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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, 1998
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. |_|
The aggregate market value of voting Common Stock held by nonaffiliates of
the registrant as of March 22, 1999:
Common Stock, $.01 par value -- $174,994,525.48
The number of shares outstanding of the issuer's common stock as of March
22, 1999:
Common Stock, $.01 par value -- 17,341,894 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the Annual Meeting of Stockholders
to be held May 19, 1999 are incorporated by reference into Part III of this
Report.
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Item 1--Business
International Telecommunication Data Systems, Inc. ("ITDS" or the
"Company") is a leading provider of comprehensive transactional billing and
customer care solutions to providers of wireless and satellite
telecommunications services. The Company uses its proprietary software
technology to develop billing and customer care 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 or fixed-fee basis. As a result, a
substantial portion 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, dispatch 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 and
customer care solutions by drawing on the Company's core technology and skilled
human resources. The Company's software currently supports the predominant
wireless telecommunications protocols, including Advanced Mobile Phone Systems
("AMPS"), an analog service predominant in the U.S., the Global System for
Mobile Communication ("GSM"), Time Division Multiple Access ("TDMA") and Code
Division Multiple Access ("CDMA"). In addition, the Company is the market leader
in supporting carriers that deploy IDEN technology.
The Company's advanced billing and customer care systems form the
foundation for its suite of applications that provide not only subscriber
billing and service support, but also subscriber activation, remittance
processing, collections, data retrieval and reporting, electronic funds
transfer, Authentication Key (A-Key) management, retail point of sale, credit
management, inventory management, data archiving and electronic bill presentment
and payment on the Internet. 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 customer care 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 $352 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 new communications media, such as the Internet, to innovative
services, such as PCS, to a rapidly evolving and growing range of vertical
services such as short message services, voice mail, paging and dispatch. For
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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.
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 60.8 million in June 1998. In the twelve months ended
June 1998, wireless providers generated more than $29 billion in revenue in the
United States. In addition to growth in the wireless telephone market, the
emergence of new wireless communications technologies and services, such as PCS,
dispatch 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. Industry sources estimate that wireline
providers, including providers of local, long-distance, network access and
related services, provide services to approximately 187 million customers in the
U.S., generating an estimated $212 billion of revenues in 1998. 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 wireless 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 Microsoft Network (MSN), 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 recurring 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 and customer care systems developed internally or
through cooperative joint ventures for
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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 customer
care-related functions because of the significant level of technological
expertise and capital resources required to implement systems successfully. In
addition, many emerging telecommunications service 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 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
In February 1999, ITDS announced the formation of a strategic business
alliance with Novazen, Inc. to include Novazen's Internet-based billing and
customer care software in ITDS's suite of products and services. ITDS has the
exclusive right to provide its clients with Novazen's advanced Internet-based
billing and customer communication software.
In addition, in February 1999, Lewis Bakes resigned as Executive Vice
President, Chief Operating Officer and Secretary; Paul K. Kothari resigned as
Chief Financial Officer; and Peter Masanotti resigned as Executive Vice
President of Operations - Stamford. Also in February 1999, Susan L. Yezzi was
promoted from Executive Vice President of Operations - Champaign to Chief
Operating Officer; Peter L. Masanotti became Secretary and Acting Chief
Financial Officer; and Kevin Piltz was elected as the Company's Chief
Information Officer.
On March 23, 1999, the Board of Directors authorized the repurchase of
shares by the Company of its Common Stock in the open market and/or in privately
negotiated transactions, for an aggregate purchase price of up to $10 million.
Any repurchased shares will be used for the Company's stock incentive plans,
employee stock purchase plan and other corporate purposes. As of March 29, 1999,
the Company had not repurchased any shares pursuant to the repurchase plan.
The ITDS Solution
The Company's solutions are based upon software systems that not only
provide reliable and accurate transactional billing and customer care 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
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single or multiple telecommunications services markets, including wireless,
ESMR, paging, dispatch and satellite. In comparison with traditional solutions,
the Company's software and services:
o 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;
o permit providers to introduce new features or combinations of features,
either directly or with others, on a timely basis;
o assure that providers have immediate access to multiple databases on an
integrated basis, to improve marketing and sales planning;
o 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;
o 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;
o support a robust retail support structure through the utilization of its
Point of Sale product suite;
o allow for a variety of bill presentment options, including Web-based
presentment; and
o complement a service provider's anti-fraud efforts by providing for
management of the provider's Authentication Keys (A-Keys).
Products and Services
Core Systems
The Company provides its customers with transactional billing and customer
care 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 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 or fixed-fee 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
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customers with critical transactional billing data and can be modified or
configured by customers to respond most appropriately to their specific
information requirements.
ITDS has completed and recently introduced XCEDE, its newest billing and
customer care solution. XCEDE has a Windows95 graphical user interface, runs on
industry standard UNIX servers and supports Oracle's relational database
management system. It is modular in architecture, intuitive in design and
scaleable in capacity, capable of supporting millions of subscribers.
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 Customer Care and Management Support -- Provides end-to-end support for
all subscriber interface requirements:
<TABLE>
<S> <C>
Subscriber Acquisition Credit Bureau Interface
Integrated Point of Sale Transactional Credit Card Billing
Phone Number Assignment Rate & Feature Assignment
Network Element Provisioning Interface Equipment Inventory Assignment & Tracking
Lead Generation & Tracking Multiple Account Receivable Options
Automatic Clearinghouse for Bank Automatic Call Credit Adjustments
Draft Payments
Multi-tiered Security Systems Multiple Search Keys at Account or Phone Level
Automatic Notes and Reminders Management of Authentication Keys
</TABLE>
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:
<TABLE>
<S> <C>
Multiple Bill Cycles by Market FIFO Overdue Payment Application
Balance Forward Billing Invoice Format Options
Multiple Level Invoices Global, Group or Individual Messages
Full Lockbox Support Federal Reserve Bank Interface
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Currency Conversion Language Options
International Addressing Print Fulfillment Options
Web-based Bill Presentment and
Payment
</TABLE>
Customers transmit call detail records from their switching network or
other network provider directly to one of the Company's data centers. In
addition, the Company extracts 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, or,
through its new bill presentment and payment capability, the Company can enable
end users to access and pay their invoices over the Web.
In addition to the foregoing general features, the Company's systems
incorporate a modular system architecture which can support a number of
complementary applications to meet a customer's specific requirements, including
the following:
o XCEDE/NP is a direct multi-switch interface between XCEDE systems and all
types of telecommunication switches, including cellular, paging and voice
mail platforms. XCEDE/NP manages line and feature activation or
deactivation in connection with XCEDE service order activity.
o XCEDE CreditLink module interfaces with several U.S.-based credit bureaus
to provide on-line credit analysis of potential subscribers.
o XCEDE Collections module provides support for dedicated collections
personnel.
o XCEDE 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 XCEDE inventory subsystem.
Other Products and Enhancements
Point of Sale System
The Company offers a Point of Sale package, which is 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 a true retail
setting. 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.
A-Key
A-Key is the latest addition to the Company's product line for supporting
the customer acquisition, billing, customer care, and process control efforts of
wireless service providers. A-Key is compliant with the EDI A-Key Guidelines as
published by CTIA. In addition, it is also capable of
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utilizing private formats as requested by a wireless service provider, or a
mobile unit manufacturer. The A-Key system encompasses six integrated modules
which can be deployed with XCEDE or as a stand-alone product that interfaces
with an existing service order/provisioning application. These modules include:
o A-Key security and encryption
o real-time EDI interface
o reconciliation process
o A-Key service order interface
o obtain key
o random key generation
Customers
As of December 31, 1998, the Company's solutions supported a variety of
technologies (including AMPS, CDMA, GSM and TDMA), serving over seven million
subscribers. In the year ended December 31, 1998, the Company's customers
included a broad range of wireless telecommunications service providers,
including Aliant Communications Co., Dobson Cellular Systems, MCI WorldCom,
Inc., Nextel Communications, Omnipoint, Sygnet Communication and Western
Wireless. Revenues from Nextel Communications and Western Wireless represented
30.2% and 11.9% of the Company's total revenue in 1998, respectively. 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
implementation 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 an account
manager, 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, to
assist customers in utilizing the system capabilities more effectively. In
February 1999, the Company's customer service and support department consisted
of 156 persons, with an additional 22 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
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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. In February 1999,
the Company's sales and marketing department consisted of 9 persons.
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 product management 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,
Oracle and Novazen to develop products compatible with their product offerings.
Currently, the Company has a number of new releases under development to meet
evolving customer requirements.
The Company actively participates in industry standards associations,
committees and forums 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. The Company is currently
represented at such regularly scheduled industry groups as CTIA's CIBERNET
Advisory Group for Industry Standards, which evaluates proposed changes to
standards for wireless industry data exchange; the CIBERNET Net Settlement Users
Group, which evaluates proposed changes to the net settlement process; the CTIA
Number Advisory Group, which addresses issues related to numbering; the CTIA
Advisory Group for Network Issues, which addresses interoperability network
issues; and the North American GSM Alliance BARG/TADIG, which evaluates proposed
changes to the standards for data exchange within the GSM industry including the
international market. In addition, the Company participates in or has
participated in other groups and meetings as required including CIBERNET Data
Message Handler Working Group, CTIA's International Forum for AMPS Standard,
Bellcore Ordering and Billing forum, CTIA's sub-committee on ESN Exhaust and
CTIA's sub-committee on Wireless Local Number Portability.
In the years ended December 31, 1998, 1997 and 1996, the Company incurred
cash expenditures on systems development, including the acquisition of ITDS
Intelicom Services Inc. (formerly, CSC Intelicom, Inc.) ("Intelicom"), of $61.3
million, $5.8 million and $3.0 million, respectively, of which $23.5 million,
$2.9 million and $858,827, respectively, were capitalized as software
development costs in each of such years. In February 1999, the Company employed
366 people in product and systems programming and development and engaged 144
independent contractors in conjunction with the continued development of its
software products.
Competition
The market for billing and customer care 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., Convergys Corp. (formerly Cincinnati Bell Information
Systems, Inc.), H.O. Systems Inc. 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
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Company competes with several international providers of billing and customer
care 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 wireless 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.
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 1999, the Company had a total of 673 employees, of whom 156
were engaged in customer service, 366 were engaged in systems programming and
development, 22 in quality assurance, 31 in new customer conversions, 9 in sales
and marketing and 89 in office administration, finance, human resources 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 and a 13,000 square
foot facility in Stamford, Connecticut and a 60,400 square foot facility in
Champaign, Illinois for systems and programming, client service, operations,
quality assurance, documentation and training, and
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administration. In addition, the Company has entered into a contract to lease an
additional 25,000 square feet in Champaign, Illinois beginning the summer of
1999. 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.
Item 3--Legal Proceedings
On April 2, 1998, the Company was served with a complaint in Connecticut
Superior Court alleging that the Company had breached the terms of its
employment contract with Alan K. Greene, the Company's former Chief Financial
Officer, and breached other obligations to Mr. Greene. The Company intends to
vigorously defend itself in the action and has filed a response to the claim and
asserted a counterclaim against Mr. Greene. The parties are currently in the
discovery phase of the litigation. In addition, on September 11, 1998, Mr.
Greene filed an age discrimination suit against the Company in the Connecticut
Commission on Human Rights and Opportunities and in the Equal Employment
Opportunities Commission. The Company filed its Answer and Position Statement,
disclaiming any liability relating to age discrimination, on November 5, 1998.
In addition, 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 obligations arising out of
such litigation or threatened litigation.
The Company does not believe that any liabilities relating to any of the
legal proceedings to which it is a party are likely to be, individually or in
the aggregate, material to its consolidated financial position or results of
operations.
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>
Lewis D. Bakes 41 Chairman and Director
Peter P. Bassermann 49 President, Chief Executive Officer and Director
Susan L. Yezzi 49 Chief Operating Officer
Peter L. Masanotti 44 Acting Chief Financial Officer, Executive Vice President,
General Counsel, Secretary and Director
Joseph A. Juliano 49 Executive Vice President of Strategic Product Management
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Kevin M. Piltz 40 Chief Information Officer
</TABLE>
Lewis D. Bakes co-founded the Company in 1990 and has served as a director
since that time. He was elected Chairman of the Company in February 1998. Mr.
Bakes served as Executive Vice President, Chief Operating Officer and Secretary
from the Company's inception until February 1999. Mr. Bakes is also an attorney,
licensed to practice in Connecticut.
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.
Susan L. Yezzi joined the Company in February 1998 as Executive Vice
President of Operations -- Champaign. In February 1999, Ms. Yezzi was appointed
Chief Operating Officer of the Company. 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.
Peter L. Masanotti joined the Company in 1996 as Vice President and General
Counsel. He has served as Executive Vice President since January 1998, serving
as Executive Vice President of Operations -- Stamford from January 1998 until
February 1999. Mr. Masanotti was elected as a director in August 1997 and became
Secretary and Acting Chief Financial Officer in February 1999. 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.
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.
Kevin M. Piltz joined the Company in August 1997, serving initially as Vice
President of Applications Development, and, from January 1998 until February
1999, as Senior Vice President of Applications Development. In February 1999,
Mr. Piltz was elected as the Company's Chief Information Officer. Prior to
joining the Company, Mr. Piltz served as Director of New Technology at
Subscriber Computing Inc., a provider of wireless billing solutions, from May
1995 through August 1997. From May 1990 through May 1995, Mr. Piltz worked at
Transamerica Insurance Group/TIG Insurance, initially as a Program Manager and
then as Assistant Vice President of Systems.
-12-
<PAGE>
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 effected on March 9, 1998).
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
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 Ended December 1998:
First Quarter................................................. $29.00 $20.83
Second Quarter................................................ $34.25 $22.00
Third Quarter................................................. $35.63 $19.63
Fourth Quarter................................................ $29.38 $11.38
Fiscal Year Ending December 1999:
First Quarter (through March 22, 1999) $21.88 $ 9.19
</TABLE>
On March 22, 1999, the last reported sale price for the Common Stock as
reported by the Nasdaq National Market was $10.63 per share. As of March 22,
1999, there were approximately 64 holders of record of the Common Stock.
Dividend Policy
The Company paid no cash dividends in 1997 or 1998. 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
unregistered securities issued by the Registrant since January 1, 1996 (as
adjusted to reflect the three-for-two stock split effected on March 9, 1998).
Also included is the consideration, if any, received by the Registrant for such
securities, 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.
-13-
<PAGE>
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, 1999, 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. Joseph
Juliano 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 and $12,000 plus interest was forgiven. As
of December 31, 1998, Mr. Juliano owed $53,426, which is payable on demand. The
loan is secured by a pledge in favor of the Company of 27,000 shares of Common
Stock held by Mr. Juliano.
On April 11, 1997, the Company loaned to Mr. Barry Lewis $32,000, which is
due on April 10, 1999. On December 15, 1997, the Company loaned Mr. Lewis
$6,960, which was due on December 14, 1999 and was repaid in May 1998. The
interest rate on both of the loans is 8-1/2% per annum. On January 2, 1998, the
Company loaned Mr. Lewis $36,240, which is due on demand. The indebtedness is
secured by a pledge in favor of the Corporation of Common Stock held by Mr.
Lewis.
On December 1, 1997, the Company loaned Mr. Kevin Piltz $100,000 at an
interest rate of 6% per annum, with interest payable monthly commencing on
January 1, 1998. The principal amount outstanding under the loan is payable as
to 20% on December 31, 2001 and as to 40% on December 31, 2004, and the
remaining principal and interest is payable on December 1, 2008.
On January 2, 1998, in connection with the Company's acquisition of all of
the issued and outstanding shares of capital stock of Intelicom from CSC
Domestic Enterprises, Inc. ("CSC Domestic"), an indirect subsidiary of Computer
Sciences Corporation, the Company issued to CSC Domestic 606,673 shares (the
"Purchase Shares") of Common Stock. The Purchase Shares represented $10,000,000
of the total purchase price of the acquired corporation.
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.
-14-
<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, 1995 and 1994 and the balance sheets as of December 31, 1996,
1995 and 1994, 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,
1998 (1) 1997 1996 1995 1994
--------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue........................................... $115,460 $23,429 $16,689 $10,821 $6,324
Costs and expenses:
Operating expenses............................. 44,334 5,617 4,283 2,788 1,647
General, administrative and selling expenses... 20,798 6,760 6,523 4,601 2,410
Depreciation and amortization.................. 10,846 1,596 1,054 641 406
Systems development and programming costs...... 16,974 2,911 2,115 1,183 755
Personnel and indirect acquisition costs....... 4,713 - - - -
In-process research and development............ 20,800 - - - -
--------------- --------------- --------------- --------------- -------------
Total cost and expenses........................... 118,465 16,884 13,975 9,213 5,218
--------------- --------------- --------------- --------------- -------------
Operating income (loss) .......................... (3,005) 6,545 2,714 1,608 1,106
Other income...................................... 1,550 1,702 316 49 29
Interest expense.................................. (2,740) (120) (416) (453) (390)
--------------- --------------- --------------- --------------- -------------
Income (loss) before income tax expense........... (4,195) 8,127 2,614 1,204 745
Income tax expense (benefit)...................... (1,095) 3,326 1,112 378 37
--------------- --------------- --------------- --------------- -------------
Income (loss) before extraordinary item........... (3,100) 4,801 1,502 826 708
Extraordinary loss (1995 net of $158 and 1998 net
of $562 tax benefit).............................. (826) - - (224) -
=============== =============== =============== =============== =============
Net income (loss) (2)............................. $(3,926) $ 4,801 $ 1,502 $ 602 $ 708
=============== =============== =============== =============== =============
Per common share (loss) data basic (3):
Pro forma income (loss) before extraordinary item. $ (.20) $ .38 $ .15 $ .09
Extraordinary loss................................ (.05) - - (.03)
--------------- --------------- --------------- ---------------
Net income (loss)................................. $ (.25) $ .38 $ .15 $ .06
=============== =============== =============== ===============
Shares used in determining pro forma basic income
(loss) per common share........................ 15,607 12,728 9,890 9,291
=============== =============== =============== ===============
Per common share (loss) data diluted (3):
Pro forma income (loss) before extraordinary item. $ (.20) $ .36 $ .15 $ .09
Extraordinary loss................................ (.05) - - (.03)
--------------- --------------- --------------- ---------------
Net income (loss)................................. $ (.25) $ .36 $ .15 $ .06
=============== =============== =============== ===============
Shares used in determining pro forma diluted
income (loss) per common share................. 15,607 13,193 10,109 9,291
=============== =============== =============== ===============
</TABLE>
(1) 1998 results include Intelicom which was acquired on January 2, 1998.
(2) Excluding the $25.5 million ($15.8 million after tax) non-recurring in
process research and development and personnel and indirect acquisition
costs associated with the Company's January 2, 1998 acquisition of
Intelicom and the extraordinary loss resulting from the early
extinguishment of debt, earnings for the year ended December 31,1998 were
$12.7 million or $0.77 per pro forma diluted share.
(3) Computed on the basis described in Note 4 of Notes to Consolidated
Financial Statements.
-15-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
--------------- --------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short term investments. $40,735 $ 28,967 $ 4,487 $1,468 $ 512
Securities available for sale, at estimated
market value................................... - - 25,023 - -
Working capital................................... 56,825 32,572 31,639 1,210 157
Current assets.................................... 78,131 34,936 33,942 3,117 1,457
Current liabilities............................... 21,306 2,364 2,303 1,907 1,300
Total assets...................................... 155,156 44,452 38,398 5,434 2,651
Total long-term debt and capital lease obligations 25 73 878 2,437 1,353
Redeemable Preferred Stock--Class C............... - - - 640 -
Total stockholders' equity (deficit).............. 133,825 40,318 34,717 379 (186)
</TABLE>
-16-
<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
or fixed fee basis. As a result, a substantial portion of the Company's revenue
is recurring in nature, and increases as a provider's subscriber base grows.
On January 2, 1998, the Company acquired a subsidiary of Computer Sciences
Corporation ("CSC"), a provider of billing and customer care software, by
acquiring all of the outstanding Capital Stock of Intelicom. This acquisition
was accounted for in accordance with the purchase method of accounting. The
purchase price, after working capital adjustments aggregating approximately
$14.2 million, aggregated $83.7 million, before direct costs of approximately
$1.2 million and consisted of 606,673 shares of Common Stock of the Company
valued at $10 million (before registration costs of approximately $100,000) and
$73.8 million in cash. In addition, the Company made a $6 million payment in
January 1999, which was contingent upon certain performance factors. The assets
acquired and liabilities assumed were recorded at their estimated fair value on
the date of acquisition and the purchase price in excess of the fair market
value of the assets acquired of approximately $45.3 million is being amortized
over 15 years. In connection with the acquisition, the Company received current
assets of $5.9 million, product development costs of $16.6 million, and other
non-current assets of $3 million and assumed accrued liabilities of $7.9
million. In addition, purchased research and development costs of $20.8 million,
before income tax benefit, and personnel and other indirect transaction costs of
$4.7 million, before income tax benefit, (principally hiring and temporary staff
of $1.8 million, special bonuses paid to the Company's employees and management
of $2.3 million and systems and other costs of $600,000) associated with the
Intelicom acquisition have been expensed in 1998. All of the personnel and
indirect acquisition costs were paid during 1998 with the exception of
approximately $220,000. The operations of Intelicom are included with the
Company's financial statements since the date of acquisition.
A portion of the cash purchase price for Intelicom 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"). The Company subsequently amended the Credit Agreement with an
Amended and Restated Credit Agreement dated as of March 18, 1998 (the "Amended
Credit Agreement") which provided for a $70 million term loan and a $30 million
line of credit. The Amended Credit Agreement contains normal covenants which
include meeting certain financial ratios.
During the quarter ended March 31, 1998, the Company entered into a hedging
agreement with a third party, expiring in March 2001, to limit exposure to
interest rate volatility on the Amended Credit Agreement (the "Hedge
Agreement").
On June 8, 1998 as a result of the follow-on offering described in Note 4, the
Company retired the $70 million term loan and terminated the Hedge Agreement. In
connection with this, the Company recorded an after tax extraordinary charge of
$826,198.
The $30 million line of credit remains outstanding at December 31, 1998. No
amounts were drawn on the line of credit during 1998.
Costs for acquired in-process research and development ("in-process R&D") for
projects that did not have future alternative uses were $20.8 million. This
allocation represents the estimated fair market value based on risk-adjusted
cash flows related to the in-process R&D projects. At the date of acquisition,
the development of these projects had not yet reached technological feasibility,
and the in-process R&D had no alternative future uses. Accordingly, these costs
were written off in the quarter ended March 31, 1998.
On the date of its acquisition, Intelicom's in-process R&D value was comprised
of three primary R&D programs that were expected to reach completion between
late 1998 and 2000. These projects included the introduction of new technology
aimed at customer care and billing. At the acquisition date, Intelicom's R&D
programs ranged in completion from 35% to 80%, and total continuing R&D
commitments to complete the projects were expected to be approximately $5.5
million. On the acquisition date, expenditures to complete Intelicom's projects
were expected to be approximately $3 million, $2 million and $500,000 in 1998,
1999 and 2000, respectively. These estimates are subject to change, given the
uncertainties of the development process, and no assurance can be given that
deviations from these estimates will not occur. Additionally, these projects
will require maintenance expenditures when and if they reach a state of
technological and commercial feasibility. Based on the activities during 1998,
the Company believes that the assumptions used in the valuation are reasonable.
-17-
<PAGE>
Management believes the Company is positioned to complete each of the major R&D
programs. However, there is risk associated with the completion of the projects,
and there is no assurance that any project will meet with either technological
or commercial success. The substantial delay or outright failure of the
Intelicom R&D could adversely impact the Company's financial condition.
The value assigned to purchased in-process R&D was determined by estimating the
projected net cash flow from Intelicom's purchased in-process R&D projects once
they had reached commercially viable products and discounting the net cash flows
to their present value. The revenue estimates used to value the in-process R&D
were based on estimates of relevant market sizes and growth factors, expected
trends in technology and the nature and expected timing of new product
introductions by the Company and its competitors. The valuation anticipates
revenues beginning in 1998.
The rates utilized to discount the net cash flows to their present value are
based on Intelicom's weighted average cost of capital. Given the nature of the
risks associated with the estimated growth, profitability and developmental
projects, Intelicom's weighted average cost of capital was adjusted. A discount
rate of 30% was deemed appropriate for Intelicom's business enterprise. This
discount rate is intended to be commensurate with Intelicom's maturity and the
uncertainties in the economic estimates described above.
The estimates used by the Company in valuing in-process R&D were based upon
assumptions the Company believes to be reasonable but which are inherently
uncertain and unpredictable. The Company's assumptions may be incomplete or
inaccurate, and no assurance can be given that unanticipated events and
circumstances will not occur. Accordingly, actual results may vary from the
projected results. Any such variance may result in a material adverse effect on
the financial condition and results of operations of the Company.
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 85.4%, 93.2% and 96.6% of total revenue for 1998, 1997 and
1996, respectively. Services are generally billed monthly and service revenue is
recognized in the period in which the services are provided. The remaining
revenue relates primarily to development of new software and enhancement of
existing installed systems.
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.
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."
-18-
<PAGE>
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, 1998, 1997 and
1996:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
---------------- ----------------- ----------------
<S> <C> <C> <C>
Revenue.............................................. 100.0% 100.0% 100.0%
Costs and expenses:
Operating expenses................................ 38.4 24.0 25.7
General, administrative and selling expenses...... 18.0 28.9 39.1
Depreciation and amortization..................... 9.4 6.8 6.3
Systems development and programming costs......... 14.7 12.4 12.6
Personnel and indirect acquisition costs.......... 4.1 - -
In process research and development .............. 18.0 - -
---------------- ----------------- ----------------
Total costs and expenses............................. 102.6 72.1 83.7
---------------- ----------------- ----------------
Operating income (loss).............................. (2.6) 27.9 16.3
Other income......................................... 1.3 7.3 1.9
Interest expense..................................... (2.4) (0.5) (2.5)
---------------- ----------------- ----------------
Income (loss) before income tax expense.............. (3.7) 34.7 15.7
Income tax expense (benefit)......................... (1.0) 14.2 6.7
---------------- ----------------- ----------------
Income (loss) before extraordinary item.............. (2.7) 20.5 9.0
Extraordinary loss................................... 0.7 - -
================ ================= ================
Net income (loss).................................... (3.4)% 20.5% 9.0%
================ ================= ================
</TABLE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Results of Operations
Primarily as a result of the Intelicom Acquisition, the Company's revenues
increased from $23.4 million for the year ended December 31, 1997 to $115.5
million for the year ended December 31, 1998. Service revenue related to the
operation of customer billing systems accounted for 93.2% and 85.4% of total
revenue for the years ended December 31, 1997 and 1998 respectively. Operating
expenses for the twelve month period, excluding nonrecurring in process research
and development and personnel and indirect costs associated with the Intelicom
Acquisition aggregating $25.5 million, increased from $16.9 million in 1997 to
$93.0 million in 1998. Additionally, interest expense for the twelve months
ended December 31, 1998, increased to $2.7 million from $120,355 for the same
period in 1997 primarily as a result of the Company's $70 million term loan
obtained in connection with the Intelicom Acquisition. The Company's effective
tax rate for the twelve month period decreased from 40.9% in 1997 to 26.1% in
1998 primarily due to the amount of tax benefit anticipated in connection with
the nonrecurring costs associated with the Intelicom Acquisition.
