compliance with any laws or rules and regulations promulgated
thereunder, including, but not limited to, those enumerated above.
Lessee shall not cause or permit Lessee's business in the demised premises
to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process hazardous substances, or
other dangerous or toxic substances, or solid waste, except in compliance
with all applicable federal, state and local laws or regulations. Lessor
and Lessee shall each notify the other immediately if either learns of any
non-compliance or of any facts (such as the existence of any release or
threat of release of hazardous substances at, on, from or beneath the
surface of the demised premises) which could rise to a claim of
non-compliance with such laws or rules and regulations promulgated
thereunder.
B. During the term of the lease, Lessee shall obtain, shall fully comply with,
and shall maintain in full force and effect all governmental licenses,
permits, registrations and approvals (federal, state, local, county
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and foreign) necessary to conduct its business including, but not limited
to, those required by the statutes enumerated above in paragraph A.
Lessee warrants and represents that if during the term of the lease any
violations are recorded or any notices are received with respect to any of
such licenses, permits, registrations and approvals or if a proceeding is
commenced or threatened to revoke or limit any of them, Lessee shall notify
Lessor immediately.
C. Lessor is, to the best of its knowledge, as of the date of the execution of
this Lease, not aware of the presence of any materials on the demised
premises which may require remedial action under any applicable
Environmental Laws or may pose a threat to human health or the environment.
Lessor shall protect, defend, indemnify and hold harmless Lessee from and
against any and all liability, lawsuits, claims, actions, causes of action,
proceedings, demands, costs, penalties, fines and expenses, including
without limitation reasonable attorney fees, consultant's fees and clean-up
costs, resulting from the generation, storage, treatment, handling,
transportation, disposal or release, of any materials on the demised
premises caused by Lessor, its agents, employees, officers, or directors
acts or omissions in violation of any applicable Environmental Laws. The
obligations of this paragraph shall survive the expiration or termination
of this Lease.
Lessee shall protect, defend, indemnify and hold harmless Lessor from and
against any and all liability, law suits, claims, actions, causes of
action, proceedings, demands, costs, penalties, fines and expenses,
including without limitation reasonable attorney fees, consultant's fees,
and clean-up costs, resulting from the generation, storage, treatment,
handling, transportation, disposal or release of any materials on the
demised premises caused by Lessee, its agents, employees, officers, or
directors acts or omissions in violation of any applicable Environmental
Laws. The obligations of this paragraph shall survive the expiration or
termination of this Lease.
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IN WITNESS WHEREOF, the parties have executed this Lease at Champaign, Illinois,
the day and year first above written.
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C. CSC INTELICOM, INC.
An Illinois Limited Liability Company A Delaware Corporation
By: FOX DEVELOPMENT CORPORATION
An Illinois Corporation
Is Managing member
By: /s/ Melinda J. Parker By: /s/ Donald G. DeBuck
---------------------------- ----------------------------
MELINDA J. PARKER DONALD G. DEBUCK
Its President Its Vice President
Finance and Administration
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OUTLINE
BUILDING SPECIFICATIONS
for
PAR 3 DEVELOPMENT, L.L.C.
for
CSC INTELICOM
CHAMPAIGN, ILLINOIS
AUGUST 19, 1996
REVISED AUGUST 29, 1996
1. GENERAL
1.1 Summary of Work
1.1.1 The Scope of Work anticipated includes design and
construction of a building as described within this Project
Description, and to be located on Lot #7, Par 3 property,
2101 Fox Drive, Champaign, Illinois.
1.1.2 The building will comprise approximately 20,400 sq. ft.
1.2 Building Features
1.2.1 The building will be one story, with structural steel framed
roof and brick veneer masonry exterior bearing walls.
1.2.2 The building will feature ribbon windows on the exterior.
1.3 Drawings & Specifications
1.3.1 Complete "Working Drawings and Specifications" will be
prepared from the preliminary design documents and will be
furnished to the Owner.
1.3.2 The Working drawings and specifications will be prepared in
accordance with our best knowledge and interpretation of the
codes and regulations of all governing bodies. Working
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drawings will bear the seal of Licensed Architects and
Engineers of the State of Illinois.
1.4 Design
1.4.1 Preliminary engineering for foundation, concrete slabs and
exterior pavement work is based on an assumed soil bearing
capacity of 2000 PSF.
1.4.2 All structural design shall be in accordance with BOCA Code
requirements unless noted otherwise.
1.4.3 All concrete work is to be completed in accordance with the
applicable standards of the American Concrete Institute
(ACI).
1.4.4 Structural steel beams, columns, and lintels will be
designed in accordance with the Steel Construction Manual of
the American Institute of Steel Construction specifications
for the design of hot-formed structural members.
1.4.5 The bar joist framing will be designed in accordance with
the requirements and guidelines of the Steel Joint
Institute.
1.4.6 Asphalt work is to conform to applicable requirements as
established by the Illinois Department of Transportation
(IDOT).
1.5 Definitions and terms
1.5.1 Where the word "Owner" appears it shall mean Par 3
Development, L.L.C.
1.5.2 Where the work "Architect" appears, it shall mean Russell A.
Dankert & Associates.
1.5.3 Where the work "Contractor" appears it shall mean Dodds
Company and/or an associate subcontractor.
2. SITEWORK
2.1 Earthwork
2.1.1 All trees, stumps, and brush that interfere with
construction are to be removed and properly disposed of
off-site. Selected trees are to tagged and protected in
accordance with Client and Contractor directives prior to
commencement of site clearing
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operation.
2.1.2 Topsoil which is stripped to accommodate new construction
will be retained on site for use in landscaping or for
construction of earth berms.
2.1.3 All debris will be removed from site and properly disposed
of.
2.1.4 Site areas which are to be occupied by the building or
surface improvements will be rough and fine graded as
necessary to meet engineered elevations and grades and to
provide for proper drainage.
2.1.5 All cutting, filling and rough grading is to be completed to
proper subgrade elevations for finish floor, pavement and
landscaped areas.
2.1.6 The site is anticipated to consist of suitable soils that
permit the site to be cut, filled and balanced without a
need to import additional fill. Should additional costs be
incurred, they shall not be borne by tenant.
2.1.7 Site areas which are to be occupied by the new building or
pavement will be proof-rolled to compact the existing
sub-base to 95% maximum density.
2.1.8 A minimum of 2" compacted granular material will be provided
under all concrete slabs on grade and will consist of
approved material as excavated from sources on-site or
obtained from approved off-site sources.
2.1.9 Fill material will be compacted to 95% maximum density.
2.1.10 (1) masonry dumpster enclosure.
2.2 Storm Drainage
2.2.1 Storm water runoff from the roof will be received by
perimeter gutters and downspouts and/or internal roof sumps.
All downspouts will be connected to the site storm drainage
system.
2.2.2 Paved and landscaped areas will be contoured and sloped to
permit an engineered rate of storm water runoff.
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2.3 Sanitary Sewer
2.3.1 A sanitary sewer system will be completed to accommodate the
domestic plumbing needs of the facility.
2.3.2 Sanitary drainage piping will be extended from the building
to the public sanitary sewer.
2.3.3 Sanitary sewer piping inside of the building shall be PVC
and/or cast iron.
2.3.4 The proposal provides a 4" sanitary entering the building
underground near the office toilet room area. It assumes
underground sanitary capacity is available for the sewer
system. Should additional costs be incurred, they shall not
be borne by tenant.
2.4 Water main
2.4.1 Water main work will be completed to satisfy the domestic,
process and fire protection related needs of the facility.
2.4.2 A water main is to be extended on site and into the building
from an existing municipal main.
2.5 Natural Gas
2.5.1 Service is anticipated to be extended from an existing lead.
Should additional costs be incurred, they shall not be borne
by tenant.
2.6 Electrical/Telephone Cable Service
2.6.1 The building electrical service will be 800 A/120-208v/3ph,
fed underground from a utility transformer at the corner of
the site.
2.6.2 While it is understood that CSC Intelicom has elected an
alternative communication service, the incoming telephone
service to the building, the cost of which shall be borne by
the landlord, is to be (2)4" PVC underground conduits with
pullstring.
2.6.3 Building electrical service to be secondary, metered by the
utility company.
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2.6.4 Cable television shall be provided through 1" conduit to
property line.
2.7 Site concrete
2.7.1 Site concrete will consist of those items shown on the
drawings and as depicted here.
2.7.2 Sidewalk(s) will be provided as indicated on the drawings
and will be 4" thick.
2.7.3 All sidewalks abutting pacing will have a 5" raised face.
2.7.4 The concrete mix will be designed to accomplish a strength
of 3500 PSI at a 28 day test and will include air
entrainment.
2.7.5 Drive approach area(s) will be completed as shown and will
be constructed in accordance with the requirements of the
governing agencies having jurisdiction.
2.7.6 All exterior flat slabs will be steel troweled and then
finished with a broom finish.
2.8 Asphalt Paving and Concrete Drives
2.8.1 Asphalt paving for on-site traffic and parking areas will be
provided as shown on the drawings.
2.8.2 Car parking areas and drive will consist of 3" asphalt
wearing surface on an 8" thick compacted stone.
2.8.3 Parking areas will be completed with painted striping as
shown.
2.8.4 No asphalt curbs or car bumpers are included.
2.9 Landscaping
2.9.1 Landscaping work is included as an allowance of $35,000.
3. CONCRETE
3.1 Foundations
3.1.1 Reinforced concrete foundation work will be completed in
accordance with all applicable codes and will accommodate
all
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building live and dead loads.
3.1.2 Soil bearing pressure at 3'-6" below finish grade is assumed
to be of 2000 psf. Should additional costs be incurred, they
shall not be borne by tenant.
3.1.3 Soil is anticipated to be of sufficient cohesiveness to
permit soil forming where appropriate. Should additional
costs be incurred, they shall not be borne by tenant.
3.1.4 Concrete strength will be 3000 PSI per drawings at 28 days.
3.2 Interior Flatwork
3.2.1 Interior flatwork is included for the completion of all
concrete slabs on grade and supported slabs.
3.2.2 The Office Area floor slab on grade will be 4" thick and
reinforced with one (1) layer of 6 x 6 1.4/1.4 EWWM.
3.2.3 Concrete strength to be 3000 PSI per drawings at 28 days.
3.2.4 Control joints will be provided as required by American
Concrete Institute requirements.
3.2.5 Perimeter insulation consisting of 2" thick x 24" wide rigid
board insulation will be laid flat below floor slabs at all
exterior walls.
4 MASONRY
4.1 Exterior Masonry
4.1.1 The exterior masonry is to be constructed of 4" thick face
brick over required concrete block back-up.
5 METALS
5.1 Structural Steel
5.1.1 The structural framing system will consist of suitably sized
beams, columns, bar joists and metal deck to accommodate the
loading as previously noted.
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5.2 Miscellaneous Metals
5.2.1 Miscellaneous metal items are to be provided where
necessary, including roof screens.
6 WOOD LAMINATES
6.1 Rough Carpentry and Wood Doors
6.1.1 Pressure treated wood nailers and blocking materials are to
be installed for the membrane roof areas.
6.2 Millwork and Laminates
6.2.1 Cabinets, shelving millwork and laminates are to be provided
where shown on the drawings or finish schedule, and as
described herein., wood doors, etc. will be installed as
scheduled.
7 THERMAL AND MOISTURE PROJECTION
7.1 Roofing
7.1.1 The roofing system will be single-ply membrane roof
ballasted as installed over rigid insulation
7.1.2 A standard sheet membrane similar or equal to that as
manufactured by Goodyear or Firestone or equal - .45 mm
thickness.
7.1.3 Roof insulation will be provided as required for an R value
of 20 using one layer insulation. One layer of insulation
produces an R value of 20.
7.1.4 All required cants, saddles, flashings, copings and trims
will be provided.
7.1.5 Roof area walk pads are not included.
7.1.6 The roof system will include a manufacturer's and roofing
contractor's 10-year written warranty.
8 DOORS WINDOWS AND GLASS
8.1 Hollow Metal
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8.1.1 Hollow metal doors and frames will be provided in all
masonry walls.
8.1.2 All frames will be fabricated of 16 gauge, steel welded
jambs and head pieces.
8.1.3 All steel doors will be of a 3'-0" x 1 3/4" thick unless
noted otherwise and are to be constructed of 18 gauge steel.
8.1.4 All doors are to be complete with hardware sets appropriate
for the use of each door as required.
8.1.5 All exterior doors will be insulated with thresholds and
weatherstripping.
8.1.6 Interior office area doors will be 3'-0" x 7'-0" x 1 3/4"
thick, solid core, with factory pre-finished
stained/varnished finish.
8.1.7 All wood doors are to be installed in hollow metal door
frames.
8.1.8 All doors with the exception of those on coat closets,
restrooms, interior lobby doors, the break room and the
copy/fax room shall be locksets, lever type.
8.1.9 Entrance doors and frames shall be dark bronze anodized
aluminum Glazing of entries shall be safety glazing where
required by Code. All non-operable exterior glazing shall be
insulated type, tinted. Closers shall be ADA standard.
8.1.10 Exterior windows shall be dark bronze anodized aluminum
thermally broken frames, with 1" thick insulated glass,
tinted.
8.2 Finish Hardware
8.2.1 Finish hardware is included for hollow metal and wood doors,
"D" series.
9 FINISHES
9.1 Drywall
9.1.1 Interior partitions throughout shall be constructed of metal
studs, at 24" max. o.c., with 5/8" gypsum wallboard each
side, full height of walls.
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9.1.2 Where indicated and adjacent to toilet rooms, offices and
conference rooms, walls will be sound insulated with R-11
sound batts.
9.2 Ceilings.
9.2.1 Acoustic ceilings shall be 24" x 48" acoustic tile, (Second
Look type) in standard inverted "T" white grid. Ceiling
height will be approximately 9'-0" throughout.
9.3 Resilient Flooring
9.3.1 Where scheduled for toilet rooms, break and equipment rooms,
floors will receive 1/8" thick commercial grade vinyl
composition floor tile.
9.3.2 All areas to be finished receive 4" high vinyl base at
walls.
9.4 Carpet and Floor Covering
9.4.1 Carpeted areas as scheduled shall receive:
A. Carpet I, private offices, will receive cut pile 42 oz.
carpet. J & J Industries Colours Supreme 3838-030
direct glue with top set vinyl vinyl base.
Approximately 423 sq. yds
B. Carpet II: At perimeter of reception and large
conference room. J & J Industries Exclusively Borders
2990-5617, approximately 35 sq. yds.
C. Carpet III: At center portions of reception and large
conference room, all areas of small conference rooms,
open office/work areas, etc., will receive J & J
Industries Panorama 2730-5639 direct glue with top set
vinyl base. Approximately 1,600 sq. yds.
9.4.2 Ceramic tile: All restrooms shall receive 1"x1" unglazed
tile by Dal-Tile.
9.5 Painting
9.5.1 Interior drywall surfaces throughout are to be finished with
one (1) application of primer and one (1) finish coat of
latex paint, eggshell finish.
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9.5.2 Hollow metal doors and exposed miscellaneous steel items
will be finish painted with one (1) coat of semi-gloss alkyd
enamel paint over shop applied primer.
9.5.3 Interior carpentry items that are not factory finished will
be finished with one (1) coat of stain and two (2) finish
applications of stain finish polyurethane.
9.5.4 Interior surfaces of exposed structural steel (shop primed,
grey) and metal deck (manufacturer grey).
9.5.5 Wall covering #1. Maharam Tek - Wall Herald 304104-003,
approximately 120 lin. Yds. Walls of reception and large
conference room.
10. MISCELLANEOUS SPECIALITIES
10.1 Toilet Partitions
10.1.1 Toilet partitions and urinal screens will be provided as
shown, or as required by code and, where applicable, will
conform to the State's Barrier Free Access requirements.
10.1.2 Partitions will be floor mounted and overhead braced. Urinal
screens will be wall, hung.
10.1.3 Partition panels will be flush metal type with baked enamel
finish.
10.2 Toilet Accessories
10.2.1 36" high mirrors are to be provided at each vanity.
10.2.2 Grab bars are to be provided in each handicap accessible
toilet compartment.
10.2.3 Toilet paper dispensers, two roll style, are to be provided
within each toilet compartment.
10.2.4 All windows (exclusive of aluminum and glass entry frames)
shall be fitted with 1" mini-blinds, prefinished aluminum,
dark, bronze color.
DIVISIONS 11-14 INTENTIONALLY OMITTED.
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15. MECHANICAL
15.1 Plumbing
15.1.1 A complete domestic plumbing system will be installed, and
will include the following items:
Water closets
Wall-hung lavatories with standard self-closing faucets.
One (1) floor level mop basin with utility type faucet per
space.
Stainless steel kitchen sinks for lunch room and
copy/coffee room counter tops.
Electric water cooler as required by code.
Toilet area floor drains as required by code.
Domestic, water and sanitary piping systems as specified.
Gas piping system as specified.
Frost-free hose bibs (4).
15.1.2 The plumbing work for the entire facility is to conform to
the following per drawings:
Plumbing fixtures to be similar or equivalent to those as
manufactured by Kohler, American Standard or Elger.
Floor drains to be similar or equivalent to those as
manufactured by Wade, Josam or Zurn.
Water cooler(s) to be equivalent to those as manufactured by
Oasis, Coroley or Halsey Taylor.
Gas piping is to be extended from a utility company supplied
meter.
Work is to be completed in a neat, workmanlike manner.
All services are to be made complete and functional with
final connections having been made to existing utilities.
Miscellaneous piping and other items of work as might be
required to complete the plumbing system will be provided.
Sanitary sewer system is to be complete with fixtures as
noted underground piping and venting.
Two (2) seventeen gallon water heaters.
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15.2 Heating, Ventilating and Air Conditioning
15.2.1 Design parameters for the Office Area heating, ventilation
and air conditioning (HVAC) system are as per specs:
Heat to 72 degrees Fahrenheit (F) dry bulb inside when 0
degrees F outside.
Cool to 75 degrees F dry bulb inside at 95 degrees F.
15.2.2 The building HVAC equipment will consist of packaged gas-
fired units, either floor or roof mounted. Air conditioning
will be DX type with coils, condensers and piping.
Refrigerant shall be as approved by IRPA.
Controls shall be 7 day programmable for heating and
cooling.
Equipment and accessories by "Trane" or equal.
15.2.3 The toilet areas and breakroom will be provided with an
exhaust system to conform to local code requirements.
15.3 Fire Protection.
15.3.1 Design parameters for the fire protection system are based
on the following:
A. The office area fire protection system design is based
upon use of non-combustible roofing and a light hazard
occupancy as specified.
B. The entire building area shall be fitted with
appropriate heads.
15.3.2 The fire protection system is designed using the following
criteria:
A. The municipal water supply (flow and pressure) is
adequate and available. Should additional costs be
incurred, they shall not be borne by tenant.
B. There is no ground storage tank. Should additional
costs be incurred, they shall not be borne by tenant.
C. The system shall conform to N.F.P.A. criteria, and for
the system parameters as noted above.
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D. Sprinkler heads shall be aligned within industry
standards, but will not necessarily be centered in
ceiling tiles.
E. Plans, specifications and shop drawings shall be
supplied to tenant's insurance carrier in a timely
fashion. Roof specifications shall be included.
15.3.3 The equipment and materials for the fire protection system
shall consist of the following:
A. Provide a wet type automatic spray sprinkler system
with distribution piping, sprinkler heads and automatic
sprinkler riser(s) as required.
B. Provide check valves, fire department connections, flow
switch, flow alarms, inspector test connectors as
required for a complete operating system, and tie into
the building alarm system.
16. ELECTRICAL
16.1 Service and Distribution
16.1.1 The incoming secondary electrical service work will include
conduit, panel, switchgear and cable work.
16.1.2 One (1) 800 AMP, 120/208 volt, three-phase secondary service
switchboard will be provided for the tenant, installed and
energized.
16.2 Lighting
16.2.1 Except as detailed in 16.2.2, 16.2.3, 16.2.4, and 16.2.5
below, light fixtures throughout shall be 2x4 lay-in type
flourescent, with 1/2" x 1/2" x 1/2" paracube lenses.
Fixtures shall be distributed to suit the size of the spaces
served.
16.2.2 Lighting in the toilet rooms and hallways shall be standards
24" x 48" lay-in flourescent fixtures with acrylic lenses.
16.2.3 Provide and install necessary emergency battery operated
(dual lamp) packs for lighting on night light circuits in
the Office Area as required.
16.2.4 Provide L.E.D. exit lighting as required by code.
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16.2.5 Reception area and conference room shall include a total of
12 incandescent fixtures.
16.3 Convenience Outlets
16.3.1 Each private office to receive two fourplex convenience
outlets, or the number of outlets as shown on the final,
approved electric plan, whichever number is greater.
16.3.2 System furniture will have one junction box per four (4) or
five (5) cubicles, with the following configuration:
A. One 20-amp dedicated circuit per junction.
B. Three or four 20-amp circuits per (2) junction boxes.
C. Other duplex outlets will be distributed as needed.
D. Telephone/data boxes will be installed in each office,
conference room, and break room, with stub-up to above
ceiling.
16.4 Miscellaneous Electrical
16.4.1 Provide power wiring for HVAC equipment as outlined under
mechanical trades per drawings.
16.4.2 Provide 2.5 lumens for the parking lot.
16.4 General Notes
16.5.1 The electrical work as described is further clarified
through the following notes:
A. All the above provisions include labor and material for
a complete electrical installation, done in a neat
workmanlike manner.
B. This proposal does not include power wiring for the
Owner's process equipment, unless outlined in the
Project Description.
C. ALl electrical work shall conform to the current
edition of the National Electrical Code and Local Code
where applicable.
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D. Footcandle figures given are intended to represent
approximate average intensities based on the lumen or
zonal cavity method of calculation and are based on an
open area with no obstructions (machines, equipment,
racks, etc.)
E. Junction boxes and conduit stubs into ceiling areas are
to be provided as previously noted for telephone
communication. Telephone incoming cabling, individual
telephone sets or wiring of the telephone
communications system are to be provided by tenant.
F. This proposal excludes utility company related charges
for incoming underground electrical service.
G. This proposal includes provisions for a security
system, with 2 card proximity reader access pads at
entrances. These readers will be tied to the system in
the adjacent 2109 Fox Drive building.
16.6 Equipment and Materials
16.6.1 The incoming service equipment will be selected from the
following:
A. All materials and installation methods to conform to
local utility company standards.
B. The electrical switchgear and panels will be similar or
equivalent to those as manufactured by Square "D".
C. All system furniture will be floor fed through conduits
where they are not adjacent to convenient walls or
columns.
D. Furnish the following equipment:
1. One microwave.
2. One oven.
3. One refrigerator.
4. One dishwasher.
5. One garbage disposal.
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<PAGE>
16.7 Fire Alarm System.
16.7.1 Contractor shall install an extension of the fire alarm
system in the 2109 Fox Drive building, to include the
following:
A. One signal module.
B. One signal circuit.
C. A transient line protector.
D. Seven pull stations.
E. Four audio/visual alarms.
17. CLARIFICATIONS, QUALIFICATIONS AND EXCLUSIONS
17.1 Clarifications
17.1.1 The amount to be paid for permits, review fees, inspection
fees, tap fees, assessments or other municipal fees is
included.
17.1.2 Quality control and testing fees are included.
17.2 Qualifications
17.2.1 Materials will be new.
17.2.2 Items and work indicated as being furnished or performed by
the Owner or tenant are not included in the Cost of the
Work. Should additional costs be incurred, they shall not be
borne by the tenant.
17.2.3 The Contractor will obtain the building permit. The amounts
to be paid for permits, inspection fees, assessments, tap-in
charges or other municipal fees are included in the Cost of
the Work. Should additional costs be incurred, they shall
not be borne by the tenant.
17.2.4 The facility will be delivered in a broom-clean condition
and all glass will be cleaned.