On a pro forma basis, assuming the Intelicom Acquisition occurred on January 1,
1997, revenues for the year ended 1998 increased 43.6% from $80.4 million in
1997 to $115.5 million on an actual basis in 1998. The increase is due primarily
to the growth of recurring revenue from existing customers. Total pro forma
operating and other expenses increased 38.6% from $67.1 million on a pro forma
basis for 1997 to $93.0 million in 1998 excluding nonrecurring in process
research and development and personnel and indirect costs associated with the
Intelicom Acquisition. This increase is due primarily to the increased service
and systems support necessary for the growing client base, provided in part by
outside contractors.
-19-
<PAGE>
For the year ended December 31, 1998 non-recurring charges of $25.5 million
($15.8 million after tax) for in-process research and development ($20.8
million) and personnel and indirect acquisition costs (principally hiring and
temporary staff of $1.8 million, special bonuses paid to the Company's employees
and management of $2.3 million and systems and other costs of $600,000)
associated with the Intelicom Acquisition. All of the personnel and indirect
acquisition costs were paid during 1998 with the exception of approximately
$220,000. Earnings for the twelve months ended December 31, 1998 before
nonrecurring and extraordinary items were $12.7 million or $0.77 per pro forma
diluted share.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenue
Revenue increased 40.4% from $16.7 million in 1996 to $23.4 million 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 $4.3 million in 1996 to $5.6 million 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 $6.5 million in
1996 to $6.7 million 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 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 $1.8 million
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
management's salaries and bonuses after the Company's initial public offering
("IPO") in October 1996.
Depreciation and amortization
Depreciation and amortization expenses increased 51.5% from $1 million in 1996
to $1.6 million 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 $2.1 million in
1996 to $2.9 million 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 $2.9 million in software
development costs in 1996 and 1997, respectively.
Other income
Other income increased 439% from $315,914 in 1996 to $1.7 million in 1997,
primarily due to an increase in investment income of $1.3 million.
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.
-20-
<PAGE>
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.
Liquidity and Capital Resources
The Company has financed its operations primarily through placements of debt and
equity securities, cash generated from operations and equipment financing
leases.
As of December 31, 1998, the Company had $40.7 million in cash and cash
equivalents, $34.7 million in net trade accounts receivable and $56.8 million in
working capital.
For the year ended December 31, 1998, the Company generated cash of $10.6
million from operating activities. The increase in accounts receivable includes
the build up of Intelicom receivables ($14 million) which were retained by CSC
at the time of the acquisition. Had the receivables been included in the
acquired assets, cash provided by operations would have been $24.6 million and
cash used for investing activities would have been $98.5 million for the year
ended December 31, 1998. The Company also generated cash of $85.6 million from
financing activities, including the sale of Common Stock in June 1998 for $83.1
million in net proceeds. Using proceeds from the follow-on offering, the Company
retired the $70 million term loan, obtained in connection with the Intelicom
Acquisition. The offering and cash generated from operating activities also
enabled the Company to fund its operations, apply $6.9 million to product
development costs and make $3.7 million in capital expenditures.
The Company believes that its existing capital resources 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 has a $30 million unused line of credit available for future cash
requirements.
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 has established a Year 2000 Task Force (the "Task Force") which
includes employees with various functional and divisional responsibilities,
material third parties and outside consultants. The Task Force has identified
five phases in becoming Year 2000 compliant:
(I) awareness--locating, listing and prioritizing specific technology that is
potentially subject to Year 2000 related challenges;
(II) assessment--determining the level of risk that exists through inquiry,
research and testing;
(III) renovation--updating code to resolve Year 2000 related issues that were
identified in previous phases by repair in a testing environment.
(IV) validation--testing, monitoring, obtaining certification and verifying
the correct manipulation of dates and date related data, including
systems of material third parties; and
(V) implementation--installation, integration and application of Year 2000
ready resolutions by replacement, upgrade, or repair of Information
Technology systems, including those of material third parties.
The Company is performing its Year 2000 analysis on both the front-end of its
systems, which are located at its customers' sites, and the back-end of its
systems, which are located at the Company. As of March 1, 1999, the awareness,
assessment and renovation phases of all of the Company's systems have been
completed in their entirety. With respect to the front-end portion of the
systems, the Year 2000 Task Force is currently in the validation and
implementation phases. The Company expects to be completed with all five of its
phases of the front-end of the systems by mid 1999. At that point, upgrades
and replacements will be provided to the Company's customers. However, there can
be no assurance that customers will accept and install the upgrades and
replacements in a timely manner. With respect to the back-end portion of the
Company's systems, the Year 2000 Task Force is currently in the validation
phase. The Company expects to be completed with the validation and
implementation phases of the back-end systems by mid 1999. If validation and
implementation of the Company's critical systems fail to meet the Company's
expectations, or identify a risk of noncompliance with a particular
functionality, the Company will perform the renovation phase to identify
alternative solutions. As of March 1, 1999, approximately 80% of all validation
activities and 50% of all implementation activities are complete.
-21-
<PAGE>
The Company is in the process of developing a working contingency plan for the
Year 2000 issue. The contingency plan is scheduled to be completed during the
third quarter of 1999. The Company will perform testing on all subsequent
upgrades of software deemed Year 2000 compliant to ensure continued compliance.
In addition to internally generated systems, the Company relies on third parties
for its system infrastructure, operating systems, human resources, financial,
and supporting billing and customer care software, some of which are not yet
Year 2000 compliant. The Company is in the process of obtaining assurances from
third parties that their systems are or will be Year 2000 compliant in a timely
manner.
While the Company does not anticipate delays or postponements in implementing
Year 2000 resolutions by the previously stated time frame, there can be no
certainty that implementation of solutions will be made in a timely manner until
the validation phase has been completed. The inability to address all issues in
a timely and successful manner, could have a material adverse effect on the
Company's business and results of operations. The failure of third parties to
provide Year 2000 compliant software products could have a material adverse
effect on the Company's financial condition and results of operations. Such
risks include, but are not limited to, failure to accurately report and bill
existing subscribers for phone usage, accept new orders, activate new
subscribers, and the inability to perform other customer care tasks.
Based on information developed to date as a result of the Task Force assessment
efforts, Management believes that the costs of becoming Year 2000 compliant will
be approximately $4.0 million. Through December 31, 1998, the Company has
incurred $2.5 million toward this development effort. Although the Company does
not expect the cost to have a material adverse effect on its business or results
of operations, there can be no assurance that the Company will not be required
to incur significant unanticipated costs in relation to its readiness
obligations. The Company has not deferred any specific projects, goals or
objectives relating to its domestic and international operations as a result of
implementing the Company's Year 2000 compliance efforts.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
Effective January 1, 1998, the Company adopted the FASB's Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS 131"). SFAS 131 superseded FASB Statement No. 14,
Financial Reporting for Segments of a Business Enterprise. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. SFAS 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The adoption
of Statement 131 did not affect results of operations or financial position. The
operating results of the Company is regularly reviewed by the chief operating
decision maker as one well-defined line of business. Therefore, the Company has
determined that under the requirements of Statement 131, it continues to have
only one operating segment.
As of January 1, 1998, the Company adopted SFAS 130, Reporting Comprehensive
Income ("SFAS 130"). SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components.
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.
Reliance On Significant Customers
For the year ended December 31, 1998, revenue from Nextel Communications
represented 30.2% of the Company's total revenue and revenue from Western
Wireless represented 11.9% of the Company's total revenue. As a result of the
Company's acquisition of Intelicom in January of 1998, the Company has
several new customers with substantially larger subscriber bases than its then
existing customers. It is likely that certain of the Company's new customers,
including each of Nextel and Western Wireless will continue to represent over 10
percent of the Company's revenues in the future. The Company has 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 Intelicom. 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.
Industry Consolidation
There has been a tremendous amount of business consolidation within the
wireless telecommunications industry. The down stream impact is that there are
less wireless customers requiring the services of billing and customer care
providers, increasing the level of competition in the industry. In addition,
these consolidated wireless companies have also strengthened their purchasing
power, putting pressure on reducing prices and challenging margin levels, and
they strive to streamline their operations as they bring multiple billing
systems onto one system, reducing the number of vendors needed. Although the
Company has sought to address this situation by continuing to market its
products and services to new customers, entering contracts up to five years to
protect current price and margin levels and working with existing customers to
provide the services they need to remain competitive in the market place, there
can be no assurance that the Company will not lose significant customers as a
result of industry consolidation.
XCEDE May Not be Commercially Successful
The Company has devoted substantial development and marketing efforts to
complete and promote its XCEDE product. XCEDE has not yet been installed
commercially, and it is currently anticipated that it will first be installed in
the second quarter of 1999. There can be no assurance that XCEDE will be
commercially successful. In addition, there can be no assurances that XCEDE will
perform in accordance with customer expectations. Any unanticipated program
development on the XCEDE system could result in substantial costs to the Company
and could delay the Company's commercial introduction of the product. Such costs
or delays could have a material adverse effect on the Company's business,
financial condition and results of operations of the Company.
-22-
<PAGE>
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 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, many of
whom are expanding their product offerings in the face of competition. There can
be no assurances that the Company can develop products that will meet the
evolving needs of its customers. 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.
Integration of Intelicom
In January 1998, the Company acquired Intelicom, 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.
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 $115.5 million in 1998. In addition, the Company
substantially increased the size of its operations, as well as the number of
subscribers it serves, by acquiring Intelicom 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 673 as of February 1999. A substantial portion of the Company's current
employees joined the Company in January 1998, in conjunction with the Company's
acquisition of Intelicom. 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.
-23-
<PAGE>
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 Wireless Telephone Industry
Although the Company's products have been designed to adapt to a variety of
current and future technologies, substantially all of its revenues to date have
been generated by sales of its solutions to service providers in the wireless
telephone industry. A decrease in the number of wireless service products served
by the Company's customers could result in lower revenues for the Company.
Although the wireless market has experienced substantial growth in the number of
subscribers in the past, there can be no assurance that such growth will be
sustained.
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,
and Susan Yezzi joined the Company in late 1997 and assumed the role of the
Company's Chief Operating Officer in February 1999. The Company is currently
seeking a Chief Financial Officer to replace Paul K. Kothari, who served in that
capacity from February 1998 to February 1999. Peter L. Masanotti became the
Company's Acting Chief Financial Officer in February 1999. 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 customer care 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.
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
-24-
<PAGE>
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; 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 wireless 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.
-25-
<PAGE>
Item 7A--Quantitative and Qualitative Disclosures About Market Risk
At December 31, 1998, the Company does not have any derivatives, debt or hedges
outstanding. In addition, because the Company's foreign operations are minimal,
the risk of foreign currency fluctuation is not material to the Company's
financial position or results of operations. The Company's available line of
credit requires interest on outstanding borrowings at various rates. Therefore,
the Company is not subject to interest rate risk, but could be subject to
fluctuating cash flows on outstanding borrowings.
-26-
<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.................................................................................. 28
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and 1997.................................................... 29
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.............................................................................. 31
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended
December 31, 1998, 1997 and 1996.............................................................................. 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.............................................................................. 33
Notes to Consolidated Financial Statements...................................................................... 34
</TABLE>
-27-
<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, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 16, 1999
-28-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31,
1998 1997
-----------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................................................ $ 40,735 $28,967
Accounts receivable, net of allowances for doubtful accounts of $2,362 and
$486, respectively................................................................. 34,713 5,008
Prepaid expenses, and other current assets........................................... 1,843 741
Deferred income taxes................................................................ 840 220
-----------------------------------
Total current assets.................................................................... 78,131 34,936
Property and equipment
Computers, including leased property under capital leases of $1,150 and $1,105,
respectively...................................................................... 9,506 4,844
Furniture and fixtures............................................................... 2,005 447
Equipment, including leased property under capital leases of $54 in 1998 and 1997.... 706 373
Leasehold improvements............................................................... 970 589
-----------------------------------
13,187 6,253
Less: accumulated depreciation and amortization...................................... 5,450 2,319
-----------------------------------
7,737 3,934
Other assets:
Goodwill - net of accumulated amortization of $3,010 in 1998......................... 42,249 -
Product development costs--at cost, net of accumulated amortization of $5,810 and
$1,105 at December 31, 1998 and December 31, 1997, respectively ................... 22,511 3,698
Deferred income taxes................................................................ 4,138 -
Other................................................................................ 390 1,884
-----------------------------------
69,288 5,582
===================================
Total assets............................................................................ $155,156 $44,452
===================================
</TABLE>
See accompanying notes.
-29-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--Continued
<TABLE>
<CAPTION>
December 31,
1998 1997
------------------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable............................................................. $ 10,921 $ 1,192
Accrued expenses and income taxes payable.................................... 2,919 560
Accrued compensation......................................................... 3,026 333
Customer advances and deferred revenue....................................... 3,862 -
Current maturities of capital lease obligations.............................. 74 279
Other........................................................................... 504 -
------------------------------------
Total current liabilities....................................................... 21,306 2,364
Capital lease obligations....................................................... 25 73
Deferred income taxes........................................................... - 1,667
Other........................................................................... - 30
Stockholders' equity
Common Stock, $.01 par value; 40,000,000 shares authorized, 17,313,231 and
12,786,740 shares issued and outstanding at December 31, 1998
and December 31, 1997, respectively........................................ 173 128
Additional paid-in capital................................................... 141,662 44,447
Retained deficit............................................................. (7,952) (4,026)
Unearned compensation........................................................ (58) (231)
------------------------------------
Total stockholders' equity...................................................... 133,825 40,318
====================================
Total liabilities and stockholders' equity...................................... $155,156 $44,452
====================================
</TABLE>
See accompanying notes.
-30-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C>
Revenue $115,460 $23,429 $16,689
Costs and expenses:
Operating expenses.............................................. 44,334 5,617 4,283
General, administrative and selling expenses.................... 20,798 6,760 6,523
Depreciation and amortization................................... 10,846 1,596 1,054
Systems development and programming costs....................... 16,974 2,911 2,115
Personnel and indirect acquisition costs........................ 4,713 - -
In-process research and development ............................ 20,800 - -
----------------------------------------------------
Total costs and expenses........................................... 118,465 16,884 13,975
Operating income (loss)............................................ (3,005) 6,545 2,714
Other income....................................................... 1,550 1,702 316
Interest expense................................................... (2,740) (120) (416)
----------------------------------------------------
Income (loss) before income taxes and extraordinary item........... (4,195) 8,127 2,614
Income tax expense (benefit)....................................... (1,095) 3,326 1,112
----------------------------------------------------
Income (loss) before extraordinary item............................ (3,100) 4,801 1,502
Extraordinary loss (net of $562 tax benefit)....................... (826) - -
----------------------------------------------------
Net income (loss).................................................. $ (3,926) $ 4,801 $ 1,502
====================================================
Income (loss) per common share--basic:
Income (loss) before extraordinary item......................... $ (.20) $ .38 $ .15
Extraordinary loss.............................................. (.05) - -
----------------------------------------------------
Net income (loss).................................................. $ (.25) $ .38 $ .15
====================================================
Shares used in computing basic income (loss) per common share...... 15,607 12,728 9,890
====================================================
Income (loss) per common share--diluted:
Income (loss) before extraordinary item......................... $ (.20) $ .36 $ .15
Extraordinary loss.............................................. (.05) - -
----------------------------------------------------
Net income (loss).................................................. $ (.25) $ .36 $ .15
====================================================
Shares used in computing diluted income (loss) per
common share.................................................... 15,607 13,193 10,109
====================================================
</TABLE>
See accompanying notes.
-31-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(In thousands, except share and per share data)
<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, 1995 18 $ 400 1,500 $328 7,312,800 $ 76
Net income
Net unrealized loss on
securities available for
sale
Comprehensive income
Preferred stock dividends
declared
Retirement of treasury (2)
stock
Recapitalization of Class
A & B preferred stock (18) (400) (1,500) (328) 1,279,218 13
Compensation paid in
common stock 106,152 1
Conversion of Class C
convertible preferred
stock 154,800 2
Exercise of warrants 501,786 5
Sale of common stock, net
of expenses 3,300,000 32
---------------------- --------------------- -----------------------
Balance at December 31, 1996 - - - - 12,654,756 127
Net income
Net unrealized gain on
securities available for
sale
Comprehensive income
Secondary sale of common
stock 75,000 1
Employee stock purchase
plan 9,078
Exercise of stock options 47,906
Amortization of unearned
compensation
---------------------- --------------------- -----------------------
Balance at December 31, 1997 - - - - 12,786,740 128
Net (loss)
Comprehensive (loss)
Shares issued in
connection with
Intelicom acquisition 606,673 6
Secondary sale of common
stock 3,662,750 37
Employee stock purchase
plan 24,300 -
Exercise of stock options 232,768 2
Tax benefit from stock
options
Amortization of unearned
compensation
---------------------- --------------------- -----------------------
Balance at December 31, 1998 - $ - - $ - 17,313,231 $ 173
====================== ===================== =======================
</TABLE>
<TABLE>
<CAPTION>
Unearned
Compensa-
tion Accumulated
Additional Treasury Retained Restricted Other
Paid-in Stock at Earnings Stock Comprehensive
Capital Cost (Deficit) Awards Income Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $(400) $ (25) $ 379
Net income 1,502 1,502
Net unrealized loss on
securities available for
sale $ (37) (37)
--------------
Comprehensive income 1,465
--------------
Preferred stock dividends
declared (79) (79)
Retirement of treasury
stock $ (398) 400 -
Recapitalization of Class
A & B preferred stock 10,115 (10,225) (825)
Compensation paid in
common stock 969 $ (336) 634
Conversion of Class C
convertible preferred
stock 638 640
Exercise of warrants 818 823
Sale of common stock, net
of expenses 31,648 31,680
-----------------------------------------------------------------------
Balance at December 31, 1996 43,790 - (8,827) (336) (37) 34,717
Net income 4,801 4,801
Net unrealized gain on
securities available
for sale 37 37
--------------
Comprehensive income 4,838
--------------
Secondary sale of common
stock 172 173
Employee stock purchase
plan 113 113
Exercise of stock options 372 372
Amortization of unearned
compensation 105 105
-----------------------------------------------------------------------
Balance at December 31, 1997 44,447 - (4,026) (231) - 40,318
Net (loss) (3,926) (3,926)
--------------
Comprehensive (loss) (3,926)
--------------
Shares issued in
connection with
Intelicom acquisition 9,894 9,900
Secondary sale of common
stock 83,107 83,144
Employee stock purchase
plan 456 456
Exercise of stock options 1,887 1,889
Tax benefit from stock
options 1,871 1,871
Amortization of unearned
compensation 173 173
-----------------------------------------------------------------------
Balance at December 31, 1998 $141,662 $ - $ (7,952) $ (58) $ - $133,825
=======================================================================
</TABLE>
See accompanying notes.
-32-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income (loss)...................................................... $ (3,926) $ 4,801 $ 1,502
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Extraordinary loss................................................ 826 - -
Write-off in process research and development..................... 20,800 - -
Depreciation and amortization..................................... 10,846 1,596 1,054
Amortization of unearned compensation............................. 173 105 -
Compensation paid in Common Stock................................. - - 634
Deferred income taxes............................................. (6,425) 1,084 612
Change in operating assets and liabilities:
Accounts receivable............................................. (23,996) (1,775) (1,884)
Prepaid expenses and other current assets....................... (900) 414 (875)
Accounts payable and accrued expenses........................... 8,900 320 391
Customer advances............................................... 2,766 - -
Other assets and liabilities, net............................... 1,580 (1,789) 12
--------------------------------------------------
Net cash provided by operating activities.............................. 10,644 4,756 1,446
Investing activities
Capital expenditures................................................... (3,749) (2,738) (1,853)
Purchase of securities available for sale.............................. - (25,329) (25,060)
Purchase of investments held to maturity............................... - (3,062) (353)
Proceeds from maturities of investments................................ - 3,411 300
Proceeds from maturities of securities available for sale.............. - 50,389 -
Purchase of Intelicom.................................................. (73,832) - -
Product development costs.............................................. (6,918) (2,872) (859)
--------------------------------------------------
Net cash (used for) provided by investing activities................... (84,499) 19,799 (27,825)
Financing activities
Principal payments on long-term debt................................... (70,000) - (1,811)
Proceeds from long-term debt........................................... 70,000 - -
Tax benefit associated with stock options.............................. 1,871 - -
Financing fee related to acquisition................................... (1,484) - -
Payment to retire Preferred Stock...................................... - - (825)
Principal payments on notes payable.................................... - - (77)
Principal payments on capital lease obligations........................ (253) (385) (362)
Proceeds from sale of Common Stock..................................... 85,489 658 32,502
Dividends paid......................................................... - - (82)
--------------------------------------------------
Net cash provided by financing activities.............................. 85,623 273 29,345
Net increase in cash and cash equivalents.............................. 11,768 24,828 2,966
Cash and cash equivalents at beginning of year......................... 28,967 4,139 1,173
--------------------------------------------------
Cash and cash equivalents at end of year............................... $ 40,735 $ 28,967 $ 4,139
==================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for interest................................. $ 2,738 $ 120 $ 434
Cash paid during the year for taxes.................................... $ 1,420 $ 2,342 $ 820
</TABLE>
Supplemental disclosure of noncash financing activities:
Capital lease obligations totaling $685,604 in the year ended December 31, 1996,
were incurred for the acquisition of new equipment.
See accompanying notes.
-33-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
International Telecommunication Data Systems, Inc. ("ITDS" or the "Company") 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
and fixed fee 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
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. Amortization of assets under capital leases is included in depreciation
expense.
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, 1998, 1997 and 1996, $4.7 million, $518,398 and $300,105,
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. Custom programming contracts are accounted for upon completion of
short-term projects. For longer-term custom programming projects, the percentage
of completion method is used. Accounts receivable at December 31, 1998 and 1997
include $12.3 million and $2.3 million, respectively, for services rendered
prior to December 31 which were billed in January of the following year when the
billing cycles were complete.
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.
-34-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expenses for the
years ended December 31, 1998, 1997, and 1996 were $670,542, $233,673 and
$194,097, respectively.
Other Income
Other income for the years ended December 31, 1998, 1997 and 1996 includes $1.4
million, $1.6 million and $313,132, respectively, of investment income,
primarily interest income.
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.
Major Customers
Revenues generated from Nextel and Western Wireless accounted for approximately
30.2% and 11.9%, respectively, of 1998 revenues. For the year ended 1997
revenues from Aliant Communications and Sygnet Communications accounted for
18.4% and 11.7%, respectively, and for the year ended 1996 Aliant Communications
and Horizon Cellular accounted for 19.1% and 12.5%, respectively, of revenues.
The loss of either Nextel or Western Wireless could have an adverse impact on
the financial condition and results of operations of the Company.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's limited use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
Effective January 1, 1998, the Company adopted the FASB's Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS 131"). SFAS 131 superseded SFAS 14, Financial
Reporting for Segments of a Business Enterprise. SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS 131 did not affect results of operations or financial position. The
operating results of the Company are regularly reviewed by the chief operating
decision maker as one well-defined line of business. Therefore, the Company has
determined that under the requirements of SFAS 131, it continues to have only
one operating segment.
As of January 1, 1998, the Company adopted SFAS 130, Reporting Comprehensive
Income ("SFAS 130"). SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components.
-35-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. ACQUISITION
On January 2, 1998, the Company acquired a subsidiary of Computer Sciences
Corporation ("CSC"), a provider of billing and customer care software, by
acquiring all of the outstanding Capital Stock of CSC Intelicom Inc. (now known
as ITDS Intelicom Services, Inc.) ("Intelicom"). This acquisition was accounted
for using the purchase method of accounting. The purchase price, after working
capital adjustments aggregating approximately $14.2 million, aggregated $83.7
million, before direct costs of approximately $1.2 million and consisted of
606,673 shares of Common Stock of the Company valued at $10 million (before
registration costs of $100,000) and $73.8 million in cash. In addition, the
Company made a $6 million payment in January 1999, which was contingent upon
certain performance factors. The assets acquired and liabilities assumed were
recorded at their estimated fair value on the date of acquisition and the
purchase price in excess of the fair market value of the assets acquired of
approximately $45.3 million is being amortized over 15 years. In connection with
the acquisition the Company received current assets of $5.9 million, product
development costs of $16.6 million, and other non-current assets of $3 million
and accrued liabilities of $7.9 million. In addition, purchased research and
development costs of $20.8 million, before income tax benefit, and personnel and
other indirect transaction costs of $4.7 million, before income tax benefit,
(principally hiring and temporary staff of $1.8 million, special bonuses paid to
the Company's employees and management of $2.3 million and systems and other
costs of $600,000) associated with the Intelicom acquisition have been expensed
in 1998. The operations of Intelicom are included with the Company's financial
statements since the date of acquisition. All of the personnel and indirect
acquisition costs were paid during 1998 with the exception of approximately
$220,000. Assuming the acquisition occurred on January 1, 1997, revenues, net
income and diluted earnings per share for 1997 would have been $80.4 million,
$5.2 million and $0.37, respectively.
A portion of the cash purchase price for Intelicom 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"). The Company subsequently amended the Credit Agreement with an
Amended and Restated Credit Agreement dated as of March 18, 1998 (the "Amended
Credit Agreement") which provided for a $70 million term loan and a $30 million
line of credit. The Amended Credit Agreement contains normal covenants which
include meeting certain financial ratios.
During the quarter ended March 31, 1998, the Company entered into a hedging
agreement with a third party, expiring in March 2001, to limit exposure to
interest rate volatility on the Amended Credit Agreement (the "Hedge
Agreement").
On June 8, 1998 as a result of the follow-on offering described in Note 4, the
Company retired the $70 million term loan and terminated the Hedge Agreement. In
connection with repaying the $70 million term loan, and canceling the Hedge
Agreement, the Company recorded an after tax extraordinary charge of $826,198.
The $30 million line of credit remains outstanding at December 31, 1998. No
amounts were drawn on the line of credit during 1998.
Costs for acquired in-process research and development ("in-process R&D") for
projects that did not have future alternative uses were $20.8 million. This
allocation represents the estimated fair market value based on risk-adjusted
cash flows related to the in-process R&D projects. At the date of acquisition,
the development of these projects had not yet reached technological feasibility,
and the in-process R&D had no alternative future uses. Accordingly, these costs
were written off in the quarter ended March 31, 1998.
On the date of its acquisition, Intelicom's in-process R&D value was comprised
of three primary R&D programs that were expected to reach completion between
late 1998 and 2000. These projects included the introduction of new technology
aimed at customer care and billing technology. At the acquisition date,
Intelicom's R&D programs ranged in completion from 35% to 80%, and total
continuing R&D commitments to complete the projects were expected to be
approximately $5.5 million. On the acquisition date, expenditures to complete
the Intelicom's projects were expected to be approximately $3 million, $2
million and $500,000 in 1998 through 2000, respectively. These estimates are
subject to change, given the uncertainties of the development process, and no
assurance can be given that deviations from these estimates will not occur.
Additionally, these projects will require maintenance expenditures when and if
they reach a state of technological and commercial feasibility. Based on the
activities during 1998, the Company believes that the assumptions used in the
valuation are reasonable.
-36-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. ACQUISITION (continued)
Management believes the Company is positioned to complete each of the major R&D
programs. However, there is risk associated with the completion of the projects,
and there is no assurance that any project will meet with either technological
or commercial success. The substantial delay or outright failure of the
Intelicom R&D could adversely impact the Company's financial condition.
The value assigned to purchased in-process R&D was determined by estimating the
costs to develop Intelicom's purchased in-process R&D into commercially viable
products, estimating the resulting net cash flows from the projects and
discounting the net cash flows to their present value. The revenue estimates
used to value the in-process R&D were based on estimates of relevant market
sizes and growth factors, expected trends in technology and the nature and
expected timing of new product introductions by the Company and its competitors.