17.2.5 Owner will be assisted by the Contractor in obtaining the
Certificate of Occupancy from the municipality. Should
additional costs be incurred, they shall not be borne by the
tenant.
17.2.6 Should conditions be encountered that differ from the basis
of preliminary design and result in a change to the Scope of
Work,
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the Owner will be responsible for any subsequent changes as
might be necessary to be made to the Cost of Work. Should
additional costs be incurred, they shall not be borne by the
tenant.
17.2.7 Should a governing body require that changes be made to any
phase of the working drawings or specifications as they were
prepared from preliminary documents, any additional cost for
these changes will be paid for by the Owner. Should
additional costs be incurred, they shall not be borne by the
tenant.
17.2.8 Building Code conformance for the Scope of Work is
anticipated to be governed by Building Officials and Code
Administration (BOCA) 1990, the National Electric Code
(NEC), and any other agency having jurisdiction.
17.2.9 The Contractor is to assume responsibility for zoning and
regulations governing use of the site and building.
17.2.10 The tenant will provide and install systems furniture. The
contractor shall make final connections from floor junction
boxes to the systems furniture.
18. Other conditions.
18.1 Owner shall provide upper and lower kitchen cabinets to break room, in
addition to supplying hot and cold water, required waste plumbing and
electrical power.
18.2 Contractor shall install a "Knox Box" on the exterior wall as approved
by the local authorities.
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EXHIBIT C
(Optional)
Change Order No. _____
- -------------------------------------------------------------------------------
This Change Order is made this ____ day of ____________________, 19___, by and
between PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability company, and
CSC INTELICOM, INC., a Delaware corporation. The parties agree that the
following (change, addition, deletion) shall be made to the tenant improvements
located in Suite ___ in the building at ______________________, Champaign,
Illinois, 61820,
and that the same shall be done for the sum of _________________________ Dollars
($________), to be (added to, deleted from) the original contract price of
____________________Dollars ($__________).
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C. CSC INTELICOM, INC.
An Illinois Limited Liability Company A Delaware Corporation
By: FOX DEVELOPMENT CORPORATION
An Illinois Corporation
Its Managing Member
By: ____________________________ By:_________________________
MELINDA J. PARKER DONALD G. DEBUCK
Its President Its Vice President
Finance and Administration
42
[EXECUTION COPY]
**************************************************************
CREDIT AGREEMENT
dated as of
January 2, 1998
between
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
The SUBSIDIARY GUARANTORS Party Hereto
The LENDERS Party Hereto
and
LEHMAN COMMERCIAL PAPER INC,
as Administrative Agent and Arranger
-------------------
$100,000,000
-------------------
**************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters............................... 2
1.01 Certain Defined Terms......................................... 2
1.02 Accounting Terms and Determinations........................... 21
1.03 Classes and Types of Loans.................................... 22
Section 2. The Commitments, Loans, Notes and Prepayments.................... 22
2.01 Loans ...................................................... 22
2.02 Borrowings.................................................... 23
2.03 Changes of the Commitments.................................... 24
2.04 Commitment Fee................................................ 24
2.05 Lending Offices............................................... 24
2.06 Several Obligations; Remedies Independent..................... 24
2.07 Notes ...................................................... 25
2.08 Optional Prepayments and Conversions or
Continuations of Loans...................................... 26
2.09 Mandatory Prepayments and Reductions of Commitments........... 27
Section 3. Payments of Principal and Interest............................... 29
3.01 Repayment of Loans............................................ 29
3.02 Interest...................................................... 30
Section 4. Payments; Pro Rata Treatment; Computations; Etc. ................ 31
4.01 Payments...................................................... 31
4.02 Pro Rata Treatment............................................ 32
4.03 Computations.................................................. 32
4.04 Minimum Amounts............................................... 32
4.05 Certain Notices............................................... 33
4.06 Non-Receipt of Funds by the Administrative Agent.............. 34
4.07 Sharing of Payments, Etc...................................... 35
Section 5. Yield Protection, Etc............................................ 36
5.01 Additional Costs.............................................. 36
5.02 Limitation on Types of Loans.................................. 39
5.03 Illegality.................................................... 39
5.04 Treatment of Affected Loans................................... 40
5.05 Compensation.................................................. 40
5.06 U.S. Taxes.................................................... 41
- i -
<PAGE>
Page
----
Section 6. Guarantee........................................................ 43
6.01 The Guarantee................................................. 43
6.02 Obligations Unconditional..................................... 44
6.03 Reinstatement................................................. 45
6.04 Subrogation................................................... 45
6.05 Remedies...................................................... 46
6.06 Instrument for the Payment of Money........................... 46
6.07 Continuing Guarantee.......................................... 46
6.08 Rights of Contribution........................................ 46
6.09 General Limitation on Guarantee Obligations................... 47
Section 7. Conditions....................................................... 48
7.01 Initial Loan.................................................. 48
7.02 Initial and Subsequent Loans.................................. 51
Section 8. Representations and Warranties................................... 52
8.01 Organization; Powers.......................................... 52
8.02 Authorization; Enforceability................................. 52
8.03 Approvals..................................................... 53
8.04 No Breach..................................................... 53
8.05 Financial Condition; No Material Adverse Change............... 53
8.06 Properties.................................................... 55
8.07 Litigation.................................................... 55
8.08 Environmental Matters......................................... 55
8.09 Compliance with Laws and Agreements........................... 56
8.10 Investment Company Act........................................ 56
8.11 Public Utility Holding Company Act............................ 56
8.12 Taxes ...................................................... 56
8.13 ERISA ...................................................... 57
8.14 True and Complete Disclosure.................................. 57
8.15 Use of Credit................................................. 57
8.16 Material Agreements and Liens................................. 58
8.17 Subsidiaries, Etc............................................. 58
8.18 Solvency...................................................... 59
8.19 Property of Obligors located in Maryland and Texas............ 59
Section 9. Covenants of the Borrower........................................ 60
9.01 Financial Statements and Other Information.................... 60
9.02 Notices of Material Events.................................... 62
9.03 Existence, Etc................................................ 63
9.04 Insurance..................................................... 63
9.05 Prohibition of Fundamental Changes............................ 64
9.06 Liens ...................................................... 65
9.07 Indebtedness.................................................. 66
9.08 Investments................................................... 67
9.09 Restricted Payments........................................... 67
9.10 Certain Financial Covenants................................... 67
9.11 Hedging Agreements............................................ 68
- ii -
<PAGE>
Page
----
9.12 Lines of Business............................................. 68
9.13 Transactions with Affiliates.................................. 69
9.14 Restrictive Agreements........................................ 69
9.15 Subsidiary Indebtedness....................................... 70
9.16 Use of Proceeds............................................... 70
9.17 Certain Obligations Respecting Subsidiaries................... 70
9.18 Modifications of Certain Documents............................ 71
9.19 Environmental Survey.......................................... 72
Section 10. Events of Default............................................... 72
Section 11. The Administrative Agent and the Arranger....................... 77
11.01 Appointment, Powers and Immunities........................... 77
11.02 Reliance by Administrative Agent............................. 78
11.03 Defaults..................................................... 78
11.04 Rights as a Lender........................................... 78
11.05 Indemnification.............................................. 79
11.06 Non-Reliance on Administrative Agent, Arranger
and Other Lenders.......................................... 79
11.07 Failure to Act............................................... 80
11.08 Resignation or Removal of Administrative Agent............... 80
11.09 Consents under Other Loan Documents.......................... 81
11.10 Arranger..................................................... 81
Section 12. Miscellaneous................................................... 82
12.01 Notices...................................................... 82
12.02 Waiver ...................................................... 82
12.03 Amendments, Etc.............................................. 82
12.04 Expenses, Etc................................................ 83
12.05 Successors and Assigns....................................... 85
12.06 Assignments and Participations............................... 85
12.07 Survival..................................................... 88
12.08 Counterparts................................................. 89
12.09 Governing Law; Submission to Jurisdiction.................... 89
12.10 WAIVER OF JURY TRIAL......................................... 89
12.11 Captions..................................................... 89
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Restrictive Agreements
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Capital Expenditures
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Term Loan Note
EXHIBIT B - Form of Security Agreement
EXHIBIT C - Form of Guarantee Assumption Agreement
EXHIBIT D - Form of Opinion of Counsel to the Obligors
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<PAGE>
Page
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EXHIBIT E - Form of Opinion of Special New York Counsel to LCPI
- iv -
<PAGE>
CREDIT AGREEMENT dated as of January 2, 1998, between: INTERNATIONAL
TELECOMMUNICATION DATA SYSTEMS, INC., a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Borrower"); each of the
Subsidiaries of the Borrower identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereto and each Subsidiary of the Borrower
that becomes a "Subsidiary Guarantor" after the date hereof pursuant to Section
9.17(a) (individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Borrower, the "Obligors"); each
of the lenders that is a signatory hereto identified under the caption "LENDERS"
on the signature pages hereto and each lender that becomes a "Lender" after the
date hereof pursuant to Section 12.06(b) (individually, a "Lender" and,
collectively, the "Lenders"); LEHMAN COMMERCIAL PAPER INC., a Delaware
corporation, as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Administrative Agent"); and LEHMAN
COMMERCIAL PAPER INC., a Delaware corporation, as arranger (in such capacity,
the "Arranger").
The Borrower and the Subsidiary Guarantors are engaged as an
integrated group in the business of providing comprehensive transactional
billing and management information services to providers of wireless, long
distance and satellite communications services. The integrated operation
requires financing on such a basis that credit supplied to the Borrower be made
available from time to time to the Subsidiary Guarantors, as required for the
continued successful operation of the Obligors, separately, and the integrated
operation as a whole. In that connection, the Obligors have requested that the
Lenders make loans to the Borrower (to be made available by the Borrower to the
Subsidiary Guarantors) in an aggregate principal amount not exceeding
$100,000,000 to finance the operations of the Obligors, to refinance certain
existing indebtedness of the Obligors and to enable certain acquisitions and
capital expenditures by the Obligors, and for other purposes.
To induce the Lenders to make such loans, the Obligors, the Lenders
and the Administrative Agent propose to enter into this Agreement pursuant to
which the Lenders will make loans to the Borrower, and each Subsidiary Guarantor
will guarantee the loans so made to the Borrower and each of the Obligors will
agree to execute and deliver security agreements providing for security
interests and liens to be granted by the Obligors on substantially all of their
respective Properties as collateral security for the obligations of the Obligors
to the Lenders and
Credit Agreement
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the Administrative Agent hereunder. Each of the Obligors expects to derive
benefit, directly or indirectly, from the loans so made to the Borrower, both in
its separate capacity and as a member of the integrated group, since the
successful operation of each of the Obligors is dependent on the continued
successful performance of the functions of the integrated group as a whole.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Acquisition" means the acquisition by the Borrower of all of the
capital stock of Intelicom as described in the Acquisition Agreement.
"Acquisition Agreement" means the Stock Purchase Agreement dated as of
January 2, 1998 by and among the Borrower, Intelicom and CSC Domestic
Enterprises, Inc.
"Acquisition Documents" means the Acquisition Agreement and all
documents, certificates and instruments delivered pursuant thereto.
"Affiliate" means any Person that directly or indirectly controls, or
is under common control with, or is controlled by, the Borrower. As used in this
definition, "control" (including, with its correlative meanings, "controlled by"
and "under common control with") means possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event, any Person that owns
directly or indirectly securities having 5% or more of the voting power for the
election of directors or other governing body of a corporation or 5% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, (a) no individual
shall be an Affiliate solely by reason of his or her being a director, officer
or employee of the Borrower or any of its
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Subsidiaries and (b) none of the Wholly Owned Subsidiaries of the Borrower shall
be Affiliates.
"Applicable Lending Office" means, for each Lender and for each Type
of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
office of such Lender (or of an affiliate of such Lender) as such Lender may
from time to time specify to the Administrative Agent and the Borrower as the
office by which its Loans of such Type are to be made and maintained.
"Applicable Margin" means, with respect to any Base Rate Loan or
Eurodollar Loan, or with respect to the commitment fees payable hereunder, as
the case may be, (a) during the initial Interest Accrual Period or should an
Event of Default have occurred and be continuing, 1.250% in the case of ABR
Loans, 2.250% in the case of Eurodollar Loans and 0.500% with respect to the
Commitment Fee Rate and (b) in all other cases, the rate per annum set forth
below under the caption "Base Rate Margin", "Eurodollar Margin" or "Commitment
Fee Rate", respectively, based on the Leverage Ratio for such Interest Accrual
Period:
================================================================================
Leverage Ratio Base Eurodollar Commitment
Rate Margin Fee Rate
Margin
- --------------------------------------------------------------------------------
Greater than 1.250% 2.250% 0.500%
or equal to
3.0 to 1
- --------------------------------------------------------------------------------
Greater than 1.000% 2.000% 0.375%
or equal to
2.5 to 1 and
less than 3.0
to 1
- --------------------------------------------------------------------------------
Less than 2.5
to 1 0.750% 1.750% 0.375%
================================================================================
For purposes hereof, an "Interest Accrual Period" means (i) initially, the
period commencing on the date hereof to but not including the Quarterly Date
falling on or nearest to June 30, 1998, and (ii) thereafter, the period
commencing on a Quarterly Date to but not including the immediately following
Quarterly Date.
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The Leverage Ratio for the initial Interest Accrual Period shall be
determined on the basis of the certificate of a Financial Officer of the
Borrower delivered pursuant to Section 7.01(d). The Leverage Ratio for any
Interest Accrual Period after the initial Interest Accrual Period shall be
determined on the basis of a certificate of a Financial Officer of the Borrower
setting forth a calculation of the Leverage Ratio as at the last day of the
fiscal quarter immediately preceding such Interest Accrual Period (i.e., the
Leverage Ratio for the Interest Accrual Period commencing July 1, 1998 shall be
determined on the basis of the Leverage Ratio as at March 31, 1998, the Leverage
Ratio for the Interest Accrual Period commencing October 1, 1998 shall be
determined on the basis of the Leverage Ratio as at June 30, 1998, and so
forth), each of which certificates shall be delivered together with the
financial statements for the fiscal quarter on which such calculation is based.
Anything in this Agreement to the contrary notwithstanding, the
Applicable Margin for Base Rate Loans, Eurodollar Loans and commitment fees
shall be the highest rate per annum provided for above (i.e., 1.250%% with
respect to Base Rate Loans, 2.250% with respect to Eurodollar Loans and 0.500%
with respect to commitment fees) (i) during any period when an Event of Default
shall have occurred and be continuing, or (ii) if a certificate of a Financial
Officer of the Borrower shall not be delivered as provided above prior to the
beginning of any Interest Accrual Period.
"Bankruptcy Code" means the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (a) the Prime Rate for such day and (b) the Federal Funds Rate for such day
plus 1/2 of 1%. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" means Loans that bear interest at rates based upon
the Base Rate.
"Basic Documents" means, collectively, the Loan Documents and the
Acquisition Documents.
"Basle Accord" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled
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"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
"Business Day" means any day (a) on which commercial banks are not
authorized or required to close in New York City and (b) if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" means, for any period, expenditures (including,
without limitation, the aggregate amount of Capital Lease Obligations incurred
during such period) made by the Borrower or any of its Subsidiaries to acquire
or construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) during such period computed in
accordance with GAAP.
"Capital Lease Obligations" means, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Casualty Event" means, with respect to any Property of any Person,
any loss of or damage to, or any condemnation or other taking of, such Property
for which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"Class" has the meaning assigned to such term in Section 1.03.
"Closing Date" means the date upon which the initial Loans hereunder
are made.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitments" means the Revolving Credit Commitments and the Term Loan
Commitments.
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"Continue", "Continuation" and "Continued" refer to the continuation
pursuant to Section 2.08 of a Eurodollar Loan from one Interest Period to the
next Interest Period for such Loan.
"Convert", "Conversion" and "Converted" refer to a conversion pursuant
to Section 2.08 of one Type of Loans into another Type of Loans, which may be
accompanied by the transfer by a Lender (at its sole discretion) of a Loan from
one Applicable Lending Office to another.
"Debt Incurrence" means the incurrence by the Borrower or any of its
Subsidiaries after the Closing Date of any Indebtedness, other than Capital
Lease Obligations and Indebtedness secured by Liens permitted by Section
9.06(h).
"Debt Service" means, for any period, the sum, for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all regularly scheduled payments or
prepayments of principal of Indebtedness (including, without limitation, the
principal component of any payments in respect of Capital Lease Obligations)
made during such period plus (b) all Interest Expense for such period.
"Default" means an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Disposition" means any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Borrower or any of its Subsidiaries to any other Person excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business (including without limitation the sale or other
disposition of worn-out or obsolete equipment) and on ordinary business terms.
"Dollars" and "$" means lawful money of the United States of America.
"EBITDA" means, for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) net operating income (calculated
before taxes, Interest Expense, extraordinary and unusual items and income or
loss attributable to equity in Affiliates) for such period plus (b) depreciation
and amortization (to the extent deducted in determining net operating income)
for such period. In the event
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that the Borrower or any of its Subsidiaries acquires any business (including,
without limitation, by means of the Acquisition) during such period, EBITDA for
such period shall be calculated as if such acquisition had occurred on the first
day of such period using such reasonable estimates and pro forma adjustments
effected in accordance with generally accepted accounting principles as the
Borrower shall propose and the Majority Lenders shall approve.
"Environmental Laws" means any and all present and future Federal,
state, local and foreign laws, rules or regulations, and any orders or decrees,
in each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Rights" means, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any shareholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
"ERISA Event" means any of the following events or conditions:
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(a) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which the
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA, including, without limitation, the
failure to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(b) the distribution under Section 4041 of ERISA of a notice of intent
to terminate any Plan or any action taken by the Borrower or an ERISA
Affiliate to terminate any Plan;
(c) the institution by the PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
the PBGC with respect to such Multiemployer Plan;
(d) the complete or partial withdrawal from a Multiemployer Plan by
the Borrower or any ERISA Affiliate that results in liability under Section
4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the
Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA;
(e) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; or
(f) the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if the Borrower
or an ERISA Affiliate fails to timely provide security to the Plan in
accordance with the provisions of such Sections.
Credit Agreement
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"Eurodollar Base Rate" means, for any Interest Period for any
Eurodollar Loan, the rate per annum appearing on Page 3750 of the Dow Jones
Markets Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to Dollar deposits in the
London interbank market) at approximately 11:00 a.m. London time on the date two
Business Days prior to the first day of such Interest Period as the rate for
Dollar deposits having a term comparable to such Interest Period, provided that
if such rate does not appear on such page, or if such page shall cease to be
publicly available, or if the information contained on such page, in the
reasonable judgment of the Majority Revolving Credit Lenders or Majority Term
Loan Lenders (as the case may be) shall cease accurately to reflect the rate
offered by leading banks in the London interbank market as reported by any
publicly available source of similar market data selected by such Lenders, the
Eurodollar Base Rate means, for any Interest Period, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) quoted by LCPI at
approximately 11:00 a.m. London time (or as soon thereafter as practicable) two
Business Days prior to the first day of such Interest Period for the offering by
LCPI to leading banks in the London interbank market of Dollar deposits having a
term comparable to such Interest Period and in the amount of the Eurodollar Loan
to be made by LCPI for such Interest Period. If LCPI is not participating in any
Eurodollar Loan during any Interest Period therefor, the Eurodollar Base Rate
for such Interest Period shall be determined by reference to the amount of such
Loan that LCPI would have made or had outstanding during such Interest Period
had it been participating in such Loan during such Interest Period.
"Eurodollar Loans" means Loans that bear interest at rates based on
rates referred to in the definition of "Eurodollar Base Rate" in this Section
1.01.
"Eurodollar Rate" means, for any Interest Period for any Eurodollar
Loan, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined by the Administrative Agent to be equal to the Eurodollar Base
Rate for such Interest Period divided by 1 minus the Reserve Requirement (if
any) for such Interest Period.
"Event of Default" has the meaning assigned to such term in Section 10.
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"Excess Cash Flow" means, for any period, the excess of (a) EBITDA for
such period over (b) the sum of (i) Capital Expenditures made during such period
(except for any such Capital Expenditures to the extent financed with the
proceeds of Indebtedness, or Capital Lease Obligations, incurred pursuant to
Section 9.07(d) during such period) plus (ii) the aggregate amount of Debt
Service for such period plus (iii) taxes payable in cash for such period.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the 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, provided that (a) if the day for which such 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 (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to LCPI on such Business Day on such transactions as determined by
the Administrative Agent.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Fixed Charges Ratio" means, as at any date, the ratio of (a) EBITDA
for the period of four consecutive fiscal quarters ending on or most recently
ended prior to such date to (b) the sum of (i) Capital Expenditures made during
such period plus (ii) the aggregate amount of Debt Service for such period plus
(iii) taxes for such period.
"Foreign Lender" means any Lender that is organized under the laws of
a jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those that, in accordance with the last sentence of
Section 1.02(a), are to be used in making the calculations for purposes of
determining compliance with this Agreement.
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"Guarantee" means a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) Property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as verbs have the
correlative meanings.
"Guarantee Assumption Agreement" means a Guarantee Assumption
Agreement substantially in the form of Exhibit C by an entity that, pursuant to
Section 9.17(a) is required to become a "Subsidiary Guarantor" hereunder in
favor of the Administrative Agent.
"Hazardous Material" means, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" means, for any Person: (a) obligations created, issued
or incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or
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agreement, contingent or otherwise, to repurchase such Property from such
Person); (b) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital Lease Obligations
of such Person; and (f) Indebtedness of others Guaranteed by such Person.
"Intelicom" means CSC Intelicom, Inc.
"Interest Coverage Ratio" means, as at any date of determination
thereof, the ratio of (a) EBITDA for the period of four fiscal quarters ending
on or most recently ended prior to such date to (b) Interest Expense for such
Period.
"Interest Expense" means, for any period, the sum, for the Borrower
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including, without limitation, the interest component of any
payments in respect of Capital Lease Obligations) accrued or capitalized during
such period (whether or not actually paid during such period) (b) minus interest
income received in cash during such period plus (c) the net amount payable (or
minus the net amount receivable) under Hedging Agreements relating to interest
during such period (whether or not actually paid or received during such
period).
"Interest Period" means, for any Eurodollar Loan, each period
commencing on the date such Eurodollar Loan is made or Converted from a Loan of
another Type or (in the event of a Continuation) the last day of the next
preceding Interest Period for such Loan and (subject to the provisions of
Section 2.01(c)) ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Borrower may select as
provided in Section 4.05, except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent
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calendar month. Notwithstanding the foregoing: (i) if any Interest Period for
any Revolving Credit Loan would otherwise end after the Revolving Credit
Commitment Termination Date, such Interest Period shall end on the Revolving
Credit Commitment Termination Date; (ii) if any Interest Period for any Term
Loan would otherwise end after the Term Loan Maturity Date, such Interest Period
shall end on the Term Loan Maturity Date; (iii) no Interest Period for any Term
Loan may commence before and end after any Principal Payment Date unless, after
giving effect thereto, the aggregate principal amount of the Term Loans having
Interest Periods that end after such Principal Payment Date shall be equal to or
less than the aggregate principal amount of the Term Loans permitted to be
outstanding after giving effect to the payments of principal required to be made
on such Principal Payment Date; (iv) each Interest Period that would otherwise
end on a day that is not a Business Day shall end on the next succeeding
Business Day (or, in the case of an Interest Period for a Eurodollar Loan, if
such next succeeding Business Day falls in the next succeeding calendar month,
on the next preceding Business Day); and (v) notwithstanding clauses (i), (ii)
and (iii) above, no Interest Period shall have a duration of less than one month
and, if the Interest Period for any Eurodollar Loan would otherwise be a shorter
period, such Loan shall not be available hereunder for such period.
"Investment" means, for any Person: (a) the acquisition (whether for
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days arising in connection with the
sale of inventory or supplies by such Person in the ordinary course of business;
(c) the entering into of any Guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person; or (d) the entering into of any Hedging Agreement.