The valuation anticipates revenues beginning in 1998.
The rates utilized to discount the net cash flows to their present value are
based on Intelicom's weighted average cost of capital. Given the nature of the
risks associated with the estimated growth, profitability and developmental
projects, Intelicom's weighted average cost of capital was adjusted. A discount
rate of 30% was deemed appropriate for Intelicom's business enterprise. This
discount rate is intended to be commensurate with Intelicom's maturity and the
uncertainties in the economic estimates described above.
The estimates used by the Company in valuing in-process R&D were based upon
assumptions the Company believes to be reasonable but which are inherently
uncertain and unpredictable. The Company's assumptions may be incomplete or
inaccurate, and no assurance can be given that unanticipated events and
circumstances will not occur. Accordingly, actual results may vary from the
projected results. Any such variance may result in a material adverse effect on
the financial condition and results of operations of the Company.
3. LINE OF CREDIT
The Amended Credit Agreement (see Note 2) provides for a $30 million line of
credit which contains normal covenants including meeting certain financial
ratios. This agreement requires the Company to pay interest at LIBOR plus up to
two and one quarter percent and expires on December 31, 2002. As of December 31,
1998, no amounts were drawn on the line of credit.
4. 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.
-37-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. CAPITAL STOCK (Continued)
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.
Follow-on Offerings
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.
In June 1998, the Company successfully completed a follow-on offering of
3,662,750 shares of Common Stock resulting in net proceeds to the Company of
approximately $83.1 million, after deducting expenses of $579,834. With the
proceeds, the Company retired the $70 million term loan obtained in connection
with the January 2, 1998 Intelicom acquisition, and the remaining funds were
used for working capital. In addition to the follow-on offering and shares
issued in connection with the Intelicom acquisition, shares were issued in
connection with the exercise of stock options during the year ended December 31,
1998.
Earnings Per Share
In February 1997, the FASB issued Statement of Financial Accounting Standards
SFAS No. 128, "Earnings Per Share" ("SFAS 128"), which revises the methodology
of calculating earnings per share. The Company adopted SFAS 128 in the fourth
quarter of 1997. All earnings per share amounts for all prior periods have been
presented in accordance with and where appropriate, restated to conform to the
SFAS 128 requirements. In accordance with SFAS 128, all common stock equivalents
that have a dilutive effect on earnings per share are included in the
calculation for diluted income per share.
The following table set forth the computation of basic and diluted earnings
(loss) per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings (loss) per share -
earnings (loss) before extraordinary item................... $ (3,100) $ 4,801 $ 1,502
=================================
Denominator:
Denominator for basic earnings (loss) per share -
weighted-average shares..................................... 15,607 12,728 9,890
Effect of dilutive securities:
Employee stock options...................................... - 465 219
---------------------------------
Denominator for diluted earnings (loss) per share - adjusted
weighted-average shares and assumed conversions............. 15,607 13,193 10,109
=================================
Basic income (loss) per common share before extraordinary item... $ (.20) $ .38 $ .15
=================================
Diluted income (loss) per common share before extraordinary item. $ (.20) $ .36 $ .15
=================================
</TABLE>
-38-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. CAPITAL STOCK (Continued)
Income per common share for the year ended December 31, 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.
5. STOCK PLANS
The Company's 1998, 1997 and 1996 Stock Plans authorize the grant of options to
employees, directors and consultants for up to 1,125,000, 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 service. 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. The 1998 and 1996 plans are incentive plans, the 1997 is a
non-qualified 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 fair market value of such Common Stock, during an offering period.
A summary of the Company's activity in the stock option plans, and related
information for the years ended December 31, 1998, 1997 and 1996 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........................................... 47,906 7.77
Cancelled........................................... 534,754 10.52
Forfeited........................................... 124,184 7.88
------- ----
Outstanding at December 31, 1997.................... 2,489,099 12.33
Granted............................................. 1,037,800 25.69
Exercised........................................... 232,768 8.12
Forfeited........................................... 344,286 15.11
------- -----
Outstanding at December 31, 1998.................... 2,949,845 $17.21
========= ======
Options exercisable at December 31, 1998............ 682,521 $11.69
Options exercisable at December 31, 1997............ 111,583 $ 9.19
Options exercisable at December 31, 1996............ 24,093 $12.24
</TABLE>
-39-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. STOCK PLANS (Continued)
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 repriced options were included in the number of shares
granted and cancelled for 1997.
<TABLE>
<CAPTION>
Options Outstanding
-------------------
Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices as of 12/31/98 Contractual Life Exercise Price
--------------- -------------- ---------------- ----------------
<S> <C> <C> <C>
$7.50--$10.00................ 612,997 8.0 $7.75
$10.00--$12.50............... 176,000 8.4 11.50
$12.50--$15.00............... 0 0 0
$15.00--$17.50............... 1,127,548 8.9 15.47
$22.50--$25.00............... 450,600 9.4 24.17
$25.00--$27.50............... 559,000 9.3 26.70
$27.50--$30.00............... 6,200 9.5 28.16
$30.00--$32.50............... 16,500 9.5 32.16
$32.50--$35.00............... 1,000 9.5 34.75
----- --- -----
2,949,845 8.8 $17.21
========= === ======
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$7.75 to $34.75 per share. The weighted average remaining contractual life of
those options is 8.8 years.
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>
1998 1997 1996
---- ---- -----
<S> <C> <C> <C>
Risk-free interest rate............................................ 5.5% 5.0% 5.0%
Dividend yield..................................................... 0.0 0.0 0.0
Expected volatility of market price of company's
common stock...................................................... .72 .63 .71
Expected option life............................................... 5 years 5 years 5 years
Weighted average fair value per share of options granted
during year....................................................... $16.47 $7.31 $4.86
</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.
-40-
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. STOCK PLANS (Continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Pro forma net income (loss).............................. $(7,381) $3,441 $1,190
======= ====== ======
Pro forma earnings per share:
Pro forma basic earnings (loss) per share................ $(.47) $.27 $.12
Pro forma diluted earnings (loss) per share.............. $(.47) $.26 $.12
</TABLE>
6. 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 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.
7. 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, 1998
(in thousands):
<TABLE>
<S> <C>
1999............................................. $ 81
2000............................................. 13
2001............................................. 13
2002............................................. 2
---
Total lease obligations.......................... 109
Less: amount representing interest............... (10)
---
Present value of minimum lease payments.......... $ 99
====
</TABLE>
8. COMMITMENTS
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.
In conjunction with the Intelicom acquisition of January 2, 1998, ITDS acquired
from CSC two noncancelable leases expiring in August 2003 for 60,400 square feet
of office space in Champaign, Illinois. 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 $1.6 million, $738,582 and $591,729 for the years
ended December 31, 1998, 1997 and 1996, respectively.
-41-
<PAGE>
International Telecommunication Data Systems, Inc.
Notes to Consolidated Financial Statements (Continued)
8. COMMITMENTS (continued)
Minimum future rental payments due under such leases as of December 31, 1998 are
as follows (in thousands):
<TABLE>
<S> <C>
1999............................. $2,002
2000............................. 1,734
2001............................. 1,218
2002............................. 1,218
2003............................. 812
-------
6,984
Less: sublease income............ (65)
---------
$6,919
</TABLE>
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 approved by the
Board of Directors. In addition, as of December 31, 1998, the Company has loans
and advances to officers aggregating $374,750 (including $29,324 in interest),
which is included in Accounts Receivable.
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 $10,000 for 1998 and 1997 calendar years. The
Company does not contribute to the plan.
9. EXTRAORDINARY ITEM
On June 8, 1998, as a result of the follow-on offering described in Note 4, the
Company retired the $70 million term loan and terminated the Hedge Agreement
obtained in conjunction with the Intelicom acquisition (see Note 2). In
connection with repaying the $70 million term loan and canceling the Hedge
Agreement, the Company recorded an after tax extraordinary charge of $826,198.
10. INCOME TAXES
Significant components of income tax expense (benefit) before extraordinary item
are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
-----------------------------
<S> <C> <C> <C>
Current:
Federal................... $ 4,661 $1,667 $ 382
State..................... 669 575 118
-----------------------------
5,330 2,242 500
-----------------------------
Deferred:
Federal................... (6,007) 806 437
State..................... (418) 278 175
-----------------------------
(6,425) 1,084 612
-----------------------------
Total tax expense (benefit).. $(1,095) $3,326 $1,112
=============================
</TABLE>
-42-
<PAGE>
International Telecommunication Data Systems, Inc.
Notes to Consolidated Financial Statements (Continued)
10. INCOME TAXES (Continued)
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>
1998 1997 1996
----------------- ----------------- ----------------
<S> <C> <C> <C>
Statutory rate................................................ (35.0)% 34.0% 34.0%
State income taxes, net of federal income tax benefit......... 3.9 6.9 7.4
Meals and entertainment....................................... 1.9 - -
Other, net.................................................... 3.1 - 1.1
----------------- ----------------- ----------------
(26.1)% 40.9% 42.5%
================= ================= ================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities are
as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997
----------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred charges........................................ $ 13 $ 29
Depreciation and amortization........................... 1,623 820
Accrued compensation.................................... 74 4
Reserve for doubtful accounts........................... 748 199
Interest................................................ 4 4
Purchased software development costs.................... 845 -
In process research and development..................... 7,435 -
----------------------------------------
Total deferred tax assets................................. 10,742 1,056
----------------------------------------
Deferred tax liabilities:
Software development costs.............................. 5,051 1,966
Capitalized leases...................................... 713 537
----------------------------------------
Total deferred tax liabilities............................ 5,764 2,503
----------------------------------------
Net deferred tax asset (liability)........................ $ 4,978 $ (1,447)
========================================
</TABLE>
-43-
<PAGE>
International Telecommunication Data Systems, Inc.
Notes to Consolidated Financial Statements (Continued)
11. LEGAL PROCEEDINGS
On April 2, 1998, the Company was served with a complaint in Connecticut
Superior Court alleging that the Company had breached the terms of its
employment contact with Alan K. Greene, the Company's former Chief Financial
Officer, and breached other obligations to Greene. The Company intends to
vigorously defend itself in the action and has filed a response to the claim and
asserted a counterclaim against Mr. Greene. The parties are currently in the
discovery phase of the litigation. In addition, on September 11, 1998, Mr.
Greene filed an age discrimination suit against the Company in the Connecticut
Commission on Human Rights and Opportunities and in the Equal Employment
Opportunities Commission. The Company filed its Answer and Position Statement,
disclaiming any liability relating to age discrimination, on November 5, 1998.
In addition, 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.
The Company does not believe that any liabilities relating to any of the legal
proceedings to which it is a party are likely to be, individually or in the
aggregate, material to its consolidated financial position or results of
operations.
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations
for the two years ended December 31, 1998 (in thousands, except per-share data):
<TABLE>
<CAPTION>
Three Months Ended
12/31/98 9/30/98 6/30/98 3/31/98
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue.................................................. $ 33,262 $28,832 $27,360 $26,006
Operating income (loss).................................. 6,308 6,003 5,068 (20,384)
Income before extraordinary loss......................... 4,095 3,877 2,433 13,505
Net income (loss)........................................ 4,095 3,877 1,607 (13,505)
Basic income (loss) per share before extraordinary loss.. .24 .22 .11 (1.01)
Diluted income (loss) per share before extraordinary loss .23 .21 .11 (1.01)
Three Months Ended
12/31/97 9/30/97 6/30/97 3/31/97
------------- ------------- ------------- -------------
Revenue.................................................. $6,758 $6,039 $5,362 $5,270
Operating income......................................... 2,027 1,659 1,421 1,439
Net income............................................... 1,420 1,240 1,078 1,062
Basic net income per share............................... .11 .10 .08 .08
Diluted net income per share............................. .11 .09 .08 .08
</TABLE>
The sum of the quarters' net income per share do not equal the full year
per-share amounts due to differences resulting from changes in the number of
shares of Common Stock outstanding.
Excluding non-recurring in-process research and development and personnel and
indirect acquisition costs associated with the Company's January 2, 1998
acquisition of Intelicom and the extraordinary loss, earnings for the quarter
ended March 31, 1998 were $2 million or $.14 per pro forma diluted share.
-44-
<PAGE>
International Telecommunication Data Systems, Inc.
Notes to Consolidated Financial Statements (Continued)
13. SUBSEQUENT EVENTS (UNAUDITED)
On February 8, 1999, the Company announced that it had formed a strategic
alliance with Novazen Inc. to include internet-based billing and customer care
software in the Company's proprietary suits or products and services.
On March 24, 1999, the Board of Directors approved a stock buy-back program of
up to $10 million. The purchased shares will be used for the Company's stock
incentive plans, employee stock purchase plan and other corporate purposes.
-45-
<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
May 19, 1999 (the "1999 Proxy Statement") in the section entitled "Election of
Directors," which section is incorporated herein by reference.
In addition, in February 1999, Paul K. Kothari resigned as the Company's
Chief Financial Officer.
Item 11--Executive Compensation
The response to this item is contained in the 1999 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 1999 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 1999 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, 1998 and 1997
Consolidated Statements of Operations for the years ended December 31,
1998, 1997 and 1996
-46-
<PAGE>
Consolidated Statements of Stockholders' Equity (Deficiency) for the
years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996
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.
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.
+10.5 1999 Stock Incentive Plan.
***+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 Registrant and Paul K. Kothari, dated
as of December 29, 1997.
+10.10 Employment Agreement between the Registrant and Susan Yezzi, dated as
of December 23, 1997, and amendment thereto effective May 1, 1998.
+10.11 Employment Agreement between the Registrant and Kevin M. Piltz, dated
as of July 20, 1998.
**10.12 Stock Purchase Agreement dated December 11, 1995, as amended, between
the Registrant and Connecticut Innovations, Incorporated relating to
Class C Convertible Preferred Stock.
**10.13 Form of Lease between the Registrant and 969 Associates, dated
December 1990.
**10.14 Sublease dated June 11, 1996 between the Registrant and Learning
International, relating to 225 High Ridge Road, Stamford, Connecticut
***10.15 Lease dated January 1996 between Par 3 Development, L.L.C. and CSC
Intelicom, Inc. (now known as ITDS Intelicom Services, Inc.).
***10.16 Lease dated September 19, 1996 between Par 3 Development, L.L.C. and
CSC Intelicom, Inc. (now known as ITDS Intelicom Services, Inc.)
10.17 Sublease dated November 15, 1998 between the Registrant and the
University of Connecticut relating to 2777 Summer Street, Stamford,
Connecticut.
</TABLE>
-47-
<PAGE>
<TABLE>
<S> <C>
10.18 Lease dated February 25, 1999 between the Registrant and Par 3
Development, L.L.C. relating to 2215 Fox Drive, Champaign, Illinois.
***10.19 Credit Agreement dated as of January 2, 1998 among the Registrant, the
Subsidiary Guarantors Party thereto and Lehman Commercial Paper Inc.
***10.20 Security Agreement, dated as of January 2, 1998 among the Registrant,
each of the subsidiaries of the Registrant, and Lehman Commercial
Paper Inc.
***10.21 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>
- -----------------------
+ Management contract or compensatory plan.
* 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.
*** Incorporated by reference to the Registrant's Report on Form 10-K for the
year ended December 31, 1997, as filed with the Securities and Exchange
Commission on March 10, 1998.
(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, 1998.
[Remainder of page intentionally left blank.]
-48-
<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 Director (Principal
Peter P. Bassermann Executive Officer) March 29, 1999
/s/ Peter L. Masanotti Acting Chief Financial Officer, March 29, 1999
- ---------------------------------------------- Executive Vice President,
Peter L. Masanotti General Counsel, Secretary and
Director (Principal Financial and
Accounting Officer)
/s/ Lewis D. Bakes Director March 29, 1999
- ----------------------------------------------
Lewis D. Bakes
/s/ Stuart L. Bell Director March 29, 1999
- ----------------------------------------------
Stuart L. Bell
/s/ Stephen J. Saft Director March 29, 1999
- ----------------------------------------------
Stephen J. Saft
/s/ Harvey M. Krueger Director March 30, 1999
- ----------------------------------------------
Harvey M. Krueger
/s/ Samuel L. Jacob Director March 29, 1999
- ----------------------------------------------
Samuel L. Jacob
</TABLE>
International Telecommunication Data Systems, Inc.
1999 STOCK INCENTIVE PLAN
-------------------------
1. Purpose
The purpose of this 1999 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
All of the Company's employees, consultants and advisors (other than the
officers and directors) are eligible to be granted options, stock appreciation
rights, performance shares, 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
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.
(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.
<PAGE>
(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 500,000 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 outstanding Award. The
number of shares resulting from any such adjustment shall always be a whole
number.
-2-
<PAGE>
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
(4) any combination of the above permitted forms of payment.
-3-
<PAGE>
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 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
-4-
<PAGE>
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.
(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,
-5-
<PAGE>
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.
(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
-6-
<PAGE>
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 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
-7-
<PAGE>
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 February 16, 1999
-8-
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 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.
<PAGE>
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 her 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.
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. 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,
<PAGE>
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 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 her 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 her or someone else during the term
of her 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 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, 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
<PAGE>
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.
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.
<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/ Susan L. Yezzi
------------------
Susan Yezzi
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement dated as of December 23, 1997
between Susan Yezzi ("Employee") and ITDS Intelicom Services, Inc.
("Corporation") is hereby effective May 1, 1998 as follows:
1. The following new Section 20 is hereby added:
"20. 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 (as defined in Section 3(a)) 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) International Telecommunication Data Systems,
Inc. (the "ITDS") or (B) any subsidiary of ITDS to which ITDS 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 ITDS
(or a subsidiary of ITDS 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 ITDS 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
ITDS (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
ITDS, 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 ITDS within the meaning of Section 1504 of the Internal Revenue
Code of 1986, as amended (the "Code") (collectively with the payments and
benefits pursuant
<PAGE>
to this Agreement if deemed to be paid pursuant to a Change in Control, "Total
Payments")) and (ii) is determined by ITDS's independent certified accounting
firm (the "Tax Advisor") that an excise tax is payable by Employee under Section
4999 of the Code, then ITDS 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 20(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 May, 1998.
ITDS INTELICOM SERVICES, INC. EMPLOYEE
By /s/ Peter P. Bassermann /s/ Susan L. Yezzi
------------------------------ -----------------------------
Peter P. Bassermann Susan Yezzi
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 20, 1998 by and between
International Telecommunication Data Systems, Inc., a Delaware corporation (the
"Company"), and Kevin M. Piltz (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 21, 1997; and
WHEREAS, the Executive's position has been changed officially as of
July 20, 1998 to be Chief Information Officer; and
WHEREAS, the Executive has been serving in such capacity for a period
of time prior to July 20, 1998; and
WHEREAS, the Company and the Executive desire to revise the prior
employment agreement to reflect such change and make other changes, 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 its Senior
Vice President and Chief Information 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 July 20, 1998
and ending on August 14, 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 Removal Term, as the case may
be, a written notice specifying that the term of the Executive's employment will
not be renewal at the end of the Initial Term or such Renewal Term, as the case
may be.
<PAGE>
(c) The period from July 20, 1998 until August 14, 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 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.
(a) The Executive shall be employed as Senior Vice President and
Chief Information 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 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.
(b) The Executive's duties shall include but not be limited to the
following:
(1) Provide managerial and executive services to the Company.
(2) Provide management for the product development efforts of the
Company.
(3) Provide a research, development and advisory function to the
Company with regards to all technology aspects of servicing the wireless and
wireline telecommunications industry.
(4) Provide support for the development, implementation and
distribution of the products and services of the Company.
2
<PAGE>
(5) Support and manage the internal and external data processing
environments of the Company.
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 $150,000 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.
(c) Loan. The Company previously has loaned the Executive $24,000 on
the commencement of employment and Executive has agreed to repay said loan to
the Company, in full, on the earlier of Executive not being employed by the
Company or before February 15, 1999, with interest at the rate of 8% per annum,
provided however, the Company already has forgiven $17,000 of principal and if
Executive is employed by the Company on February 15, 1999, the Company will
forgive the remaining $7,000 of principal and all accrued interest, all as more
specifically set forth on the promissory note attached hereto.
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 plan, as the same may be in effect from time to time.
(b) be eligible to participate in any medial and health plans (at no
cost to the Executive) 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
3
<PAGE>
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; provided that the
Executive shall be entitled to receive term life insurance in an amount equal to
that provided other officers;
(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;
(g) received reimbursement for documented and approved expenses
related to the relocation of the Executive to Connecticut, which did not exceed
$32,0000, provided however, Executive will reimburse the Company for 37% of said
expenses, if Executive is not employed by the Company for any reason on February
15, 1999; and
(h) has received a second mortgage loan in an amount not to exceed
$100,000, at 6% per annum, interest only, with principal payments of 20% of the
outstanding principal balance and interest prior to the third anniversary of the
loan, 40% prior to the 6th anniversary and 100% prior to the 10th anniversary.
Said loan will be due in full immediately if Executive ceases to be employed by
the Company for any reason. Said loan will have additional terms and conditions
customary for mortgage loans in Connecticut.
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:
4
<PAGE>
(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 (100)
or more days, whether or not consecutive, or seventy-five (75)
consecutive days, 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 Senior Vice President and Chief
Information 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 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 or the Chief Executive Officer (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 or the Chief Executive Officer.
(b) In the event that the Executive's employment with the Company is
5
<PAGE>
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 12 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 (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
application 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).
6
<PAGE>
(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
payment sand 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 (10 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: (i) Cincinnati Bell
Information Systems, Systematics, Saville Systems, Cable Services Group,
Computer Sciences Corporation, Electronic Data Systems, Alltel, Comsoft, LHS,
Danet, Subscriber Computing, HO Software and 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 Company and/or (b) which 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
7
<PAGE>
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 a 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 interests
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
8
<PAGE>
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 assigned 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, 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 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.
9
<PAGE>
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. 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 Company, be settled by arbitration in Stamford, Connecticut in accordance
with the rules of the American Arbitration Association and the judgment upon the
reward rendered shall be entered by consent in any court having jurisdiction
thereof.
20. 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.
21. 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.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall deemed an original, but all of which together
shall constitute one and the same instrument.
23. 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
10
<PAGE>
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 TELECOMMUNICATIONS EXECUTIVE
DATA SYSTEMS, INC.
By: /s/ Lewis D. Bakes /s/ Kevin M. Piltz
--------------------------------- ------------------------
Lewis D. Bakes Kevin M. Piltz
COO
11
SUBLEASE
WHEREAS the University of Connecticut is authorized by a certain Standard Form
of Office Lease and Rider [Exhibit A], dated March 31, 1995 ["Master Lease"],
with Northeast Summer Limited Partnership, the interest of the Owner in which
the Lease was assigned on April 28, 1995 to K/B Realty Advisors, Inc., and is
now held by K/B Fund II, hereinafter called the "OWNER" and specifically by a
consent to sublease in the November 4, 1997 letter from Mark Halan, Senior
Manager for K/B Realty Advisors, Inc. to Larry Schilling, the University's
Director of Facilities Management, Exhibit B hereto, to sublease approximately
13,000 square feet of space located on the fourth floor of the building at 2777
Summer Street, Stamford, Connecticut, as evidenced now therefore:
This sublease is made and entered into as of the 15th day of November,
1998, by and between the University of Connecticut, hereafter called the
SUBLESSOR, acting herein by Dale M. Dreyfuss, its Vice Chancellor for Business
and Administration pursuant to the provisions of Public Act 93-201, Section 3,
and International Telecommunications Data Systems, Inc., [ITDS], a Connecticut
corporation, hereinafter called the SUBLESSEE, acting herein by Peter L.
Masanotti, its Executive Vice President for Operations -- Stamford and General
Counsel, duly authorized.
WITNESSETH:
The parties hereto, for the consideration hereinafter mentioned, covenant and
agree to sublease the SUBLESSOR'S interest in the "Master Lease" to the
SUBLESSEE as follows:
1. The SUBLESSOR hereby subleases unto the SUBLESSEE approximately 13,000 square
feet of space, located on the fourth floor of the building located at 2777
Summer Street, Stamford, Connecticut, as shown on Exhibit D, together with the
right to means of ingress into and egress out of the leased premises. All terms
and conditions of the "Master Lease" are incorporated herein by reference except
as modified herein.
The premises are to be used by the SUBLESSEE as office space.
2. The term of the lease shall be December 15, 1998 through March 14, 2000.
3. The SUBLESSEE shall pay no rent for the period November 15, 1998 through
December 15, 1998. Commencing on December 15, 1998, the SUBLESSEE shall pay the
SUBLESSOR the rental of Thirteen Thousand Five Hundred Forty-One Dollars and
Sixty-Seven Cents [$13,541.67] per month, payable in advance. A Check in payment
of rent shall be made payable to the order of the University of Connecticut,
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<PAGE>
and shall be sent to the Accounts Receivable Office, Box U-73, Storrs,
Connecticut 06269-2073.
If the SUBLESSEE fails to pay the rent by the tenth of each month, the SUBLESSEE
shall pay the SUBLESSOR a late payment charge of $50.00 per occurrence.
4. The SUBLESSOR warrants and represents to the SUBLESSEE that the "Master
Lease" has not been amended or modified except as expressly set forth herein,
that the SUBLESSOR is not now, as of the commencement of the Term hereof will
not be in default or breach of any provisions of the "Master Lease", and that
the SUBLESSOR has no knowledge of any claim by the OWNER that the SUBLESSOR is
in default or breach of any provisions of the "Master Lease".
5. The parties hereto agree that this Sublease is not to be assigned and that
the leased premises are not to be sublet, in whole or in part, by the SUBLESSEE
without the prior written consent of the University of Connecticut's Vice
Chancellor for Business and Administration and the OWNER, and otherwise in
compliance with the terms and conditions of the "Master Lease". In the event
such consent is given, it shall be a condition of the aforementioned consent
that the SUBLESSEE provide the SUBLESSOR with the name, address, financial
statement and description of the business of the proposed assignee or SUBLESSEE.
The SUBLESSEE shall remain fully liable under all the terms, covenants and
conditions of this Sublease, including, but not limited to, the provisions of
payment of rent, until there is a proper assignment or subletting.
6. The parties hereto agree that if the "Master Lease" requires the SUBLESSOR to
pay to OWNER all or portion of the expenses of operating the building and/or
project of which the Premises are a part ["Operating Costs"], including but not
limited to taxes, utilities, or insurance, then the SUBLESSEE shall pay to
SUBLESSOR as additional rent any increases in operating and taxes over a 1999
base year. Such additional rent shall be payable as and when Operating Costs are
payable by the SUBLESSOR to the OWNER. If the "Master Lease" provides for the
payment by the SUBLESSOR of Operating Costs on the basis of an estimate thereof,
then as and when adjustments between estimated and actual Operating Costs are
made under the "Master Lease", the obligations of the SUBLESSOR and SUBLESSEE
shall be adjusted in a like manner; and if such adjustment shall occur after the
expiration or earlier termination of this Sublease, then the obligations of the
SUBLESSOR and SUBLESSEE under this Section shall survive such expiration or
termination. SUBLESSOR shall, upon request by SUBLESSEE, furnish SUBLESSEE with
copies of all statements submitted by OWNER of actual or estimated Operating
Costs during the term of this Sublease.