"LCPI" means Lehman Commercial Paper Inc.
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"Leverage Ratio" means, as at any date of determination thereof, the
ratio of (a) Indebtedness of the Borrower and its Subsidiaries (determined on a
consolidated basis, without duplication, in accordance with GAAP) as at such
date to (b) EBITDA for the period of four fiscal quarters ending on or most
recently ended prior to such date.
"Lien" means, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" means, collectively, this Agreement, the Notes and
the Security Documents.
"Loans" means the Revolving Credit Loans and the Term Loans.
"Majority Lenders" means, subject to the last paragraph of Section
12.03, Lenders having more than 50% of the sum of (a) the aggregate outstanding
principal amount of the Term Loans or, if the Term Loans shall not have been
made, the aggregate outstanding principal amount of the Term Loan Commitments,
as the case may be, plus (b) the sum of (i) the aggregate unused amount, if any,
of the Revolving Credit Commitments plus (ii) the aggregate outstanding
principal amount of the Revolving Credit Loans.
"Majority Revolving Credit Lenders" means Revolving Credit Lender
having more than 50% of the aggregate amount of the Revolving Credit Commitments
or, if the Revolving Credit Commitments shall have terminated, Lenders holding
more than 50% of the aggregate unpaid principal amount of the Revolving Credit
Loans.
"Majority Term Loan Lenders" means Term Loan Lenders holding more than
50% of the aggregate outstanding principal amount of the Term Loans or, if the
Term Loans shall not have been made, more than 50% of the Term Loan Commitments.
"Margin Stock" means "margin stock" within the meaning of Regulations
G, T, U and X.
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"Material Adverse Effect" means a material adverse effect on (a) the
Property, business, operations, financial condition, prospects, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or other amounts payable in
connection therewith.
"Multiemployer Plan" means a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" means:
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Borrower and its Subsidiaries in respect of such Casualty Event net
of (A) reasonable expenses incurred by the Borrower and its Subsidiaries in
connection therewith and (B) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Borrower or any of its
Subsidiaries in respect of such Casualty Event; and
(iii) in the case of any Debt Incurrence, the aggregate amount of all
cash received by the Borrower and its Subsidiaries in respect of such Debt
Incurrence net of reasonable expenses incurred by the Borrower and its
Subsidiaries in connection therewith.
"Net Cash Payments" means, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Borrower and its Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the Borrower and its
Subsidiaries in connection with such
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Disposition and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Borrower and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority within three
months of the date of such Disposition) and (b) Net Cash Payments shall be net
of any repayments by the Borrower or any of its Subsidiaries of Indebtedness to
the extent that (i) such Indebtedness is secured by a Lien on the Property that
is the subject of such Disposition and (ii) the transferee of (or holder of a
Lien on) such Property requires that such Indebtedness be repaid as a condition
to the purchase of such Property.
"Notes" means the Revolving Credit Notes and the Term Loan Notes.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" means: (a) direct obligations of the United
States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 180 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 180 days from the date of acquisition
thereof; and (c) commercial paper rated A-1 or better or P-1 by Standard &
Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., or
Moody's Investors Services, Inc., respectively, maturing not more than 180 days
from the date of acquisition thereof; in each case so long as the same (x)
provide for the payment of principal and interest (and not principal alone or
interest alone) and (y) are not subject to any contingency regarding the payment
of principal or interest.
"Person" means any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" means an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate
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and that is covered by Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" means a rate per annum equal to 2% plus the Base
Rate as in effect from time to time plus the Applicable Margin for Base Rate
Loans, provided that, with respect to principal of a Eurodollar Loan that shall
become due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise) on a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" shall be, for the period from
and including such due date to but excluding the last day of such Interest
Period, 2% plus the interest rate for such Loan as provided in Section 3.02(b)
and, thereafter, the rate provided for above in this definition.
"Prime Rate" means the rate of interest from time to time announced by
Citibank, N.A. as its base rate.
"Principal Payment Dates" means the Quarterly Dates falling on or
nearest to March 31, June 30, September 30 and December 31 of each year,
commencing with March 31, 2000, through and including December 31, 2003.
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Quarterly Dates" means the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date hereof.
"Registered Holder" has the meaning assigned to such term in Section
5.06(a)(ii).
"Registered Loan" has the meaning assigned to such term in Section
2.07(e).
"Registered Note" has the meaning assigned to such term in Section
2.07(e).
"Regulations A, D, G, T, U and X" means, respectively, Regulations A,
D, G, T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" means, with respect to any Lender, any change
after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or
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the adoption or making after such date of any interpretation, directive or
request applying to a class of banks including such Lender of or under any
Federal, state or foreign law or regulations (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" means, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate for any
Interest Period for any Eurodollar Loans is to be determined as provided in the
definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category
of extensions of credit or other assets that includes Eurodollar Loans.
"Restricted Payment" means dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Borrower or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Borrower or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Borrower.
"Revolving Credit Commitment" means, as to each Revolving Credit
Lender, the obligation of such Lender to make Revolving Credit Loans in an
aggregate principal amount at any
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one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on the signature pages hereof under the caption "Revolving Credit
Commitment" or, in the case of a Person that becomes a Revolving Credit Lender
pursuant to an assignment permitted under Section 12.06(b), as specified in the
respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced at any time or from time to time pursuant
to Section 2.03 or 2.09). The original aggregate principal amount of the
Revolving Credit Commitments is $30,000,000.
"Revolving Credit Commitment Termination Date" means the Quarterly
Date falling on or nearest to January 2, 2003.
"Revolving Credit Lenders" means (a) on the date hereof, the Lenders
having Revolving Credit Commitments on the signature pages hereof and (b)
thereafter, the Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).
"Revolving Credit Loans" means the loans provided for in Section
2.01(a), which may be Base Rate Loans and/or Eurodollar Loans.
"Revolving Credit Notes" means the promissory notes provided for in
Section 2.07(a) and all promissory notes delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time. The term "Revolving Credit Notes" shall include any
Registered Notes evidencing Revolving Credit Loans executed and delivered
pursuant to Section 2.07(e).
"Security Agreement" means a Security Agreement substantially in the
form of Exhibit B between the Obligors and the Administrative Agent, as the same
shall be modified and supplemented and in effect from time to time.
"Security Documents" means, collectively, the Security Agreement and
all Uniform Commercial Code financing statements required by the Security
Agreement to be filed with respect to the security interests in personal
Property and fixtures created pursuant to the Security Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting
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power to elect a majority of the board of directors or other persons performing
similar functions of such corporation, limited liability company, partnership or
other entity (irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such corporation, limited
liability company, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Unless otherwise specified, "Subsidiary" means a subsidiary of the Borrower.
"Term Loan Commitment" means, as to each Term Loan Lender, the
obligation of such Lender to make a Term Loan in a principal amount up to but
not exceeding the amount set opposite the name of such Lender on the signature
pages hereof under the caption "Term Loan Commitment" or, in the case of a
Person that becomes a Term Loan Lender pursuant to an assignment permitted under
Section 12.06(b), as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced at any
time or from time to time pursuant to Section 2.03 or 2.09). The original
aggregate principal amount of the Term Loan Commitments is $70,000,000.
"Term Loan Commitment Termination Date" means the earlier to occur of
the Closing Date and January 2, 1998.
"Term Loan Lenders" means (a) on the date hereof, the Lenders having
Term Loan Commitments on the signature pages hereof and (b) thereafter, the
Lenders from time to time holding Term Loans and Term Loan Commitments after
giving effect to any assignments thereof permitted by Section 12.06(b).
"Term Loan Maturity Date" means the Quarterly Date falling on or
nearest to January 2, 2004.
"Term Loan Notes" means the promissory notes provided for in Section
2.07(b) and all promissory notes delivered in substitution or exchange therefor,
in each case as the same shall be modified and supplemented and in effect from
time to time. The term "Term Loan Notes" shall include any Registered Notes
evidencing Term Loans executed and delivered pursuant to Section 2.07(e).
"Term Loans" means the loans provided for in Section 2.01(b), which
may be Base Rate Loans and/or Eurodollar Loans.
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"TRIS" means TRIS, a Division of CSC Intelicom, Inc.
"Type" has the meaning assigned to such term in Section 1.03.
"U.S. Person" means a citizen or resident of the United States of
America, a corporation, limited liability company, partnership or other entity
created or organized in or under any laws of the United States of America or any
State thereof, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income.
"U.S. Taxes" means any present or future tax, assessment or other
charge or levy imposed by or on behalf of the United States of America or any
taxing authority thereof.
"Wholly Owned Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in paragraph (b) of this
Section 1.02) be prepared, in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the preparation of
the latest financial statements furnished to the Lenders hereunder (which, prior
to the delivery of the first financial statements under Section 9.01, shall mean
the audited financial statements as at December 31, 1996 referred to in Section
8.05). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 9.01 (or,
prior to the delivery of the first financial statements under Section 9.01, used
in the preparation of the audited financial statements as at December 31, 1996
referred to in Section 8.05) unless (i) the Borrower shall have
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objected to determining such compliance on such basis at the time of delivery of
such financial statements or (ii) the Majority Lenders shall so object in
writing within 30 days after delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 9.01, shall mean the
audited financial statements referred to in Section 8.05).
(b) The Borrower shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 9.01 (i) a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) of this Section 1.02 and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9, the Borrower will not change the last
day of its fiscal year from December 31, or the last days of the first three
fiscal quarters in each of its fiscal years from March 31, June 30 and September
30, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished by
"Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a Loan)
refers to whether such Loan is a Revolving Credit Loan or a Term Loan, each of
which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a
Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may
be identified by both Class and Type.
Section 2. The Commitments, Loans, Notes and Prepayments.
2.01 Loans.
(a) Revolving Credit Loans. Each Revolving Credit Lender severally
agrees, on the terms and conditions of this Agreement, to make loans to the
Borrower in Dollars during the
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period from and including the date that the Term Loans are made hereunder to but
not including the Revolving Credit Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Revolving Credit Commitment of such Lender as in effect from time to
time. Subject to the terms and conditions of this Agreement, during such period
the Borrower may borrow, repay and reborrow the amount of the Revolving Credit
Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert
Revolving Credit Loans of one Type into Revolving Credit Loans of another Type
(as provided in Section 2.08) or Continue Revolving Credit Loans of one Type as
Revolving Credit Loans of the same Type (as provided in Section 2.08).
(b) Term Loans. Each Term Loan Lender severally agrees, on the terms
and conditions of this Agreement, to make a term loan to the Borrower in Dollars
on or before January 2, 1998 in a principal amount up to but not exceeding the
amount of the Term Loan Commitment of such Lender. Thereafter the Borrower may
Convert Term Loans of one Type into Term Loans of another Type (as provided in
Section 2.08) or Continue Term Loans of one Type as Term Loans of the same Type
(as provided in Section 2.08).
(c) Limit on Eurodollar Loans. No more than three separate Interest
Periods for Term Loans, and no more than five separate Interest Periods for
Revolving Credit Loans, in respect of Eurodollar Loans from each Lender may be
outstanding at any one time, provided that prior to March 31, 1998, all
Eurodollar Loans of any Class must have an Interest Period of one month's
duration and be coterminous with the Interest Periods of all other Eurodollar
Loans of any Class, and, to the extent that prior to such date a Eurodollar Loan
would not satisfy such conditions, such Loan shall be made, or Continued as or
Converted into, a Base Rate Loan.
2.02 Borrowings. The Borrower shall give the Administrative Agent
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later
than 1:00 p.m. New York time on the date specified for each borrowing hereunder,
each Lender shall make available the amount of the Loan or Loans to be made by
it on such date to the Administrative Agent, at such account at a bank in New
York as shall be designated by the Administrative Agent from time to time, in
immediately available funds, for account of the Borrower. The amount so received
by the Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by depositing the same, in
immediately available funds, in an
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account of the Borrower at a bank in New York designated by the Borrower from
time to time.
2.03 Changes of the Commitments.
(a) The aggregate amount of the Revolving Credit Commitments shall be
automatically reduced to zero on the Revolving Credit Commitment Termination
Date.
(b) The Borrower shall have the right at any time or from time to time
(i) to terminate or reduce the aggregate unutilized amount of the Term Loan
Commitments, (ii) so long as no Revolving Credit Loans are outstanding, to
terminate the Revolving Credit Commitments, and (iii) to reduce the aggregate
unutilized amount of the Revolving Credit Commitments; provided that (x) the
Borrower shall give notice of each such termination or reduction as provided in
Section 4.05 and (y) each partial reduction of the Commitments of any Class
shall be in an aggregate amount equal to $1,000,000 or a larger multiple of
$1,000,000.
(c) Any portion of the Term Loan Commitments not utilized on the
Closing Date shall be automatically terminated.
(d) The Commitments once terminated or reduced may not be reinstated.
2.04 Commitment Fee. The Borrower shall pay to the Administrative
Agent for account of each Lender a commitment fee on the daily average
unutilized amount of such Lender's Revolving Credit Commitment, for the period
from and including the date hereof to but not including the earlier of the date
such Revolving Credit Commitment is terminated and the Revolving Credit
Commitment Termination Date, at a rate per annum equal to 1/2 of 1%. Accrued
commitment fee shall be payable on each Quarterly Date and on the earlier of the
date the relevant Commitments are terminated and the Revolving Credit Commitment
Termination Date.
2.05 Lending Offices. The Loans of each Type made by each Lender shall
be made and maintained at such Lender's Applicable Lending Office for Loans of
such Type.
2.06 Several Obligations; Remedies Independent. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure
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of any other Lender to make a Loan to be made by such other Lender, and (except
as otherwise provided in Section 4.06) no Lender shall have any obligation to
the Administrative Agent or any other Lender for the failure by such Lender to
make any Loan required to be made by such Lender. The amounts payable by the
Borrower at any time hereunder and under the Notes to each Lender shall be a
separate and independent debt and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall not
be necessary for any other Lender or the Administrative Agent to consent to, or
be joined as an additional party in, any proceedings for such purposes.
2.07 Notes.
(a) The Revolving Credit Loans (other than Registered Loans) made by
each Lender shall be evidenced by a single promissory note of the Borrower
substantially in the form of Exhibit A-1, dated the date hereof, payable to such
Lender in a principal amount equal to the amount of its Revolving Credit
Commitment as originally in effect and otherwise duly completed.
(b) The Term Loans (other than Registered Loans) made by each Lender
shall be evidenced by a single promissory note of the Borrower substantially in
the form of Exhibit A-2, dated the date hereof, payable to such Lender in a
principal amount equal to the amount of its Term Loan Commitment as originally
in effect and otherwise duly completed.
(c) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of any Note
evidencing the Loans of such Class held by it, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof; provided that the
failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower to make a payment when due of any amount
owing hereunder or under such Note in respect of such Loans.
(d) No Lender shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Commitment, Loans and Notes pursuant to
Section 12.06 and except as provided in paragraph (e) of this
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Section 2.07 (and, if requested by any Lender, the Borrower agrees to so
exchange any Note).
(e) Notwithstanding the foregoing, any Lender that is not a U.S.
Person and is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code may request the Borrower (through the Administrative Agent), and the
Borrower agrees thereupon, to record on the Register referred to in Section
12.06(g) any Loans of any Class held by such Lender under this Agreement. Loans
recorded on the Register ("Registered Loans") may not be evidenced by promissory
notes other than Registered Notes as defined below and, upon the registration of
any Loan, any promissory note (other than a Registered Note) evidencing the same
shall be null and void and shall be returned to the Borrower. The Borrower
agrees, at the request of any Lender that is the holder of Registered Loans, to
execute and deliver to such Lender a promissory note in registered form to
evidence such Registered Loans (i.e., containing the optional registered note
language as indicated in Exhibit A-1 or A-2, as the case may be) and registered
as provided in Section 12.06(g) (herein, a "Registered Note"), dated the date
hereof, payable to such Lender and otherwise duly completed. A Loan once
recorded on the Register may not be removed from the Register so long as it
remains outstanding and a Registered Note may not be exchanged for a promissory
note that is not a Registered Note.
2.08 Optional Prepayments and Conversions or Continuations of Loans.
Subject to Section 4.04, the Borrower shall have the right to prepay Loans, or
to Convert Loans of one Type into Loans of another Type or Continue Loans of one
Type as Loans of the same Type, at any time or from time to time and in each
case without premium or penalty, provided that: (a) the Borrower shall give the
Administrative Agent notice of each such prepayment, Conversion or Continuation
as provided in Section 4.05 (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder);
(b) Eurodollar Loans may be prepaid or Converted only on the last day of an
Interest Period for such Loans; (c) prepayments of the Term Loans shall be
applied to the installments of the Term Loans in the inverse order of their
maturities; and (d) any Conversion into or Continuation of Eurodollar Loans
shall be subject to the provisions of Section 2.01(c). Notwithstanding the
foregoing, and without limiting the rights and remedies of the Lenders under
Section 10, in the event that any Event of Default shall have occurred and be
continuing, the Administrative Agent may (and at the request of the Majority
Lenders shall) suspend the right of the Borrower to Convert any Loan into a
Eurodollar Loan, or to Continue any Loan
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as a Eurodollar Loan, in which event all Loans shall be Converted (on the last
day(s) of the respective Interest Periods therefor) into, or Continued as, as
the case may be, Base Rate Loans.
2.09 Mandatory Prepayments and Reductions of Commitments.
(a) Casualty Events. Upon the date 30 days following the receipt by
the Borrower or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Borrower or any of its Subsidiaries (or upon such
earlier date as the Borrower or such Subsidiary, as the case may be, shall have
determined not to repair or replace the Property affected by such Casualty
Event), the Borrower shall prepay the Loans, and/or the Commitments shall be
subject to automatic reduction, in an aggregate amount, if any, equal to 100% of
the Net Available Proceeds of such Casualty Event not theretofore applied to the
repair or replacement of such Property, such prepayment and/or reduction to be
effected in each case in the manner and to the extent specified in paragraph (e)
of this Section 2.09; provided that if, on or before the 60th day following such
receipt, the Borrower furnishes to the Administrative Agent and the Arranger a
plan for the repair or replacement of the Property affected by such Casualty
Event that the Administrative Agent and the Arranger approve in the reasonable
exercise of their discretion as appropriate in light of the nature of such
Property, the time by which such prepayment and reduction must occur shall be
extended to such later date as shall be set forth in such plan with respect to
the amount of the Net Available Proceeds referred to in such plan as will be
expended for such repair or replacement.
(b) Excess Cash Flow. Not later than the date 90 days after the last
day of each fiscal year of the Borrower ending after the date hereof, the
Borrower shall prepay the Loans, and/or the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to the excess of (A) the
Applicable Percentage (as defined below) for last day of Excess Cash Flow for
such fiscal year over (B) the aggregate amount of prepayments of Term Loans made
during such fiscal year pursuant to Section 2.08 and, after the payment in full
of the Term Loans, the aggregate amount of voluntary reductions of the Revolving
Credit Commitments made during such fiscal year pursuant to Section 2.03(b),
such prepayment and/or reduction to be effected in each case in the manner and
to the extent specified in paragraph (e) of this Section 2.09. For purposes of
the preceding sentence "Applicable Percentage" means, on any day,
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25%, if the Leverage Ratio on such day is less than 2.50 to 1, and 50%, in all
other cases.
(c) Sale of Assets. Without limiting the obligation of the Borrower to
obtain the consent of the Majority Lenders pursuant to Section 9.05 to any
Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition (herein, the "Current Disposition"), and
of all prior Dispositions as to which a prepayment has not yet been made under
this paragraph, shall exceed $2,500,000 then, no later than five Business Days
prior to the occurrence of the Current Disposition, the Borrower will deliver to
the Lenders a statement, certified by a Financial Officer of the Borrower, in
form and detail satisfactory to the Administrative Agent, of the amount of the
Net Available Proceeds of the Current Disposition and of all such prior
Dispositions and upon the date 90 days following the receipt by the Borrower or
any of its Subsidiaries of the proceeds of the Current Disposition (or upon such
earlier date as the Borrower or such Subsidiary, as the case may be, shall have
determined not to reinvest the proceeds of the Current Disposition in Capital
Expenditures or the acquisition of any business not prohibited hereby), the
Borrower shall prepay the Loans, and/or the Commitments shall be subject to
automatic reduction, in an aggregate amount, if any, equal to 100% of the Net
Available Proceeds of the Current Disposition and such prior Dispositions not
theretofore so reinvested, such prepayment and/or reduction to be effected in
each case in the manner and to the extent specified in paragraph (e) of this
Section 2.09.
(d) Debt Incurrence. Upon any Debt Incurrence, the Borrower shall
prepay the Loans, and/or the Commitments shall be subject to automatic
reduction, in an aggregate amount equal to 100% of the Net Available Proceeds
thereof, such prepayment and/or reduction to be effected in each case in the
manner and to the extent specified in paragraph (e) of this Section 2.09.
(e) Application. Prepayments and/or reductions of the Commitments
described in paragraphs (a), (b), (c) or (d) of this Section 2.09 shall be
applied as follows:
first, (i) if such prepayment and/or reduction of the Commitments is
required to be made before the Term Loan Commitments have terminated, to
reduce the aggregate amount of the Term Loan Commitments (and to the extent
that, after giving effect to such reduction, the aggregate principal amount
of the Term Loans would exceed the Term Loan Commitments, the Borrower
shall prepay the Term Loans in an aggregate amount equal to such excess),
and (ii) if such
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prepayment and/or reduction of the Commitments is required to be made after
the Term Loan Commitments have terminated, to prepay the Term Loans, and
second, after the payment in full of the Term Loans and the
termination of the Term Loan Commitments, to reduce the aggregate amount of
the Revolving Credit Commitments (and to the extent that, after giving
effect to such reduction, the aggregate principal amount of the Revolving
Credit Loans would exceed the Revolving Credit Commitments, the Borrower
shall prepay the Revolving Credit Loans in an aggregate amount equal to
such excess, such payment to be made for account of the Lenders pro rata in
accordance with the amounts of Revolving Credit Loans then due and payable
to the respective Lenders.
Each such prepayment of the Term Loans shall be applied to the installments
thereof in the inverse order of maturity.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
(a) The Borrower hereby promises to pay to the Administrative Agent
for account of each Lender the entire outstanding principal amount of such
Lender's Revolving Credit Loans, and each Revolving Credit Loan shall mature, on
the Revolving Credit Commitment Termination Date.
(b) The Borrower hereby promises to pay to the Administrative Agent
for account of each Lender the principal of such Lender's Term Loans in sixteen
installments payable on the Principal Payment Dates as follows:
Principal Payment Date
Falling on or Nearest to: Amount of Installment ($)
------------------------ -------------------------
March 31, 2000 $1,250,000
June 30, 2000 1,250,000
September 30, 2000 1,250,000
December 31, 2000 1,250,000
March 31, 2001 4,375,000
June 30, 2000 4,375,000
September 30, 2001 4,375,000
December 31, 2001 4,375,000
March 31, 2002 5,625,000
June 30, 2002 5,625,000
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September 30, 2002 5,625,000
December 31, 2002 5,625,000
March 31, 2003 6,250,000
June 30, 2003 6,250,000
September 30, 2003 6,250,000
December 31, 2003 6,250,000
If the Borrower does not borrow the full amount of the aggregate Term Loan
Commitments on the Closing Date, the shortfall shall be applied to reduce the
foregoing installments ratably.
3.02 Interest. The Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin; and
(b) during each Interest Period for such Loan during which such Loan
is a Eurodollar Loan, the Eurodollar Rate for such Interest Period plus the
Applicable Margin.
Notwithstanding the foregoing, the Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender and on any
other amount payable by the Borrower hereunder or under the Notes held by such
Lender to or for account of such Lender, that shall not be paid in full when due
(whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full. Accrued interest on each Loan shall
be payable (i) in the case of a Base Rate Loan, quarterly on the Quarterly
Dates, (ii) in the case of a Eurodollar Loan, on the last day of each Interest
Period therefor and, if such Interest Period is longer than three months, at
three-month intervals following the first day of such Interest Period, and (iii)
in the case of any Loan, upon the payment or prepayment thereof or the
Conversion of such Loan to a Loan of another Type (but only on the principal
amount so paid, prepaid or Converted), except that interest payable at the
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, the
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Administrative Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Borrower.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this
Agreement and the Notes, and, except to the extent otherwise provided therein,
all payments to be made by the Obligors under any other Loan Document, shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Administrative Agent at such account at a bank in New York
as shall be designated by the Administrative Agent from time to time, not later
than 1:00 p.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Borrower with such
Lender (with notice to the Borrower and the Administrative Agent), provided that
such Lender's failure to give such notice shall not affect the validity thereof.
(c) The Borrower shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans or
other amounts payable by the Borrower hereunder to which such payment is to be
applied (and in the event that the Borrower fails to so specify, or if an Event
of Default has occurred and is continuing, the Administrative Agent may
distribute such payment to the Lenders for application in such manner as it or
the Majority Lenders, subject to Section 4.02, may determine to be appropriate).
(d) Each payment received by the Administrative Agent under this
Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
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(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 shall be made from the relevant Lenders, each payment of commitment
fee under Section 2.04 shall be made for account of the relevant Lenders, and
each termination or reduction of the amount of the Commitments of a particular
Class under Section 2.03 shall be applied to the respective Commitments of such
Class of the relevant Lenders, pro rata according to the amounts of their
respective Commitments of such Class; (b) except as otherwise provided in
Section 5.04, Eurodollar Loans of any Class having the same Interest Period
shall be allocated pro rata among the relevant Lenders according to the amounts
of their respective Revolving Credit Commitments and Term Loan Commitments (in
the case of the making of Loans) or their respective Revolving Credit Loans and
Term Loans; (c) each payment or prepayment of principal of Revolving Credit
Loans and Term Loans by the Borrower shall be made for account of the relevant
Lenders pro rata in accordance with the respective unpaid principal amounts of
the Loans of such Class held by them; and (d) each payment of interest on
Revolving Credit Loans and Term Loans by the Borrower shall be made for account
of the relevant Lenders pro rata in accordance with the amounts of interest on
such Loans then due and payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans and commitment fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable and interest on Base Rate Loans shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable. Notwithstanding the foregoing, for each day that the Base Rate is
calculated by reference to the Federal Funds Rate, interest on Base Rate Loans
shall be computed on the basis of a year of 360 days and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
to Section 2.09 and Conversions or prepayments made pursuant to Section 5.04,
each borrowing, Conversion and partial prepayment of principal of Loans of
either
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Class shall be in an aggregate amount equal to $1,000,000 or a larger multiple
of $500,000 (borrowings, Conversions or prepayments of or into Loans of
different Types or, in the case of Eurodollar Loans, having different Interest
Periods at the same time hereunder to be deemed separate borrowings, Conversions
and prepayments for purposes of the foregoing, one for each Type or Interest
Period), provided that the aggregate principal amount of Eurodollar Loans having
the same Interest Period shall be in an amount equal to $5,000,000 or a larger
multiple of $1,000,000 and, if any Eurodollar Loans would otherwise be in a
lesser principal amount for any period, such Loans shall be Base Rate Loans
during such period.
4.05 Certain Notices. Notices by the Borrower to the Administrative
Agent of terminations or reductions of the Commitments, of borrowings,
Conversions, Continuations and optional prepayments of Loans, of Classes of
Loans, of Types of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 10:00 a.m., New York City time, on the number of Business Days
prior to the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 1
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04) and Type of each Loan to be borrowed, Converted,
Continued or prepaid and the date of borrowing, Conversion,
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Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan within the time period and otherwise as provided
in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Borrower (the
"Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrower) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Borrower to the Lenders, the
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Borrower and the recipient(s) shall each be obligated retroactively to the
Advance Date to pay interest in respect of the Required Payment at the
Post-Default Rate (without duplication of the obligation of the Borrower
under Section 3.02 to pay interest on the Required Payment at the
Post-Default Rate), it being understood that the return by the recipient(s)
of the Required Payment to the Administrative Agent shall not limit such
obligation of the Borrower under Section 3.02 to pay interest at the
Post-Default Rate in respect of the Required Payment, and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to the Borrower, the Payor and the Borrower shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment pursuant to whichever of the rates specified in
Section 3.02 is applicable to the Type of such Loan, it being understood
that the return by the Borrower of the Required Payment to the
Administrative Agent shall not limit any claim the Borrower may have
against the Payor in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option (to the fullest extent
permitted by law), to set off and apply any deposit (general or special, time or
demand, provisional or final), or other indebtedness, held by it for the credit
or account of such Obligor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans or
any other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such deposit or other indebtedness is then due to such
Obligor), in which case it shall promptly notify such Obligor and the
Administrative Agent thereof, provided that such Lender's failure to give such
notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class owing to it or payment of any
other amount under this Agreement or any other Loan Document through the
exercise of any right of set-off, banker's lien or counterclaim or similar right
or otherwise (other than from the Administrative Agent as provided herein), and,
as a result of such payment, such Lender shall have received a greater
percentage of the principal of or interest on
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the Loans of such Class or such other amounts then due hereunder or thereunder
by such Obligor to such Lender than the percentage received by any other Lender,
it shall promptly purchase from such other Lenders participations in (or, if and
to the extent specified by such Lender, direct interests in) the Loans of such
Class or such other amounts, respectively, owing to such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Lenders shall share the benefit of such excess payment (net of any expenses that
may be incurred by such Lender in obtaining or preserving such excess payment)
pro rata in accordance with the unpaid principal of and/or interest on the Loans
of such Class or such other amounts, respectively, owing to each of the Lenders.
To such end all the Lenders shall make appropriate adjustments among themselves
(by the resale of participations sold or otherwise) if such payment is rescinded
or must otherwise be restored.
(c) The Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Borrower shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by
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such Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office for any
of such Loans) to any tax, duty or other charge in respect of such Loans or
its Notes or changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(excluding changes in the rate of tax on the overall net income of such
Lender or of such Applicable Lending Office by the jurisdiction in which
such Lender has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement used in the determination
of the Eurodollar Rate for any Interest Period for such Loan) relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Borrower under this paragraph, the
Borrower may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Loans of any other Type into Eurodollar Loans,
until the Regulatory Change giving rise to such request ceases to be in effect
(in which case the provisions of Section 5.04 shall be applicable), provided
that such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrower shall pay directly to each
Lender from time to time on request such amounts as such Lender may reasonably
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it reasonably determines are reasonably
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directly attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory Change
or (ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) hereafter issued by any government or governmental
or supervisory authority implementing at the national level the Basle Accord, of
capital in respect of its Commitments or Loans (such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Lender (or any Applicable Lending Office or such bank
holding company) to a level below that which such Lender (or any Applicable
Lending Office or such bank holding company) could have reasonably certainly
achieved but for such law, regulation, interpretation, directive or request.
(c) Each Lender shall notify the Borrower of any event occurring after
the date hereof entitling such Lender to compensation under paragraph (a) or (b)
of this Section 5.01 as promptly as practicable, but in any event within 45
days, after such Lender obtains actual knowledge thereof; provided that (i) if
any Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Borrower a certificate setting forth the basis and amount of
each request by such Lender for compensation under paragraph (a) or (b) of this
Section 5.01. Determinations and allocations by any Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) of
this Section 5.01, or of the effect of capital maintained pursuant to paragraph
(b) of this Section 5.01, on its costs or rate of return of maintaining Loans or
its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate
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such Lender under this Section 5.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of the Eurodollar Base
Rate for any Interest Period for any Eurodollar Loan;
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01 are
not being provided in the relevant amounts or for the relevant maturities
for purposes of determining rates of interest for Eurodollar Loans as
provided herein; or
(b) the Majority Revolving Credit Lenders (in the case of Revolving
Credit Loans) or the Majority Term Loan Lenders (in the case of Term Loans)
determine, which determination shall be conclusive, and notify the
Administrative Agent that the relevant rates of interest referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 upon the basis of
which the rate of interest for Eurodollar Loans for such Interest Period is
to be determined are not likely adequately to cover the cost to such
Lenders of making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Loans of any other Type into Eurodollar Loans,
and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or
Convert such Loans into another Type of Loan in accordance with Section 2.08.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
the Borrower thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
Eurodollar
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Loans shall be suspended until such time as such Lender may again make and
maintain Eurodollar Loans (in which case the provisions of Section 5.04 shall be
applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03, such
Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) for Eurodollar Loans
(or, in the case of a Conversion resulting from a circumstance described in
Section 5.03, on such earlier date as such Lender may specify to the Borrower
with a copy to the Administrative Agent) and, unless and until such Lender gives
notice as provided below that the circumstances specified in Section 5.01 or
5.03 that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such Lender
as Eurodollar Loans shall be made or Continued instead as Base Rate Loans,
and all Loans of such Lender that would otherwise be Converted into
Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 that gave rise to
the Conversion of such Lender's Eurodollar Loans pursuant to this Section 5.04
no longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans of the same Class made by
other Lenders are outstanding, such Lender's Base Rate Loans of such Class shall
be automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Loans, to the extent necessary so
that, after giving effect thereto, all Base Rate Loans and Eurodollar Loans of
such Class are allocated among the Lenders ratably (as to principal amounts,
Types and Interest Periods) in accordance with their respective Commitments of
such Class.
5.05 Compensation. The Borrower shall pay to the Administrative Agent
for account of each Lender, upon the request
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of such Lender through the Administrative Agent, such amount or amounts as shall
be sufficient (in the reasonable opinion of such Lender) to compensate it for
any loss, cost or expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10) on a date
other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 to be satisfied) to borrow a Eurodollar Loan from such Lender on
the date for such borrowing specified in the relevant notice of borrowing
given pursuant to Section 2.03.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender), or if such Lender shall cease to make such bids, the equivalent rate,
as reasonably determined by such Lender, derived from Page 3750 of the Dow Jones
Markets Service or other publicly available source as described in the
definition of "Eurodollar Base Rate" in Section 1.01.
5.06 U.S. Taxes.
(a) The Borrower agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person),
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will not be less than the amount stated herein to be then due and payable,
provided that the foregoing obligation to pay such additional amounts shall not
apply:
(i) to any payment to any Lender hereunder (other than in respect of
any Registered Loan) unless such Lender is, on the date hereof (or on the
date it becomes a Lender hereunder as provided in Section 12.06(b)) and on
the date of any change in the Applicable Lending Office of such Lender,
either entitled to submit a Form 1001 (relating to such Lender and
entitling it to a complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or Form 4224 (relating to
all interest to be received by such Lender hereunder in respect of the
Loans),
(ii) to any payment to any Lender hereunder in respect of a Registered
Loan (a "Registered Holder"), unless such Registered Holder (or, if such
Registered Holder is not the beneficial owner of such Registered Loan, the
beneficial owner thereof) is, on the date hereof (or on the date such
Registered Holder becomes a Lender as provided in Section 12.06(b)) and on
the date of any change in the Applicable Lending Office of such Lender,
entitled to submit a Form W-8, together with an annual certificate stating
that (x) such Registered Holder (or beneficial owner, as the case may be)
is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, and
(y) such Registered Holder (or beneficial owner, as the case may be) shall
promptly notify the Borrower if at any time, such Registered Holder (or
beneficial owner, as the case may be) determines that it is no longer in a
position to provide such certificate to the Borrower (or any other form of
certification adopted by the relevant taxing authorities of the United
States of America for such purposes), or
(iii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Loan, such beneficial owner) to comply with
applicable certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or connections
with the United States of America of such non-U.S. Person (or beneficial
owner, as the case may be) if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
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For the purposes of this paragraph, (A) "Form 1001" means Form 1001 (Ownership,
Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the
United States of America, (B) "Form 4224" means Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States) of the Department of the Treasury of the
United States of America and (C) "Form W-8" means Form W-8 (Certificate of
Foreign Status) of the Department of Treasury of the United States of America.
Each of the Forms referred to in the foregoing clauses (A), (B) and (C) shall
include such successor and related forms as may from time to time be adopted by
the relevant taxing authorities of the United States of America to document a
claim to which such Form relates.
(b) Within 30 days after paying any amount to the Administrative Agent
or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Borrower
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
Section 6. Guarantee.
6.01 The Guarantee. The Subsidiary Guarantors hereby jointly and
severally guarantee to each Lender and the Administrative Agent and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal of and
interest on the Loans made by the Lenders to, and the Notes held by each Lender
of, the Borrower and all other amounts from time to time owing to the Lenders or
the Administrative Agent by the Borrower under this Agreement and under the
Notes and by any Obligor under any of the other Loan Documents, and all
obligations of the Borrower or any of its Subsidiaries to any Lender in respect
of any Hedging Agreement, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "Guaranteed
Obligations"). The Subsidiary Guarantors hereby further jointly and severally
agree that if the Borrower shall fail to pay in full when due (whether at stated
maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the
Subsidiary Guarantors will promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
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6.02 Obligations Unconditional. The obligations of the Subsidiary
Guarantors under Section 6.01 are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Borrower under this Agreement, the Notes or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 6.02 that the obligations of the Subsidiary
Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Subsidiary Guarantors hereunder,
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the Subsidiary
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement
or the Notes or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices
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whatsoever, and any requirement that the Administrative Agent or any Lender
exhaust any right, power or remedy or proceed against the Borrower under this
Agreement or the Notes or any other agreement or instrument referred to herein
or therein, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations.
6.03 Reinstatement. The obligations of the Subsidiary Guarantors under
this Section 6 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Subsidiary Guarantors jointly
and severally agree that they will indemnify the Administrative Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6.04 Subrogation. The Subsidiary Guarantors hereby jointly and
severally agree that until the payment and satisfaction in full of all
Guaranteed Obligations and the expiration and termination of the Commitments of
the Lenders under this Agreement they shall not exercise any right or remedy
arising by reason of any performance by them of their guarantee in Section 6.01,
whether by subrogation or otherwise, against the Borrower or any other guarantor
of any of the Guaranteed Obligations or any security for any of the Guaranteed
Obligations.
Each Subsidiary Guarantor hereby waives all rights of subrogation or
contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under the Bankruptcy Code) or
otherwise by reason of any payment by it pursuant to the provisions of this
Section 6 and further agrees with the Borrower for the benefit of each of its
creditors (including, without limitation, each Lender and the Administrative
Agent) that any such payment by it shall constitute a contribution of capital by
such Subsidiary Guarantor to the Borrower (or an investment in the equity
capital of the Borrower by such Subsidiary Guarantor).
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6.05 Remedies. The Subsidiary Guarantors jointly and severally agree
that, as between the Subsidiary Guarantors and the Lenders, the obligations of
the Borrower under this Agreement and the Notes may be declared to be forthwith
due and payable as provided in Section 10 (and shall be deemed to have become
automatically due and payable in the circumstances provided in Section 10) for
purposes of Section 6.01 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by the Subsidiary Guarantors
for purposes of Section 6.01.
6.06 Instrument for the Payment of Money. Each Subsidiary Guarantor
hereby acknowledges that the guarantee in this Section 6 constitutes an
instrument for the payment of money, and consents and agrees that any Lender or
the Administrative Agent, at its sole option, in the event of a dispute by such
Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
6.07 Continuing Guarantee. The guarantee in this Section 6 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
6.08 Rights of Contribution. The Subsidiary Guarantors hereby agree,
as between themselves, that if any Subsidiary Guarantor shall become an Excess
Funding Guarantor (as defined below) by reason of the payment by such Subsidiary
Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall,
on demand of such Excess Funding Guarantor (but subject to the next sentence),
pay to such Excess Funding Guarantor an amount equal to such Subsidiary
Guarantor's Pro Rata Share (as defined below and determined, for this purpose,
without reference to the Properties, debts and liabilities of such Excess
Funding Guarantor) of the Excess Payment (as defined below) in respect of such
Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any
Excess Funding Guarantor under this Section 6.08 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Subsidiary Guarantor under the other provisions of this Section 6 and such
Excess Funding Guarantor shall not exercise any right or remedy with respect to
such excess until payment and satisfaction in full of all of such obligations.
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For purposes of this Section 6.08, (i) "Excess Funding Guarantor"
means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has
paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations,
(ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the
amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of
such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Subsidiary
Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the
aggregate present fair saleable value of all Properties of such Subsidiary
Guarantor (excluding any shares of stock of any other Subsidiary Guarantor)
exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of such Subsidiary Guarantor hereunder and any
obligations of any other Subsidiary Guarantor that have been Guaranteed by such
Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable
value of all Properties of all of the Subsidiary Guarantors exceeds the amount
of all the debts and liabilities (including contingent, subordinated, unmatured
and unliquidated liabilities, but excluding the obligations of the Borrower and
the Subsidiary Guarantors hereunder and under the other Loan Documents) of all
of the Subsidiary Guarantors, determined (A) with respect to any Subsidiary
Guarantor that is a party hereto on the Closing Date, as of the Closing Date,
and (B) with respect to any other Subsidiary Guarantor, as of the date such
Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.
6.09 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 would otherwise, taking into account the provisions of Section
6.08, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 6.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
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Section 7. Conditions.
7.01 Initial Loan. The obligation of any Lender to make its initial
Loan hereunder is subject to the conditions precedent that (i) such Loan shall
be made on or before January 2, 1998 and (ii) the Administrative Agent shall
have received the following documents (with, in the case of clauses (a), (b),
(c) and (d) below, sufficient copies for each Lender), each of which shall be
satisfactory to the Administrative Agent (and to the extent specified below, to
each Lender) in form and substance:
(a) Opinion of Counsel to the Obligors. An opinion, dated the Closing
Date, of Hale and Dorr, counsel to the Obligors, substantially in the form
of Exhibit D, and covering such other matters as the Administrative Agent
or any Lender may reasonably request (and each Obligor hereby instructs
such counsel to deliver such opinion to the Lenders and the Administrative
Agent).
(b) Opinion of Special New York Counsel to LCPI. An opinion, dated the
Closing Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel
to LCPI, substantially in the form of Exhibit E (and LCPI hereby instructs
such counsel to deliver such opinion to the Lenders).
(c) Corporate Documents. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor and of all corporate authority
for each Obligor (including, without limitation, board of director
resolutions and evidence of the incumbency, including specimen signatures,
of officers) with respect to the execution, delivery and performance of
such of the Basic Documents to which such Obligor is intended to be a party
and each other document to be delivered by such Obligor from time to time
in connection herewith and the Loans hereunder (and the Administrative
Agent and each Lender may conclusively rely on such certificate until it
receives notice in writing from such Obligor to the contrary).
(d) Officer's Certificate. A certificate of the President, a Vice
President or a Financial Officer of the Borrower, dated the Closing Date,
to the effect set forth in the lettered clauses of the first sentence of
Section 7.02.
(e) Notes. The Notes, duly completed and executed for each Lender
(except that, in the case of a Registered Holder, Notes shall be required
only to the extent that such
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Registered Holder shall have requested the execution and delivery of a Note
pursuant to Section 2.07(e)).
(f) Security Agreement. The Security Agreement, duly executed and
delivered by the Obligors and the Administrative Agent and the certificates
identified under the name of such Obligor in Annex 1 thereto, in each case
accompanied by undated stock powers executed in blank. In addition, Each
Obligor shall have taken such other action (including, without limitation,
delivering to the Administrative Agent, for filing, appropriately completed
and duly executed copies of Uniform Commercial Code financing statements)
as the Administrative Agent shall have requested in order to perfect the
security interests created pursuant to the Security Agreement.
(g) Solvency Analysis. A certificate from a Financial Officer of the
Borrower certifying as to the accuracy of Section 8.18.
(h) Acquisition. Evidence that the Acquisition shall have been (or
shall substantially simultaneously with the initial borrowing hereunder be)
consummated in all material respects in accordance with the terms of the
Acquisition Documents (and no material provision thereof shall have been
waived, amended, supplemented or otherwise modified) for an aggregate
purchase price not exceeding $100,000,000, of which not more that
$90,000,000 shall be cash, and the Administrative Agent shall have received
a certificate of a Financial Officer to that effect (and attaching thereto
true and complete copies of the Acquisition Documents, which shall be
reasonably satisfactory to the Administrative Agent in form and substance).
(i) Approvals. All governmental and third party approvals (including
landlords' and other consents) necessary or, in the discretion of the
Arranger, advisable in connection with the Acquisition, the financing
contemplated hereby and the continuing operations of the Borrower and its
Subsidiaries shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority which would restrain,
prevent or otherwise impose adverse conditions on the Acquisition or the
financing thereof.
(j) Financial Statements. (i) Satisfactory audited consolidated
financial statements of the Borrower covering
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the fiscal years ended December 31, 1995 and December 31, 1996, together
with quarterly unaudited consolidated financial statements of the Borrower
for the quarterly periods ending March 31, 1997, June 30, 1997 and
September 30, 1997; (ii) satisfactory audited consolidated financial
statements of TRIS for the fiscal year ending on March 28, 1997, and the
audited consolidated financial statement of TRIS for the six-month period
ended September 26, 1997; and (iii) a satisfactory pro forma consolidated
balance sheet of the Borrower as at the date of the most recent
consolidated balance sheet delivered pursuant to the preceding sentence,
adjusted to give effect to the consummation of the Acquisition and the
financings contemplated hereby as if such transactions had occurred on such
date, and satisfactory financial projections for the Borrower and its
Subsidiaries for a period of six years after the Closing Date.
(k) Lien Search. The results of a recent lien search in each relevant
jurisdiction with respect to the Borrower, Intelicom and their respective
Subsidiaries, and such search shall reveal no Liens on any of their
respective Properties except for Liens permitted hereby or Liens to be
discharged on or prior to the Closing Date as provided in Section 7.01(m).
(l) Insurance. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Obligors pursuant to Section
9.04 hereof in such form and containing such information as is specified in
said Section 9.04, including evidence that the Administrative Agent shall
have been named as loss payee or an additional insured as its interests may
appear for the benefit of itself and the Lenders. In addition, the Borrower
shall have delivered a certificate of a Financial Officer setting forth the
insurance obtained in accordance with the requirements of Section 9.04 and
stating that such insurance is in full force and effect and that all
premiums then due and payable thereon have been paid.
(m) Repayment of Existing Indebtedness. Evidence that the principal of
and interest on, and all other amounts owing in respect of, the
Indebtedness (including, without limitation, any contingent or other
amounts payable in respect of letters of credit) indicated on Schedule I
that is to be repaid on the Closing Date shall have been (or shall be
simultaneously) paid in full, that any commitments to extend credit under
the agreements or instruments
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relating to such Indebtedness shall have been canceled or terminated and
that all Guarantees in respect of, and all Liens securing, any such
Indebtedness shall have been released (or arrangements for such release
satisfactory to the Majority Lenders shall have been made); in addition,
the Administrative Agent shall have received from any Person holding any
Lien securing any such Indebtedness, such Uniform Commercial Code
termination statements, mortgage releases and other instruments, in each
case in proper form for recording, as the Administrative Agent shall have
requested to release and terminate of record the Liens securing such
Indebtedness (or arrangements for such release and termination satisfactory
to the Majority Lenders shall have been made).
(n) Other Documents. Such other documents as the Administrative Agent
or any Lender or special New York counsel to LCPI may reasonably request.
The obligation of any Lender to make its initial Loan hereunder is
also subject to (i) the Lenders being satisfied with the sufficiency of amounts
available under the Revolving Credit Commitments to meet the ongoing working
capital needs of the Borrower and its subsidiaries following the Acquisition and
the consummation of the other transactions contemplated hereby, (ii) the
Lenders' review of and satisfaction with (a) the Borrower's tax assumptions
relating to the Acquisition, (b) the ownership, capital, corporate,
organizational and legal structure of the Borrower, Intelicom and their
respective Subsidiaries and (c) other legal issues relating to the Acquisition,
the Borrower, Intelicom and their respective Subsidiaries and (iii) the payment
by the Borrower of such fees as the Borrower shall have agreed to pay to any
Lender or the Administrative Agent in connection herewith, including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to LCPI, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the Notes and the
other Loan Documents and the Loans hereunder (to the extent that statements for
such fees and expenses have been delivered to the Borrower).