7. Notices from the SUBLESSOR or OWNER to the SUBLESSEE shall be sufficient if
delivered to the SUBLESSEE in care of Telecommunication Data Systems, Inc.,
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<PAGE>
225 High Ridge Road, Stamford, CT 06905, or if placed with the United Postal
Service properly addressed to the SUBLESSEE in care of its Executive Vice
President for Operations -- Stamford and General Counsel.
Notices from the SUBLESSEE to the SUBLESSOR shall be sufficient of place with
the United States Postal Service, certified mail, postage prepaid, addressed to
the Vice Chancellor for Business and Administration, University of Connecticut,
352 Mansfield Road, U-72, Storrs, CT 06269-2072 and copied to the OWNER at its
offices at 2777 Summer Street, Stamford, CT 06905.
8. All applicable terms and conditions of the "Master Lease" are incorporated
into and made a part of the Sublease as if the SUBLESSEE were the SUBLESSOR
thereunder, the SUBLESSEE the SUBLESSOR thereunder, and the Premises the Master
Premises.
SUBLESSEE assumes and agrees to perform the SUBLESSOR's obligations under the
"Master Lease" during the Term to the extent that such obligations are
applicable to the Premises, except that the obligations to pay the rent to the
OWNER under the "Master Lease" shall be considered performed by the SUBLESSEE to
the extent and in the amount rent is paid to SUBLESSOR in accordance with
Section 3 of this Sublease. SUBLESSEE shall commit or suffer any act or omission
that will violate any of the provisions of the "Master Lease". SUBLESSOR shall
exercise due diligence in attempting to cause the OWNER to perform its
obligations under the "Master Lease" for the benefit of the SUBLESSEE. If the
"Master Lease" terminates, this Sublease shall terminate and the parties shall
be relieved of any further liability or obligation under the Sublease, provided
however, that if the "Master Lease" terminates as a result of a default or
breach by SUBLESSOR or SUBLESSEE under this Sublease and/or the "Master Lease",
then the defaulting party shall be liable to the nondefaulting party for the
damage suffered as a result of such termination. Notwithstanding the foregoing,
if the "Master Lease" gives SUBLESSOR any right to terminate the "Master Lease"
in event of the partial or total damage, destruction, or condemnation of the
Master Premises or the building or project of which the Master Premises are a
part, the exercise of such right by the SUBLESSOR shall not constitute a default
or breach hereunder.
SUBLESSOR agrees to observe and perform its obligations under the terms of the
"Master Lease". SUBLESSOR shall not do or permit anything to be done which would
cause the "Master Lease" to be terminated or forfeited for reason of any right
or termination or forfeiture reserved or vested on OWNER or SUBLESSOR including
without limitation the provisions of Article 58 -- Option to Terminate of the
Master Lease [option to terminate].
Anything contained herein to the contrary notwithstanding, the following
Articles of the Master Lease are hereby deemed deleted for purposes of
incorporation by
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<PAGE>
reference of this Sublease: The fixed rent referenced in the first recitals;
Article 2 -- Occupancy; Article 34 -- Security; Article 38 -- Term: Preparation
for Occupancy and Possession; Article 41 -- Operation Expense and Tax
Escalation, [except that the definition of taxes and operation expenses shall be
used to determine operating costs for purposes of calculating Sublessee's
payments as described in Paragraph 7 of the Sublease]; Articles 44[c, e and f]
- -- electricity and Article 46 -- Broker.
9. This Sublease shall be of no force or effect unless consented to by the OWNER
within 10 days after the execution hereof, if such consent is required under the
terms of the "Master Lease".
All other Sections of the "Master Lease" remain intact and in accordance with
the terms of said lease. Notwithstanding anything to the contrary herein, this
Agreement shall not modify the "Master Lease" in any way as between the OWNER
and SUBLESSOR and SUBLESSOR remains primarily liable to the OWNER under the
"Master Lease".
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<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands.
Signed in the presence of:
International Telecommunications Data
Systems, Inc.
/s/ Susan M. Vickers )
- -----------------------------------)
Susan M. Vickers ) by /s/ Peter L. Masanotti
) ----------------------
) Peter L. Masanotti
) Its Executive Vice President for
/s/ Kavita Kuppuswamy ) Operations--Stamford and General Counsel
- -----------------------------------) duly authorized
Kavita Kuppuswamy
Date signed: 11/19/98
---------------------------
University of Connecticut
/s/ Barbara M. Simmons ) by /s/ Dale M. Dreyfuss
- -----------------------------------) -------------------------------------
Barbara M. Simmons ) Dale M. Dreyfuss
) Its Vice Chancellor for Business and
/s/ Rose P. Lacasse ) Administration
- -----------------------------------) duly authorized
Rose P. Lacasse
Date signed: 12/1/98
---------------------------
State of Connecticut
County of Fairfield
The foregoing instrument was acknowledged before me this 19th day of
November, 1998 by Peter L. Masanotti, Executive Vice President for Operations --
Stamford and General Counsel of International Telecommunications Data Systems,
Inc., a Connecticut corporation, on behalf of the corporation.
In witness whereof I hereunto set my hand.
/s/ Susan M. Vickers
------------------------------------------
Notary Public
My commission expires: October 31, 1999
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<PAGE>
State of Connecticut
County of Tolland
On this the 1st day of December, 1998, before me Isabelle Atwood, the
undersigned officer, personally appeared Dale M. Dreyfuss, of the University of
Connecticut, known to me to be the person described in the foregoing instrument,
and acknowledged that he executed the same in the capacity therein stated and
for the purposes therein contained.
In witness whereof I hereunto set my hand
/s/ Isabelle Atwood
-----------------------------------------
Notary Public
My commission expires: 4/30/2001
Approved
/s/[illegible signature] Date: 12/14/98
- ------------------------------ -----------------------------------
Associate Attorney General
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<PAGE>
Attachment A
STANDARD FORM OF OFFICE
LEASE AND RIDER
Table of Contents
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
1. Rent............................................................................1
2. Occupancy.......................................................................1
3. Tenant Alterations..............................................................2
4. Maintenance and Repairs.........................................................2
5. Window Cleaning.................................................................3
6. Requirements of Law, Fire Insurance, Floor Loads................................3
7. Subordination...................................................................5
8. Property--Loss, Damage, Reimbursement, Indemnity................................5
9. Destruction, Fire and Other Casualty............................................5
10. Eminent Domain..................................................................6
11. Assignment, Mortgage, Etc.......................................................6
12. Electric Current................................................................7
13. Access to Premises..............................................................7
14. Vault, Vault Space, Area........................................................8
15. Occupancy.......................................................................8
16. Bankruptcy......................................................................8
17. Default.........................................................................9
<PAGE>
18. Remedies of Owner and Waiver of Redemption.....................................10
19. Fees and Expenses..............................................................11
20. Building Alterations and Management............................................11
21. No Representations by Owners...................................................12
22. End of Term....................................................................12
23. Quiet Enjoyment................................................................12
24. Failure to Give Possession.....................................................12
25. No Waiver......................................................................13
26. Waiver of Trial by Jury........................................................13
27. Inability to Perform...........................................................14
28. Bills and Notices..............................................................14
29. Services Provided by Owners....................................................14
30. Captions.......................................................................14
31. Definitions....................................................................15
32. Adjacent Excavation-Shoring....................................................15
34. Security.......................................................................15
35. Estoppel Certificate...........................................................16
36. Successors and Assigns.........................................................16
37. Additional Definitions.........................................................18
38. Term: Preparation for Occupancy and Possession................................19
39. Rent...........................................................................21
40. Parking........................................................................22
41. Operating Expense and Tax Escalation...........................................23
<PAGE>
42. Cleaning; Trash Removal........................................................28
43. Heating, Ventilation and Air-Conditioning......................................29
44. Electricity....................................................................30
45. Amendments for Financing; Information for Mortgagees...........................34
46. Broker.........................................................................35
47. Building Name; Tenant Signs; Directory.........................................35
48. Holdover.......................................................................35
49. Insurance and Indemnity........................................................35
50. Exculpation....................................................................37
5.1 Partnership....................................................................37
52. Restrictions on Use............................................................38
53. Rules and Regulations..........................................................38
54. Tenant's Alterations...........................................................39
55. Notice.........................................................................39
56. Miscellaneous..................................................................40
57. Amendments to Printed Form.....................................................42
58. Option to Terminate............................................................43
59. Attorney General Approval......................................................44
60. Non-discrimination.............................................................44
</TABLE>
Exhibit A - Rules and Regulations
Exhibit B - Cleaning Specifications
Exhibit C - Work Specifications
Exhibit D - Floor Plan
<PAGE>
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 31st day of March 1995, between
NORTHEAST SUMMER LIMITED PARTNERSHIP, a Connecticut limited partnership, having
an office at 100 Clearbrook Road, Elmsford, New York 10523 party of the first
part, hereinafter referred to as OWNER, and UNIVERSITY OF CONNECTICUT, having an
address at Box U-122, Storrs, Connecticut 06269 party of the second part,
hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from
Owner the area of the 4th floor shown on the floor plan annexed hereto as
Exhibit D (the "demised premises") (approximately 13,000 square feet, the
"Rentable Area") in the building known as 2777 Summer Street (the "Building") in
the borough of Stamford, Connecticut, for the term of five (5) years (or until
such term shall sooner cease and expire as hereinafter provided), at an annual
rental rate of (the "Fixed Annual Rent") of $266,500.00 per annum which Tenant
agrees to pay in lawful money of the United States which shall be legal tender
in payment of all debts and dues, public and private, at the time of payment, in
equal monthly installments in advance on the first day of each calendar month
during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may then and without notice to Tenant add the amount of such
arrears shall be added to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
1. Rent: Tenant shall pay the rent as above and as hereinafter provided.
2. Occupancy: Tenant shall use and occupy demised premises for general
office use and classrooms for graduate and post graduate studies only and for no
other purpose. Notwithstanding anything contained herein to the contrary, Tenant
shall not have more than 52 occupants in the demised premises between the hours
of 8:00 a.m. and 6:00 p.m. on business days and 55 occupants in the demised
premises between the hours of 8:00 a.m. and 6:00 p.m. every other Friday.
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<PAGE>
3. Tenant Alterations: Tenant shall make no changes in or to the demised
premises of any nature without Owner's prior written consent. Subject to the
prior written consent of Owner, and to the provisions of this article, Tenant at
Tenant's expense, may make alterations, installations, additions or improvements
which are non-structural and which do not affect utility services or plumbing
and electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved by Owner. Tenant shall, before making
any alterations, additions, installations or improvements, at its expense,
obtain all permits, approvals and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner and Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workmen's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within ten days thereafter, at Tenant's expense,
by filing the bond required by law. All fixtures and all paneling, partitions,
railings and like installations, installed in the premises at any time, either
by Tenant or by Owner in Tenant's behalf, shall, upon installation, become the
property of Owner and shall remain upon and be surrendered with the demised
premises unless Owner, by notice to Tenant no later than twenty days prior to
the date fixed as the termination of this lease, elects to relinquish Owner's
right thereto and to have them removed by Tenant, in which event the same shall
be removed from the premises by Tenant prior to the expiration of the lease, at
Tenant's expense. Nothing in this Article shall be construed to give Owner title
to or to prevent Tenant's removal of trade fixtures, moveable office furniture
and equipment, but upon removal of any such from the premises or upon removal of
other installations as may be required by Owner, Tenant shall immediately and at
its expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be included as
Owner's property or may be removed from the premises by Owner, at Tenant's
expense. (See Article 54)
4. Maintenance and Repairs: Tenant shall, throughout the term of this
lease, take good care of the demised premises and the fixtures and appurtenances
therein. Tenant shall be responsible for all damage or injury to the demised
premises or any other part of the building and the systems and equipment
thereof, whether requiring structural or nonstructural repairs caused by or
resulting from carelessness, omission, neglect or improper conduct of Tenant,
Tenant's subtenants, agents, employees, invitee or licensees, or which arise out
of any work, labor, service or equipment done for or supplied to Tenant or any
subtenant or arising out of the
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<PAGE>
installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only the contractor for
the trade or trades in question, selected from a list of at least two
contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by Owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating systems (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury in business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or reduction
of rent by reason of any failure of Owner to comply with the covenants of this
or any other article of this lease. Tenant agrees that Tenant's sole remedy at
law in such instance will be by way of an action for damages for breach of
contract. The provisions of this Article 4 shall not apply in the case of fire
or other casualty which are dealt with in Article 9 hereof. Nothing contained
herein shall be deemed a waiver of Tenant's [illegible] law right to claim
constructive eviction to the extent permitted by laws and requirements of public
authorities if Owner shall fail to perform any of its material obligations under
this Lease. (See Article 57)
5. Window Cleaning: Tenant will not clean nor require, permit, suffer or
allow any window in the demised premises to be cleaned from the outside in
violation of Section 202 of the Labor Law or any other applicable law, or of any
other Board or body having or asserting jurisdiction.
6. Requirements of Law, Fire Insurance, Floor Loads: Prior to the
commencement of the lease term, if Tenant is then in possession, and at all
times thereafter, Tenant, at Tenant's sole cost and expense, shall promptly
comply with all present and future laws, orders and regulations of all state,
federal, municipal and local governments, departments, commissions and boards
and any direction of any public officer pursuant to law, and all orders, rules
and regulations of the Connecticut Board of Fire Underwriters, Insurance
Services Office, or any similar body which shall impose any violation, order or
duty upon Owner or Tenant with respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof (including Tenant's
permitted use) or, with respect to the
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building if arising out of Tenant's use or manner of use of the premises or the
building (including the use permitted under the lease). Nothing herein shall
require Tenant to make structural repairs or alterations unless Tenant has, by
its manner of use of the demised premises or method of operations therein,
violated any such laws, ordinances, orders, rules, regulations or requirements
with respect thereto. Tenant may, after securing Owner to Owner's satisfaction
against all damages, interest, penalties and expenses, including, but not
limited to, reasonable attorney's fees, by cash deposit or by surety bond in the
amount and in a company satisfactory to Owner, context and appeal any such laws,
ordinances, orders, rules, regulations or requirements provided same is done
with all reasonable promptness and provided such appeal shall not subject Owner
to prosecution for a criminal offense of constitute a default under any lease or
mortgage under which Owner may be obligated, or cause the demised premises or
any part thereof to be condemned or vacated. Tenant shall not do or permit any
act or thing to be done in or to the demised premises which is contrary to law,
or which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time certified by or for the benefit of Owner with
respect to the demised premises or the building of which the demised premises
forms a part, or which shall or might subject Owner to any liability or
responsibility in any person or for property damage. Tenant shall not keep
anything in the demised premises except as now or hereafter permitted by the
Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization
or other authority having jurisdiction, and then only in such manner and such
quality so as not to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses,
fines, penalties, or damages, which may be imposed upon Owner by reason of
Tenant's failure to comply with the provisions of this article and if by reason
of such failure the fire insurance rate shall, at the beginning of this lease or
at any time thereafter, be higher than it otherwise would be, then Tenant shall
reimburse Owner, as additional rent hereunder, for that portion of all the
insurance premiums thereafter aid by Owner which shall have been charged because
of such failure by Tenant. In any actions or proceeding wherein Owner and Tenant
are parties, a schedule or "make-up" of rule for the building on demised
premises issued by the Connecticut Fire Insurance Exchange, or other entity
risking life insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items until charges in
the fire insurance rates then applicable to said premises. Tenant shall not
place a load upon any floor of the demised premises exceeding the floor load per
square foot area which it was designed to carry and which is allowed by law.
Owner reserves the right to prescribe the weight and position of all safes,
business machines and mechanical equipment. Such installations shall be placed
and maintained by Tenant, at Tenant's expense. In selling sufficient, in Owner's
judgment, to absorb and prevent vibration, noise and annoyance.
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7. Subordination: This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request. (See
Article 57)
8. Property--Loss, Damage, Reimbursement, Indemnity: Owner or its agents
shall not be liable for any damage to property of Tenant or of others entrusted
to employees of the building, nor for loss of or damage to any property of
Tenant by theft or otherwise, nor for any injury or damage to persons or
property resulting from any cause of whatsoever nature, unless caused by or due
to the negligence of Owner, its agents, servants or employees. Owner or its
agents will not be liable for any such damage caused by other tenants or persons
in, upon or about said building or caused by operations in construction of any
private, public or quasi public work. If at any time any windows of the demised
premises are temporarily closed, darkened or bricked up (or permanently closed,
darkened or bricked up, if required by law) for any reason whatsoever including,
but not limited to Owner's own acts, Owner shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
therefor nor abatement or diminution of rent nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction.
9. Destruction, Fire and Other Casualty: (a) If the demised premises or any
part thereof shall be damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall continue in full force
and effect except as hereinafter set forth. (b) If the demised premises are
partially damaged or rendered partially unusable by fire or other casualty, the
damages thereto shall be repaired by and at the expense of Owner and the rent,
until such repair shall be substantially completed, shall be apportioned from
the day following the casualty according to the part of the premises which is
usable. (c) If the demised premises are totally damaged or rendered wholly
unusable by fire or other casualty, then the rent shall be proportionately paid
up to the time of the casualty and thenceforth shall cease until the date when
the premises shall have been repaired and restored by Owner subject to Owner's
right to elect not to restore the same as hereinafter provided. (d) If the
demised premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within [illegible] days after such fire or casualty, specifying a date for
the expiration of the lease, which date shall not be more than 60 days after the
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giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Landlord's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant. Unless Owners shall serve a
termination notice as provided for herein, Owner shall make the repairs and
restorations under the conditions of (b) and (c) hereof, with all reasonable
expedition, subject to delays due to adjustment of insurance claims, labor
troubles and causes beyond Owner's control. After any such casualty, Tenant
shall cooperate with Owner's restoration by removing from the premises as
promptly as reasonably possible, all of Tenant's salvageable inventory and
movable equipment, furniture, and other property. Tenant's liability for rent
shall resume five (5) days after written notice from Owner that the premises are
substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove
shall relieve Tenant from liability that may exist as a result of damage from
fire or other casualty. Notwithstanding the foregoing, each party shall look
first to any insurance in its favor before making any claim against the other
party for recovery for loss or damage resulting from fire or other casualty, and
to the extent that such insurance is in force and collectible and to the extent
permitted by law, Owner and Tenant each hereby releases and waives all right of
recovery against the other or any one claiming through or under each of them by
way of subrogation or otherwise. The foregoing release and waiver shall be in
force only if both Releasers' insurance policies contain a clause providing that
such a release or waiver shall not invalidate the insurance. If, and in the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefitting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to waiver of subrogation. Tenant acknowledges
that Owner will not carry insurance on Tenant's furniture and/or furnishings or
any fixtures or equipment, improvements, or appurtenances removable by Tenant
and agrees that Owner will not be obligated to repair any damages thereto or
replace the same.
10. Eminent Domain: If the whole or any part of the demised premises shall
be acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease and assigns to
Owner, Tenant's entire interest in any such award.
11. Assignment, Mortgage, Etc.: Tenant, for itself, its heirs,
distributees, executors, administrators, legal representatives, successors and
assigns, expressly
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covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner. In each instance,
Transfer of the stock of a corporate Tenant shall be deemed an assignment. If
this lease be assigned, or if the demised premises or any part thereof be
underlet or occupied by anybody other than Tenant, Owner may, after default by
Tenant, collect rent from the assignee, under-tenant or occupant, and apply the
net amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, under-tenant or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Owner to an assignment or
underletting shall not in any wise be construed to relieve Tenant from obtaining
the express consent in writing of Owner to any further assignment or
underletting.
12. Electric Current: Rates and conditions in respect to submetering or
rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain. (See Article 44)
13. Access to Premises: Owner or Owner's agents shall have the right (but
shall not be obligated) to enter the demised premises in any emergency at any
time, and, at other reasonable times, to examine the same and to make such
repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to the demised premises or to any other portion of the
building or which Owner may elect to perform. Tenant shall permit Owner to use
and maintain and replace pipes, ducts and conduits in and through the demised
premises and to erect new pipes, ducts and conduits therein provided they are
concealed within the walls, floor, or ceiling. Owner may, during the progress of
any work in the demised premises, take all necessary materials and equipment
into said premises without the same constituting an eviction nor shall the
Tenant be entitled to any abatement of rent while such work is in progress nor
to any damages by reason of loss or interruption of business or otherwise.
Throughout the term hereof Owner shall have the right to enter the demised
premises at reasonable hours for the purpose of showing the same to prospective
purchasers or mortgagees of the building, and during the last six months of the
term for the purpose of showing the same to prospective tenants. If Tenant is
not present to open and permit an entry into the premises, Owner or Owner's
agents may enter the same whenever such entry may be necessary or permissible by
master key or forcibly and provided reasonable care is
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exercised to safeguard Tenant's property, such entry shall not render Owner or
its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom, Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
14. Vault, Vault Space, Area: No vaults, vault space or area, whether or
not enclosed or covered, not within the property line of the building is leased
hereunder, anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the limitation of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant.
15. Occupancy: Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy issued for the building of
which the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to Owner's
work, if any. In any event, Owner makes no representation as to the condition of
the premises and Tenant agrees to accept the same subject to violations, whether
or not of record.
16. Bankruptcy:
(a) Anything elsewhere in this lease to the contrary notwithstanding, this
lease may be cancelled by Owner by the sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
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(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages in any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so relet during the term of the reletting. Nothing herein
contained shall limit or prejudice the right of the Owner to prove for and
obtain as liquidated damages by reason of such termination, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
17. Default: (1) If Tenant defaults in fulfilling any of the covenants of
this Lease other than the covenants for the payment of rent or additional rent;
or if the demised premises becomes vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under ss. 235 of Title 11 of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written five (5) days
notice upon Tenant specifying the nature of said default and upon the expiration
of said five (5) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said five (5) day
period, and if Tenant shall not have diligently commenced curing such default
without such five (5) day period, and shall not thereafter with reasonable
diligence and in good faith, proceed to remedy or cure such default, then Owner
may serve a written five (5) day's notice of cancellation of this lease upon
Tenant, and upon the expiration of said five days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such five (5) day period were the day herein definitely fixed for the end and
expiration of this Lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner but Tenant shall remain liable as
hereinafter provided. Any further proceedings by Owner to recover possession of
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the demised premises shall be in accordance with Connecticut statutes pertaining
to summary process.
(2) If the notice provided for in [illegible] shall have been given, and
the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may dispossess Tenant by summary
proceedings or other lawful means, and the legal representative of Tenant or
other occupant of demised premises and remove their effects and hold the
premises as if this lease had not been made, and Tenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end. If Tenant shall make default hereunder prior to the date fixed as the
commencement of any renewal or extension of this lease, Owner may cancel and
terminate such renewal or extension agreement by written notice. (See Article
57)
18. Remedies of Owner and Waiver of Redemption: In case of any such
default, expiration and/or dispossess by summary proceedings or otherwise, (a)
the rent shall become due thereupon and be paid up to the time of such
dispossess and/or expiration, (b) Owner may re-let the premises or any part or
parts thereof, either in the name of Owner or otherwise, for a term or terms,
which may at Owner's option be less than or exceed the period which would
otherwise have constituted the balance of the term of this lease and may grant
concessions or free rent or charge a higher rental than that in this lease,
and/or (c) Tenant or the legal representatives of Tenant shall also pay Owner as
liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the rent hereby
reserved and/or covenanted to be paid and the net amount, if any, of the rents
collected on account of the lease or leases of the demised premises for each
month of the period which would otherwise have constituted the balance of the
term of this lease. The failure of Owner to re-let the premises or any part or
parts thereof shall not release or affect Tenant's liability for damages.
Notwithstanding the foregoing, to the extent required by laws and requirements
of public authorities, in the event of a default by Tenant, Owner shall use its
reasonable efforts to mitigate its damages. In computing such liquidated damages
there shall be added to the said deficiency such reasonable expenses as Owner
may incur in connection with re-letting, such as legal expenses, attorney's
fees, brokerage, advertising and for keeping the demised premises in good order
or for preparing the same for re-letting. Any such liquidated damages shall be
paid in monthly installments by Tenant on the rent date specified in this lease
and any suit brought to collect the amount of the deficiency for any month shall
not prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole
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judgment, considers advisable and necessary for the purpose of re-letting the
demised premises, and the making of such alterations, repairs, replacements,
and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that the
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof. Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises, by reason of the violation by Tenant of any of
the covenants and conditions of this lease, or otherwise.
19. Fees and Expenses: If Tenant shall default in the observance or
performance of any term or covenant on Tenant's part to be observed or performed
under or by virtue of any of the terms or provisions in any article of this
lease, then, unless otherwise provided elsewhere in this lease, Owner may
immediately or at any time thereafter and without notice perform the obligation
of Tenant thereunder. If Owner, in connection with the foregoing or in
connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceeding, then Tenant will reimburse
Owner for such sums so paid or obligations incurred with interest and costs. The
foregoing expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within five (5)
days of rendition of any bill or statement to Tenant thereof. If Tenant's lease
term shall have expired at the time of making of such expenditures or incurring
of such obligations, such sums shall be recoverable by Owner as damages.
20. Building Alterations and Management: Owner shall have the right at any
time without the same constituting an eviction and without incurring liability
to Tenant therefor to change the arrangement and/or location of public
entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets
or other public parts of the building and to change the name, number or
designation by which the building may be known. There shall be no allowance to
Tenant for diminution of rental value and no liability on the part of Owner by
reason of inconvenience, annoyance or injury to business arising from Owner or
other Tenants making any repairs in the building or any such alterations,
additions and improvements. Furthermore, Tenant shall not have any claim against
Owner by reason of Owner's
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imposition of such controls of the manner of access to the building by Tenant's
social or business visitors as the Owner may deem necessary for the security of
the building and its occupants.
21. No Representations by Owners: Neither Owner nor Owner's agents have
made any representations or promises with respect to the physical condition of
the building, the land upon which it is erected or the demised premises, the
rents, leases, expenses of operation or any other matter or thing affecting or
related to the premises except as herein expressly set forth and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" and acknowledges that the taking
of possession of the demised premises by Tenant shall be conclusive evidence
that the said premises and the building of which the same form a part were in
good and satisfactory condition at the time such possession was so taken. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between the Owner and Tenant and any executory agreement hereafter
made shall be ineffective to change, modify, discharge or effect an abandonment
of it in whole or in part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change, modification,
discharge or abandonment is sought.
22. End of Term: Upon the expiration or other termination of the term of
this lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease.
23. Quiet Enjoyment: Owner covenants and agrees with Tenant that upon
Tenant paying the rent and additional rent and observing and performing all the
terms, covenants and conditions, on Tenant's part to be observed and performed,
Tenant may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to Article 20 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
24. Failure to Give Possession: If Owner is unable to give possession of
the demised premises on the date of the commencement of the term hereof, because
of the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured
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or for any other reasons, Owner shall not be subject to any liability for
failure to give possession on said date and the validity of the lease shall not
be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease. Tenant covenants and agrees that such
occupancy, shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent.
25. No Waiver: The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent will knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
than the monthly sum herein stipulated shall be deemed to be other than on
account of the earlier stipulate rent, nor, shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises, and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the terminate
of the lease and the delivery of keys to any such agent or employee shall not
operate as a termination of the lease or a surrender of the premises.
26. Waiver of Trial by Jury: It is mutually agreed by and between Owner and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statuary remedy.