7.02 Initial and Subsequent Loans. The obligation of the Lenders to
make any Loan to the Borrower upon the occasion of each borrowing hereunder
(including the initial borrowing) is subject to the further conditions precedent
that, both immediately prior to the making of such Loan and also after giving
effect thereto and to the intended use thereof:
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(a) the representations and warranties made by the Borrower in Section
8, and by each Obligor in each of the other Loan Documents to which it is a
party, shall be true and complete on and as of the date of the making of
such Loan with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date); and
(b) no Default shall have occurred and be continuing.
Each notice of borrowing by the Borrower hereunder shall constitute a
certification by the Borrower to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Borrower otherwise notifies
the Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
Section 8. Representations and Warranties. The Borrower represents and
warrants to the Administrative Agent and the Lenders that:
8.01 Organization; Powers. Each of the Borrower and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
8.02 Authorization; Enforceability. Each Obligor has all necessary
corporate power, authority and legal right to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party; the
execution, delivery and performance by each Obligor of each of the Basic
Documents to which it is a party have been duly authorized by all necessary
corporate action on its part (including, without limitation, any required
shareholder approvals); and this Agreement has been duly and validly executed
and delivered by each Obligor and constitutes, and each of the Notes and the
other Basic Documents to which it is a party when executed and delivered by such
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Obligor (in the case of the Notes, for value) will constitute, its legal, valid
and binding obligation, enforceable against each Obligor in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
8.03 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of this Agreement or any of the other Basic Documents
to which it is a party or for the legality, validity or enforceability hereof or
thereof, except for filings and recordings in respect of the Liens created
pursuant to the Security Documents.
8.04 No Breach. None of the execution and delivery of this Agreement
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws any Obligor, or any applicable
law or regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Borrower or any of its Subsidiaries is a party or by which any of them or any of
their Property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or (except for the Liens created
pursuant to the Security Documents) result in the creation or imposition of any
Lien upon any Property of the Borrower or any of its Subsidiaries pursuant to
the terms of any such agreement or instrument.
8.05 Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to each of the Lenders (i)
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at December 31, 1996 and the related consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the fiscal year ended on such date, with the
opinion thereon (in the case of such consolidated balance sheet and statements)
of Ernst & Young LLP, and the unaudited consolidated and consolidating balance
sheets of the Borrower and
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its Subsidiaries as at September 30, 1997 and the related consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the nine-month period ended on such date and
(ii) consolidated and consolidating balance sheets of Intelicom and its
Subsidiaries as at March 31, 1997 and the related consolidated and consolidating
statements of income, retained earnings and cash flows of Intelicom and its
Subsidiaries for the fiscal year ended on such date, with the opinion thereon
(in the case of such consolidated balance sheet and statements) of Ernst & Young
LLP, and the unaudited consolidated and consolidating balance sheets of
Intelicom and its Subsidiaries as at September 30, 1997 and the related
consolidated and consolidating statements of income, retained earnings and cash
flows of Intelicom and its Subsidiaries for the six-month period ended on such
date. All such financial statements are complete and correct and fairly present
the consolidated financial condition of the Borrower and its Subsidiaries or
Intelicom and its Subsidiaries, as the case may be, and (in the case of such
consolidating financial statements) the respective unconsolidated financial
condition of the Borrower and of each of its Subsidiaries or Intelicom and its
Subsidiaries, as the case may be, as at such dates and the consolidated and
unconsolidated results of their operations for the fiscal year and nine-month
period or six-month period, as the case may be, ended on such dates (subject, in
the case of such financial statements as at September 30, 1997, to normal
year-end audit adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent basis. None of the
Borrower, Intelicom or their respective Subsidiaries has on the date hereof any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in such balance
sheets as at such dates.
(b) Since December 31, 1996, there has been no material adverse change
in the consolidated financial condition, operations, business or prospects taken
as a whole of the Borrower and its Subsidiaries from that set forth in the
financial statements as at such date referred to in paragraph (a) of this
Section 8.05. Since September 30, 1997, there has been no material adverse
change in the consolidated financial condition, operations, business or
prospects taken as a whole of Intelicom and its Subsidiaries from that set forth
in the financial statements as at such date referred to in paragraph (a) of this
Section 8.05.
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8.06 Properties.
(a) The Borrower owns and has on the date hereof, and will own and
have on the Closing Date (after giving effect to the transactions contemplated
to occur on or before the Closing Date), good and marketable title (subject only
to Liens permitted by Section 9.06) to the Properties shown to be owned in the
most recent financial statements referred to in Section 8.05 (other than
Properties disposed of in the ordinary course of business or otherwise permitted
to be disposed of pursuant to Section 9.05). The Borrower owns and has on the
date hereof, and will own and have on the Closing Date (after giving effect to
the transactions contemplated to occur on or before the Closing Date), good and
marketable title to, and enjoys on the date hereof, and will enjoy on the
Closing Date (after giving effect to the transactions contemplated to occur on
or before the Closing Date), peaceful and undisturbed possession of, all
Properties (subject only to Liens permitted by Section 9.06) that are necessary
for the operation and conduct of its businesses.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
8.07 Litigation. There are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Borrower) threatened against the Borrower or
any of its Subsidiaries that, if adversely determined, could (either
individually or in the aggregate) have a Material Adverse Effect.
8.08 Environmental Matters. Each of the Borrower and its Subsidiaries
has obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and each of the Borrower and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable
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Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply therewith would not (either
individually or in the aggregate) have a Material Adverse Effect. In addition,
no notice, notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been assessed
and no investigation or review is pending or threatened by any governmental or
other entity with respect to any alleged failure by the Borrower or any of its
Subsidiaries to have any environmental, health or safety permit, license or
other authorization required under any Environmental Law in connection with the
conduct of the business of the Borrower or any of its Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any Hazardous Materials generated by
the Borrower or any of its Subsidiaries. All environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Borrower or any of its Subsidiaries in relation to facts,
circumstances or conditions at or affecting any site or facility now or
previously owned, operated or leased by the Borrower or any of its Subsidiaries
and that could result in a Material Adverse Effect have been made available to
the Lenders.
8.09 Compliance with Laws and Agreements. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any
governmental or regulatory authority or agency applicable to it or its Property
and all indentures, agreements and other instruments binding upon it or its
Property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
8.10 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.11 Public Utility Holding Company Act. Neither the Borrower nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
8.12 Taxes. The Borrower and its Subsidiaries have filed all Federal
income tax returns and all other material tax returns that are required to be
filed by them and have paid all
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taxes due pursuant to such returns or pursuant to any assessment received by the
Borrower or any of its Subsidiaries. The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Borrower, adequate. The Borrower
has not given or been requested to give a waiver of the statute of limitations
relating to the payment of any Federal, state, local and foreign taxes or other
impositions.
8.13 ERISA. Each Plan, and, to the knowledge of the Borrower, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no ERISA
Event has occurred and is continuing as to which the Borrower would be under an
obligation to furnish a report to the Lenders under Section 9.02(c).
8.14 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Obligors to the Administrative Agent, the Arranger or any Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Borrower and its Subsidiaries to the Administrative Agent, the Arranger and the
Lenders in connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to the Borrower that could have a Material Adverse Effect
that has not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
8.15 Use of Credit. Neither the Borrower nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or
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carrying Margin Stock, and no part of the proceeds of any Loan hereunder will be
used to buy or carry any Margin Stock.
8.16 Material Agreements and Liens.
(a) Part A of Schedule I is a complete and correct list of each credit
agreement, loan agreement, indenture, purchase agreement, guarantee, letter of
credit or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, the Borrower or any of its Subsidiaries outstanding
on the date hereof, or that (after giving effect to the transactions
contemplated to occur on or before the Closing Date) will be outstanding on the
Closing Date, the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $25,000, and the aggregate principal or face amount
outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of Schedule I.
(b) Part B of Schedule I is a complete and correct list of each Lien
securing Indebtedness of any Person outstanding on the date hereof, or that
(after giving effect to the transactions contemplated to occur on or before the
Closing Date) will be outstanding on the Closing Date, the aggregate principal
or face amount of which equals or exceeds (or may equal or exceed) $25,000 and
covering any Property of the Borrower or any of its Subsidiaries, and the
aggregate Indebtedness secured (or that may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in Part B of
Schedule I.
8.17 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule III is a complete and correct list
of all of the Subsidiaries of the Borrower as of the date hereof, and as of the
Closing Date (after giving effect to the transactions contemplated to occur on
or before the Closing Date), together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
ownership interests in such Subsidiary and (iii) the nature of the ownership
interests held by each such Person and the percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed in Part
A of Schedule III, (x) each of the Borrower and its Subsidiaries owns, or will
own on the Closing Date (after giving effect to the transactions contemplated to
occur on or before the Closing Date), free and clear of Liens (other than Liens
created pursuant to the Security Documents), and has the unencumbered right to
vote, all outstanding ownership interests in each Person shown to
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be held by it in Part A of Schedule III, (y) all of the issued and outstanding
capital stock of each such Person organized as a corporation is validly issued,
fully paid and nonassessable and (z) there are no outstanding Equity Rights with
respect to such Person.
(b) Set forth in Part B of Schedule III is a complete and correct list
of all Investments (other than Investments disclosed in Part A of Schedule III)
held by the Borrower or any of its Subsidiaries in any Person on the date hereof
or that will be held on the Closing Date (after giving effect to the
transactions contemplated to occur on or before the Closing Date) and, for each
such Investment, (x) the identity of the Person or Persons holding such
Investment and (y) the nature of such Investment. Except as disclosed in Part B
of Schedule III, each of the Borrower and its Subsidiaries owns (or will own,
after giving effect to the transactions contemplated to occur on or before the
Closing Date), free and clear of all Liens (other than Liens created pursuant to
the Security Documents), all such Investments.
(c) None of the Subsidiaries of the Borrower is, on the date hereof,
subject to any indenture, agreement, instrument or other arrangement of the type
described in Section 9.14.
8.18 Solvency. The aggregate value of all Properties of the Borrower
and its Subsidiaries at their present fair saleable value (i.e., the amount that
may be realized within a reasonable time, considered to be six months to one
year, either through collection or sale at the regular market value, conceiving
the latter as the amount that could be obtained for the Property in question
within such period by a capable and diligent businessman from an interested
buyer who is willing to purchase under ordinary selling conditions), exceed the
amount of all the debts and liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of the Borrower and its Subsidiaries.
The Borrower and its Subsidiaries do not, on a consolidated basis, have an
unreasonably small capital with which to conduct their business operations. The
Borrower and its Subsidiaries have, on a consolidated basis, sufficient cash
flow to enable them to pay their debts as they mature.
8.19 Property of Obligors located in Maryland and Texas. The value of
any Property of any Obligor which is located in (i) the State of Maryland does
not exceed $30,000 and (ii) the State of Texas does not exceed $2,500.
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Section 9. Covenants of the Borrower. The Borrower covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment or Loan is outstanding and until payment in full of all amounts
payable by the Borrower hereunder:
9.01 Financial Statements and Other Information. The Borrower shall
deliver to each of the Lenders:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, consolidated and consolidating
statements of income, retained earnings and cash flows of the Borrower and
its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of such consolidated
statements and balance sheet of the Borrower, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that such consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Borrower and its Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted accounting
principles, and a statement of such accountants to the effect that, in
making the examination necessary for their opinion, nothing came to their
attention that caused them to believe that the Borrower was not in
compliance with Section 9.10 and (ii) in the case of such consolidating
statements and balance sheets, by a certificate of a Financial Officer of
the Borrower, which certificate shall state that such consolidating
financial statements fairly present the respective individual
unconsolidated financial condition and results of operations of the
Borrower and of each of its Subsidiaries, in each case in accordance with
generally accepted accounting principles, consistently applied, as at the
end of, and for, such fiscal year;
(b) as soon as available and in any event within 45 days after the end
of each quarterly fiscal period of each fiscal year of the Borrower,
consolidated and consolidating statements of income, retained earnings and
cash flows of the Borrower and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and
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consolidating balance sheets of the Borrower and its Subsidiaries as at the
end of such period, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the corresponding
periods in the preceding fiscal year (except that, in the case of balance
sheets, such comparison shall be to the last day of the prior fiscal year),
accompanied by a certificate of a Financial Officer of the Borrower, which
certificate shall state that such consolidated financial statements fairly
present the consolidated financial condition and results of operations of
the Borrower and its Subsidiaries, and such consolidating financial
statements fairly present the respective individual unconsolidated
financial condition and results of operations of the Borrower and of each
of its Subsidiaries, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments);
(c) concurrently with any delivery of financial statements under
clause (a) or (b) of this Section 9.01, a certificate of a Financial
Officer of the Borrower (i) to the effect that no Default has occurred and
is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Borrower has taken or proposes to take with respect thereto) and (ii)
setting forth in reasonable detail the computations necessary to determine
whether the Borrower is in compliance with Section 9.10 as of the end of
the respective quarterly fiscal period or fiscal year;
(d) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, that the Borrower shall
have filed with the Securities and Exchange Commission (or any governmental
agency substituted therefor) or any national securities exchange;
(e) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed; and
(f) from time to time such other information regarding the financial
condition, operations, business or prospects of the Borrower or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA), or
compliance with the terms of this Agreement and
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the other Loan Documents, as any Lender or the Administrative Agent may
reasonably request.
9.02 Notices of Material Events. The Borrower will furnish the
following to the Administrative Agent and each Lender in writing:
(a) promptly after the Borrower knows or has reason to believe that
any Default has occurred, notice of such Default;
(b) prompt notice of all legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory authority or
agency, and of any material development in respect of such legal or other
proceedings, affecting the Borrower or any of its Subsidiaries, except
proceedings that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect;
(c) as soon as possible, and in any event within ten days after the
Borrower knows or has reason to believe that any ERISA Event has occurred
or exists, notice of the occurrence of such ERISA Event and a copy of any
report or notice required to be filed with or given to the PBGC by the
Borrower or an ERISA Affiliate with respect to such ERISA Event;
(d) prompt notice of the assertion of any environmental matter by any
Person against, or with respect to the activities of, the Borrower or any
of its Subsidiaries and notice of any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any environmental matter or alleged violation
that, if adversely determined, would not (either individually or in the
aggregate) have a Material Adverse Effect; and
(e) prompt notice of any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 9.02 shall be accompanied by a
statement of a Financial Officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
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9.03 Existence, Etc. Each Obligor will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses, contracts and franchises (provided that
nothing in this Section 9.03 shall prohibit any transaction expressly
permitted under Section 9.05);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay its obligations, including taxes, assessments and governmental
charges or levies, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending
such contest could not reasonably be expected to result in a Material
Adverse Effect;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may be).
9.04 Insurance. Each Obligor will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations.
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9.05 Prohibition of Fundamental Changes. The Borrower will not, nor
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution).
The Borrower will not, nor will it permit any of its Subsidiaries to,
acquire any business or Property from, or capital stock of, or be a party to any
acquisition of, any Person except for purchases of inventory and other Property
to be sold or used in the ordinary course of business, Investments permitted
under Section 9.08(f) and Capital Expenditures permitted under Section 9.10(d).
The Borrower will not, nor will it permit any of its Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, any part of its business or Property, whether now owned
or hereafter acquired (including, without limitation, receivables and leasehold
interests, but excluding (i) obsolete or worn-out Property, tools or equipment
no longer used or useful in its business so long as the amount thereof sold in
any single fiscal year by the Borrower and its Subsidiaries shall not have a
fair market value in excess of $100,000 and (ii) any inventory or other Property
sold or disposed of in the ordinary course of business and on ordinary business
terms). Notwithstanding the foregoing provisions of this Section 9.05:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into: (i) the Borrower if the Borrower shall be the continuing or
surviving corporation or (ii) any other such Subsidiary; provided that (x)
if any such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation and (y) if any such transaction shall be between a
Subsidiary Guarantor and a Subsidiary not a Subsidiary Guarantor, and such
Subsidiary Guarantor is not the continuing or surviving corporation, then
the continuing or surviving corporation shall have assumed all of the
obligations of such Subsidiary Guarantor hereunder and under the other Loan
Documents;
(b) any Subsidiary of the Borrower may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to the Borrower or a Wholly Owned Subsidiary of the Borrower;
provided that if any such sale is by a Subsidiary Guarantor to a Subsidiary
of the Borrower not a Subsidiary Guarantor, then such
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Subsidiary shall have assumed all of the obligations of such Subsidiary
Guarantor hereunder and under the other Loan Documents; and
(c) the Borrower or any Subsidiary of the Borrower may merge or
consolidate with any other Person if (i) in the case of a merger or
consolidation of the Borrower, the Borrower is the surviving corporation
and, in any other case, the surviving corporation is a Wholly Owned
Subsidiary of the Borrower and (ii) after giving effect thereto no Default
would exist hereunder.
9.06 Liens. The Borrower will not, nor will it permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule I (excluding, however, following the making of the initial Loans
hereunder, Liens securing Indebtedness to be repaid with the proceeds of
such Loans, as indicated on Schedule I);
(c) Liens imposed by any governmental authority for taxes, assessments
or charges not yet due or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Borrower or the affected Subsidiaries, as
the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days or that are being contested in
good faith and by appropriate proceedings and Liens securing judgments but
only to the extent for an amount and for a period not resulting in an Event
of Default under clause (k) of Section 10;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases, statutory obligations, surety and appeal
bonds, performance bonds and
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other obligations of a like nature incurred in the ordinary course of
business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any
of its Subsidiaries; and
(h) Liens upon real and/or tangible personal Property acquired after
the date hereof (by purchase, construction or otherwise) by the Borrower or
any of its Subsidiaries, each of which Liens either (A) existed on such
Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including the cost of construction) of such Property; provided that
(i) no such Lien shall extend to or cover any Property of the Borrower or
such Subsidiary other than the Property so acquired and improvements
thereon and (ii) the principal amount of Indebtedness secured by any such
Lien shall not exceed 80% of the fair market value (as determined in good
faith by a Financial Officer of the Borrower) of such Property at the time
it was acquired (by purchase, construction or otherwise).
9.07 Indebtedness. The Borrower will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in Part A
of Schedule I (excluding, however, following the making of the initial
Loans hereunder, the Indebtedness to be repaid with the proceeds of such
Loans, as indicated on Schedule I);
(c) Indebtedness of Subsidiaries of the Borrower to the Borrower or to
other Subsidiaries of the Borrower; and
(d) additional Indebtedness of the Borrower and its Subsidiaries
(including, without limitation, Capital Lease
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Obligations and other Indebtedness secured by Liens permitted under Section
9.06(h)) up to but not exceeding $10,000,000 at any one time outstanding.
9.08 Investments. The Borrower will not, nor will it permit any of its
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding on the date hereof and identified in Part
B of Schedule IV;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Borrower and its Subsidiaries in the Borrower
and its Subsidiaries;
(e) Hedging Agreements entered into in the ordinary course of business
as bona fide hedges and not for speculative purposes; and
(f) additional Investments (including, without limitation, Investments
in foreign Subsidiaries) up to but not exceeding $5,000,000 in the
aggregate.
9.09 Restricted Payments. The Borrower will not, nor will it permit
any of its Subsidiaries to, declare or make any Restricted Payment at any time.
Nothing herein shall be deemed to prohibit the payment of dividends by any
Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the
Borrower.
9.10 Certain Financial Covenants.
(a) Leverage Ratio. The Borrower will not permit the Leverage Ratio to
exceed the following respective ratios at any time during the following
respective periods:
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Period Ratio
------ -----
From the Closing Date
through January 1, 1999 3.50 to 1
From January 2, 1999
through January 1, 2000 3.00 to 1
From January 2, 2000
and at all times thereafter 2.5 to 1
(b) Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio to exceed the following respective ratios at any time during the
following respective periods:
Period Ratio
------ -----
From the Closing Date
through January 1, 1999 3.00 to 1
From January 2, 1999
through January 1, 2000 3.50 to 1
From January 2, 2000
and at all times thereafter 4.0 to 1
(c) Fixed Charges Ratio. The Borrower will not permit the Fixed
Charges Ratio to be less than 1.10 to 1.
(d) Capital Expenditures. The Borrower will not permit the aggregate
amount of Capital Expenditures by the Borrower and its Subsidiaries to exceed
the respective amounts for the respective periods listed in Schedule IV hereto.
9.11 Hedging Agreements. The Borrower will within 60 days of the
Closing Date enter into, and thereafter maintain in full force and effect, one
or more Hedging Agreements with one or more of the Lenders (and/or with a bank
or other financial institution having capital, surplus and undivided profits of
at least $500,000,000), that effectively enables the Borrower (in a manner
satisfactory to the Majority Lenders) to protect itself against interest rate
fluctuations as to a notional principal amount at least equal to $35,000,000.
9.12 Lines of Business. The Borrower will not, nor will it permit any
of its Subsidiaries to, engage to any substantial extent in any line or lines of
business activity
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other than the business referred to in the recitals of this Agreement.
9.13 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Borrower will not, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, Guarantees and assumptions of obligations of an Affiliate);
provided that (x) any Affiliate who is an individual may serve as a director,
officer or employee of the Borrower or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity and (y) the
Borrower and its Subsidiaries may enter into transactions (other than extensions
of credit by the Borrower or any of its Subsidiaries to an Affiliate) providing
for the leasing of Property, the rendering or receipt of services or the
purchase or sale of inventory and other Property in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Borrower and its Subsidiaries as the
monetary or business consideration that would obtain in a comparable transaction
with a Person not an Affiliate.
9.14 Restrictive Agreements. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Borrower or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule II (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the
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Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause
(a) of the foregoing shall not apply to restrictions or conditions imposed by
any agreement relating to secured Indebtedness permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) clause (a) of the foregoing shall not apply to
customary provisions in leases restricting the assignment thereof.
9.15 Subsidiary Indebtedness. The Borrower will not permit its
Subsidiaries to maintain or incur any Indebtedness (excluding any Indebtedness
of a Subsidiary owned under the Loan Documents or owed to the Borrower or
another Subsidiary).
9.16 Use of Proceeds. The Borrower will use the proceeds of the Loans
hereunder solely to finance the consummation of the Acquisition and to pay
related fees and expenses and the proceeds of the Revolving Credit Loans solely
to finance the consummation of the Acquisition and for general corporate
purposes (including working capital) of the Borrower and its subsidiaries in
ordinary course of business after the consummation of the Agreement (in
compliance with all applicable legal and regulatory requirements, including,
without limitation, Regulations G, T, U and X and the Securities Act of 1933 and
the Securities Exchange Act of 1934 and the regulations thereunder); provided
that neither the Administrative Agent nor any Lender shall have any
responsibility as to the use of any of such proceeds.
9.17 Certain Obligations Respecting Subsidiaries.
(a) Subsidiary Guarantors. The Borrower will take such action, and
will cause each of its Subsidiaries to take such action, from time to time as
shall be necessary to ensure that all Subsidiaries of the Borrower are
"Subsidiary Guarantors" hereunder. Without limiting the generality of the
foregoing, in the event that the Borrower or any of its Subsidiaries shall form
or acquire any new Subsidiary that shall constitute a Subsidiary hereunder, the
Borrower and its Subsidiaries will cause such new Subsidiary to
(i) become a "Subsidiary Guarantor" hereunder, and a "Securing Party"
under the Security Agreement pursuant to a Guarantee Assumption Agreement,
(ii) cause such Subsidiary to take such action (including, without
limitation, delivering such shares of stock, executing and delivering such
Uniform Commercial Code
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financing statements) as shall be necessary to create and perfect valid and
enforceable first priority Liens on substantially all of the personal
Property of such new Subsidiary as collateral security for the obligations
of such new Subsidiary hereunder and
(iii) deliver such proof of corporate action, incumbency of officers,
opinions of counsel and other documents as is consistent with those
delivered by each Obligor pursuant to Section 7.01 on the Closing Date or
as the Administrative Agent shall have requested.