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27. Inability to Perform: This lease and the obligation of Tenant to pay
rent hereunder and perform all of the other covenants and agreements hereunder
on part of Tenant to be performed shall in no wise be affected, impaired or
excused because Owner is unable to fulfill any of its obligations under this
lease or to supply or is delayed in supplying any service expressly or impliedly
to be supplied or is unable to make, or is delayed in making any repair,
additions, alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Owner is prevented or delayed from so
doing by reason of strike or labor troubles or any cause beyond Owner's
reasonable control including, but not limited to, government preemption in
connection with a National Emergency or by reason of any rule, order or
regulation of any department or subdivision thereof of any government agency or
by reasons of the conditions of supply and demand which have been or are
affected by war or other emergency.
28. Bills and Notices: Intentionally omitted.
29. Services Provided by Owners: As long as Tenant is not in default under
any of the covenants of this lease, Owners shall provide: (a) necessary elevator
facilities on business days from 8:00 a.m. to 6 p.m. and on Saturdays from 8:00
am. to 6:00 p.m. and have one elevator subject to call at all other times; (b)
heat the demised premises when and as required by law, on business days from
8:00 a.m. to 6:00 p.m.; (c) water for [illegible] lavatory purposes, but if
Tenant [illegible] water for any other purposes or in unusual quantities (of
which Owner shall be the sole judge), Owner may install a water meter at
Tenant's expense which Tenant shall thereafter maintain at Tenant's expense in
good working order and repair to register such water consumption and Tenant
shall pay for water consumed as shown on said meter as additional rent as and
when bills are rendered; (d) (crossed out); (e) (illegible) Owner will furnish
the same at Tenant's expense. RIDER to be added in respect to rates and
conditions for such additional service; (1) Owner reserves the right to stop
services of the heating, elevators, plumbing, air-conditioning, power systems or
cleaning or other services, if any, when necessary by reason of accident or for
repairs, alternations, replacements or improvements necessary or desirable in
the judgment of Owner for as long as may be reasonably required by reason
thereof. If the building of which the demised premises are a part supplies
manually operated elevator service, Owner at any time may substitute automatic
control elevator service and upon ten days written notice to Tenant, proceed
with alterations necessary therefor without in any wise affecting this lease or
the obligation of Tenant hereunder. The same shall be done with a minimum of
inconvenience to Tenant and Owner shall pursue the alteration with due
diligence. (See Articles 42, 43 and 57)
30. Captions: The Captions are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope of this lease
nor the intent of any provisions thereof.
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31. Definitions: The term "office", or "offices", wherever used in this
lease, shall not be construed to mean premises used as a store or stores, for
the sale or display, at any time, of goods, wares or merchandise, of any kind,
or as a restaurant, shop, booth, [illegible] or other stand, barber shop, or for
other similar purpose or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) conveyance of which the demised
premises form a part so that in the event of any sale or sales of said land and
building or of said lease, or in the event of a lease of said building, or of
the land and building, the said Owner shall be and hereby is entirely freed and
relieved of all covenants and obligations of Owner hereunder, and it shall be
deemed and construed without further agreement between the parties or their
successors in interest, or between the parties and the purchaser, at any such
sale, or the said lessee of the building, or of the land and building, that the
purchaser or the lessee of the building has assumed and agreed to carry out any
and all covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays,
Sundays and all days observed by the State or Federal Government as legal
holidays and those designated as holidays by the applicable building service
union employees service contract or by the applicable Operating Engineers
contract with respect to HVAC service. (See Article 57).
32. Adjacent Excavation-Shoring: If an excavation shall be made upon land
adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
said person shall deem necessary to preserve the wall or the building of which
demised premises form a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnify against Owner, or
diminution or abatement of rent.
33. Rules and Regulations: Omitted. (See Article 53)
34. Security: Tenant has deposited with Owner the sum of $23,833.33 as
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
lease, including, but not limited to, the payment of rent and additional rent,
Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sums as to which Tenant is in default or for any sum which Owner
may expend or may be required to expend by reason of Tenant's default in respect
of any of the terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the re-letting of
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the premises, whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Owner. In the event that Tenant shall fully and
faithfully comply with all of the terms, provisions, covenants and conditions of
this lease, the security shall be returned to Tenant after the date fixed as the
end of the lease and after delivery of entire possession of the demised premises
to Owner. In the event of a sale of the land and building or leasing of the
building, of which the demised premises form a part, Owner shall have the right
to transfer the security to the vendee or lessee or transferee and Owner shall
thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look to the new Owner solely for the return of
said security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Owner. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance, conveyance or transfer. (See
Article 57).
35. Estoppel Certificate: Tenant, at any time, and from time to time, upon
at least 10 days' prior notice by Owner, shall execute, acknowledge and deliver
to Owner, and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this Lease is unmodified and in full force and effect
(or, if there have been modifications, that the same is in full force and effect
as modified and stating the modifications), stating the dates to which the rent
and additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
36. Successors and Assigns: The covenants, conditions and agreements
contained in this lease shall bind and inure to the benefit of Owner and Tenant
and their respective heirs, distributees, executors, administrators, successors,
and except as otherwise provided in this lease, their assigns.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed
this Lease as of the day and year first above written.
NORTHEAST SUMMER LIMITED
PARTNERSHIP
BY: 2777 Summer Street Corp., general
partner
Witness for Owner:
/s/ Gary T. Wagner By: /s/ [illegible] [L.S.]
- ----------------------------- ------------------------------------
Gary T. Wagner President
Witness for Tenant: UNIVERSITY OF CONNECTICUT
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/s/ Lyn D. Pearl By: /s/ [illegible]
- ----------------------------- -------------------------------------------
Lynd D. Pearl Vice President of Finance &
Administration
ACKNOWLEDGEMENTS
CORPORATE OWNER
STATE OF NEW YORK,
County of Westchester
On this 29th day of March, 1995, before me personally came Martin S. Berger
to me known, who being by me duly sworn, did depose and say that he resides in
New York, New York that he is the President of 2777 Summer Street Corp. the
corporation described in and which executed the foregoing instrument, as OWNER;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name-thereto by like
order.
/s/ [illegible]
-------------------------------------------
INDIVIDUAL OWNER
STATE OF NEW YORK,
Count of ________
On this _________ day of ________________, 19_____, before me personally
came _____________________ to be known and known to me to be the individual
_____________ described in and who, at OWNER, executed the foregoing instrument
and acknowledged to me that _______________________ be executed the same.
-----------------------------------------------
APPROVED AS TO FORM:
/s/ William B. Gundling 4/19/95
- ----------------------------- -------
WILLIAM B. GUNDLING DATE
ASSOCIATE ATTORNEY GENERAL
TENANT
STATE OF CONNECTICUT
Count of [illegible]
On this [illegible] day of March, 1995, before me personally came Wilber R.
James to me known, who being by me duly sworn, did depose and say that he
resides in [illegible], Connecticut, that he is the Vice President of the
University of
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Connecticut, the corporation described in and which executed the foregoing
instrument, as TENANT; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so alleged by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
/s/[name illegible
-----------------------------------------------
INDIVIDUAL TENANT
STATE OF NEW YORK
County of [Illegible]
On this ______ day of _______________, 19__, before me personally came
___________________ to me known and known to me to be the individual
______________ described in and who, as TENANT, executed the foregoing
instrument and acknowledged to me that _________ be executed the same
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UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS OF
2777 SUMMER STREET CORP. AS GENERAL PARTNER OF
NORTHEAST SUMMER LIMITED PARTNERSHIP
The undersigned, being all of the directors of 2777 Summer Street Corp.
(the "Corporation"), the sole general partner of Northeast Summer Limited
Partnership, do hereby adopt the following resolutions in behalf of the
Corporation:
RESOLVED, that the President or any Vice President of the Corporation
be, and each of them hereby is authorized, empowered and directed to
execute, acknowledge and deliver an Agreement of Lease in the name and on
behalf of the Corporation (on behalf of Northeast Summer Limited
Partnership ("NSLP")), whereby NSLP agrees to lease approximately 13,000
square feet of space at 2777 Summer Street, Stamford, Connecticut, to the
University of Connecticut, subject to such conditions and agreements
otherwise deemed acceptable to the signing officer; and it is further
RESOLVED, that the President or any Vice President of the Corporation
be, and each of them hereby is authorized, empowered and directed to take
such further actions and to execute and deliver all such further
instruments and documents, in the name and on behalf of the Corporation, in
its capacity as general partner of NSLP, as shall in their judgment be
necessary or proper, to carry out and effectuate the Agreement of Lease and
the purposes of the foregoing resolution, and each of them and the actions
of such officers in respect of the fulfillment of the intent of these
resolutions is herein approved, ratified and confirmed.
--------------------------------
MARTIN S. BERGER
/s/ Robert F. Weinberg
--------------------------------
ROBERT F. WEINBERG
/s/ Charles J. Persico
--------------------------------
CHARLES J. PERSICO
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OFF/MAS/1991
Striking out or deletion of any portion of this lease (and the insertion of
asterisks at various points) was done as a matter of convenience in preparing
the lease for execution. The language omitted (as well as the use or placement
of such asterisks) is not to be given any effect in construing this lease.
RULES & REGULATIONS - Exhibit A
CLEANING SPECIFICATIONS - Exhibit B
WORK SPECIFICATIONS - Exhibit C
FLOOR PLAN - Exhibit D
STANDARD FORM OF RIDER TO STANDARD FORM OF OFFICE LEASE
Date of Lease: March 31, 1995
Owner: NORTHEAST SUMMER LIMITED PARTNERSHIP
Tenant: UNIVERSITY OF CONNECTICUT
Building: 2777 Summer Street, Stamford, Connecticut
Rentable Area: approximately 13,000 square feet
37. Additional Definitions. For all purposes of this lease, and all
agreements supplemental hereto, the terms defined in this Article shall have the
meanings specified unless the context otherwise requires:
(a) The term law and requirements of public authorities shall mean laws and
ordinances of federal, state, city, and county governments, and rules,
regulations, orders and directives of departments, subdivisions, bureaus,
agencies or offices thereof, or any other governmental, public or quasi-public
authorities having jurisdiction of the Building, and the directions of any
public office pursuant to law.
(b) The word invitee shall mean any employee, agent, visitor, customer,
contractor, licensee, or other party claiming under or in the Building, or in
the Park, if applicable, by permission or sufferance of, Owner or Tenant.
(c) The term requirements of insurance bodies shall mean rules,
regulations, orders and other requirements of the Connecticut Board of Fire
Underwriters or Connecticut Fire Insurance Rating Organization or any similar
body performing the same or similar functions.
(d) The term unavoidable delays shall mean delays due to strikes or labor
troubles, fire or other casualty, governmental restrictions, enemy action, civil
commotion, war or other emergency, acts of God or nature or any cause beyond the
reasonable control of either party whether or not similar to any of the causes
stated
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above, but not the inability of either party to obtain financing which may be
necessary to carry out its obligations.
(e) The term Real Property shall mean the land and Building of which the
demised premises is a part.
(f) The term lease year shall mean the 12 month period commencing with the
Commencement Date (as defined in Article 38), and ending the date preceding the
first anniversary of the Commencement Date (except that if the Commencement Date
shall occur on a day other than the first day of a calendar month, such period
shall commence with the Commencement Date and end with the last day of the 12th
full calendar month thereafter) and each 12 month period thereafter, all or part
of which falls within the term of this lease.
38. Term: Preparation for Occupancy and Possession.
(a) The term of this lease and the estate hereby granted shall commence on
a date (the "Commencement Date") which shall be the earlier of the day (i) on
which the demised premises shall be deemed to be completed (of which date Tenant
shall be given 5 days notice) as such term is defined in paragraph (c) of this
Article, or (ii) Tenant (or anyone claiming under or through Tenant) shall
occupy the demised premises for the conduct of business. The term shall expire
on the last day of the month five (5) years after the month in which the
Commencement Date occurs (the "Expiration Date") or on such earlier date upon
which said term may expire or be terminated pursuant to any provision of this
lease or law. Promptly following the determination of the Commencement Date, the
parties shall enter into a supplementary written agreement setting forth the
Commencement and Expiration Dates.
(b) The demised premises shall be completed and initially prepared by Owner
in the manner, and subject to the provisions of the attached Work Specifications
and Floor Plans. Tenant and its contractors shall be entitled to access to the
demised premises prior to the completion of Owner's work only so long as they
work in conformity with and do not interfere, in Owner's judgment, with Owner or
its contractors in the completion of Owner's work, and provided they accept the
administrative supervision of Owner. If Tenant's work interferes with Owner's
work, Owner may withdraw the license granted to Tenant pursuant to this
paragraph upon 24 hours notice. Worker's Compensation, public liability and
property damage insurance, as set forth in Article 49, shall be maintained by
Tenant and/or its contractors, and certificates of such insurance shall be
furnished to Owner prior to the commencement of Tenant's work. Tenant's
selection of contractors must be in compliance with the provisions of this
lease.
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(c) The demised premises shall be deemed complete on the earliest date on
which Owner's work in the demised premises has been substantially completed,
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment or decoration remain to be performed, the non-completion
of which would not materially interfere with Tenant's use of the demised
premises. If completion of the demised premises is delayed by reason of:
(i) any act or omission of Tenant or any of its employees, agents or
contractors, including failure of Tenant to comply with any of its
obligations under the Work Specifications, or
(ii) failure to plan or execute Tenant's work with reasonable speed
and diligence, or
(iii) failure to make selections required by the Work Specifications,
or
(iv) changes by Tenant in its drawings or specifications or changes or
substitutions requested by Tenant, or
(v) failure to submit or approve drawings, plans or specifications
timely,
(vi) Tenant's failure to deliver to Owner the first month's rent (if
required by the provisions on the first page of this lease), and the
security deposit required by Article 34 (if any),
then the demised premises shall be deemed complete (and Tenant shall commence
paying rent) on the date when it would have been completed but for such delay,
and Tenant shall pay Owner all costs and damages which Owner may sustain by
reason of such delay.
(d) Floor Plans attached hereto are subject to revision based on laws and
requirements of public authorities and requirements of insurance bodies. Any
changes in door swings, arrangements of exits and/or passages so mandated shall
be binding on Owner and Tenant as if they had been incorporated into the Floor
Plans. If any common foyers or exit foyers or exit passages mandated by such
regulations are used by more than one tenant, the size of such areas or passages
and the rent therefore shall be apportioned among the tenants in relation to the
total square footage which they proportionately occupy, and Tenant's share of
such charges shall be payable as additional rent.
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(e) Owner may change the arrangement and/or location of (including the
closing off of) exits, entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets or other parts of the Building whenever necessary to
comply with laws and requirements of public authorities and requirements of
insurance bodies. Tenant shall pay the cost thereof where the requirement for
such addition is due solely to Tenant's use of the demised premises.
39. Rent.
(a) If the Commencement Date is other than the first day of a calendar
month, the first monthly installment of Fixed Annual Rent shall be prorated to
the end of said calendar month.
(b) All rent shall be paid by currently dated, unendorsed check of Tenant,
payable to the order of Owner or to an agent designated by Owner, and drawn on a
bank or trust company which is a member of the Connecticut Clearing House.
(c) Tenant shall pay the Fixed Annual Rent without notice or demand. If no
date shall be set forth herein for the payment of any other sums due Owner, then
such sums shall be due and payable within 10 business days after the date upon
which Owner makes written demand for such payment. The Fixed Annual Rent and
such other sums due Owner are referred to in this lease as "rent".
(d) If at any time during the term the rent, or any part thereof, shall not
be fully collectible by reason of any law and requirement of public authorities,
Tenant shall enter into such agreements and take such actions as Owner may
request to permit Owner to collect the maximum rents which may, during
continuance of such legal rent restrictions, be legally permissible (but not in
excess of the amounts reserved under this lease). Upon termination of such rent
restriction prior to the Expiration Date (i) the rent shall become and
thereafter be payable in accordance with the amounts reserved in this lease for
the period of the term following such termination, and (ii) Tenant shall pay
Owner, if legally permissible, an amount equal to (y) the rent which would have
been paid pursuant to this lease but for such legal rent restriction less (z)
the rents paid by Tenant for the period during which such rent restriction was
in effect.
(e) If any installment of Fixed Annual Rent is not paid when due, or if any
other monies owing by Tenant are not paid within 10 business days of the date
due and payable, Tenant shall pay Owner, without prejudice to any of Owner's
rights and remedies, in compensation for the additional administrative,
bookkeeping and collection expenses incurred by reason of such overdue sum, a
sum calculated by multiplying the late payment by three percentage points above
the prime rate or its
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equivalent then established by Chemical Bank, or its successors, dividing the
product by 365 and multiplying the quotient by the number of days between the
date such payment was due and the date such payment is in fact paid. Nothing
herein shall be intended to violate any applicable law, code or regulation, and
in all instances all such charges shall be automatically reduced to any maximum
applicable legal rate or charge. Such compensation shall be without prejudice to
any of Owner's rights and remedies hereunder.
(f) If any check tendered by Tenant, for any payment due, shall be
dishonored by the payor bank, Tenant shall pay Owner, without prejudice to any
of Owner's rights and remedies, in compensation for the additional
administrative, bookkeeping and collection expenses incurred by reason of such
dishonored check, the sum of $100. If during any twelve month period during the
term of this lease, two or more checks tendered by Tenant, for any payment due,
shall be dishonored by the payor bank, Owner may at any time thereafter require
that all future payments of rent by Tenant shall be made by certified or
official bank checks.
40. Parking.
(a) Throughout the term, so long as Tenant shall have performed all of the
agreements on Tenant's part to be performed, Owner shall make available to
Tenant the following number of parking spaces, on a non-exclusive basis.
52 spaces between the hours of 8:00 a.m. and 6:00 p.m. on regular business
days and 200 spaces at all other times. Tenant, at its sole cost and
expense, shall hire its own security staff to patrol the Building and
parking area on days other than regular business days and during hours
other than between 8:00 a.m. and 6:00 p.m. on regular business days. The
security staff hired by Tenant shall be reputable and professional. Owner
shall have no liability for any damage to any person or property during
such times that Tenant is required to have security on duty.*
If Tenant or its invitees use more than the specified number of spaces,
after 5 days notice from Owner, Tenant shall, at the option of Owner, either (i)
pay Owner's then current charge per month for each additional space used on a
month to month basis, which may be revoked by Owner at any time upon 30 days
notice (as of the date of this lease, Owner's current monthly charge is $40.00
per space), or (ii) cease and desist immediately from using said additional
spaces.
(b) As necessary, Owner shall light (between 8:00 a.m. and 10:30 p.m. on
business days and 8:00 a.m. and 6:00 p.m. on Saturdays), clean, remove snow from
and maintain, the parking area. Tenant shall be responsible for repairing damage
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caused by tenant or its invitees. Owner shall not be obligated to remove snow
unless the accumulation exceeds 3 inches. In no event shall Owner be obligated
to remove snow from areas obstructed by parked vehicles at the time Owner's
equipment is servicing such areas.*
(c) Tenant shall require its invitees to park in areas designated by Owner,
and not to obstruct the areas of other tenants nor park in undesignated areas.
Tenant shall, upon request, furnish to Owner the license numbers of the
automobiles operated by Tenant, its officers and employees. Owner may use any
lawful means to enforce the parking regulations established pursuant to Article
53, including the towing away of improperly parked or unauthorized cars and the
pasting of warning notices on car windows and windshields.
(d) Owner may temporarily close any common area (i.e. areas not leased to
Tenant) to make repairs or changes therein, to prevent the acquisition of public
rights in such area, or to discourage unauthorized parking. Owner may do such
other acts in and to the common areas as, in its judgment, may be desirable to
improve the convenience thereof.
41. Operating Expense and Tax Escalation.
(a) Tenant's Proportionate Share shall mean 12.04%.
(b) Tax Escalation.
(i) Definitions. As used in this lease:
(x) "Taxes" shall mean the total amount of real estate taxes and
assessments now or hereafter levied, imposed, confirmed or assessed against
the Real Property, (or, during any period the Real Property is owned by an
industrial development agency, such as would be levied, imposed, confirmed
or assessed as if Owner named herein were the fee owner), including city,
county, town, village, school and transit taxes, water fees and sewer and
refuse disposal charges, or taxes, assessments or charges levied, imposed,
confirmed or assessed against, or a lien on, the Real Property by any
taxing authority whether general or specific, ordinary or extraordinary,
foreseen or unforeseen and whether for public betterments or improvements
or otherwise. If, due to any change in the method of taxation, any
franchise, capital stock, capital, income, profit, sales, rental, use and
occupancy tax or charge shall be levied, assessed, confirmed or imposed
upon any owner of the Real Property in lieu of, or in addition to any real
estate taxes or assessments upon or
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with respect to the Real Property, such tax shall be included in the term
Taxes. Penalties and interest on Taxes (except to the extent imposed upon
timely payments of assessments that may be, and are in fact, paid in
installments) and income, franchise, transfer, inheritance and capital
stock taxes shall be deemed excluded from Taxes except to the extent
provided in the immediately preceding sentence.
(y) "Base Tax" is the product of the tax rates set forth on tax bills
rendered for each Tax for the Tax Year during which January 1, 1995 occurs
multiplied by the assessed valuations of the Real Property for the Tax Year
during which January 1, 1995 occurs. "Tax Year" shall mean the fiscal period for
each Tax. Any and all tax abatements shall be for the benefit of Owner.*
(ii) Tax Payments. (a) If Taxes for any Tax Year during the term ("Tax
Comparison Year") shall exceed the Base Tax, Tenant shall pay Owner as
additional rent for each such Tax Comparison Year, Tenant's Proportionate
Share of such excess ("Tax Payment").
(b) Subsequent to Owner's receipt of the tax bills for each Tax
Comparison Year, Owner shall submit to Tenant a statement showing (i) the
Tax Payments due for such Tax Comparison Year, and (ii) the basis of
calculations ("Owner's Tax Statement"). Tenant shall (y) pay Owner the
unpaid portion (if any) of the Tax Payment within 30 days after receipt of
Owner's Tax Statement, and (z) on account of the immediately following Tax
Comparison Year, pay Owner commencing as of the first day of the month
during which Owner's Tax Statement is rendered, and on the first day of
each month thereafter until a new Owner's Tax Statement is rendered, 1/12th
of the total payment of the current Tax Comparison Year. The monthly
payments based on the total payment for the current Tax Comparison Year
shall be adjusted from time to time to reflect Owner's reasonable estimate
of increases in Taxes for the immediately following Tax Comparison Year.
(iii) Reduction of Comparison Year Taxes. If Taxes for a Tax
Comparison Year are reduced, the amount of Owner's costs and expenses of
obtaining such reduction (including legal, appraisers' and consultants'
fees) shall be added to and deemed part of Taxes for such Tax Comparison
Year. If Owner obtains a refund of Taxes for a Tax Comparison Year for
which a Tax Payment has been made, Owner shall credit against Tenant's next
succeeding Tax Payment(s), Tenant's Proportionate Share of the refund (but
not more than the Tax Payment
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that was the subject of the refund) after deducting from such refund the
expenses incurred by Owner in obtaining the refund, including legal,
appraisers' and consultants' fees. If no Tax Payment shall thereafter be
due, Owner shall pay Tenant's Proportionate Share of such refund to Tenant.
(iv) Reduction of Base Tax. If Owner obtains a reduction in the Base
Tax, the Base Tax shall be reduced (such reduction to include the expenses
incurred by Owner in obtaining such reduction, including legal, appraisers'
and consultants' fees), prior Tax Payments (if any) shall be recalculated
and Tenant shall pay Owner Tenant's Proportionate Share of the increased
amount of Tax Payment for each prior Tax Comparison Year. Tenant's payment
under this paragraph shall be made within 30 days after Owner's billing
therefor.
(v) Tax Protests. While proceedings for reduction in assessed
valuations are pending, the computation and payment of Tax Payments shall
be based upon the original assessments for the years in question. Tenant
shall have no right to institute or participate in any tax proceedings or
other proceedings of a similar nature. The commencement, maintenance,
settlement and conduct thereof shall be in the sole discretion of Owner.
Notwithstanding the foregoing, Tenant shall have the right, by
appropriate proceedings, to protest or contest any assessment or
reassessment for Taxes. In such event, Tenant shall notify Owner within 30
days after the initial public availability of any such assessment or
reassessment if Tenant desires to have such assessment contested or
protested (time being of the essence). After receipt of Tenant's notice, if
Owner does not intend to seek a reduction of assessed valuation (or, having
commenced a proceeding for same, does not intend to prosecute it), Owner
shall notify Tenant promptly, so as to enable Tenant to initiate (or
further prosecute, as the case may be) such proceeding. Tenant may
thereafter initiate (or further prosecute, as the case may be) such
proceeding in the name and place of Owner. If Tenant shall so elect, then
Owner shall cooperate with Tenant to the extent reasonably required by
Tenant, provided that Owner shall have no obligation to expend any money
with respect thereto.*
(vi) Assessment With Other Properties. If, at any time, the Real
Property is assessed for tax purposes with other property owned by Owner,
the Taxes shall be an allocable portion of the Taxes on all
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such properties, based upon an informal apportionment by the tax assessors
of the total assessment to such Real Property or if such apportionment is
not available, as shall be reasonably determined by Owner.
(vii) Tenant's Improvements. In the event an increase in Taxes is
caused by Tenant's improvements to the demised premises after the initial
installation performed by Owner pursuant to this lease, Tenant shall pay
the entire increase attributable to such improvements. If the Taxes for the
improvements which are to be paid separately by Tenant are not separately
assessed, Tenant's portion of that Tax shall be reasonably determined by
Owner.*
(c) Operating Expense Escalation.
(i) Definitions. As use din this lease:
(y) "Operating Expenses" or "Expenses" shall mean such costs or expenses
(and taxes thereon), as shall be paid or incurred by or in behalf of Owner in
providing services to tenants leasing space in the Building, and in the
operation, cleaning, repair (whether structural or non-structural and whether or
not capitalized under generally accepted accounting principles), management,
security and maintenance of the Real Property (collectively called "Building
Operation") including but not limited to (1) salaries, wages and benefits paid
to persons engaged in Building Operations, including but not limited to social
security, unemployment and other payroll taxes related thereto, disability and
workers' compensation coverage, hospitalization, medical, surgical, union and
general welfare benefits (including group life insurance), pension, retirement
or life insurance plans and other benefit or similar expenses (2) the cost of
casualty, rent, boiler, machinery, sprinkler, apparatus, liability, fidelity,
plate glass, earthquake and any other insurance, (3) management fees in a sum
not in excess of the prevailing rate for management fees payable for comparable
properties in comparable locations, (4) legal (except those for preparation of
this and other leases), accounting and other professional fees and
disbursements, (5) maintenance and repair of grounds, including interior and
exterior lawns, gardens, shrubbery, trees, planters, containers, statuary,
exhibits, displays, walks and other ways and areas and common areas, interior or
exterior, (6) telephone charges incurred at the Building office (if any), (7)
costs and expenses for fuel or energy purchased or used for the operation of the
Building's heating, ventilating and air cooling system and equipment, and for
common area light and power, and (8) costs for alterations or improvements
resulting in or intended to result in a
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reduction in fuel or energy consumption or Operating Expenses or made by
reason of laws and requirements of public authorities or requirement of
insurance bodies or Owner's insurers, provided however, that to the extent
such costs are capitalized under generally accepted accounting principles,
such costs (together with an interest factor equal to the greater of the
interest with an interest factor equal to the greater of the interest rate
set forth in the first mortgage encumbering the Building or two percentage
points in excess of the prime rate established by Chemical Bank, or its
successor, at the time of expenditure) shall be amortized over a period of
5 years. An item of expense properly included in more than one category
shall not be included more than once in the calculation of Expenses.