Notwithstanding anything contained herein to the contrary, (x) no Subsidiary of
the Borrower that is organized and conducts substantially all of its business
outside of the United States of America (a "Foreign Subsidiary") shall be
required to become a "Subsidiary Guarantor" hereunder or a "Securing Party"
under the Security Agreement, (y) unless the Majority Lenders reasonably
determine that a Foreign Subsidiary (including its Subsidiaries) is material to
the Property, business, operations, financial condition, prospects or
liabilities of the Borrower and its Subsidiaries taken as a whole, no capital
stock of any Foreign Subsidiary shall be required to be pledged under the
Security Agreement and (z) notwithstanding the preceding clause (y), no more
than 65% of the voting stock of any Foreign Subsidiary shall be required to be
pledged under the Security Agreement.
(b) Ownership of Subsidiaries. The Borrower will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be necessary
to ensure that each of its Subsidiaries is a Wholly Owned Subsidiary. In the
event that any additional shares of stock shall be issued by any Subsidiary, the
respective Obligor agrees forthwith to deliver to the Administrative Agent
pursuant to the Security Agreement the certificates evidencing such shares of
stock, accompanied by undated stock powers executed in blank and to take such
other action as the Administrative Agent shall request to perfect the security
interest created therein pursuant to the Security Agreement.
9.18 Modifications of Certain Documents. The Borrower will not consent
to any modification, supplement or waiver of any Acquisition Document without
the prior consent of the Administrative Agent (with the approval of the Majority
Lenders).
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9.19 Environmental Survey. If requested by the Majority Lenders and if
such request is consented to by the Administrative Agent, the Borrower shall
furnish to the Lenders no later than 90 days after such request an environmental
survey and assessment prepared by a firm of licensed engineers (familiar with
the identification of toxic and hazardous substances) in form and scope
satisfactory to the Majority Lenders, such environmental survey and assessment
to be based upon physical on-site inspections by such firm of each of the
existing sites and facilities owned, operated or leased by the Borrower and its
Subsidiaries, as well as an historical review of the uses of such sites and
facilities and of the business and operations of the Borrower and its
Subsidiaries (including any former Subsidiaries or divisions of the Borrower or
any of its Subsidiaries that have been disposed of prior to the date of such
survey and assessment and with respect to which the Borrower or any of its
Subsidiaries may have retained liability for Environmental Claims).
Section 10. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) the Borrower shall default in the payment of any principal of any
Loan when due (whether at stated maturity or at mandatory or optional
prepayment);
(b) the Borrower shall default in the payment of any interest on any
Loan, any fee or any other amount (other than an amount referred to in
clause (a) of this Section 10) payable by it hereunder or under any other
Loan Document when due and such default shall have continued unremedied for
30 or more Business Days;
(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by the Borrower or any of its Subsidiaries, or any
certificate furnished to any Lender or the Administrative Agent pursuant to
the provisions hereof or thereof, shall prove to have been false or
misleading as of the time made or furnished in any material respect;
(d) the Borrower shall default in the performance of any of its
obligations under any of Sections 9.02, 9.05, 9.06 (except in cases where
such default under 9.06 is involuntary), 9.07, 9.09, 9.10, 9.13, 9.14,
9.15, 9.17 or 9.18 or any Obligor shall default in the performance of any
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of its obligations under Section 4.02 or 5.02 of the
Secur ity Agreement;
(e) any Obligor shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Section 10) or any other Loan
Document and such failure shall continue unremedied for a period of 30 or
more days after notice thereof to the Borrower by the Administrative Agent
or any Lender (through the Administrative Agent);
(f) the Borrower or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $1,000,000 or more; or the Borrower or any of its
Subsidiaries shall default in the payment when due of any amount
aggregating $1,000,000 or more under any Hedging Agreement;
(g) any event specified in any note, agreement, indenture or other
document evidencing or relating to any other Indebtedness aggregating
$1,000,000 or more of the Borrower or any of its Subsidiaries shall occur
if the effect of such event is to cause, or (with the giving of any notice
or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether
by redemption, purchase, offer to purchase or otherwise), prior to its
stated maturity or to have the interest rate thereon reset to a level so
that securities evidencing such Indebtedness trade at a level specified in
relation to the par value thereof; or any event specified in any Hedging
Agreement shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit, termination
or liquidation payment or payments aggregating $1,000,000 or more to become
due];
(h) a proceeding or case shall be commenced, without the application
or consent of the Borrower or its affected Subsidiary, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of a receiver, custodian, trustee,
examiner, liquidator or the like of the Borrower or such Subsidiary or of
all or any substantial part of its Property, or (iii) similar relief in
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respect of the Borrower or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against the Borrower or
any of its Subsidiaries shall be entered in an involuntary case under the
Bankruptcy Code;
(i) the Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code or (vi) take any corporate action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due;
(k) a final judgment or judgments for the payment of money of
$1,000,000 or more in the aggregate shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction
against the Borrower or any of its Subsidiaries and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within 30 days from the date of
entry thereof and the Borrower or the relevant Subsidiary shall not, within
such period of 30 days, or such longer period during which execution of the
same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal;
(l) an event or condition specified in Section 9.01(c) shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Borrower or any ERISA Affiliate shall incur
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or in the opinion of the Majority Lenders shall be reasonably likely to
incur a liability to a Plan, a Multiemployer Plan or the PBGC (or any
combination of the foregoing) that, in the determination of the Majority
Lenders, would (either individually or in the aggregate) have a Material
Adverse Effect;
(m) a reasonable basis shall exist for the assertion against the
Borrower or any of its Subsidiaries, or any predecessor in interest of the
Borrower or any of its Subsidiaries or Affiliates, of (or there shall have
been asserted against the Borrower or any of its Subsidiaries) any claims
or liabilities, whether accrued, absolute or contingent, based on or
arising from the generation, storage, transport, handling or disposal of
Hazardous Materials by the Borrower or any of its Subsidiaries, Affiliates
or predecessors that, in the judgment of the Majority Lenders, are
reasonably likely to be determined adversely to the Borrower or any of its
Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect (insofar
as such amount is payable by the Borrower or any of its Subsidiaries but
after deducting any portion thereof that is reasonably expected to be paid
by other creditworthy Persons jointly and severally liable therefor);
(n) Any one or more of the following shall occur and be continuing:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities and Exchange Act of 1934 (the "Exchange Act"))
is or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
20% of the voting stock of Borrower; or
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of
the Borrower (together with any new directors whose election by such
Board of Directors or whose nomination for election by the Borrower's
shareholders was approved by a vote of a majority of the Borrower's
directors then still in office who either were directors at the
beginning of
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such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
of the Borrower's directors then in office; or
(o) the Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than Liens
permitted under Section 9.06 or under the respective Security Documents),
or, except for expiration in accordance with its terms, any of the Security
Documents shall for whatever reason be terminated or cease to be in full
force and effect, or the enforceability thereof shall be contested by any
Obligor;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (h) or (i) of this Section 10 with respect to any Obligor, the
Administrative Agent may, by notice to the Borrower, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Obligors hereunder
and under the Notes (including, without limitation, any amounts payable under
Section 5.05) to be forthwith due and payable (provided that (A) if so requested
by the Majority Revolving Credit Lenders, the Administrative Agent shall take
such action with respect to the Revolving Credit Commitments and/or the
Revolving Credit Loans and such interest and other amounts to the extent owed to
the Revolving Credit Lender and (B) if so requested by the Majority Term Loan
Lenders, the Administrative Agent shall take such action with respect to the
Term Loan Commitments and the Term Loans and such interest and other amounts to
the extent owed to the Term Loan Lenders), whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor; and (2) in the case of the occurrence of an Event of Default referred
to in clause (h) or (i) of this Section 10 with respect to any Obligor, the
Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Obligors hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor.
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Section 11. The Administrative Agent and the Arranger.
11.01 Appointment, Powers and Immunities. Each Lender hereby appoints
and authorizes the Administrative Agent to act as its agent hereunder and under
the other Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and of the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
11.05 and the first sentence of Section 11.06 hereof shall include reference to
its affiliates and its own and its affiliates' officers, directors, employees
and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not
by reason of this Agreement or any other Loan Document be a trustee for any
Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Loan Document, or in any certificate or other document referred
to or provided for in, or received by any of them under, this Agreement or
any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
any other Loan Document or any other document referred to or provided for
herein or therein or for any failure by the Borrower or any other Person to
perform any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of
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any such agents or attorneys-in-fact selected by it in good faith. The
Administrative Agent may deem and treat the payee (or Registered Holder, as the
case may be) of a Note as the holder thereof for all purposes hereof unless and
until a notice of the assignment or transfer thereof shall have been filed with
the Administrative Agent, together with the consent of the Borrower to such
assignment or transfer (to the extent required by Section 12.06(b) hereof).
11.02 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders, and such instructions of the Majority Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
11.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Borrower specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Lenders except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders or all of the Lenders.
11.04 Rights as a Lender. With respect to its Commitment and the Loans
made by it, LCPI (and any successor acting as Administrative Agent) in its
capacity as a Lender
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hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Administrative
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Administrative Agent in its individual capacity. LCPI
(and any successor acting as Administrative Agent) and its affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make investments in and generally engage in any kind of banking, trust
or other business with the Credit Parties (and any of their Subsidiaries or
Affiliates) as if it were not acting as the Administrative Agent, and LCPI (and
any such successor) and its affiliates may accept fees and other consideration
from the Credit Parties for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Arranger (to the extent not reimbursed under
Section 12.04 hereof, but without limiting the obligations of the Borrower under
said Section 12.04) ratably in accordance with the aggregate principal amount of
the Loans held by the Lenders (or, if no Loans are at the time outstanding,
ratably in accordance with their respective Commitments), for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative Agent or the
Arranger (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement or
any other Loan Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses that the Borrower is obligated to pay
under Section 12.04 hereof, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent, Arranger and Other
Lenders. Each Lender agrees that it has, independently and without reliance on
the Administrative Agent, the Arranger or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and its Subsidiaries and decision to enter into this
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Agreement and that it will, independently and without reliance upon the
Administrative Agent, the Arranger or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or under any other Loan Document. Neither the Administrative Agent nor
the Arranger shall be required to keep itself informed as to the performance or
observance by any Credit Party of this Agreement or any of the other Loan
Documents or any other document referred to or provided for herein or therein or
to inspect the Properties or books of the Borrower or any of its Subsidiaries.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Administrative Agent hereunder or
under the Security Documents, neither the Administrative Agent nor the Arranger
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Borrower or any of its Subsidiaries (or any of their affiliates) that may come
into the possession of the Administrative Agent, the Arranger or any of their
respective affiliates.
11.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 11.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
11.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Borrower, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York. Upon the acceptance of any appointment as
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Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. After any retiring Administrative Agent's resignation
or removal hereunder as Administrative Agent, the provisions of this Section 11
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
11.09 Consents under Other Loan Documents. Except as otherwise
provided in Section 12.03 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Loan Documents, provided that, without the prior consent of each Lender, the
Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under any
Security Document providing for collateral security, agree to additional
obligations being secured by such collateral security (unless the Lien for such
additional obligations shall be junior to the Lien in favor of the other
obligations secured by such Security Document, in which event the Administrative
Agent may consent to such junior Lien provided that it obtains the consent of
the Majority Lenders thereto), alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents or
release any guarantor under any Security Document from its guarantee obligations
thereunder, except that no such consent shall be required, and the
Administrative Agent is hereby authorized, to release any Lien covering Property
(and to release any such guarantor) that is the subject of either a disposition
of Property permitted hereunder or a disposition to which the Majority Lenders
have consented.
11.10 Arranger. Except as provided in this Section 11, and in Section
12.06(b), the Arranger shall not have any rights or obligations under this
Agreement or in connection with the syndication of the Commitments hereunder,
other than in its capacity as a "Lender" hereunder.
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Section 12. Miscellaneous.
12.01 Notices. All notices, requests and other communications provided
for herein and in the Security Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telecopy), delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof (below the name of the Borrower, in the case of any
Subsidiary Guarantor); or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.02 Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Each Obligor irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent or any Lender relating in any way to this Agreement should
be dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by any Obligor relating in any way to this Agreement
whether or not commenced earlier. To the fullest extent permitted by applicable
law, the Obligors shall take all measures necessary for any such action or
proceeding commenced by the Administrative Agent or any Lender to proceed to
judgment prior to the entry of judgment in any such action or proceeding
commenced by any Obligor.
12.03 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Borrower and the Majority Lenders, or
by the Borrower and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent
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acting with the consent of the Majority Lenders; provided that: (a) no
modification, supplement or waiver shall, unless by an instrument signed by all
of the Lenders or by the Administrative Agent acting with the consent of all of
the Lenders: (i) increase, or extend the term of any of the Commitments, or
extend the time or waive any requirement for the reduction or termination of any
of the Commitments, (ii) extend the date fixed for the payment of principal of
or interest on any Loan or any fee hereunder, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest is payable
thereon or any fee is payable hereunder, (v) alter the rights or obligations of
the Borrower to prepay Loans, (vi) alter the manner in which payments or
prepayments of principal, interest or other amounts hereunder shall be applied
as between the Lenders or Types or Classes of Loans, (vii) alter the terms of
this Section 12.03, (viii) modify the definition of the term "Majority Lenders",
"Majority Revolving Credit Lenders" or "Majority Term Loan Lenders", or modify
in any other manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
(ix) release any Subsidiary Guarantor from any of its guarantee obligations
under Section 6, or (x) waive any of the conditions precedent set forth in
Section 7.01; (b) any modification or supplement of Section 11, or of any of the
rights or duties of the Administrative Agent hereunder, shall require the
consent of the Administrative Agent; and (c) any modification or supplement of
Section 6 shall require the consent of each Subsidiary Guarantor.
Anything in this Agreement to the contrary notwithstanding, no waiver
or modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrower to satisfy a
condition precedent to the making of a Revolving Credit Loan shall be effective
against the Revolving Credit Lenders for the purposes of the Revolving Credit
Commitments unless the Majority Revolving Credit Lenders shall have concurred
with such waiver or modification.
12.04 Expenses, Etc. The Borrower agrees to pay or reimburse each of
the Lenders, LCPI and the Administrative Agent for: (a) all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to LCPI) in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement and the other Loan
Documents and the making of the Loans hereunder and (ii) the negotiation or
preparation of any
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modification, supplement or waiver of any of the terms of this Agreement or any
of the other Loan Documents (whether or not consummated); (b) all reasonable
out-of-pocket costs and expenses of the Lenders and the Administrative Agent
(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceedings resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
12.04; and (c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein.
The Borrower hereby agrees to indemnify the Administrative Agent,
LCPI, the Arranger and each Lender and their respective directors, officers,
employees, attorneys and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any of
them (including, without limitation, any and all losses, liabilities, claims,
damages or expenses incurred by the Administrative Agent to any Lender, whether
or not the Administrative Agent or any Lender is a party thereto) arising out of
or by reason of any investigation or litigation or other proceedings (including
any threatened investigation or litigation or other proceedings) relating to the
Loans hereunder or any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the Loans hereunder, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). Without limiting the generality of the foregoing, the Borrower
will (x) indemnify the Administrative Agent for any payments that the
Administrative Agent is required to make under any indemnity issued to any bank
referred to in Section 4.02 of the Security Agreement to which remittances in
respect of Accounts, as defined therein, are to be made and (y) indemnify
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the Administrative Agent, LCPI, the Arranger and each Lender from, and hold the
Administrative Agent, LCPI, the Arranger and each Lender harmless against, any
losses, liabilities, claims, damages or expenses described in the preceding
sentence (but excluding, as provided in the preceding sentence, any loss,
liability, claim, damage or expense incurred by reason of the gross negligence
or willful misconduct of the Person to be indemnified) arising under any
Environmental Law as a result of the past, present or future operations of the
Borrower or any of its Subsidiaries (or any predecessor in interest to the
Borrower or any of its Subsidiaries), or the past, present or future condition
of any site or facility owned, operated or leased at any time by the Borrower or
any of its Subsidiaries (or any such predecessor in interest), or any Release or
threatened Release of any Hazardous Materials at or from any such site or
facility, excluding any such Release or threatened Release that shall occur
during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies hereunder
or under any of the Security Documents, but including any such Release or
threatened Release occurring during such period that is a continuation of
conditions previously in existence, or of practices employed by the Borrower and
its Subsidiaries, at such site or facility.
12.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.06 Assignments and Participations.
(a) No Obligor may assign any of its rights or obligations hereunder
or under the Notes without the prior consent of all of the Lenders and the
Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes and its
Commitments (but only with the consent of the Administrative Agent and the
Arranger and, in the case of an outstanding Commitment, the Borrower); provided
that
(i) no such consent by the Borrower, the Administrative Agent or the
Arranger shall be required in the case of any assignment (x) to another
Lender or (y) under which the Arranger is the assignor or the assignee;
(ii) except to the extent the Borrower, the Administrative Agent and
the Arranger shall otherwise
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consent, any such partial assignment (other than to another Lender) shall
be in an amount at least equal to $5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit Loans,
Revolving Credit Note or Revolving Credit Commitment shall be made in such
manner so that the same portion of its Revolving Credit Loans, Revolving
Credit Note and Revolving Credit Commitment is assigned to the respective
assignee; and
(iv) each such assignment by a Lender of its Term Loans or Term Loan
Commitment shall be made in such manner so that the same portion of its
Term Loans and Term Loan Commitment is assigned to the respective assignee
provided further that any consent of the Borrower otherwise required under
this paragraph shall not be required if an Event of Default under clause
(h) or (i) of Section 10 has occurred and is continuing. Upon execution and
delivery by the assignee to the Borrower and the Administrative Agent of an
instrument in writing pursuant to which such assignee agrees to become a
"Lender" hereunder (if not already a Lender) having the Commitment(s) and
Loans specified in such instrument, and upon consent thereto by the
Borrower, the Administrative Agent and the Arranger to the extent required
above, the assignee shall have, to the extent of such assignment (unless
otherwise consented to by the Borrower the Administrative Agent and the
Arranger, the obligations, rights and benefits of a Lender hereunder
holding the Commitment(s) and Loans (or portions thereof) assigned to it
(in addition to the Commitment(s) and Loans, if any, theretofore held by
such assignee) and the assigning Lender shall, to the extent of such
assignment, be released from the Commitment(s) (or portion(s) thereof) so
assigned. Upon each such assignment the assigning Lender shall pay the
Administrative Agent an assignment fee of $2,000 provided that no fee shall
be payable if the Arranger is the assignor or the assignee pursuant to such
assignment.
(c) A Lender may sell or agree to sell to one or more other Persons
(each a "Participant") a participation in all or any part of any Loans held by
it, or in its Commitments, provided that such Participant shall not have any
rights or obligations under this Agreement or any Note or any other Loan
Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender in
favor of the Participant). All amounts payable by the Borrower to any Lender
under Section 5 in respect of Loans held by it and its Commitments shall be
determined as if such
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Lender had not sold or agreed to sell any participations in such Loans and
Commitments, and as if such Lender were funding each of such Loans and
Commitments in the same way that it is funding the portion of such Loans and
Commitments in which no participations have been sold. In no event shall a
Lender that sells a participation agree with the Participant to take or refrain
from taking any action hereunder or under any other Loan Document except that
such Lender may agree with the Participant that it will not, without the consent
of the Participant, agree to (i) increase or extend the term of such Lender's
related Commitment, (ii) extend the date fixed for the payment of principal of
or interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee or (v) consent to any
modification, supplement or waiver hereof or of any of the other Loan Documents
to the extent that the same, under Section 11.09 or 12.03, requires the consent
of each Lender.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.06, any Lender may (without notice
to the Borrower, the Administrative Agent, the Arranger or any other Lender and
without payment of any fee) assign and pledge all or any portion of its Loans
and its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank, and
such Loans and Notes shall be fully transferrable as provided therein. No such
assignment shall release the assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
(f) Anything in this Section 12.06 to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan held by it hereunder
to the Borrower or any of its Affiliates or Subsidiaries without the prior
consent of each Lender.
(g) At the request of any Lender that is not a U.S. Person and is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code, the Borrower
shall maintain, or
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cause to be maintained, a register (the "Register") that, at the request of the
Borrower, shall be kept by the Administrative Agent on behalf of the Borrower at
no charge to the Borrower at the address to which notices to the Administrative
Agent are to be sent hereunder, on which it enters the name of such Lender as
the registered owner of each Registered Loan held by such Lender. A Registered
Loan (and the Registered Note, if any, evidencing the same) may be assigned or
otherwise transferred in whole or in part by registration of such assignment or
transfer on the Register (and each Registered Note shall expressly so provide).
Any assignment or transfer of all or part of such Loan (and the Registered Note,
if any, evidencing the same) may be effected by registration of such assignment
or transfer on the Register, together with the surrender of the Registered Note,
if any, evidencing the same duly endorsed by (or accompanied by a written
instrument of assignment or transfer duly executed by) the holder of such
Registered Note, whereupon, at the request of the designated assignee(s) or
transferee(s), one or more new Registered Notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s). Prior to
the registration of assignment or transfer of any Registered Loan (and the
Registered Note, if any, evidencing the same), the Borrower shall treat the
Person in whose name such Loan (and the Registered Note, if any, evidencing the
same) is registered as the owner thereof for the purpose of receiving all
payments thereon and for all other purposes, notwithstanding notice to the
contrary.
(h) The Register shall be available for inspection by the Borrower and
any Lender that is a Registered Holder at any reasonable time upon reasonable
prior notice.
12.07 Survival. The obligations of the Borrower under Sections 5.01,
5.05, 5.06 and 12.04, the obligations of each Subsidiary Guarantor under Section
6.03, and the obligations of the Lenders under Section 11.05, shall survive the
repayment of the Loans and the termination of the Commitments and, in the case
of any Lender that may assign any interest in its Commitment(s) or Loans
hereunder, shall survive the making of such assignment, notwithstanding that
such assigning Lender may cease to be a "Lender" hereunder. In addition, each
representation and warranty made, or deemed to be made by a notice of any Loan,
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Lender shall be deemed to have waived, by reason of making any
Loan hereunder, any Default that may arise by reason of such representation or
warranty proving to have been false or misleading in any material respect,
notwithstanding that such Lender or the Administrative Agent may
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have had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
12.08 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.09 Governing Law; Submission to Jurisdiction. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each Obligor hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
12.10 WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, THE ADMINISTRATIVE
AGENT, THE ARRANGER AND EACH LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
12.11 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
By /s/ Peter P. Bassermann
---------------------------------
Name: Peter P. Bassermann
Title: President and
Chief Executive Officer
Address for Notices:
International Telecommunication
Data Systems, Inc.
225 High Ridge Road
Stamford, CT 06905
Attention: Peter Masanotti, Esq.
Telecopier No.: 203-316-4886
Telephone No.: 203-321-1300 x259
Credit Agreement
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LENDERS
-------
Revolving Credit Commitment LEHMAN COMMERCIAL PAPER INC.
$30,000,000
Term Loan Commitment
$70,000,000
By /s/ Dennis J. Dee
-----------------------------------
Name: Dennis J. Dee
Title: Authorized Signatory
Lending Office for Base Rate Loans:
Lehman Commercial Paper Inc.
3 World Financial Center
16th Floor
New York, New York 10285
Lending Office for Eurodollar
Loans:
Lehman Commercial Paper Inc.
3 World Financial Center
16th Floor
New York, New York 10285
Address for Notices:
Lehman Commercial Paper Inc.
3 World Financial Center
16th Floor
New York, New York 10285
Attention: Michelle Zorn
Telecopier No.: 212-528-7471
Telephone No.: 212-526-8625
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LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By /s/ Dennis J. Dee
-----------------------------------
Name: Dennis J. Dee
Title: Authorized Signatory
Address for Notices to LCPI
as Administrative Agent:
Lehman Commercial Paper Inc.
3 World Financial Center
16th Floor
New York, New York 10285
Attention: Michelle Zorn
Telecopier No.: 212-528-7471
Telephone No.: 212-526-8625
LEHMAN COMMERCIAL PAPER INC.,
as Arranger
By /s/ Dennis J. Dee
---------------------------------
Name: Dennis J. Dee
Title: Authorized Signatory
Credit Agreement
----------------
0
<PAGE>
SCHEDULE I
Material Agreements and Liens
-----------------------------
[See Section 7.01(i), Section 8.16, Section 9.06(b) and Section 9.07(b)]
Part A - Material Agreements
First Union Bank Letter of Credit for approximately $250,000
Part B - Liens
UCC filings for Leased Equipment
First Union Bank Letter of Credit for approximately $250,000
Schedule I to Credit Agreement
------------------------------
<PAGE>
SCHEDULE II
Restrictive Agreements
----------------------
[See Section 9.14]
None
Schedule II to Credit Agreement
-------------------------------
<PAGE>
SCHEDULE III
Subsidiaries and Investments
[See Section 8.17 and Section 9.08(a)]
Part A - Subsidiaries
ITDS Ltda, a Brazilian Limited Liability Company. MDS, Inc. holds a 99%
quota and ITDS Holding Company LLC holds a 1% quota.
MDS, Inc., a Delaware corporation. The Borrower holds 100% of the issued
and outstanding capital stock.
ITDS Holding Company LLC, a Delaware Limited Liability Company. The sole
member is MDS, Inc.
ITDS Intelicom Services, Inc., a Delaware corporation. The Borrower holds
100% of the issued and outstanding capital stock upon the closing of the
Acquisition.
Part B - Investments
Approximately $35,000,000 brokered through Lehman Brothers of which
approximately $25,000,000 is held in overnight treasuries and approximately
$10,000,000 is held in bank deposits.
Schedule III to Credit Agreement
--------------------------------
<PAGE>
SCHEDULE IV
Capital Expenditures
--------------------
[See Section 9.10(d)]
Period Amount
------ ------
From the Closing Date
through December 31, 1998 $7,500,000
From January 1, 1999
through December 31, 1999 $7,500,000
Per annum amount for
each calendar year thereafter $5,000,000
Schedule IV to Credit Agreement
-------------------------------
<PAGE>
EXHIBIT A-1
[Form of Revolving Credit Note]
PROMISSORY NOTE
$_______________ January 2, 1998
New York, New York
FOR VALUE RECEIVED, INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS,
INC., a Delaware corporation (the "Borrower"), hereby promises to pay to
__________________ (the "Lender") [or registered assigns](1), for account of its
respective Applicable Lending Offices provided for by the Credit Agreement
referred to below, at the principal office of Lehman Commercial Paper Inc. at 3
World Financial Center, New York, New York 10285, the principal sum of
_______________ Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Revolving Credit Loans made by the Lender to the
Borrower under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Revolving Credit Loan, at such office, in like
money and funds, for the period commencing on the date of such Revolving Credit
Loan until such Revolving Credit Loan shall be paid in full, at the rates per
annum and on the dates provided in the Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrower as provided in Section 12.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Revolving Credit Loan made by the Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation
thereof, provided that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a payment
when due of any amount owing under the Credit Agreement or hereunder in respect
of the Revolving Credit Loans made by the Lender.
- --------
(1) Bracketed language to be inserted into Registered Notes
Revolving Credit Note
---------------------
<PAGE>
- 2 -
This Note is one of the Revolving Credit Notes [(constituting a
Registered Note)] referred to in the Credit Agreement dated as of January 2,
1998 (as modified and supplemented and in effect from time to time, the "Credit
Agreement") between the Borrower, the Subsidiary Guarantors party thereto, the
lenders party thereto (including the Lender) and Lehman Commercial Paper Inc, as
Administrative Agent and Arranger, and evidences Revolving Credit Loans made by
the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
By _________________________
Title:
Revolving Credit Note
---------------------
<PAGE>
- 3 -
SCHEDULE OF REVOLVING CREDIT LOANS
This Note evidences Revolving Credit Loans made, Continued or
Converted under the within-described Credit Agreement to the Borrower, on the
dates, in the principal amounts, of the Types, bearing interest at the rates and
having Interest Periods (if applicable) of the durations set forth below,
subject to the payments, Continuations, Conversions and prepayments of principal
set forth below:
Amount
Date Paid,
Made, Principal Duration Prepaid,
Continued Amount Type of Continued Unpaid
or of of Interest Interest or Principal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------- --------
Revolving Credit Note
---------------------
<PAGE>
EXHIBIT A-2
[Form of Term Loan Note]
PROMISSORY NOTE
$_______________ January 2, 1998
New York, New York
FOR VALUE RECEIVED, INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS,
INC., a Delaware corporation (the "Borrower"), hereby promises to pay to
__________________ (the "Lender") [or registered assigns](1), for account of its
respective Applicable Lending Offices provided for by the Credit Agreement
referred to below, at the principal office of Lehman Commercial Paper Inc. at 3
World Financial Center, New York, New York 10285, the principal sum of
_______________ Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Term Loans made by the Lender to the Borrower
under the Credit Agreement), in lawful money of the United States of America and
in immediately available funds, on the dates and in the principal amounts
provided in the Credit Agreement, and to pay interest on the unpaid principal
amount of each such Term Loan, at such office, in like money and funds, for the
period commencing on the date of such Term Loan until such Term Loan shall be
paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrower as provided in Section 12.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Term Loan made by the Lender to the Borrower, and each
payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
that the failure of the Lender to make any such recordation or endorsement shall
not affect the obligations of the Borrower to make a payment when due of any
amount owing under the Credit Agreement or hereunder in respect of the Term
Loans made by the Lender.
- --------
(1) Bracketed language to be inserted into Registered Notes
Term Loan Note
--------------
<PAGE>
- 2 -
This Note is one of the Term Loan Notes [(constituting a Registered
Note)] referred to in the Credit Agreement dated as of January 2, 1998 (as
modified and supplemented and in effect from time to time, the "Credit
Agreement") between the Borrower, the Subsidiary Guarantors party thereto, the
lenders party thereto (including the Lender) and Lehman Commercial Paper Inc, as
Administrative Agent and Arranger, and evidences Term Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective meanings
assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Term
Loans upon the terms and conditions specified therein.
Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance
with, the law of the State of New York.
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
By _______________________________
Title:
Term Loan Note
--------------
<PAGE>
- 3 -
SCHEDULE OF TERM LOANS
This Note evidences Term Loans made, Continued or Converted under the
within-described Credit Agreement to the Borrower, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Paid,
Made, Principal Duration Prepaid,
Continued Amount Type of Continued Unpaid
or of of Interest Interest or Principal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ -------
Term Loan Note
--------------
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 2, 1998, between INTERNATIONAL
TELECOMMUNICATION DATA SYSTEMS, INC., a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Borrower"); each of the
Subsidiaries of the Borrower identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereof (individually, a "Subsidiary
Guarantor" and, collectively, the "Subsidiary Guarantors" and, together with the
Borrower, the "Obligors"); and LEHMAN COMMERCIAL PAPER INC, as administrative
agent for the lenders or other financial institutions or entities party, as
lenders, to the Credit Agreement referred to below (in such capacity, together
with its successors in such capacity, the "Administrative Agent").
The Borrower, the Subsidiary Guarantors, certain lenders and the
Administrative Agent are parties to a Credit Agreement dated as of January 2,
1998 (as modified and supplemented and in effect from time to time, the "Credit
Agreement"), providing, subject to the terms and conditions thereof, for loans
to be made by said lenders to the Borrower in an aggregate principal amount not
exceeding $100,000,000. In addition, the Borrower may from time to time be
obligated to said lenders in respect of certain other indebtedness (such
indebtedness being herein referred to as the "Other Indebtedness").
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder and to extend credit that would constitute Other
Indebtedness, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Obligor has agreed to pledge
and grant a security interest in the Collateral (as hereinafter defined) as
security for the Secured Obligations (as so defined). Accordingly, the parties
hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
herein as defined therein. In addition, as used herein:
"Accounts" has the meaning assigned to such term in Section 3(d)
hereof.
Security Agreement
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<PAGE>
-2-
"Collateral" has the meaning assigned to such term in Section 3
hereof.
"Collateral Account" has the meaning assigned to such term in Section
4.01 hereof.
"Copyright Collateral" means all Copyrights, whether now owned or
hereafter acquired by any Obligor, including each Copyright identified in
Annex 2 hereto.
"Copyrights" means all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"Documents" has the meaning assigned to such term in Section 3(j)
hereof.
"Equipment" has the meaning assigned to such term in Section 3(h)
hereof.
"Instruments" has the meaning assigned to such term in Section 3(e)
hereof.
"Intellectual Property" means, collectively, all Copyright Collateral,
all Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements
granted to any Obligor with respect to any of the foregoing, in each case
whether now or hereafter owned or used including, without limitation, the
licenses or other agreements with respect to the Copyright Collateral, the
Patent Collateral or the Trademark Collateral, listed in Annex 5 hereto;
(c) all information, customer lists, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data, sales
data and other information relating to sales or service of products now or
hereafter manufactured; (e) all accounting information and all media in
which or on which any information or knowledge or data or records may be
recorded or stored and all computer programs used for the compilation
Security Agreement
------------------
<PAGE>
-3-
or printout of such information, knowledge, records or data; (f) all
licenses, consents, permits, variances, certifications and approvals of
governmental agencies now or hereafter held by any Obligor; and (g) all
causes of action, claims and warranties now or hereafter owned or acquired
by any Obligor in respect of any of the items listed above.
"Inventory" has the meaning assigned to such term in Section 3(f)
hereof.
"Issuers" means, collectively, the respective corporations identified
beneath the names of the Obligors on Annex 1 hereto under the caption
"Issuer".
"Motor Vehicles" means motor vehicles, tractors, trailers and other
like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patent Collateral" means all Patents, whether now owned or hereafter
acquired by any Obligor, including each Patent identified in Annex 3
hereto.
"Patents" means all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Pledged Stock" has the meaning assigned to such term in Section 3(a)
hereof.
"Secured Obligations" means, collectively, (a) in the case of the
Borrower, the principal and interest on the Loans made by the Lenders to,
and the Note(s) held by each Lender of, the Borrower and all other amounts
from time to time owing to the Lenders or the Administrative Agent by the
Borrower under the Loan Documents (including, without limitation, all Other
Indebtedness and interest thereon), (b) in the case of the Subsidiary
Guarantors, all obligations of the Subsidiary Guarantors under the Credit
Agreement and the other Loan Documents (including, without limitation, in
respect of their Guarantee under Section 6 of
Security Agreement
------------------
<PAGE>
-4-
the Credit Agreement, and (c) all obligations of the Obligors to the
Lenders and the Administrative Agent hereunder.
"Stock Collateral" means, collectively, the Collateral described in
clauses (a) through (c) of Section 3 hereof and the proceeds of and to any
such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and
other papers.
"Trademark Collateral" means all Trademarks, whether now owned or
hereafter acquired by any Obligor, including each Trademark identified in
Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral
does not and shall not include any Trademark that would be rendered
invalid, abandoned, void or unenforceable by reason of its being included
as part of the Trademark Collateral.
"Trademarks" means all trade names, trademarks and service marks,
logos, trademark and service mark registrations, and applications for
trademark and service mark registrations, including, without limitation,
all renewals of trademark and service mark registrations, all rights
corresponding thereto throughout the world, the right to recover for all
past, present and future infringements thereof, all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together, in
each case, with the product lines and goodwill of the business connected
with the use of, and symbolized by, each such trade name, trademark and
service mark.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Each Obligor represents and
warrants to the Lenders and the Administrative Agent that:
(a) Such Obligor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Section 3 hereof
and no Lien exists or will exist upon such Collateral at any time, except
for liens permitted under Section 9.06(h) of the Credit Agreement and
except for the pledge and security interest in favor of the Administrative
Agent for the benefit of the Lenders created
Security Agreement
------------------
<PAGE>
-5-
or provided for herein, which pledge and security interest constitute a
first priority perfected pledge and security interest in and to all of such
Collateral.
(b) The Pledged Stock evidenced by the certificates identified under
the name of such Obligor in Annex 1 hereto is, and all other Pledged Stock
in which such Obligor shall hereafter grant a security interest pursuant to
Section 3 hereof will be, duly authorized, validly existing, fully paid and
non-assessable and none of such Pledged Stock is or will be subject to any
contractual restriction, or any restriction under the charter or by-laws of
the respective Issuer of such Pledged Stock, upon the transfer of such
Pledged Stock (except for any such restriction contained herein or in the
Credit Agreement).
(c) The Pledged Stock evidenced by the certificates identified under
the name of such Obligor in Annex 1 hereto constitutes all of the issued
and outstanding shares of capital stock of any class of the Issuers
beneficially owned by such Obligor on the date hereof (whether or not
registered in the name of such Obligor) and said Annex 1 correctly
identifies, as at the date hereof, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such
Pledged Stock and the respective number of shares (and registered owners
thereof) represented by each such certificate.
(d) Annexes 2, 3 and 4 hereto, respectively, set forth under the name
of such Obligor a complete and correct list of all Copyrights, Patents and
Trademarks owned by such Obligor on the date hereof; except pursuant to
licenses and other user agreements entered into by such Obligor in the
ordinary course of business that are listed in Annex 5 hereto, such Obligor
owns and possesses the right to use, and has done nothing to authorize or
enable any other Person to use, any Copyright, Patent or Trademark listed
in said Annexes 2, 3 and 4, and all registrations listed in said Annexes 2,
3 and 4 are valid and in full force and effect; except as may be set forth
in said Annex 5, such Obligor owns and possesses the right to use all
Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property on
the date hereof.
Security Agreement
------------------
<PAGE>
-6-
(f) To such Obligor's knowledge, (i) except as set forth in Annex 5
hereto, there is no violation by others of any right of such Obligor with
respect to any Copyright, Patent or Trademark listed in Annexes 2, 3 and 4
hereto, respectively, under the name of such Obligor and (ii) such Obligor
is not infringing in any respect upon any Copyright, Patent or Trademark of
any other Person; and no proceedings have been instituted or are pending
against such Obligor or, to such Obligor's knowledge, threatened, and no
claim against such Obligor has been received by such Obligor, alleging any
such violation, except as may be set forth in said Annex 5.
(g) Such Obligor does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
(h) Any goods now or hereafter produced by such Obligor or any of its
Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as
amended.
Section 3. Collateral. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Obligor hereby pledges and grants to the
Administrative Agent, for the benefit of the Lenders as hereinafter provided, a
security interest in all of such Obligor's right, title and interest in the
following property, whether now owned by such Obligor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) the shares of stock of the Issuers represented by the certificates
identified in Annex 1 hereto under the name of such Obligor and all other
shares of capital stock of whatever class of the the Issuers, now or
hereafter owned by such Obligor, in each case together with the
certificates evidencing the same (collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged
Stock or otherwise received in exchange therefor,
Security Agreement
------------------
<PAGE>
-7-
and any subscription warrants, rights or options issued to the holders of,
or otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of such Obligor under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which an Issuer is not the
surviving corporation, all shares of each class of the capital stock of the
successor corporation (unless such successor corporation is such Obligor
itself) formed by or resulting from such consolidation or merger (the
Pledged Stock, together with all other certificates, shares, securities,
properties or moneys as may from time to time be pledged hereunder pursuant
to clause (a) or (b) above and this clause (c) being herein collectively
called the "Stock Collateral");
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Obligor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to such Obligor in respect of any loans or advances or for
Inventory and Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to such Obligor under any
guarantee (including a letter of credit) of the purchase price of Inventory
and Equipment sold by such Obligor and all tax refunds (such accounts,
general intangibles and moneys due and to become due being herein called
collectively "Accounts");
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Obligor evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
(f) all inventory (as defined in the Uniform Commercial Code) of such
Obligor, all goods obtained by such Obligor in exchange for such inventory,
and any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto (herein
collectively called "Inventory");
Security Agreement
------------------
<PAGE>
-8-
(g) all Intellectual Property and all other accounts or general
intangibles of such Obligor not constituting Intellectual Property or or
Accounts;
(h) all equipment (as defined in the Uniform Commercial Code) of such
Obligor, including all Motor Vehicles (herein collectively called
"Equipment");
(i) each contract and other agreement of such Obligor relating to the
sale or other disposition of Inventory and Equipment;
(j) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of such Obligor covering, evidencing or representing
Inventory and Equipment (herein collectively called "Documents");
(k) all rights, claims and benefits of such Obligor against any Person
arising out of, relating to or in connection with Inventory and Equipment
purchased by such Obligor, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory and Equipment;
(l) the Collateral Account and all cash, securities and other Property
from time to time credited thereto; and
(m) all other tangible and intangible personal property and fixtures
of such Obligor, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Obligor described in the
preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and
warranties now or hereafter held by any Obligor in respect of any of the
items listed above) and, to the extent related to any property described in
said clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Obligor or any
computer bureau or service company from time to time acting for such
Obligor.
Security Agreement
------------------
<PAGE>
-9-
Section 4. Cash Proceeds of Collateral.
4.01 Collateral Account. The Administrative Agent may cause to be
established by a Securities Intermediary (as defined in Section 8-102(a)(14) of
the Uniform Commercial Code) a "securities account" (within the meaning of
Section 8-501 of the Uniform Commercial Code) in the name of the Administrative
Agent as "entitlement holder" (within the meaning of Section 8-102(a)(17) of
the Uniform Commercial Code) (the "Collateral Account") into which there shall
be deposited from time to time the cash proceeds of any of the Collateral
(including proceeds of insurance thereon) required to be delivered to the
Administrative Agent pursuant hereto and into which the Obligors may from time
to time deposit any additional amounts that any of them wishes to pledge to the
Administrative Agent for the benefit of the Lenders as additional collateral
security hereunder. Property from time to time credited to the Collateral
Account shall constitute part of the Collateral hereunder and shall not
constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Administrative
Agent shall remit the collected cash credit balance of the Collateral Account to
or upon the order of the respective Obligor as such Obligor through the Borrower
shall from time to time instruct. However, at any time following the occurrence
and during the continuance of an Event of Default, the Administrative Agent may
(and, if instructed by the Lenders as specified in Section 10 of the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied
(subject to collection) the balance from time to time standing to the credit of
the Collateral Account to the payment of the Secured Obligations in the manner
specified in Section 5.09 hereof. The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided herein.
4.02 Proceeds of Accounts. At any time after the occurrence and during
the continuance of an Event of Default, each Obligor shall, upon the request of
the Administrative Agent, instruct all account debtors and other Persons
obligated in respect of all Accounts to make all payments in respect of the
Accounts either (a) directly to the Administrative Agent (by instructing that
such payments be remitted to a post office box which shall be in the name and
under the control of the Administrative Agent) or (b) to one or more other banks
in the United States of America (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Administrative Agent) under arrangements, in form and substance satisfactory to
the Administrative Agent pursuant to which such Obligor shall have
Security Agreement
------------------
<PAGE>
-10-
irrevocably instructed such other bank (and such other bank shall have agreed)
to remit all proceeds of such payments directly to the Administrative Agent for
deposit into the Collateral Account. All payments made to the Administrative
Agent, as provided in the preceding sentence, shall be immediately deposited in
the Collateral Account. In addition to the foregoing, each Obligor agrees that,
at any time after the occurrence and during the continuance of an Event of
Default, if the proceeds of any Collateral hereunder (including the payments
made in respect of Accounts) shall be received by it, such Obligor shall, upon
the request of the Administrative Agent, as promptly as possible deposit such
proceeds into the Collateral Account. Until so deposited, all such proceeds
shall be held in trust by such Obligor for and as the property of the
Administrative Agent and shall not be commingled with any other funds or
property of such Obligor.
4.03 Investment of Balance in Collateral Account. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Obligor through the Borrower (or, after the
occurrence and during the continuance of a Default, the Administrative Agent)
shall determine, which Permitted Investments shall be credited to the Collateral
Account and held in the name of the Administrative Agent, provided that (i) at
any time after the occurrence and during the continuance of an Event of Default,
the Administrative Agent may (and, if instructed by the Lenders as specified in
Section 10 of the Credit Agreement, shall) in its (or their) discretion at any
time and from time to time elect to liquidate any such Permitted Investments and
to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof and (ii) if
requested by the respective Obligor through the Borrower, such Permitted
Investments may be held in the name and under the control of one or more of the
Lenders (and in that connection each Lender, pursuant to Section 4.07 of the
Credit Agreement has agreed that such Permitted Investments shall be held by
such Lender as a collateral sub-agent for the Administrative Agent hereunder).
Section 5. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Obligors
hereby jointly and severally agree with each Lender and the Administrative Agent
as follows:
Security Agreement
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<PAGE>
-11-
5.01 Delivery and Other Perfection. Each Obligor shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by such Obligor under clauses (a), (b) and (c) of Section 3
hereof are received by such Obligor, forthwith either (x) transfer and
deliver to the Administrative Agent such shares or securities so received
by such Obligor (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock powers
duly executed in blank), all of which thereafter shall be held by the
Administrative Agent, pursuant to the terms of this Agreement, as part of
the Collateral or (y) take such other action as the Administrative Agent
shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c);
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, that so long as no Default shall have occurred and be
continuing, such Obligor may retain for collection in the ordinary course
any Instruments received by such Obligor in the ordinary course of business
and the Administrative Agent shall, promptly upon request of such Obligor
through the Borrower, make appropriate arrangements for making any
Instrument pledged by such Obligor available to such Obligor for purposes
of presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate by the Administrative Agent,
against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Administrative Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the Stock
Collateral to be transferred of record into the name of the Administrative
Agent or its nominee (and the Administrative Agent agrees that if any Stock
Collateral is transferred into its name or the name of its nominee, the
Administrative Agent will thereafter
Security Agreement
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<PAGE>
-12-
promptly give to the respective Obligor copies of any notices and
communications received by it with respect to the Stock Collateral pledged
by such Obligor hereunder), provided that notices to account debtors in
respect of any Accounts or Instruments shall be subject to the provisions
of clause (i) below;
(d) without limiting the obligations of such Obligor under Section
5.04(c) hereof, upon the acquisition after the date hereof by such Obligor
of any Equipment covered by a certificate of title or ownership, cause the
Administrative Agent to be listed as the lienholder on such certificate of
title and within 120 days of the acquisition thereof deliver evidence of
the same to the Administrative Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(f) furnish to the Administrative Agent from time to time (but, unless
a Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark Collateral as the
Administrative Agent may reasonably request, all in reasonable detail;
(g) promptly upon request of the Administrative Agent, following
receipt by the Administrative Agent of any statements, schedules or reports
pursuant to clause (f) above, modify this Agreement by amending Annexes 2,
3 and/or 4 hereto, as the case may be, to include any Copyright, Patent or
Trademark that becomes part of the Collateral under this Agreement;
(h) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Administrative Agent to be present at such
Obligor's place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any notices
or communications received
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by such Obligor with respect to the Collateral, all in such manner as the
Administrative Agent may require; and
(i) upon the occurrence and during the continuance of any Default,
upon request of the Administrative Agent, promptly notify (and such Obligor
hereby authorizes the Administrative Agent so to notify) each account
debtor in respect of any Accounts or Instruments that such Collateral has
been assigned to the Administrative Agent hereunder, and that any payments
due or to become due in respect of such Collateral are to be made directly
to the Administrative Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 9.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 12.03 of the Credit Agreement), no Obligor shall
file or suffer to be on file, or authorize or permit to be filed or to be on
file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.