(z) "Base Operating Expenses" shall mean Expenses for the 1995
calendar year ("Base Expense Year"). If the Building is not fully
operational or occupied during such year, the Expenses for such year shall
be calculated by Owner by projecting actual expenses to such amount as
would have been incurred if the Building had been fully operational and 95%
occupied.*
(ii) Expense Payments.
(w) If Operating Expenses for any calendar year during the term and
following the Base Expense Year (each such year being called an "Expense
Comparison year") shall exceed Base Operating Expenses, Tenant shall pay
Owner, for each such Expense Comparison Year, Tenant's Proportionate Share
of such excess ("Expense Payment"). If the Building is not fully
operational or occupied during any Expense Comparison Year, then the
Operating Expenses for each such year shall be calculated by Owner by
projecting actual expenses to such amount as would have been incurred if
the Building had been fully operational and 95% occupied.
(x) Subsequent to the end of each Expense Comparison Year, Owner shall
submit to Tenant a statement showing (1) the Expense Payments due for such
Expense Comparison Year, and (2) the basis for such calculations ("Owner's
Statement"). Tenant shall (x) make payment of any unpaid portion of the
Expense Payment within 30 days after receipt of Owner's Statement, (y) pay
to Owner, on account of the then current Expense Comparison Year, within 30
days after receipt of Owner's Statement an amount equal to the product
obtained by multiplying the total payment required for the preceding
Expense Comparison Year by a fraction, the denominator of which shall be 12
and the numerator of which shall be the number of months of the current
Expense Comparison Year which shall have elapsed prior to the first day of
the month immediately following the rendition of Owner's Statement, and (z)
pay Owner,
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on account of the then current Expense Comparison Year, commencing as of
the first day of the month immediately following the rendition of Owner's
Statement and on the first day of each month thereafter until a new Owner's
Statement is rendered, 1/12th of the total payment for the preceding
Expense Comparison Year. The monthly payments based on the total payment
for the preceding Expense Comparison Year shall be adjusted from time to
time to reflect Owner's reasonable estimate of increases in Operating
Expenses for the current Expense Comparison year. The payments required to
be made under clauses (y) and (z) above shall be subject to adjustment as
and when Owner's Statement for such current Expense Comparison year is
rendered by Owner. During the first Expense Comparison Year Tenant shall
make payments on account of Expense Payments, based upon reasonable
estimates prepared by Owner, payments to be made monthly on the first day
of each month during such first Expense Comparison Year. The payments based
on such estimates shall be adjusted following the expiration of the first
Expense Comparison Year, upon rendition of Owner's Statement for that year.
(y) No Credit. If in a Tax Comparison Year the Taxes are less than the
Base Tax, and/or if an Expense Comparison Year the Operating Expenses are
less than the Base Operating Expenses, the Tenant shall not be entitled to
receive a credit, by way of a reduction in Fixed Annual Rent, a refund of
all or a portion of prior (or a credit against future) Tax Payments or
Expense Payments, or otherwise.
(z) Partial Comparison year. If the Expiration Date or earlier date
upon which the term may expire or terminate shall be a date other than the
last day of a Tax or Expense Comparison Year, Tenant's Tax Payment and
Expense Payment for such partial Tax or Expense Comparison Year shall be
prorated, based upon Owner's reasonable estimate of the tax payments and
expense payments for such Tax or Expense Comparison Year.
42. Cleaning; Trash Removal.
(a) If Tenant keeps the demised premises in good order, Owner shall cause
the demised premises to be cleaned on business days, in accordance with the
provisions of the annexed Cleaning Specifications. Tenant shall provide
unrestricted access to the interior of all windows within the demised premises
as a condition precedent to Owner's obligation to clean same. Tenant shall
provide Owner, its contractors and their employees, with unrestricted access to
the demised premises between the hours of 8:00 a.m. to 5:00 p.m., together with
the use of Tenant's electricity and water (if any), all as may be required for
cleaning. In consideration for Owner's cleaning of the demised premises during
such hours. Tenant shall pay
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Owner, as additional rent, the sum of $3,286.00, which sum shall be payable in
equal monthly installments of $273.83 per month together with and in the same
manner as the Fixed Annual Rent.*
(b) Tenant shall pay Owner the costs incurred by Owner as a result of (i)
cleaning performed in the demised premises and the Building, necessitated by (v)
misuse or neglect on the part of Tenant or its invitees, (w) use of any portion
of the demised premises for preparation, serving or consumption of food or
beverages, reproducing operations, private lavatories or other special purposes
requiring greater or more difficult cleaning work than that normally associated
with office areas, provided, however, that Tenant may use the kitchenette in the
demised premises for its intended purpose, (x) interior glass surfaces, (y)
non-building standard materials or finishes installed by or at Tenant's request,
or (z) increases in frequency or scope of any of the items set forth in the
Cleaning Specifications as requested by Tenant, and (ii) removal from the
demised premises or building of Tenant's refuse and rubbish exceeding that
normally accumulated daily in routine or ordinary business office occupancy.*
(c) Extraordinary waste (such as crates, cartons, boxes and used furniture
and equipment) shall be removed from the Building by Owner, at Tenant's cost.
Tenant shall not place waste of any kind in any public area. Anything placed in
a public area by Tenant shall be deemed abandoned and of no value to Tenant, and
Owner may remove and dispose of same, at Tenant's cost. The costs incurred by
Owner pursuant to paragraphs (b) and (c) of this Article shall be paid by Tenant
to Owner, within 30 days after submission of a statement therefor, without
limitation Owner's additional rights under this lease.
43. Heating, Ventilation and Air-Conditioning.
(a) Owner shall have free and unrestricted access to all heating,
air-conditioning and ventilating ("HVAC") equipment in the demised premises.
Damage caused to the HVAC equipment, appliances or appurtenances as a result of
the negligence or careless operation by Tenant, its employees or its invitees,
shall be repaired by Owner. The cost and expense thereof shall be paid by Tenant
within 30 days after submission of Owner's statement, without limiting any of
Owner's additional rights under this lease. Owner shall have no maintenance or
repair obligation as to supplemental HVAC equipment installed by, or at,
Tenant's request or expense.*
(b) Owner will not be responsible for the failure of the air-conditioning
system to meet its performance specifications (i) prior to the proper balancing
of the system, or (ii) if such failure results from the occupancy of the demised
premises by
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more than an average of 1 person for each 150 square feet of Rentable Area, or
(iii) if Tenant installs and operates machines and appliances the installed
electrical load of which when combined with the load of all lighting fixtures
exceeds the electrical load contemplated by the floor plan attached hereto. If
the use of the demised premises in a manner exceeding the occupancy and
electrical load criteria, or the rearrangement of partitioning after the initial
preparation of the demised premises, results in the air-conditioning system
being unable to achieve its rated performance specifications, and it is feasible
to make changes to the system so as to enable it to achieve such performance
specifications, if Tenant requests such changes, such changes shall be made by
Owner at Tenant's cost, which cost shall be paid by Tenant within 30 days after
submission of a statement therefor.*
(c) In order to enable the air-conditioning system to function properly,
Tenant shall keep all windows closed and shall lower and close window coverings
when necessary because of the sun's position. Tenant shall comply with all
regulations and requirements Owner may establish for the functioning and
protection of the HVAC systems.
(d) The Fixed Annual Rent includes up to 950 hours per annum of overtime
heating and air conditioning use. If Tenant exceeds 950 hours per annum of
overtime heating and air conditioning use, Tenant shall pay Owner's's then
standard charge for such use. Owner's current charge for overtime heating and
air conditioning service is $35.00 per hour.*
44. Electricity.
(a) Electricity shall be supplied to the demised premises during the term
in accordance with the provisions of paragraph (c) of this Article. However, at
any time and from time to time during the term hereof, provided it is then
permissible under the provisions of laws and requirements of public authorities,
Owner shall have the option to have electricity supplied to the demised premises
in accordance with paragraph (d) of this Article.*
(b) For the purposes of this Article
(i) The term "Electric Rate" shall mean the Service Classification
pursuant to which Owner purchases electricity from the utility company
servicing the Building, provided, however, at no time shall the amount
payable by Tenant for electricity be less than Owner's Cost per Kilowatt
and Cost per Kilowatt Hour (as such terms are hereinafter defined), and
provided further that in any event, the Electric Rate shall include all
applicable surcharges, and
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demand, energy, fuel adjustment and time of day charges (if any), taxes and
other sums payable in respect thereof.*
(ii) The term "Cost per Kilowatt Hour" shall mean the total cost for
electricity incurred by Owner to service the Building during a particular
time period (including all applicable surcharges, and energy, fuel
adjustment and time of day charges (if any), taxes and other sums payable
in respect thereof) divided by the total kilowatt hours purchased by Owner
during such period.
(iii) The term "Cost per Kilowatt" shall mean the total cost for
demand incurred by Owner to service the Building during a particular time
period (including all applicable surcharges, demand, and time of day
charges (if any), taxes and other sums payable in respect to thereof)
divided by the total kilowatts purchased by Owner during such period.
(c) (i) Owner shall supply electricity to service the demised premises
on a submetered basis, and Tenant shall pay to Owner, as additional rent,
the sum of (y) an amount determined by applying the Electric Rate or, at
Owner's election, the Cost per Kilowatt Hour and Cost per Kilowatt, to
Tenant's consumption of and demand for electricity within the demised
premises as recorded on the submeter or submeters servicing the demised
premises, and (z) Owner's administrative charge of 8% of the amount
referred to in clause (y) above, if and to the extent same is permitted by
laws and requirements of public authorities (such combined sum being
hereinafter called "Submeter Electric Rent"). Except as set forth in the
foregoing clause (z), Owner will not charge Tenant more than the Electric
Rate or, at Owner's election, the Cost per Kilowatt and Cost per Kilowatt
Hour for the electricity provided pursuant to this paragraph.*
(ii) Where more than one submeter measures the electric service to
Tenant, the electric service rendered through each submeter shall be
computed and billed separately in accordance with the provisions
hereinabove set forth.
(iii) Tenant shall pay to Owner, on account of the Submeter Electric
Rent payable pursuant to this paragraph (c), the annual sum of $19,500.00
("Estimated Submeter Electric Rent"), subject to the adjustments on the
first day of each and every calendar month of the term (except that if the
first day of the term is other than the first day of a calendar month, the
first monthly installment, prorated to the end of said calendar month,
shall be payable on the first day of the first full calendar month).
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(iv) From time to time during the term, the Estimated Submeter
Electric Rent may be adjusted by Owner on the basis of either Owner's
reasonable estimate of Tenant's electric consumption and demand (if at any
time the submeter(s) servicing the demised premises are inoperative) or
Tenant's actual consumption of and demand for electricity as recorded on
the submeter(s) servicing the premises, and, in either event, the Electric
Rate or Cost per Kilowatt and Cost per Kilowatt Hour then in effect.
(v) Subsequent to the end of each calendar year during the term of
this lease, or more frequently if Owner shall elect, Owner shall submit to
Tenant a statement of the Electric Submeter Rent for such year or shorter
period together with the components thereof, as set forth in clause (i) of
this paragraph (c) ("Submetered Electric Statement"). To the extent that
the Estimated Submeter Electric Rent paid by Tenant for the period covered
by the Submetered Electric Statement shall be less than the Submeter
Electric Rent as set forth on such Submeter Electric Statement, Tenant
shall pay Owner the difference within 30 days after receipt of the Submeter
Electric Statement. If the Estimated Submeter Electric Rent paid by Tenant
for the period covered by the Submeter Electric Statement shall be greater
than the Submeter Electric Rent as set forth on the Submeter Electric
Statement, such difference shall be credited against the next required
payment(s) of Estimated Submeter Electric Rent. If no Estimated Submeter
Electric Rent payment(s) shall thereafter be due, Owner shall pay such
difference to Tenant.
(vi) For any period during which the submeter(s) servicing the
premises are inoperative, the Submeter Electric Rent shall be determined by
Owner, based upon its reasonable estimate of Tenant's actual consumption of
and demand for electricity, and the Electric Rate or Cost per Kilowatt and
cost per Kilowatt Hour then in effect.
(d) If Owner discontinues furnishing electricity to the demised premises
pursuant to paragraph (c) of this Article, Tenant shall make its own
arrangements to obtain electricity directly from the utility company furnishing
electricity to the building. The cost of such service shall be paid by Tenant
directly to such utility company. Owner shall permit its electric feeders,
risers and wiring serving the demised premises to be used by Tenant, to the
extent available, safe and capable of being used for such purpose. All meters
and all additional panel boards, feeders, risers, wiring and other conductors
and equipment which may be required to enable Tenant to obtain electricity of
substantially the same quality and character, shall be installed by Owner at
Tenant's cost and expense. Owner shall not discriminate against Tenant in its
decision to discontinue furnishing electricity to the demised premises.*
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(e) Bills for electricity supplied pursuant to paragraph (c) of this
Article shall be rendered to Tenant at such times as Owner may elect. Tenant's
payments for electricity supplied in accordance with paragraph (c) of this
Article shall be due and payable within 30 days after delivery of a statement
therefor, by Owner to Tenant. If any tax is imposed upon Owner's receipts from
the sale of electricity to Tenant by laws and requirements of public
authorities, Tenant agrees that, unless prohibited by such laws and requirements
of public authorities, Tenant's Proportionate Share of such taxes shall be
included in the bills of, and paid by Tenant to Owner, as additional rent.*
(f) Owner's failure during the term to prepare and deliver any statements
or bills under this Article, or Owner's failure to make a demand under this
Article, shall not in any way be deemed to be a waiver of, or cause Owner to
forfeit or surrender, its rights to collect any amount of additional rent which
may become due pursuant to this Article, except that any such failure beyond 24
months following the end of the year during which such sum shall be due and
payable shall result in Owner being unable to collect such sums; but such
abatement of Tenant's obligation shall not constitute a waiver of or in any way
impair the continuing obligation of Tenant to pay for electricity consumption
during future periods during the term. Tenant's liability for any amounts due
under this Article shall survive the expiration or sooner termination of the
term.*
(g) Tenant's failure or refusal, for any reason, to utilize the electrical
energy provided by Owner, shall not entitle Tenant to any abatement or
diminution of Fixed Annual Rent or additional rent, or otherwise relieve Tenant
from any of its obligations under this lease.
(h) If either the quantity or character of the electrical service is
changed by the utility company supplying electrical service to the Building or
is no longer available or suitable for Tenant's requirements, or if there shall
be a change, interruption or termination of electrical service due to a failure
or defect on the part of the utility company, no such change, unavailability,
unsuitability, failure or defect shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any payment from Owner for
any loss, damage or expense, or to abatement or diminution of Fixed Annual Rent
or additional rent, or otherwise relieve Tenant from any of its obligations
under this lease, or impose any obligation upon Owner or its agents. Owner will
use reasonable efforts to insure that there is no interruption in electrical
service to Tenant, but in no event shall Owner be responsible for any failures
of the utility providing such service or the negligence or other acts of third
parties causing any such interruption.
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(i) Tenant shall not make any electrical installations, alterations,
additions or changes to the electrical equipment or appliances in the demised
premises without prior written consent of Owner in each such instance. Tenant
shall comply with the rules and regulations applicable to the service,
equipment, wiring and requirements of Owner and of the utility company supplying
electricity to the Building. Tenant agrees that its use of electricity in the
demised premises will not exceed the capacity of existing feeders to the
Building or the risers or wiring installations therein and Tenant shall not use
any electrical equipment which, in Owner's judgment, will overload such
installations or interfere with the use thereof by other tenants in the
Building. If, in Owner's judgment, Tenant's electrical requirements necessitate
installation of an additional riser, risers or other proper and necessary
equipment or services, including additional ventilating or air-conditioning, the
same shall be provided or installed by Owner at Tenant's expense, which shall be
chargeable and collectible as additional rent and paid within 30 days after the
rendition to Tenant of a bill therefor.
(j) If, after Owner's initial installation work, (i) Tenant shall request
the installation of additional risers, feeders or other equipment or service to
supply its electrical requirements and Owner shall determine that the same are
necessary and will not cause damage or injury to the Building or the demised
premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants or occupants of the Building, or (ii) Owner shall
determine that the installation of additional risers, feeders or other equipment
or service to supply Tenant's electrical requirements is necessary, then and in
either of such events Owner shall cause such installations to be made, at
Tenant's sole cost and expense and Tenant shall pay Owner for such
installations, as additional rent, within 30 days after submission of a
statement therefor.
45. Amendments for Financing; Information for Mortgagees.
(a) If, in connection with obtaining or renewing financing for the Real
Property, an institutional lender shall request modifications in this lease as a
condition to such financing, Tenant will not withhold, delay or defer its
consent thereto, provided that such modifications neither increase the monetary
obligations of Tenant nor decrease the size of the demised premises, the number
of parking spaces provided for in Article 40 or the services required to be
provided by Owner, or substantial alter Tenant's rights hereunder.*
(b) Tenant agrees, within a reasonable time after being requested, to
submit such financial information as may be reasonably required by Owner's
mortgagee(s).
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46. Broker. Owner and Tenant each represents to the other that, in the
negotiation of this lease, they dealt with no broker or any other person legally
entitled to claim a brokerage commission or finder's or consultant's fee with
respect to this transaction except D.H. White Commercial Real Estate Services,
Inc. and based thereupon Owner shall pay a commission per a separate agreement.
Owner and Tenant shall indemnify, defend and hold the other harmless from and
against all losses, costs, damages, expenses, claims and liabilities (including
court costs and attorneys' fees and disbursements) arising out of any inaccuracy
of this representation.*
47. Building Name; Tenant Signs; Directory.
(a) Building Name. Owner may, from time to time, designate a name for the
Building and change the name and/or address of the Building.
(b) Tenant Signs. Owner shall provide, at Owner's sole cost, Owner's
building standard sign to be installed on the door of the demised premises.
(c) Directory. Owner shall, upon Tenant's request list on the Building's
directory ("Directory") (if any), the name of Tenant.
48. Holdover. Tenant acknowledges that possession of the demised premises
must be surrendered at the expiration or sooner termination of the term, time
being of the essence. The parties agree that the damage to Owner resulting from
failure by Tenant to surrender possession of the demised premises on a timely
basis will be extremely substantial, will exceed the amount of rent payable
hereunder and will be impossible of accurate measurement. Tenant shall pay
Owner, as liquidated damages for each month and for any portion of a month
during which Tenant holds over in the demised premises after expiration or
sooner termination of the term of this lease, a sum equal to 150% of the average
rent which was payable per month under this lease during the last 3 months of
the term. Tenant's failure or refusal to surrender the demised premises. Nothing
contained herein shall be deemed to authorize Tenant to remain in occupancy of
the demised premises after the expiration or sooner termination of the term.*
49. Insurance and Indemnity.
(a) Tenant shall provide, prior to entry upon the demised premises, and
maintain throughout the term of this lease, at its own cost, and with companies
rated not less than B+ Class IX by A.M. Best Company, Inc., and authorized to do
business in the State of Connecticut (i) public liability and property damage
insurance in an amount not less than $2,000,000 combined single limit for
personal injury, death and
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property damage arising out of any one occurrence, protecting Owner and Tenant
against all claims for personal injury, death or property damage occurring in,
upon or adjacent to the demised premises and any part thereof, or arising from,
related to, or in any way connected with the conduct and operation of Tenant's
use of or occupancy of the demised premises, which insurance shall be written on
an occurrence basis and name Owner (and at Owner's request, Owner's mortgagees)
as addition insureds, (ii) workers' compensation insurance covering all persons
employed by Tenant or its contractors in connection with work performed by or
for Tenant, and (iii) plate glass insurance covering plate glass in the demised
premises. All of Tenant's insurance shall be in a form reasonably satisfactory
to Owner and shall provide that it shall not be cancelled, terminated or changed
except after 20 days' written notice to Owner. All such policies or certificates
for same (in both instances with evidence of payment of the premium) shall be
deposited with Owner not less than 30 days prior to the day such insurance is
required to be in force and upon renewals of said policies not less than 30 days
prior to the expiration of the term of such coverage. Owner shall have the right
and from time to time during the term, on not less than 30 days notice, to
require that Tenant increase the amount and/or types of coverage required to be
maintained under this Article to the amounts and/or types generally required of
tenants in comparable buildings in Fairfield County. The minimum limits of
liability insurance required pursuant to clause (i) shall in no way limit or
diminish Tenant's liability under paragraph (d) of this Article.
(b) Tenant shall not knowingly commit or permit anything to be done in, on
or about the demised premises, the Building, the Real Property, the Park, if
applicable, or any adjacent property contrary to law, or which will invalidate
or be in conflict with the insurance policies carried by Owner or by others for
Owner's benefit, or do or permit anything to be done, or keep or permit anything
to be kept, in the demised premises, which (i) could result in termination of
any of such policies, (ii) could adversely affect Owner's right of recovery
under any such policies, (iii) could subject Owner to any liability or
responsibility to any person, or (iv) would result in reputable and independent
insurance companies refusing to insure the Building or property of Owner therein
or in the Park, if applicable, in amounts satisfactory to its mortgagees.*
(c) Tenant shall procure a clause in, or endorsement on, each of its
policies for fire or extended coverage insurance covering the demised premises
or personal property, fixtures or equipment located thereon, pursuant to which
the insurance company waives subrogation or consents to a waiver of right of
recovery against Owner. Tenant agrees not to make claims against or seek to
recover from Owner for loss or damage to its property or property of others
covered by such insurance. To the extent Tenant shall be a self-insurer, Tenant
waives the right of recovery, if any,
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against Owner, its agents and employees, for loss, damages or destruction of
Tenant's property.
50. Exculpation. Tenant shall look solely to the estate and interest of
Owner, its successors and assigns, in the Building for the collection of any
judgment (or other judicial process) recovered against Owner based upon breach
by Owner of any of the terms, conditions or covenants of this lease on the part
of Owner to be performed, and no other property or assets of Owner shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of Tenant's remedies under or with respect to either this lease, the
relationship of landlord and tenant hereunder, or Tenant's use and occupancy of
the demised premises.
5.1 Partnership. If Tenant's interest in this lease shall at any time be
held by a partnership, or by 2 or more persons individually (any such
partnership and such persons are referred to in this Article as "Partnership"),
the following provisions shall apply to such Partnership:
(a) The liability of each of the parties comprising Partnership shall be
joint and several;
(b) Each of the parties comprising Partnership shall be deemed to consent
to, and be bound by, all (i) written instruments which may thereafter be
executed, changing, modifying or discharging this lease, in whole or in part, or
surrendering all of any part of the demised premises to Owner, and (ii) notices,
demands, requests or other communications which may thereafter be given by
Partnership or any of the parties comprising Partnership;
(c) Any bills, statements, notices, demands, requests or other
communications given or rendered to Partnership, or to any one of the parties
comprising Partnership, shall be deemed given or rendered to partnership and to
all persons comprising Partnership and shall be binding upon Partnership and all
such parties;
(d) If Partnership shall admit new partners, all of such new partners shall
by their admission to partnership, be deemed to have assumed the obligation to
perform the terms, covenants and conditions of this lease on Tenant's part to be
observed an performed; and
(e) Partnership shall give prompt notice to Owner of the admission of each
new partner, and upon demand of Owner, shall cause each such new partner to
execute and deliver to Owner an agreement in form satisfactory to Owner, wherein
each new partner shall assume performance of the terms, covenants and conditions
of
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this lease on Tenant's part to be observed and performed (but neither Owner's
failure to request such agreement nor failure of any partner to execute or
deliver such agreement shall relieve such new partner of his obligation
hereunder).
The provisions of this Article shall not constitute a consent by Owner to
the assignment of any interest in this lease by Tenant.
52. Restrictions on Use.
(a) Tenant agrees that neither Tenant nor any subtenant, assignee or
occupant of the demised premises shall at any time during the term occupy or use
the demised premises or permit the same to be occupied or used in any manner
except as provided in Article 2.
(b) Tenant shall not knowingly permit the demised premises to be used in
any manner, or anything to be done therein, or permit anything to be brought
into or kept therein, which would (i) violate any laws or requirements of public
authorities, (ii) cause injury to the Building or the Park, if applicable, (iii)
constitute a nuisance, (iv) impair the appearance of the Building, (v) impair
the use for normal purposes of any area of the Building by, or required to be
furnished by Owner to Tenant or to any other tenants or occupants of the
building or the Park, if applicable, or (vi) violate any of Tenant's obligations
under this lease.*
(c) Tenant shall not place (nor require the placement of) a load upon any
floor of the demised premises exceeding 75 lbs. per square foot (live and dead),
nor shall Tenant place (or require the placement of) a load upon any ceiling in
the demised premises exceeding 5 lbs. per square foot. All data processing and
other business machines and equipment and all other mechanical equipment
installed and used by Tenant in the demised premises, as approved by Owner,
shall be quipped, installed and maintained by Tenant, at its expense, so as to
prevent noise, vibration or electrical or other interference from being
transmitted from the demised premises to any other area of the Building. Tenant
shall not move any safe, machinery or heavy equipment in or out of the Building
without employing persons property licensed, if required by laws and
requirements of public authorities.
53. Rules and Regulations. Tenant and Tenant's invitees shall observe and
comply with the attached Rules and Regulations, and such additional Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
additional Rules and Regulations shall be given to Tenant. Owner shall have no
duty or obligation to enforce the Rules and Regulations or the terms, covenants
or conditions in any other lease, against any other tenant of the Building and
in the Park, if applicable, and Owner shall not be liable to Tenant for
violation of the same
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by any other tenant or its invitees, provided that Owner shall not discriminate
against Tenant in its enforcement of the Rules and Regulations. In the event of
a conflict between the Rules and Regulations and the provision of the lease, the
provisions of the lease shall prevail.
54. Tenant's Alterations. Supplementing Article 3, Tenant shall not employ
contractors in connection with any services, provisions, alterations or
maintenance, unless Owner has consented in writing to the contractor, it being
the intention of Owner to limit the number of such contractors employed in the
Building and Park, if applicable. If such consent has not been obtained Tenant
shall, if requested by Owner, forthwith cancel such contract. Owner's
disapproval of any contractor selected by Tenant must be accompanied by the
designation of one or more contractors acceptable to Owner, whose prices must be
reasonably competitive. If Owner does not approve or disapprove Tenant's
contractor within 7 business days after receipt of written request therefor, the
contractor so selected by Tenant shall be deemed approved by Owner. Tenant shall
not employ persons in connection with any such services, provisions, alterations
or maintenance the employment of whom would cause a strike, stoppage or slowdown
by employees of contractors of Owner in the Building and Park, if applicable.
Owner does not consent to the reservation of title by any conditional vendor, or
the retention of a security interest by a secured party, to any property which
may be affixed to the realty.
55. Notice.
(a) At the request of the holder(s) of any mortgage encumbering the Real
Property, Tenant shall serve upon such mortgagee(s) a copy of all notices given
by Tenant to Owner pursuant to paragraph (b) below, such service to be by
registered or certified mail addressed to such mortgagee(s) at the address
provided by such mortgagee(s) to Tenant.
(b) Except for rent bills, any notice, approval, consent, bill, statement
or other communication required or permitted to be given, rendered or made by
either party hereto to the other, pursuant to this lease or pursuant to any
applicable law or requirement of public authority, shall be in writing and shall
be delivered personally or by registered or certified mail addressed to the
other party at the address hereinabove set forth, All notices given by either
party pursuant to this Article may be given by such party, their agents or
attorneys, Either party may, by notice as aforesaid, designate a different
address or addresses for notices, bills, statements or other communications
intended for it. All notices given pursuant to this Article shall be deemed
given on the second business day after posting if mailed in Fairfield County,
and on the third business day after posting if mailed outside of Fairfield
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County and upon delivery if made personally, on and after the Commencement Date
notices directed to Tenant shall be addressed to Tenant at the Building.