5.03 Preservation of Rights. The Administrative Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
5.04 Special Provisions Relating to Certain Collateral.
(a) Stock Collateral.
(1) The Obligors will cause the Stock Collateral to constitute at all
times 100% of the total number of shares of each class of capital stock of each
Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Obligors shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Obligors jointly and severally agree that they will
not vote the Stock Collateral in any manner that is inconsistent with the terms
of this Agreement, the Credit Agreement, the Notes or any such other instrument
or agreement; and the Administrative Agent shall execute and deliver to the
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Obligors or cause to be executed and delivered to the Obligors all such proxies,
powers of attorney, dividend and other orders, and all such instruments, without
recourse, as the Obligors may reasonably request for the purpose of enabling the
Obligors to exercise the rights and powers that they are entitled to exercise
pursuant to this Section 5.04(a)(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Obligors shall be entitled to receive and retain any dividends
on the Stock Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the
Administrative Agent and retained by it in the Collateral Account as part of the
Stock Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, the Obligors jointly and
severally agree to execute and deliver to the Administrative Agent appropriate
additional dividend, distribution and other orders and documents to that end,
provided that if such Event of Default is cured, any such dividend or
distribution theretofore paid to the Administrative Agent shall, upon request of
the Obligors (except to the extent theretofore applied to the Secured
Obligations), be returned by the Administrative Agent to the Obligors.
(b) Intellectual Property.
(1) For the purpose of enabling the Administrative Agent to exercise
rights and remedies under Section 5.05 hereof at such time as the Administrative
Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, each Obligor hereby grants to the Administrative Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to such Obligor) to use, assign,
license or sublicense any of the Intellectual Property now owned or hereafter
acquired by such Obligor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer
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programs used for the compilation or printout thereof, such grant to become
effective upon the occurrence of an Event of Default.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 9.05 of the Credit Agreement that limit the
rights of the Obligors to dispose of their property, so long as no Event of
Default shall have occurred and be continuing, the Obligors will be permitted to
exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or
take other actions with respect to the Intellectual Property in the ordinary
course of the business of the Obligors. In furtherance of the foregoing, unless
an Event of Default shall have occurred and be continuing the Administrative
Agent shall from time to time, upon the request of the respective Obligor,
execute and deliver any instruments, certificates or other documents, in the
form so requested, that such Obligor through the Borrower shall have certified
are appropriate (in its judgment) to allow it to take any action permitted above
(including relinquishment of the license provided pursuant to clause (1)
immediately above as to any specific Intellectual Property). Further, upon the
payment in full of all of the Secured Obligations and cancellation or
termination of the Commitments or earlier expiration of this Agreement or
release of the Collateral, the Administrative Agent shall grant back to the
Obligors the license granted pursuant to clause (1) immediately above. The
exercise of rights and remedies under Section 5.05 hereof by the Administrative
Agent shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Obligors in accordance with the first
sentence of this clause (2).
(c) Motor Vehicles. At any time after the occurrence and during the
continuance of an Event of Default, each Obligor shall, upon the request of the
Administrative Agent, deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles owned by it with the
Administrative Agent listed as lienholder and take such other action as the
Administrative Agent shall deem appropriate to perfect the security interest
created hereunder in all such Motor Vehicles.
5.05 Events of Default, Etc. During the period during which an Event
of Default shall have occurred and be continuing:
(a) each Obligor shall, at the request of the Administrative Agent,
assemble the Collateral owned by it at such place or places, reasonably
convenient to both the
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Administrative Agent and such Obligor, designated in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Administrative Agent were the sole
and absolute owner thereof (and each Obligor agrees to take all such action
as may be appropriate to give effect to such right);
(d) the Administrative Agent in its discretion may, in its name or in
the name of the Obligors or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do
so; and
(e) the Administrative Agent may, upon ten business days' prior
written notice to the Obligors of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter come
into the possession, custody or control of the Administrative Agent, the
Lenders or any of their respective agents, sell, lease, assign or otherwise
dispose of all or any part of such Collateral, at such place or places as
the Administrative Agent deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be waived),
and the Administrative Agent or any Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to
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<PAGE>
-17-
the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind, including
any right or equity of redemption (statutory or otherwise), of the
Obligors, any such demand, notice and right or equity being hereby
expressly waived and released. In the event of any sale, assignment, or
other disposition of any of the Trademark Collateral, the goodwill
connected with and symbolized by the Trademark Collateral subject to such
disposition shall be included, and the Obligors shall supply to the
Administrative Agent or its designee, for inclusion in such sale,
assignment or other disposition, all Intellectual Property relating to such
Trademark Collateral. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the sale
may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof.
The Obligors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Obligors acknowledge that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer or
issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Obligors shall remain liable for any
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deficiency to the extent the Obligors are obligated under this Agreement.
5.07 Removals, Etc. Without at least 30 days' prior written notice to
the Administrative Agent, no Obligor shall (i) maintain any of its books and
records with respect to the Collateral at any office, or maintain its principal
place of business at any place, or permit any Inventory and Equipment to be
located anywhere, other than at the address indicated beneath the signature of
the Borrower to the Credit Agreement or at one of the locations identified in
Annex 6 hereto under its name or in transit from one of such locations to
another or (ii) change its name, or the name under which it does business, from
the name shown on the signature pages hereto.
5.08 Private Sale. The Administrative Agent and the Lenders shall
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner. Each Obligor hereby waives any claims against
the Administrative Agent or any Lender arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer the Collateral to more
than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Administrative Agent under Section 4 hereof or this Section 5, shall be
applied by the Administrative Agent:
First, to the payment of the reasonable costs and expenses of such
collection, sale or other realization, including reasonable out-of-pocket
costs and expenses of the Administrative Agent and the fees and expenses of
its agents and counsel, and all reasonable expenses incurred and advances
made by the Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations other than
Secured Obligations constituting Other Indebtedness, in each case equally
and ratably in accordance with the respective amounts thereof then due and
owing or as the Lenders holding the same may otherwise agree;
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Next, to the payment in full of all other Secured Obligations
(including all Other Indebtedness), equally and ratably in accordance with
the respective amounts thereof then due and owing or as the Lenders holding
the same may otherwise agree; and
Finally, to the payment to the respective Obligor, or their respective
successors or assigns, or as a court of competent jurisdiction may direct,
of any surplus then remaining.
As used in this Section 5.09, "proceeds" of Collateral means cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Obligors or any issuer of or obligor on
any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of each Obligor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
any Obligor representing any dividend, payment or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, each Obligor shall (i) file such financing
statements and other documents in such offices as the Administrative Agent may
request to perfect the security interests granted by Section 3 of this
Agreement, (ii) cause the Administrative Agent to be listed as the lienholder on
all certificates of title or ownership relating to Motor Vehicles owned by such
Obligor and (iii) deliver to the Administrative Agent all certificates
identified in Annex 1 hereto, accompanied by undated stock powers duly executed
in blank.
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5.12 Termination. When all Secured Obligations shall have been paid in
full and the Commitments of the Lenders under the Credit Agreement shall have
expired or been terminated, this Agreement shall terminate, and the
Administrative Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the respective Obligor and to be released and canceled all
licenses and rights referred to in Section 5.04(b) hereof. The Administrative
Agent shall also execute and deliver to the respective Obligor upon such
termination such Uniform Commercial Code termination statements, certificates
for terminating the Liens on the Motor Vehicles and such other documentation as
shall be reasonably requested by the respective Obligor to effect the
termination and release of the Liens on the Collateral.
5.13 Further Assurances. Each Obligor agrees that, from time to time
upon the written request of the Administrative Agent, such Obligor will execute
and deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
5.14 Release of Motor Vehicles. So long as no Default shall have
occurred and be continuing, upon the request of any Obligor, the Administrative
Agent shall execute and deliver to such Obligor such instruments as such Obligor
shall reasonably request to remove the notation of the Administrative Agent as
lienholder on any certificate of title for any Motor Vehicle; provided that any
such instruments shall be delivered, and the release effective only upon receipt
by the Administrative Agent of a certificate from such Obligor stating that the
Motor Vehicle the lien on which is to be released is to be sold or has suffered
a casualty loss (with title thereto passing to the casualty insurance company
therefor in settlement of the claim for such loss).
Section 6. Miscellaneous.
6.01 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 12.01 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 12.01.
Security Agreement
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6.02 No Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
6.03 Amendments, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Obligor and the Administrative Agent (with the consent of the Lenders as
specified in Section 12.03 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and each Obligor.
6.04 Expenses. The Obligors jointly and severally agree to reimburse
each of the Lenders and the Administrative Agent for all reasonable costs and
expenses of the Lenders and the Administrative Agent (including, without
limitation, the reasonable fees and expenses of legal counsel) in connection
with (i) any Default and any enforcement or collection proceeding resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (w) performance by the Administrative Agent of any
obligations of the Obligors in respect of the Collateral that the Obligors have
failed or refused to perform, (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Administrative Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 6.04, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Section
3 hereof.
6.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each Obligor,
the Administrative Agent, the Lenders and each holder of any of the Secured
Obligations (provided, however, that no Obligor shall assign or transfer its
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rights hereunder without the prior written consent of the Administrative Agent).
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.07 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.
6.08 Captions. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
6.09 Agents and Attorneys-in-Fact. The Administrative Agent may employ
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith.
6.10 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
6.11 The Administrative Agent. As provided in Section 11.01 of the
Credit Agreement, each Lender has appointed Lehman Commercial Paper Inc. as its
Administrative Agent for purposes of this Agreement. Following the payment in
full of all Secured Obligations outstanding under the Credit Agreement and the
termination or expiration of the Commitments thereunder, the provisions of said
Section 11.01 shall be deemed to continue in full force and effect for the
benefit of the Administrative Agent under this Agreement. In that connection,
following such payment in full and expiration and termination of the
Commitments, the term "Majority Lenders" (as used in said Section 11.01) shall
be deemed to refer to Lenders holding Secured Obligations representing more than
50% of the aggregate Secured Obligations.
Security Agreement
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6.12 Additional Obligors. As contemplated in Section 9.17(a) of the
Credit Agreement, a new Subsidiary of the Borrower formed by the Borrower after
the date hereof may become a "Subsidiiary Guarantor" under the Credit Agreement
and an "Obligor" under this Agreement, by executing and delivering to the
Administrative Agent a Guarantee Assumption Agreement in the form of Exhibit C
to the Credit Agreement. Accordingly, upon the execution and delivery of any
such Guarantee Assumption Agreement by any such Subsidiary, such new Subsidiary
shall automatically and immediately, and without any further action on the part
of any Person, become an "Obligor" for all purposes of this Agreement, and each
of the Annexes hereto shall be supplemented in the manner specified in such
Guarantee Assumption Agreement.
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<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
INTERNATIONAL TELECOMMUNICATION DATA
SYSTEMS, INC.
By /s/ Peter P. Bassermann
--------------------------------
Title: President and
Chief Executive Officer
Security Agreement
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<PAGE>
-25-
LEHMAN COMMERCIAL PAPER INC,
as Administrative Agent
By /s/ Dennis J. Dee
--------------------------------
Title: Authorized Signatory
Address for Notices:
3 World Financial Center
New York, NY 10285
Attention: Michelle Zorn
Security Agreement
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<PAGE>
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c).]
International Telecommunication Data Systems, Inc.
- --------------------------------------------------
Certificate Registered Number
Issuer Nos. Owner of Shares
- ----------------- ------------- --------------------- -----------------
ITDS Intelicom 136 International 100 shares of
Services, Inc. Telecommunication common stock,
Data Systems, Inc. $1 par value per
share
Annex 1 to Security Agreement
-----------------------------
<PAGE>
ANNEX 2
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
[See Section 2(d).]
International Telecommunication Data Systems, Inc.
- --------------------------------------------------
Date of
Title Date Registered Registration No. Creation
- --------------------- ---------------------- ---------------- --------
ITDS 10X Software December 3, 1990 TX2969733 1990
Annex 2 to Security Agreement
-----------------------------
<PAGE>
ANNEX 3
LIST OF PATENTS AND PATENT APPLICATIONS
[See Section 2(d).]
International Telecommunication Data Systems, Inc.
- --------------------------------------------------
File Patent Country Registration No. Data
- ---- ------ ------- ---------------- ----
NONE
Annex 3 to Security Agreement
-----------------------------
<PAGE>
ANNEX 4
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
[See Section 2(d).]
U.S. Trademarks
---------------
International Telecommunication Data Systems, Inc.
- --------------------------------------------------
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
- --------------------- ---------------- --------------------
Payscan S75283806 April 30, 1997
ITDS S75283805 April 30, 1997
ITDS and Design S75283804 April 30, 1997
ITDS 10X R1664867 November 19, 1991
Annex 4 to Security Agreement
-----------------------------
<PAGE>
- 2 -
Foreign Trademarks
------------------
International Telecommunication Data Systems, Inc.
- --------------------------------------------------
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
- ----------------- ---------------- --------------- ---------------
ITDS S860,442 Canada October 30, 1997
ITDS and Design S860,441 Canada October 30, 1997
ITDS 10X S819880140 Brazil April 9, 1997
ITDS S819880132 Brazil April 9, 1997
ITDS S819880124 Brazil April 9, 1997
Annex 4 to Security Agreement
-----------------------------
<PAGE>
ANNEX 5
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
[See Section 2(d), (e) and (f).]
International Telecommunication ata Systems, Inc.
- -------------------------------------------------
International Telecommunication Data Systems, Inc. (ITDS)
licenses for its use various off-the-shelf business software.
ITDS has a perpetual, limited use, non-exclusive license to use an ISIS
Reformatter from CSC and a software license to use Computer Associates'
software.
ITDS licenses certain of its intellectual property rights to the following
entities:
Advantage Cellular
Aliant Cellular (Lincoln)
Cellular One of East Central Illinois
CellularOne/Allegan Cellular
CellularOne of Albany
CellularOne of Kansas/Missouri
CellularOne of Mid-South Texas
Comsat
Brazos Cellular
CellularOne - Frederick
CellularOne by Blue Mountain
CellularOne of Colorado
CellularOne of Lake Charles
CellularOne of San Luis Obispo
Central Oregon Cellular Inc.
Copper Valley Cellular
Aliant Cellular (Grand Island)
Artice Slope Telecom & Cellular Inc.
Cellular Mobile System of St. Cloud
CellularOne Great Lakes of Iowa
CellularOne of El Dorado
CellularOne of Lewiston
CellularOne of Santa Cruz
Columbia River Cellular/D.B.A. CellularOne
Data Cellular Computer Solutions
Farmers Cellular Telephone Inc.
Frontier CellularOne
Kern County Cellular Telephone Company Inc.
Annex 5 to Security Agreement
-----------------------------
<PAGE>
- 2 -
New Wave Cellular
Pace Communications
Ramcell of Kentucky
Sygnet Communications
Thunder Bay Mobility
WirelessNorth
France Caraibe Mobiles
Highland (Frontier Cellular)
MComcast
PCM Management (for CellularOne)
Ramcell of North Carolina
Star Cellular
Sygnet Communications
WorldCom - WCW2
Frontier
HighwayMaster
Mercury Communications
Oklahoma Western Telephone Company
Ramcell of California
Ramcell of Oregon
Sygnet Communications
Sygnet Communications (Eric)
Valley Telecommunications
Worldcom Airtouch Minnesota
Annex 5 to Security Agreement
-----------------------------
<PAGE>
ANNEX 6
LIST OF LOCATIONS
[See Section 5.07.]
International Telecommunication Data Systems, Inc.
- --------------------------------------------------
225 High Ridge Road Stamford, CT
1502 Haddox Ct., College Station, TX
Annex 6 to Security Agreement
-----------------------------
GUARANTEE ASSUMPTION AGREEMENT
GUARANTEE ASSUMPTION AGREEMENT dated as of January 2, 1998 by ITDS
Intelicom Services, Inc., a Delaware corporation (the "Additional Subsidiary
Guarantor"), in favor of Lehman Commercial Paper Inc. ("LCPI"), as
administrative agent for the lenders or other financial institutions or entities
party as "Lenders" to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
International Telecommunication Data Systems, Inc., a Connecticut
corporation, the Subsidiary Guarantors referred to therein and the
Administrative Agent are parties to a Credit Agreement dated as of January 2,
1998 (as modified and supplemented and in effect from time to time, the "Credit
Agreement").
Pursuant to Section 9.17(a) of the Credit Agreement, the Additional
Subsidiary Guarantor hereby agrees to become a "Subsidiary Guarantor" for all
purposes of the Credit Agreement, and a "Debtor" for all purposes of the
Security Agreement. Without limiting the foregoing, the Additional Subsidiary
Guarantor hereby, jointly and severally with the other Subsidiary Guarantors,
guarantees to each Lender, the Administrative Agent, Guarantors, guarantees to
each Lender, the Administrative Agent, LCPI and the Arranger and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of all Guaranteed Obligations
(as defined in Section 6.01 of the Credit Agreement) in the same manner and to
the same extent as is provided in Section 6 of the Credit Agreement. In
addition, the Additional Subsidiary Guarantor hereby makes the representations
and warranties set forth (i) in Sections 8.01, 8.02, 8.04, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12, 8.13, 8.14 and 8.15 of the Credit Agreement, and in Section 2
of the Security Agreement, with respect to itself and its obligations under this
Agreement, as if each reference in said Sections to the Basic Documents included
reference to this Agreement, (ii) in Sections 8.16 and 8.17 of the Credit
Agreement with respect to the supplements to Schedules I and III to the Credit
Agreement attached hereto as Appendix A and (iii) in Section 2 of the Security
Agreement with respect to the supplements to Annexes 1 through 6 to the Security
Agreement attached hereto as Appendix B. The Additional Subsidiary Guarantor
hereby agrees to take promptly such action (including, without limitation,
delivering such shares of stock, executing and delivering such Uniform
Commercial Code financing statements) as shall be necessary to create and
perfect valid and enforceable first priority Liens on substantially all of its
personal Property as collateral security for its obligations under the Credit
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Additional Subsidiary Guarantor has caused this
Guarantee Assumption Agreement to be duly executed and delivered as of the day
and year first above written.
ITDS INTELICOM SERVICES, INC.
By: /S/ Peter P. Bassermann
------------------------------
Title: President and Treasurer
ACCEPTED AND AGREED:
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By: /S/ Dennis J. Dee
---------------------------
Title: Authorized Signatory
-2-
<PAGE>
Appendix A
to
Guarantee Assumption
Agreement
Supplement to Schedule I of the Credit Agreement (Material Agreements
and Liens):
Part A: None
Part B: UCC Filings for Leased Equipment
Supplement to Schedule III of the Credit Agreement (Subsidiaries and
Investments):
Part A: None
Part B: None
Guarantee Assumption Agreement
------------------------------
-3-
<PAGE>
Appendix B
to
Guarantee Assumption
Agreement
Supplement to Annex 1 of the Security Agreement
PLEDGED STOCK
-------------
[See Section 2 (b) and (c) of the Security Agreement.]
ITDS Intelicom Services, Inc.
- -----------------------------
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ---- ----- ----------------
N/A N/A N/A N/A
Annex 1 to Security Agreement
-----------------------------
-4-
<PAGE>
Supplement to Annex 2 to the Security Agreement
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
[See Section 2 (d) of the Security Agreement.]
ITDS Intelicom Services, Inc.
- -----------------------------
Date Registration Date of
Title Registered No. Creation
----- ---------- ----------- --------
TRIS + front end February 11, 1993 TX 3653494 1993
TRIS + back end February 11, 1993 TX 3484231 1991
Annex 2 to Security Agreement
-----------------------------
-5-
<PAGE>
Supplement to Annex 3 to the Security Agreement
LIST OF PATENTS AND PATENT APPLICATIONS
[See Section 2 (d) of the Security Agreement.]
ITDS Intelicom Services, Inc.
- -----------------------------
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
NONE
Annex 3 to Security Agreement
-----------------------------
-6-
<PAGE>
Supplement to Annex 4 to the Security Agreement
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
[See Section 2 (d) of the Security Agreement.]
U.S. Trademarks
---------------
ITDS Intelicom Services, Inc.
- -----------------------------
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
---- ----------------- --------------
TRIS + R 1,842,753 July 5, 1994
TRIS Common Law Trademark
Annex 4 to Security Agreement
-----------------------------
-7-
<PAGE>
Foreign Trademarks
------------------
ITDS Intelicom Services, Inc.
- -----------------------------
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
- ---- ---------------- ------- ---------------
NONE
Annex 4 to Security Agreement
-----------------------------
-8-
<PAGE>
Supplement to Annex 5 to the Security Agreement
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
[See Section 2 (d), (e) and (f) of the Security Agreement]
ITDS Intelicom Services, Inc.
- -----------------------------
ITDS Intelicom Services, Inc., uses licenses of various off-the-shelf
business software and various public domain/share-ware software.
It also licenses Intellectual Property to the following entities:
Liberty Cellular/Kansas Cellular
Southwestern Bell Mobile
Southwestco/Bell Atlantic Mobile
Mercury-Magnolia
Mercury-Alaska 3
Cellcom/New Cell
MobileTel
Sagir
NE Michigan/RFB Cellular
Cybertel-Kauai
NE Colorado
Commnet
Nextel
Citizens Mohave
Western Wireless
Mid-Tex Cellular
OneComm
Dial Call
Southern Company
Omnipoint
and, through a predecessor in interest, it licenses certain Intellectual
Property to Sema Group Mobile Communications, Limited.
ITDS Intelicom Services, Inc. has software license agreements and/or
maintenance agreements with the following entities:
Computer Associates
Lotus
Microsoft Select
Microsoft Exchange
McAfee
Annex 5 to Security Agreement
-----------------------------
-9-
<PAGE>
Supplement to Annex 6 to the Security Agreement
LIST OF LOCATIONS
[See Section 5.07 of the Security Agreement.]
ITDS Intelicom Services, Inc.
- -----------------------------
2109 Fox Drive, Champaign IL
6707 Democracy Boulevard, Suite 1000 Bethesda, MD
Annex 6 to Security Agreement
-----------------------------
-10-
Name of Subsidiary Jurisdiction of Incorporation
- ------------------------------ -------------------------------------
ITDS Holding Company LLC Delaware
ITDS Intelicom Services, Inc. Delaware
ITDS LTDA Brazil
MDS, Inc. Delaware
Exhibit 23
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-21287) pertaining to the 1996 Stock Incentive Plan of
International Telecommunication Data Systems, Inc. and in the Registration
Statement (Form S-8 No. 333-21283) pertaining to the 1996 Employee Stock
Purchase Plan of International Telecommunication Data Systems, Inc. of our
report dated February 10, 1998, except for information describing the 3 for 2
stock split in Note 1 and Note 3, as to which the date is February 23, 1998,
with respect to the financial statements of International Telecommunication Data
Systems, Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 1997.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
balance sheets for the year ended December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000867889
<NAME> INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 28,967,173
<SECURITIES> 0
<RECEIVABLES> 5,007,581
<ALLOWANCES> 486,422
<INVENTORY> 0
<CURRENT-ASSETS> 34,936,051
<PP&E> 6,252,923
<DEPRECIATION> 2,318,936
<TOTAL-ASSETS> 44,452,452
<CURRENT-LIABILITIES> 2,364,020
<BONDS> 0
0
0
<COMMON> 127,868
<OTHER-SE> 40,190,452
<TOTAL-LIABILITY-AND-EQUITY> 44,452,452
<SALES> 23,428,810
<TOTAL-REVENUES> 23,428,810
<CGS> 0
<TOTAL-COSTS> 5,617,245
<OTHER-EXPENSES> 11,266,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,355
<INCOME-PRETAX> 8,127,001
<INCOME-TAX> 3,326,382
<INCOME-CONTINUING> 4,800,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,800,619
<EPS-PRIMARY> .38
<EPS-DILUTED> .36
</TABLE>