56. Miscellaneous.
(a) Whenever it is provided that Owner shall not unreasonably withhold or
delay consent or approval or shall exercise its judgment reasonably (such
consent or approval and such exercise of judgment being collectively referred to
as "Consent"), if Owner shall delay or refuse such consent, Tenant shall not be
entitled to make any claim, and Tenant waives any claim for money damages (nor
shall Tenant claim any money damage by way of setoff, counterclaim or defense)
based upon any claim or assertion that Owner unreasonably withheld or
unreasonably delayed consent. Tenant's sole remedy shall be an action or
proceeding for specific performance, injunction or declaratory judgment to
enforce any such provision, but any such equitable remedy which can be cured by
the expenditure of money may be enforced personally against Owner only to the
extent of interest in the Building. Failure on the part of Tenant to seek relief
within 30 days after the date upon which Owner has withheld its consent shall be
deemed a waiver of any right to dispute the reasonableness of such withholding
of consent.
(b) Owner shall have no liability or responsibility if any service or
utility required to be provided by Owner is interrupted or stopped by reason of
unavoidable delays, unless caused by Owner's negligence.*
(c) If Tenant shall request the consent or approval of Owner to the making
of any alterations or to any other thing, and Owner shall seek and pay a
separate fee for the opinion of Owner's counsel, architect, engineer or other
representative or agent as to the form or substance thereof, Tenant shall pay
Owner, as additional rent, within 30 days after demand, all reasonable costs and
expenses of Owner incurred in connection therewith, including, in case of any
alterations, costs and expenses of Owner in reviewing plans and specifications.
(d) This lease is submitted to Tenant for signature with the understanding
that it shall not bind Owner unless and until it has been executed by Owner and
delivered to Tenant or Tenant's attorney.
(e) Whenever reference is made to public halls, elevators, corridors, etc.
and if none such are present on or about the premises demised herein then such
reference shall have no relevance to the terms herein.
(f) In the event of any conflict between the printed provisions of the
lease and the Rider to the lease, the provisions of this Rider shall prevail.
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(g) Owner's failure to prepare and/or deliver any statement or bill
required to be delivered to Tenant, or Owner's failure to make demand for
payment of Fixed Annual Rent or additional rent shall not be a waiver of, or
cause Owner to forfeit or surrender its rights to collect, any rent due.
Notwithstanding the foregoing, any delay or failure of Owner in billing any
additional rent under this lease beyond 24 months following the end of the year
in which such additional rent was incurred shall result in Owner being unable to
collect such additional rent payment; but such abatement of rent obligation
shall not constitute a waiver of or in any way impair the continuing obligation
of Tenant to make future additional rent payments. Tenant's liability for all
such payments shall continue unabated during the term and shall survive the
expiration or sooner termination of the term.*
(h) Tenant shall not cause (or allow any of its contractors, agents or
other persons or entities over whom or which it exercises a degree of control to
cause) to occur within the demised premises, the Building or the Park, if
applicable, any discharge, spillage, uncontrolled loss, seepage or filtration of
hazardous waste or oil or petroleum liquids or solids, asbestos, pcb,
radioactive substances, methane, volatile hydrocarbons, industrial solvents, or
any other materials or substances which have in the past caused or constituted,
or are in the future found to cause or constitute, a health, safety or
environmental hazard.
(i) Anything herein to the contrary notwithstanding, if the first month's
rent or the security deposit shall not have been delivered to Owner upon the
approval of this lease by the Office of the Attorney General of the State of
Connecticut, then (in additional to such other remedies available to Owner
hereunder, at law or in equity) Owner shall not be obligated to commence
preparation of the demised premises for occupancy (if required by the provisions
of this lease) until such sums shall have been delivered to Owner.*
(j) Tenant agrees not to disclose the terms, covenants, conditions or other
facts with respect to this lease, including, but not limited to, the Fixed
Annual Rent, to any person, corporation, partnership, associations, newspaper,
periodical or other entity. This non-disclosure and confidentiality agreement
shall be binding upon Tenant without limitation as to time, and a breach of this
paragraph shall constitute a material breach under this lease.
(k) Tenant shall prevent its students from loitering in any part of the
Building and from congregating in front of the Building. If Tenant's students
loiter in the Building or congregate in front of the Building, same shall be
deemed a material breach of this lease by Tenant. Owner acknowledges that
Tenant's obligation to prevent such loitering is limited to loitering on
non-public property.*
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57. Amendments to Printed Form.
(a) Article 4 is amended by inserting the following after the sentence
ending on line 9 of column 2, on page 1: "All maintenance and repairs shall be
performed in a manner acceptable to Owner."
(b) Article 6 is amended by adding the following after "premises" in line
16 on page 2, "or the building or any property adjacent thereto,"; the following
after "part" in line 20 on page 2, "or the adjacent property"; and the following
after "effect" on line 28 on page 2, "as if Tenant were not occupying the
building."
(c) Article 7 is amended by adding the following paragraph:
"Notwithstanding anything contained herein to the contrary, and at the election
of the holder of any current or future mortgage encumbering all or a portion of
the premises of which the demised premises are a part, such mortgage shall be
subordinate to this lease with the same force and effect as if this lease had
been executed, delivered and recorded prior to the execution, delivery and
recording of the said mortgage, except however that the said subordination or
the mortgage to the lease shall not affect nor be applicable to and does
expressly exclude:
(i) The prior right, claim or lien of the said mortgage in, to and
upon any award or other compensation heretofore or hereafter to be made for
any taking by eminent domain of any part of the mortgaged premises, and to
the right of disposition thereof in accordance with the provisions of the
said mortgage;
(ii) The prior right, claim and lien of the said mortgage in, to and
upon any proceeds payable under all policies of fire and rent insurance
upon the said mortgaged premises and as to the right of disposition thereof
in accordance with the terms of the said mortgage; and
(iii) Any lien, right, power or interest, if any, which may have
arisen or intervened in the period between the recording of the said
mortgage and the execution of this lease, or any lien or judgment which may
arise at any time under the terms of this lease.
Although this clause shall be self-operative upon the election of any such
mortgage, in confirmation hereof, Tenant shall execute promptly any certificate
that Owner or such mortgagee may request."
(d) Article 18 is amended by adding the following paragraph:
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In the event of a default by Tenant in its obligations under this lease,
beyond applicable grace periods, if any, in addition to Owner's other rights and
remedies, there shall be immediately payable by Tenant to Owner, as additional
rent, the amount of all of the following which are incurred, granted or assumed
by Owner in connection with the lease: all rent concessions; free rent; rent
credits, contributions or payments by Owner with respect to work or improvements
performed in the demised premises; and/or obligations expenses and liabilities
of Tenant assumed or paid for by Owner in consideration of Tenant's entering
into this lease.
(e) Article 29 is amended by adding the following after "heat" in line 5,
"and air-conditioning"; the following after "ordinary" in line 8, "drinking
and,"; and the following after "thereof" in line 5 of clause (f), "and Owner
shall have no responsibility or liability for failure to supply such services in
the event of any such stoppage."
(f) Article 31 is amended by adding the following after "lease" as found
twice in line 11, "(including a termination thereof"); and the following after
"lessee" in lines 16 and 17, "or transferee".
(g) Article 34 is amended by adding the following after the sentence ending
on line 6 of column 2, "If Owner so uses, applies or retains any part of the
security so deposited, Tenant, upon demand, shall deposit with Owner the amount
so used, applied or retained, so that Owner shall have the full deposit on hand
at all times during the term of this lease."
58. Option to Terminate.
Tenant shall have the right to elect to terminate this lease at any time
after the third lease year, provided Tenant has given Owner notice of its
election no later than 180 days prior to the effective date of termination
("Termination Date") (time being of the essence in the giving of such notice).
Simultaneously with the notice to be given pursuant to the foregoing sentence,
Tenant shall pay to Owner the sum of (1) an amount equal to the product of
$174.52 multiplied by the number of days between the Termination Date and the
original Expiration Date plus (2) an amount equal to (i) $71,500.00, if the
Termination Date is on or before the fourth year and fourth month anniversary of
the Commencement Date, (ii) $47,666.67, if the Termination Date is after the
fourth year and fourth month anniversary of the Commencement Date but on or
before the fourth year and eight month anniversary of the commencement Date or
(iii) $23,833.33 if the Termination Date is after the fourth year and eight
month anniversary of the Commencement Date. The foregoing sum shall be in
addition to all Fixed Annual Rent and additional rent due and owing through the
Termination Date.*
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59. Attorney General Approval. This lease is conditioned upon the approval
of the Office of the Attorney General of the State of Connecticut (the "Attorney
General's Office"). Tenant shall deliver to Owner evidence of the approval of
the Attorney General's Office within 30 days after the delivery to Tenant of
four copies of this lease executed by Owner. If Tenant fails to obtain the
approval from the Attorney General's Office within such 30 day period, time
being of the essence, this lease shall automatically terminate and be of no
further force or effect. In such event, neither party shall have any liability
to the other.
60. Non-discrimination. For the purposes of this section, the word
"contractor" is substituted for and has the same meaning and effect as if it
read "Owner". This section is inserted in connection with subsection (a) of
Section 4A-60 of the General Statutes of Connecticut as revised.
(a) For the purposes of this section, "minority business enterprises" means
any small contractor or supplier of materials fifty-one percent or more of the
capital stock, if any, or assets of which is owned by a person or persons: (1)
who ar active in the daily affairs of the enterprise (2) who have the power to
direct the management and policies of the enterprise and (3) who are members of
a minority, as such term is defined in subsection (a) of Conn. Gen. Stat.,
ss.32-9n; and "good faith" means that degree of diligence which a reasonable
person would exercise in the performance of illegal duties and obligations.
"Good faith efforts" shall include, but not be limited to, those reasonable
initial efforts necessary to comply with statutory or regulatory requirements
and additional or substituted efforts when it is determined that such initial
efforts will not be sufficient to comply with such requirements.
For purposes of this section, "Commission" means the Commission on Human
Rights and Opportunities.
For purposes of this section, "Public works Contract" means any agreement
between any individual, firm or corporation and the state or any political
subdivision of the state other than a municipality for construction,
rehabilitation, conversion, extension, demolition or repair of a public
building, highway or other changes or improvements in real property, or which is
financed in whole or in part by the state, including, but not limited to,
matching expenditures, grants, loans, insurance or guarantees.
(b) (1) The contractor agrees and warrants that in the performance of a
contract, such contractor will not discriminate or permit discrimination against
any person or group of persons on the grounds of race, color, religious creed,
age, marital status, national origin, ancestry, sex, mental retardation or
physical disability, including, but not limited to blindness, unless it is shown
by such contractor that
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such disability prevents performance of the work involved, in any manner
prohibited by the laws of the United States or of the State of Connecticut. The
contractor further agrees to take affirmative action to insure that applicants
with job related qualifications are employed and that employees are treated when
employed without regard to their race, color, religious creed, age, marital
status, national origin, ancestry, sex, mental retardation or physical
disability, including, but not limited to blindness, unless it is shown by such
contractor that such disability prevents performance of the work involved; (2)
the contractor agrees, in all solicitations or advertisements for employees
placed by or on behalf of the contractor, to state that it is an "affirmative
action-equal opportunity employer" in accordance with regulations adopted by the
commission; (3) the contractor agrees to provide each labor union or
representative of workers with which such contractor has a collective bargaining
agreement or other contract or understanding and each vendor with which such
contractor has a contract or understanding, a notice to be provided by the
commission advising the labor union or workers' representative of the
contractor's commitments under this section, and to post copies of the notice in
conspicuous places available to employees and applicants for employment; (4) the
contractor agrees to provide with each provision of this section and Conn. Gen.
Stat., ss.ss.46a-68e and 46a-68f and with each regulation or relevant order
issued by said commission pursuant to Conn. Gen. Stat., ss.ss.46a-56, as amended
by Section 5 of Public Act 89-253, 46a-68e and 46a-68f; (5) the contractor
agrees to provide the commission on human rights and opportunities with such
information requested by the commission, and permit access to pertinent books,
records and accounts, concerning the employment practices and procedures of the
contractor as relate to the provisions of this section and sections 46a-56. If
the contract is a public works contract, the contractor agrees and warrants that
he will make good faith efforts to employ minority business enterprises as
subcontractors and suppliers of materials on such public works project.
(c) Determination of the contractor's good faith efforts, shall include,
but shall not be limited to the following factors: The contractor's employment
and subcontracting policies, patterns and practices; affirmative advertising,
recruitment and training; technical assistance, activities and such other
reasonable activities or efforts as the commission may prescribe that are
designed to insure the participation of minority business enterprises in public
works projects.
(d) The contractor shall develop and maintain adequate documentation, in a
manner prescribed by the commission of its good faith efforts.
(e) The contractor shall include the provisions of subsection (b) of this
section in every subcontract or purchase order entered into in order to fulfill
any obligation of a contract with the state and such provisions shall be binding
on the subcontractor, vendor or manufacturer unless exempted by regulations or
orders of
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the commission. The contractor shall take such action with respect to any such
subcontract or purchase order as the commission may direct as a means of
enforcing such provisions including sanctions for non-compliance in accordance
with Conn. Gen. Stat., ss.46a-56, as amended by Section 5 of Public Act 89-253;
provided, if such contractor becomes involved in, or is threatened with,
litigation with a subcontractor or vendor as a result of such direction by the
commission, the contractor may request the State of Connecticut to enter into
any such litigation or negotiation prior thereto to protect the interests of the
state and the sate may so enter.
(f) The contractor agrees to comply with the regulations referred to in
this section as they exist on the date of this contract and as they may be
adopted or amended from time to time during the term of this contract and any
amendments thereto.
For the purposes of this section , the word "contractor" is substituted for
and has the same meaning and effect as if it read "LESSOR." This section is
inserted in connection with Section 4a-60a of the General Statutes of
Connecticut, as revised.
(a) (1) The contractor agrees and warrants that in the performance of the
contract such contractor will not discriminate or permit discrimination against
any person or group of persons on the grounds of sexual orientation, in any
manner prohibited by the laws of the United States or of the State of
Connecticut, and that employees are treated when employed without regard to
their sexual orientation; (2) the contractor agrees to provide each labor union
or representative of workers with which such contractor has a collective
bargaining agreement or other contract or understanding and each vendor with
which such contractor has a contract or understanding, a notice to be provided
by the commission on human rights and opportunities advising the labor union or
workers' representative of the contractor's commitments under this section, and
to post copies of the notice in conspicuous places available to employees and
applicants for employment; (3) the contractor agrees to comply with each
provision of this section and with each regulation or relevant order issued by
said commission pursuant to section 46a-56 of the general statutes; (4) the
contractor agrees to provide the commission on human rights and opportunities
with such information requested by the commission, and permit access to
pertinent books, records and accounts, concerning the employment practices and
procedures of the contractor which relate to the provisions of this section and
section 46a-56 of the general statutes.
(b) The contractor shall include the provisions of subsection (a) of this
section in every subcontractor or purchase order entered into in order to
fulfill any obligation of a contract with the state and such provisions shall be
binding on a subcontractor, vendor or manufacturer unless exempted by
regulations or orders of
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the commission. The contractor shall take such action with respect to any such
subcontract or purchase order as the commission may direct as a means of
enforcing such provisions including sanctions for noncompliance in accordance
with section 46a-56 of the general statutes; provided, if such contractor
becomes involved in, or is threatened with, litigation with a subcontractor or
vendor as a result of such direction by the commission, the contractor may
request the state of Connecticut to enter into any such litigation or
negotiation prior thereto to protect the interests of the state and the state
may so enter.
(c) The contractor agrees to comply with the regulations referred to in
this section as they exist on the date of this contract and as they may be
adopted or amended from time to time during the term of this contract and any
amendments thereto.
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EXHIBIT A
RULES AND REGULATIONS
1. Any moving of furniture or equipment into or out of the demised premises
must be done by Tenant at its own cost and expense, on business days after 6:00
p.m., or on Saturday subject, however, to the prior written consent of Owner. If
such move requires use of an elevator, such move shall not be in excess of such
elevator's carrying load capacity. Tenant shall reimburse Owner for its
reasonable costs of operating any elevator when same is used for moving Tenant's
furniture or equipment.
2. The sidewalks, entrances, passages, lobby, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by Tenant or
used for any purpose other than ingress and egress to and from the demised
premises and Tenant shall not permit any of its invitees to congregate in any of
said areas. No door mat shall be placed or left in any public hall or outside
any entry door of the demise premises.
3. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades, or screens shall be attached to or
hung in, or used in connection with, any window or door of the demised premises,
without the prior consent of Owner. Such curtains, blinds, shades or screens
must be of a quality type, design and color, and attached in the manner approved
by Owner.
4. No sign, insignia, advertisements, object, notice or other lettering
shall be exhibited, inscribed, painted or affixed by any Tenant on any part of
the outside or inside of the demised premises or the Building without the prior
written consent of Owner. In the event of the violation of the foregoing by
tenant, Owner may remove the same without any liability, and may charge the
expense incurred in such removal to Tenant. Interior signs and lettering on
doors and directory tablets shall, if and when approved by Owner, be inscribed,
painted or affixed by Owner at the expense of Tenant, and shall be of a size,
color and style acceptable to Owner.
5. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places shall not
be covered or obstructed by Tenant. Bottles, parcels, or other articles shall
not be placed on window sills by Tenant.
6. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules by Tenant.
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7. Tenant shall not discharge or permit to be discharged any materials
which may cause damage into waste lines, vents or flues. The water and wash
closets and other plumbing fixtures shall not be used for any purposes other
than those for which they were designed or constructed, and no sweepings,
rubbish, rags, corrosives, acids or other substances shall be thrown or
deposited therein. All damages resulting from any misuse of the fixtures shall
be borne by the tenant who, or whose invitees, shall have caused the same.
8. Tenant shall not mark, paint, drill into, or in any way deface any part
of the demised premises or the Building. No boring, cutting or stringing of
wires shall be permitted, except with the prior consent of Owner, and as Owner
may direct. Tenant shall not lay linoleum, or other similar floor covering, so
that the same shall come in direct contact with the floor of the demised
premises, and, if linoleum or other similar floor covering is desired to be used
an interlining of builder's deadening felt shall be first affixed to the floor,
by a paste or other material, soluble in water, the use of cement and other
similar adhesive material is prohibited.
9. No bicycles, vehicles, animals, fish or birds of any kind shall be
brought into or kept in or about the demised premises.
10. No noise, including, but not limited to, music or the playing of
musical instruments, recordings, radio or television which, in Owner's judgment,
might disturb other tenants in the Building or the Park, if applicable, shall be
made or permitted by Tenant. Nothing shall be done or permitted in the demised
premises by Tenant which would impair or interfere with the use or enjoyment by
any other tenant of any other space in the Building or the Park, if applicable.
Tenant shall not throw anything out of the doors, windows of skylights or down
the passageways. Owner acknowledges the Tenant's use of audio/visual equipment
in the demised premises, and Owner further acknowledges that such use will not
be deemed a breach of this lease.
11. Neither Tenant nor its invitees shall bring or keep upon the demised
premises any explosive fluid, chemical or substance, nor any inflammable or
combustible objects or materials.
12. Additional locks or bolts of any kind which shall not be operable by
the grand master key(s) for the Building shall not be placed upon any of the
doors or windows by Tenant, nor shall any changes be made in locks or the
mechanism thereof which shall make such locks inoperable by said grand master
key(s). Tenant shall, upon the termination of its tenancy, turn over to Owner
all keys of stores, offices and toilet rooms, either furnished to, or otherwise
procured by, Tenant and in
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the event of the loss of any keys furnished by Owner, Tenant shall pay to Owner
the cost thereof.
13. All removals from the demised premises or the Building, or the moving
or carrying in or out of any safes, freight, furniture, packages, boxes, crates
or any other object or matter of any description must take place during such
hours and in such elevators as Owner or its agent may determine from time to
time. All deliveries of any nature whatsoever to the Building or the demised
premises must be made only through Building entrances specified or such
deliveries by Owner. Owner reserves the right to inspect all objects and matter
to be brought into the Building and to exclude from the Building all objects and
matter which violate the Lease. Owner may require any person leaving the
Building with any package or other object or matter, to submit a pass, listing
such package or object or matter, from the tenant from whose premises the
package or other object or matter is being removed, but neither the
establishment and enforcement of such requirement shall, nor the failure to
establish and enforce same, shall impose any responsibility on Owner for the
protection of any tenant against the removal or property from the premises.
Owner shall, in no way, be liable to Tenant for damages or loss arising from the
admission, exclusion or ejection of any person to or from the demised premises
or the Building under the provisions of this Rule or Rule 16.
14. Tenant shall not occupy or permit any portion of the demised premises
to be occupied as an office for a public stenographer or public typist, or for
the possession, storage, manufacture, or sale of beer, wine or liquor,
narcotics, drugs, tobacco in any form, or as a barber, beauty or manicure shop,
or as an employment bureau. Tenant shall not engage or pay any employees on the
demised premises, except those actually working for Tenant on the demised
premises, nor advertise for laborers giving an address at the demised premises.
Tenant shall not use the demised premises or any part thereof, or permit the
demised premises or any part thereof to be used, for manufacturing, or for sale
at auction of merchandise, goods or property of any kind. The demised premises
shall not be used for lodging or sleeping or for any immoral or illegal purpose.
Canvassing, soliciting and peddling in the Building are prohibited and Tenant
shall cooperate to prevent the same. Tenant shall not cause or permit any odors
of cooking or other processes or any unusual or objectionable odors to emanate
from the demised premises which would annoy other tenants or create a public or
private nuisance. No cooking shall be done in the demised premises except as is
expressly permitted in the lease.
15. Tenant shall not obtain, purchase or accept for use in the demised
premises ice, drinking water, food, beverage, towel, barbering, boot blacking,
cleaning, floor polishing or other similar services from any persons not
authorized by Owner in writing to furnish such services, provided always that
the charges for such
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services by persons authorized by Owner shall not be excessive. Such services
shall be furnished only at such hours, in such places within the demised
premises, and under such regulations as may be filed by Owner. Tenant shall not
purchase or contract for waxing, rug shampooing, venetian blind washing,
furniture polishing, lamp servicing, cleaning of electric fixtures, removal of
garbage or towel service in the demised premises except from contractors,
companies or persons so approved by the Owner.
16. Owner reserves the right (although it is understood that Owner shall
not be obligated under any circumstances) to exclude from the Building during
hours other than regular business hours (8:00 a.m. through 6:00 p.m. Monday
through Friday) and days all persons who do not present a pass signed by Owner.
All persons entering and/or leaving the Building during hours other than regular
business hours and days may be required to sign a register. Owner will furnish
passes to persons for whom Tenant requests same in writing. Tenant shall be
responsible for all persons for whom Tenant requests such pas an shall be liable
to Owner for all acts or omissions of such persons. Owner's providing of
services during other than regular business hours and days shall not be
interpreted to mean that the Building is in operation during such after-hours;
Owner shall have no obligation, during such after-hours, to take measures
regarding security of Tenant's invitees using the demised premises during other
than regular business hours and days. Owner shall have no liability to Tenant
for failure to implement any such security system or, in the event such system
is implemented, for any losses suffered by Tenant by reason of the operation of
system, except in the vent of Owner's negligence.
17. Tenant, before closing and leaving the demised premises at any time,
shall turn off the lights. All entrance doors in the demised premises shall be
left locked by Tenant when the demised premises are not in use. Entrance doors
shall not be left open at any time.
18. Tenant shall provide artificial light and electrical energy for the
employees of Owner and/or Owner's contractors while doing janitorial service or
other cleaning in the demised premises and while making repairs or alterations
in the demised premises.
19. The requirements of Tenant will be attended to only upon application at
the office of the Building or, in the absence of such office, at the office of
Owner or its designated agent. Employees of Owner shall not perform any work or
do anything outside of their regular duties for the account of Tenant, unless
under instructions from Owner.
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OFF/MAS/1991
20. There shall not be used in any space, or in any lobbies, corridors,
public halls or other public areas of the Building, in the moving or delivery or
receipt of safes, freights, furniture, packages, boxes, crates, paper, office
material, or any other object or thing, any hand trucks except those equipped
with rubber tires and such other safeguards as Owner shall require. No move or
delivery of any object or thing of whatever nature, other than light-weight
objects hand-carried by not more than one person, shall be made without at least
24 hours prior notice by Tenant to Owner and without Tenant, prior to any such
move or delivery, laying (without affixation or attachment to any part of the
floor or floor covering) adequate masonite or plywood sheets covering all lobby
corridor, public hall and other public area floors of the Building (whether or
not carpeted) over which such move or delivery shall take place.
21. Owner reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building, when, in its judgment, it
deems it necessary or desirable for the reputation, safety, care or appearance
of the Building or the Park, if applicable, or the preservation of good order
therein, or the operation or maintenance of the Building (or the Park or the
equipment thereof, or the comfort of tenants or others in the equipment thereof,
or the comfort of tenants or others in the Building. No recision, alteration or
waiver of any rule or regulation in favor of one tenant shall operate as a
recision, alteration or waiver in favor of any other tenant.
22. Tenant, its employees, agents, licensees, contractors and subtenants
shall not litter any public areas of the Building the Park, if applicable, or
the Real Property (including, the walkways and parking areas located thereon).
23. Owner shall not unreasonably withhold or delay from Tenant any approval
provided for in the Rules and Regulations.
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OFF/MAS/1991
EXHIBIT B
CLEANING SPECIFICATIONS
1. General
(a) All non-carpeted flooring to be swept and/or dust mopped on each
business day.
(b) All carpeting areas and rugs vacuumed twice weekly.
(c) All stairways to be swept weekly.
(d) Empty and wipe wastepaper baskets and ashtrays each business day.
(e) Cigarette urns to be cleaned each business day and sand replaced when
necessary.
(f) Floors, walls and interior surfaces of lobby, elevators and public
corridors to be maintained as required.
(g) Dust furniture and window sills as required.
(h) Water coolers to be wiped each business day.
(i) Entrance lobby glass to be washed or wiped each business days.
2. Lavatories Daily (Business Days)
(a) All flooring to be sept and washed using disinfectant in water.
(b) All basins, bowls, urinals and toilet seats to be washed.
(c) All mirrors to be washed.
(d) Paper towels and sanitary disposal receptacles to be emptied and
cleaned.
(e) Toilet tissue holders and soap and paper towel dispensers to be
filled.
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OFF/MAS/1991
3. Windows
(a) Three times per year clean all exterior windows on the inside only,
provided that window sills are free of articles and access to the
windows is not obstructed.
(b) Two times per year clean all exterior windows on the outside.
4. Venetian Blinds
Venetian blinds to be dusted annually.
5. Ledges and moldings
Ledges and moldings to be high dusted semi-annually as required.
6. Lighting Fixtures
Interior and exterior of lighting fixtures to be dusted annually as
required.
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OFF/MAS/1991
EXHIBIT C
WORK SPECIFICATIONS
Owner agrees at its sole expense and without charge to Tenant, to do the
following Building Standard Work in the demised premises unless otherwise set
forth on the Floor Plan attached hereto:
A. General Construction:
1. Partitions
Owner shall supply and install ceiling-high metal stud drywall
partitions with 5/8" sheet rock on both sides. All partitions to
be finished with 4" base, either cove or straight. Corridor and
classroom and between tenant partitions shall be of sound
attenuating construction, extending to the underside of the floor
above.
2. Doors
Owner shall supply and install necessary doors. All interior
tenant doors to be solid laminate 3' full height and shall be
furnished complete with bucks, 1-1/2 pair butts, door stops and
latch sets.
3. Ceilings
Owner shall supply and install a 2' x 4' textured acoustical
ceiling tile laid in a tee system throughout all tenant areas.
4. Electrical
Owner shall supply and install:
(a) Lightings
Recessed building standard 2' x 4' light fixtures. Initial
lamping by Owner; all subsequent replacements by Tenant.
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OFF/MAS/1991
(b) Outlets
Duplex convenience wall outlets as shown on the floor plan
attached hereto and made a part hereof.
(c) Switches
Wall switches in each partitioned office and classrooms, one
switch at entrance to open areas and one switch for audio
visual equipment in the classroom.
5. Telephone
Tenant shall make arrangements with any telephone company for
installation of telephone service. Owner will not provide or
initiate such service. Owner has provided space for Tenant's
phone system in a closet in the buffet prep areas as shown on the
attached plan. Owner will also provide a four foot by four foot
piece of plywood and a dedication circuit for Tenant's phone
system within the closet.
6. Window Covering
Building Standard Riviera by Levolor (or equal 1" slat) Slimline
Tapeless blinds will be provided at all exterior windows in a
uniform color throughout the building. No substitution from
Building Standard will be permitted.
7. Painting
All partitions will be painted with two coats of flat finish
latex paint. Exposed metal surfaces, e.g. convector enclosures,
doors and bucks will be painted with two coats semi-gloss enamel.
Charge will be made for more than one color in any one room.
Selection will be from premised Building Standard Color Chart.
Should Tenant desire colors darker or different than the Building
Standard Color Chart, same colors shall be at Tenant's sole
expense.
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OFF/MAS/1991
8. Flooring
Owner shall install Owner's standard grade carpet to be selected
by Tenant from Owner's standard selection chart as to type and
color. The floors in the kitchenette and storage rooms shall be
vinyl composite tile, colors of which shall be chosen by Tenant
from Owner's standard selection chart.
9. Substitutions
Tenant may substitute like items for building Standard items of
similar quality, but no credits for Building Standard items will
be given against the cost of items so substituted. No credit will
be given for Building Standard items not utilized by Tenant.
B. Heating, Ventilation and Air Conditioning
The Owner shall furnish and install a complete heating, ventilating
and year-round air conditioning system. The equipment shall be capable
of maintaining an indoor temperature of 78(degree) F.D.B. at 50% R.H.
during summer (June through September) based on the local 2-1/2%
outdoor design condition as specified in the latest edition of the
"Ashrae Handbook of Fundamentals" and 72(degree) F.D.B. in the winter
based on local 97(degree) 1/2% design as specified in the latest
edition of the "Ashrae Handbook of Fundamentals".
The air conditioning system will provide fresh air in a quantity of
not less than .10 cubic feet per minute per square foot of rentable
floor area.
Owner represents that the HVAC design and installation will
accommodate Tenant's use.
Real Estate Taxes assessed against any item of construction which is a part of
Owner's standard work letter or customary installation are included as part of
the Lease terms set forth herein. If any additional specifications, extras or
non-standard items of improvement give rise to the assessment of additional real
estate taxes, such taxes shall be for the account of Tenant.
All selections or designations to be made by Tenant are to be made within five
(5) business days after request by Owner. If Tenant has not made such
designation or selections within said period, the Owner shall be authorized to
do so on behalf of the Tenant.
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LEASE
THIS LEASE is made and entered into this 25th day of February, 1999, 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 ITDS INTELICOM SERVICES, INC., a
Delaware corporation, with its offices at 225 High Ridge Road, Stamford,
Connecticut, 06905 (hereinafter referred to as "Lessee").
SECTION ONE
DEMISE AND DESCRIPTION OF PREMISES
Lessor leases to Lessee and Lessee leases from Lessor that certain office
building which is herein referred to as the "demised premises", consisting of
approximately twenty-five thousand (25,000) square feet, located at 2215 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, except
as provided below, 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 specifications to be prepared by Lessor.
B. Commencement of construction. Lessor will commence the construction of
such demised premises, in accordance with the plans and specifications
further detailed on Exhibit A-1 and Exhibit A-2 to this lease, as soon as
is reasonably possible and will diligently prosecute such construction to
completion.
<PAGE>
Lessor shall construct the building detailed on Exhibit A-l and Exhibit
A-2. Lessor and Lessee agree that Lessor shall pay on behalf of Lessee an
amount equal to eight ($8) Dollars per square foot (the "Improvement
Allowance") above the building's standard cost (which overages above the
building's standard is further detailed on Exhibit A-3 which is attached
hereto and incorporated by reference herein) for the cost and expense of
design and construction of the improvements that Lessee requires for its
use of the premises. Lessee shall be responsible for Seven Hundred
Seventy-Nine Thousand Eight Hundred Sixty-Three Dollars ($779,863) of the
cost of improvements over the building's standard which shall be due and
payable in accordance with the Schedule of Payments detailed in Exhibit
A-3. In the event such actual cost is less than the estimated cost then,
in such event and upon completion of all improvements, such excess sum, if
any, shall be refunded to Lessee. Additions or changes to the previously
agreed upon improvements shall he paid for 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. Each change order shall
reflect the dollar amount by which the above stated construction allowance
shall be increased or decreased by virtue of such deviation, change or
extra. All such change orders shall be appended to this lease and shall be
incorporated herein by reference. In no event shall Lessee take possession
of said premises or any part thereof until Lessee's share of the actual
cost of such improvements is fully paid.
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.
D. Lessee's Authorized Agents. Lessee hereby designates Jim Baugher
and Peter L. Masanotti as Lessee's authorized agents for all
purposes arising out of or related to the construction of the
demised premises. Lessee hereby directs Lessor to only deal with
Jim Baugher or Peter L. Masanotti with regard to the construction
of the demised premises unless and until Lessor receives written
notice from Lessee revoking Lessee's agency relationship with Jim
Baugher or Peter L. Masanotti.
E. Uninterrupted Power Supply/Lieberts. Lessor and Lessee
acknowledge and agree that (i) any and all components including,
but not limited to the generator, which collectively comprise the
uninterrupted power supply (the "UPS Components") and (ii) the
Lieberts system, all of which is as further detailed in the plans
and specifications attached to this lease as Exhibit A-1 and
Exhibit A-2, shall not be deemed to be Lessor's personal property
but rather shall be deemed to be the personal property of
Lessee. So long as Lessor has not exercised its option to
purchase the UPS Components and the Liebert system after receipt
of Lessee's Notice, and so long as Lessee shall not be in default
of all covenants of this lease, Lessee shall be entitled to
remove the UPS Components and Lieberts system at its sole cost
and expense, no later than thirty (30) days after the expiration
of the term of this lease; provided, however, if the UPS
Components and Lieberts system have not been removed by the
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<PAGE>
fifteenth (15th) day after the expiration of the term of this
lease, Lessee shall pay Lessor the sum of One Hundred Dollars
($100.00) for each day thereafter which the UPS Components and
Lieberts system are not removed. If, after thirty (30) days
after the expiration of the term of this lease, the UPS
Components and Lieberts system have not been removed by Lessee,
Lessee shall automatically be deemed to have relinquished any and
all right in and to the UPS Components and Lieberts system and
thereafter the UPS Components and Lieberts system shall, at
Lessor's election, be deemed to belong to Lessor. Lessee shall
be responsible for repairing all damage to the demised premises
to the reasonable satisfaction of Lessor as a result of said
removal. Notwithstanding anything contained in this Section Two
(E) to the contrary, the parties acknowledge and agree that
Lessee shall, on or before (90) days prior to the expiration of
the term of this lease offer in writing to sell the UPS
Components and Lieberts system to Lessor for the fair market
value of the UPS Components and Lieberts system as stated in said
notice ("Lessee's Notice"). Lessor shall have fifteen (15) days
after receipt of Lessee's Notice in which to notify Lessee
whether or not Lessor will purchase the UPS Components and
Lieberts system for said amount. If Lessor elects to purchase
the UPS Components and Lieberts system, Lessor shall promptly pay
Lessee the fair market value of the UPS Components and Lieberts
system immediately prior to the expiration of the lease term.
For the purposes of this Section Two (E), the phrase "fair market
value" shall mean a value as determined by a recognized supplier
of systems similar to the UPS Components and Lieberts system at
the premises.
F. All construction and related services to be performed or contracted for by
Lessor including all labor, materials, equipment and services to be
provided by Lessor, its employees, agents or independent contractors in
performance of its obligations in this Section Two are sometimes
collectively referred to in this lease as the "Work".
Lessor warrants to Lessee that materials and equipment furnished as part
of the Work will be of good quality and new unless otherwise required or
permitted by this lease; that, for a period of one (1) year after the
Commencement Date, the Work will be free from defects not inherent in the
quality required or permitted; and that the Work will conform with the
requirements of this lease. If required by Lessee, Lessor shall furnish
satisfactory evidence as to the kind and quality of materials and
equipment.
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, janitorial expenses for all common
facilities, garbage storage and garbage removal expenses, and
public liability and property insurance
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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.
C. Parking facilities. The parking areas are shown on Exhibit B which is
attached hereto. No charges will be made for parking. Lessor reserves the
right to rearrange or reallocate the parking and common liabilities so
long as the number of parking spaces shown on Exhibit B is not reduced by
more than ten percent (10%). Lessee shall be entitled to the exclusive use
of one hundred percent (100%) of the parking spaces.
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 twenty-four (24)
hours after receipt of written notice of any violation by Lessee or its
employees, agents or invitees 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 Eighty-Seven
Thousand Five Hundred Dollars ($287,500.00) payable in equal
monthly installments of Twenty-Three Thousand Nine Hundred
Fifty-Eight and 34/100 Dollars ($23,958.34) 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.
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B. Additional Rent. Lessee shall pay Lessor one hundred percent (100%) of all
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 annual real estate tax and expense charges which in the
first year of this lease have been estimated to be Twenty-Three
Thousand Seven Hundred Fifty Dollars ($23,750.00) payable in
equal monthly installments simultaneously with the payment of the
base rent so that the aggregate payments due hereunder from
Lessee shall equal Twenty-Five Thousand Nine Hundred Thirty-Seven
and 51/100 Dollars ($25,937.51) per month for the first year.
The monthly charges due from Lessee for all subsequent years
during the term hereof shall be adjusted by the parties in
accordance with the terms of this lease. 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 calendar year,
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 Lessor is more
than that paid Lessee shall pay Lessor the difference within thirty (30)
days; if said amount is less, Lessor shall pay the overage to Lessee
within thirty (30) days. Lessor and Lessee agree to annually adjust the
monthly real estate tax and expense charges in accordance with the most
recently ascertainable real estate tax and expense information.
SECTION FIVE
TERM
The term of this lease shall be for a period of seven (7) years from the
Commencement Date, as hereinafter defined. For the purposes of this lease, the
term "Commencement Date" shall be the earlier of (i) the sixth (6th) business
day following Lessee's receipt of a factually correct notice from Lessor that
the demised premises are Substantially Complete, as hereinafter defined, and
that the demised premises are now available for Lessee to install its furniture,
fixtures and equipment; or (ii) the date Lessee commences business operations
from the demised premises. For the purposes of this lease the term
"Substantially Complete" shall mean (1) the shell and core of the building in
which the demises premises is located are complete and in compliance with all
applicable laws and all of the building systems are operational to the extent
necessary to service the demises premises; (2) Lessor has sufficiently completed
all work required to be performed by Lessor in accordance with the lease (except
installation and connection of the UPS Components and Generator which Lessor
shall complete within 60 days thereafter and of minor punch list items which
Lessor shall thereafter
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promptly complete); (3) Lessor has obtained a certificate of occupancy for the
subject building or a temporary certificate of occupancy for that portion of the
subject building that includes all of the demised premises, or its equivalent;
(4) Lessee has been provided with the number of parking privileges and spaces to
which it is entitled under the lease; (5) Lessee has been delivered complete and
uninterrupted access to the demised premises (and other required portions of the
subject building and site) sufficient to allow Lessee to install its
freestanding work stations, fixtures, furniture, equipment and telecommunication
and computer cabling systems; and (6) Lessee has received a non-disturbance
agreement, signed by Lessor and each holder of any mortgage of record which
encumbers the real estate further described on Exhibit A.
When the Commencement Date 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 ______________, 19__.
LESSOR: LESSEE:
By: ____________________________ By: ____________________________
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 Commencement Date. 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
SECURITY DEPOSIT
[THIS SECTION INTENTIONALLY OMITTED]
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SECTION SEVEN
OCCUPANCY AND ACCEPTANCE OF PREMISES
Lessor warrants to Lessee (i) that the building in which the demised premises is
located and the demised premises have been or will, within sixty (60) days of
the Commencement Date, be constructed in accordance with all applicable federal,
state or local laws, statutes and ordinances; and (ii) that the demised premises
has been constructed substantially in accordance with the plans and
specifications therefor.
After the Work is Substantially Complete (excepting punch list items) and prior
to Lessee's move-in into the demised premises, in each case following two (2)
business days' advance written notice from Lessor to Lessee, Lessor shall
inspect the premises with a representative of Lessee and complete a punch list
of unfinished items of the Work. Authorized representatives for Lessor and
Lessee shall execute said punch list to indicate their approval thereof. The
items listed on such punch list shall be completed by Lessor within thirty (30)
days after the approval of such punch list or as soon thereafter as reasonably
practicable.
If, within one (1) year after the Commencement Date, any of the Work is found to
be not in accordance with the requirements of this lease, Lessor shall correct
it promptly after receipt of written notice from Lessee to do so unless Lessee
has previously given Lessor a written acceptance of such condition. This
obligation under this subparagraph shall survive acceptance of the Work under
this lease. Lessee shall give such notice promptly after discovery of the
condition.
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. Business name. The name of Lessee's business will be ITDS INTELICOM
SERVICES and will remain so and shall not be changed except with the
written consent of Lessor, which consent will not be withheld
unreasonably, providing that, in allowing changes, Lessee will be solely
responsible for any costs of changing the name as it is featured in any
signs, advertisements and promotional literature 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.
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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, 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 beyond the electrical capabilities of the
building, as determined by the sole opinion of Lessor.
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. Any such trade fixtures, lighting fixtures, floor
covering, or wall covering or furnishings 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.
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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.
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.
Lessee acknowledges that the demised premises are part of an integrated and
uniform commercial center and that control of all interior and 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 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 changes, alterations or additions shall be made by Lessee to the demised
premises without the prior written consent of Lessor, 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. 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 sever 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
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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-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.
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 two-thirds of reconstruction cost. Either party hereto
shall have the right to terminate this lease if; during the last
three (3) months of the term hereof, the demised premises are
damaged to an extent exceeding two-thirds of the then
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 one hundred twenty (120) 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 control of
Lessor. Materials used in repair shall be nearly like original
materials as may be reasonably procured in regular channels of
supply.
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.
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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 rental shall be payable while the demised premises are wholly
unoccupied 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, including, but not
limited to, heating, ventilating, air conditioning, plumbing,
electrical and all other parts thereof. Lessee's maintenance
obligation shall include the cost of bi-annual inspections and
service 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.
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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 thereon. Lessee shall annually
provide Lessor, on the anniversary date of this lease, with a binder
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 approved by Lessor, which will
insure Lessor 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 maimed
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 plate glass insurance. Lessee shall maintain and keep in
force adequate plate glass insurance on all plate glass on demised
premises.
D. 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.
E. 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.
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F. Lessee's waiver of 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.
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 covenant of Lessor.
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
acknowledge and agree an assignment of this lease to a parent company of Lessee
or wholly owned subsidiary of Lessee is expressly permitted.
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. Lessee shall indemnify Lessor 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 Lessee 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 Lessor for all loss, damage and expense,
including reasonable attorney's 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 Lessee 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,
Lessor 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
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payment Lessor shall be the sole judge of the legality thereof. All
amounts so paid by Lessor shall be repaid by Lessee to Lessor on demand,
together with interest thereon at the rate of eighteen percent (18%) per
annum, from the date of payment by Lessor until repayment is fully made.
Personal injuries, violation of law. 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 expense arising out of the
death of or injury to any person or persons holding under Lessee.
SECTION TWENTY-ONE
SUBORDINATION OF LEASE
Subject to Lessee's receipt of a reasonably acceptable non-disturbance agreement
from any future mortgagee, 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 ten (10) days after
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").
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It is expressly understood and agreed that any prospective purchaser or
encumbrancer of all or any portion of the Devonshire Corporate Centre II office
complex shall be entitled to rely upon any such statement.
Lessee's failure to deliver an Estoppel Certificate to Lessor within ten (10)
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. Further, if Lessee fails to deliver an
Estoppel Certificate within said ten (10) day period Lessee does hereby
irrevocably appoint Lessor as attorney in fact of Lessee in Lessee's name, place
and stead to sign and deliver an Estoppel Certificate as if the same had been
signed and delivered by Lessee.
SECTION TWENTY-THREE
LESSOR'S RIGHT OF INSPECTION
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 five (5) 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 five (5) days
after notice in writing specifying the nature of such failure, or
if Lessee abandons the demised premises, or if Lessee breaches
any obligation under this lease by it to be performed which
cannot be cured, 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 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 attorney's 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
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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. 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.
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 ten percent (10%) of the basic monthly rent shall
be immediately due for each five (5) day period, commencing the first day
of the applicable month, that the rental or other charges, or any part
thereof, 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
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
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 default as
stated herein, Lessor may, at its option, without further 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
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 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.
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H. Lessor's remedies cumulative. Each and all of the remedies given to Lessor
in this lease or by law shall be cumulative, and the exercise of one right
or remedy by Lessor shall not impair its right to exercise any other right
or remedy.
I. Lessee's waiver of claims against Lessor. Lessee hereby waives
all claim or demand for damages that may be caused by Lessor in
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 or to any other person, firm or corporation
as may be in or on the premises at the time of such re-entry.
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 incur any expenses in enforcing any provision of this lease Lessee
shall pay to Lessor all expenses so incurred, including reasonable attorney's
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 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
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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 on
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.
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.
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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 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.
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,
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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 three times the daily rate 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 may be served on Lessee (as an
alternative to personal service) by leaving a copy of such demand or notice, or
by mailing a copy thereof by registered or certified mail, postage prepaid,
addressed to Lessee at the demised premises 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 at the time of the leaving of such notice as
aforesaid or within two (2) days within mailing of same. 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.
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
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. Lessor and Lessee
respectively (respectively, the "Indemnifying Party") each covenant and agree to
defend, indemnify and save the other harmless from and against any actions,
damages, real estate commissions, fees, costs or expenses (including reasonable
attorney's fees and costs of tribunals at all levels) resulting or arising from
any
20
<PAGE>
commissions, fees, costs or expenses due any real estate broker or agent
because of this lease due to the acts of the Indemnifying Party.
SECTION THIRTY-NINE
OFFICE BUILDING LEASES
Concurrently with the execution of this lease, Lessor and Lessee agree to enter
into and execute (i) an Addendum to Lease by and between Lessor and Lessee
concerning the real estate commonly known as 2101 Fox Drive, Champaign,
Illinois, a copy of which is attached hereto as Exhibit D and incorporated by
reference herein; (ii) an Addendum to Lease by and between Lessor and Lessee
concerning the real estate commonly known as 2109 Fox Drive, Champaign,
Illinois, a copy of which is attached hereto as Exhibit E and incorporated by
reference herein; and (iii) an Addendum to Lease by and between Lessor and
Lessee concerning the real estate commonly known as 2201 Fox Drive, Champaign,
Illinois, a copy of which is attached hereto as Exhibit F and incorporated by
reference herein.
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. ITDS INTELICOM SERVICES, INC.
An Illinois Limited Liability Company A Delaware Corporation
By: FOX DEVELOPMENT CORPORATION By: /s/ Peter L. Masanotti
An Illinois Corporation ------------------------
Its Managing Member
By: /s/ Kim B. Fox Its: /s/ E.V.P.
-------------------------- ------------------------
KIM B. FOX, Its President
21
<PAGE>
EXHIBIT A
[Diagram of Corporate Center]
22
<PAGE>
EXHIBIT A-1
[Diagram of Corporate Center]
23
<PAGE>
EXHIBIT A-2
PROJECT DESCRIPTION
INTERNATIONAL TELECOMMUNICATIONS DATA SYSTEMS
CHAMPAIGN, ILLINOIS
February 1, 1999
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:
ITDS office area..........................25,000 sf
Total.....................................25,000 sf
1.2 Building Features
1.2.1 A finish ceiling height of 9' +/- is anticipated for the main
office area.
1.3 Drawings & Specifications
1.3.1 Complete "Working Drawings and Specifications" will be
prepared from the 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.
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
America
1
<PAGE>
EXHIBIT A-2
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 and Terms
1.5.1 Where the work "Client" appears it shall mean International
Telecommunications Data Systems.
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.
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
improvement will be rough and fine graded as necessary to meet
engineered elevations and grades and to provide for proper
surface 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.
2
<PAGE>
EXHIBIT A-2
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. 3" +/-
2.1.9 Fill material will be compacted to 95% maximum density.
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.
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 Water Main
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 an
insurance regulators.
3
<PAGE>
EXHIBIT A-2
2.5 Natural Gas
2.5.1 Service is anticipated to be extended from an existing lead.
2.6 Electrical/Telephone Service
2.6.1 The incoming electrical service will be 1200 amp 277/480 volt
utility company pad mounted transformer, positioned adjacent
on the drawing.
2.6.2 The incoming telephone service is to be (2) 4" PVC underground
conduit with pull string.
2.6.3 Building electrical service to be secondary, metered by the
utility company.
2.6.4 TV cable will be available by 1" conduit to building.
2.7 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.
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 Drive
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 a 8" thick compacted stone.
4
<PAGE>
EXHIBIT A-2
2.8.3 Parking areas will be completed with painted striping as shown
on the parking plan.
2.8.4 No asphalt curbs or car bumpers are included.
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 2000 psf.
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.
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 (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% 4" thick face brick
backed up with 8" concrete block.
5
<PAGE>
EXHIBIT A-2
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
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 27' lineal feet of white base
and upper cabinets are included by Space Metrics (residential
line). Laminate colors are to be the same as existing
buildings.
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, flashings, copings and trims will be
provided.
7.1.5 Roof area walk pads are not included.
6
<PAGE>
EXHIBIT A-2
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.
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 All interior office doors will be 3'-0 x 7'0", 1 3/4' thick,
solid core, prefinished veneer doors (54).
8.1.7 All wood doors are to be installed in hollow metal door
frames.
8.1.8 Hardware to be 80% passages 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 (banding the perimeter of the building) of
the Office Area will be the same as Devonshire Corp. Centre I,
i.e., bronze tinted.
8.3.2 Aluminum framing for the 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.
7
<PAGE>
EXHIBIT A-2
8.3.4 Aluminum doors and frames will utilize manufacturer's standard
surface mounted hardware.
9. FINISHES
9.1 Drywall
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 1,648 lineal feet.
9.2 Acoustical Ceiling
9.2.1 Acoustical ceilings to be 2x2 Tegular suspended system ceiling
throughout at 9 ft. +/- from finished floor.
9.3 Resilient Flooring
9.3.1 Floor in the storage, printer/copier, mail room and breakroom
areas will be finished with a 1/8" thick commercial quality
resilient tile flooring (approximately 1,325 sq. fi.)
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
base.
9.4 Carpet and Floor Covering
9.4.1 Carpet I - All private offices consisting of approximately
5,091 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.
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
approximately 16,692 sq. ft:.
9.4.3 Ceramic Tile - All restrooms will receive 1" x 1" unglazed
floor tile by Dal-Tile approximately 660 sq. ft.
9.4.4 Raised Access Flooring - Data room to receive Tate Access
Flooring or equal stringer type one foot above slab with 200
lbs/psf approximately 1,232 sq. ft.
8
<PAGE>
EXHIBIT A-2
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.
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 or 5 approximately 936 sq. ft. in meeting
room
9.5.6 Wall covering #2 Vinyl wall covering 20 oz./lineal
yard by Genon approximately 1,656 sq. ft. in
restrooms only.
9.5.7 Wall covering #3 Wall carpet wainscoat (4' high) in print room
Vertex 24 oz. (30 lineal foot).
9.5.8 All window openings shall be fitted with horizontal mini
blinds, to match mullion color.
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" mirrors are to be provided at each vanity.
9
<PAGE>
EXHIBIT A-2
10.2.2 Grab bars are to be provided in each handicap accessible
toilet compartment.
10.2.3 Double roll toilet paper dispensers are to be provided
within each toilet compartment.
11. MECHANICAL
11.1 Plumbing
11.1.1 The office, break and restroom 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 break room
counter-top and coffee area counter
(1) water heater with recirculation loop
(2) electric water coolers
Four (4) toilet area floor drains
Domestic, water and sanitary piping system as specified
Gas piping system as specified
11.1.2 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 Kohier, American Standard or Eljer.
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
10
<PAGE>
EXHIBIT A-2
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.
11.2 Heating, Ventilating and Air Conditioning
11.2.1 Design parameters for the office area heating, ventilation
and air condition (HVAC) systems are as per specs:
Heat to 72 degree Fahrenheit (F) dry bulb inside with 0
degree F outside.
Cool to 75 degree F dry bulb inside at 95 degree F
outside
All ventilation to be in accordance with ASHRAE standards.
11.2.2 The description for the heating, ventilation and air
conditioning systems is as follows per specs:
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 area 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.
11
<PAGE>
EXHIBIT A-2
11.2.3 The HVAC equipment and materials will be selected from the
following:
The packaged roof-top conditioning unit with accessories
shall be Trane or equal.
11.3 FIRE PROTECTION
11.3.1 Design parameters for the fire protection system are based
on the following:
The Office area fire protection system design is based upon
use of noncombustible 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.
11.3.2 General notes for clarifying the fire protection system
design are as follows:
The municipal water supply (flow and pressure) is assumed to
be adequate and available.
This proposal provides for the fire protection work as
outlined per specs.
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.
11.3.3 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 riser(s) as required.
Provide check valves, fire department connections, flow
switch flow switch alarms, inspector test connections as
required for a complete and operable system.
12
<PAGE>
EXHIBIT A-2
Computer Room to be equipped with independent pre-action
Suppression system and shall be a wet system.
12. ELECTRICAL
12.1 Service and Distribution
12.1.1 The incoming secondary electrical service work will include
conduit, panel, switchgear and cable work.
12.1.2 One (1) 1200 amp 277/480 volt, three-phase, secondary
service switchboard will be provided, installed and
energized.
12.1.3 One 750 KW 480V Cumins diesel generator with (1) 400 amp and
(1) 600 amp transfer switch.
12.2 Lighting
12.2.1 In the general and private office areas, lighting to be
through the use of 2'-0" x 4'-0" recessed, commercial
fluorescent fixtures, lay-in type with 3 tube white deep
cell lens with electronic ballast.
12.2.2 In the storage, UPS room, copier room, janitor room and
breakroom, lighting to be through the use of 2'-0" x 4'-0"
recessed, commercial fluorescent fixtures, lay-in type with
prismatic lens (25 total).
12.2.3 In the conference and training room areas, 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. (14) recessed incandescent fixtures
75R20 Lightolier or equal.
12.2.4 Provide and install necessary emergency battery operated
(dual lamp) packs for lighting on night light circuits in
the office areas as required.
12.2.5 Provide exit lighting as required by code.
12.3 Convenience Outlets
12.3.1 Each private office shall have one (1) quadraplex and two
(2) duplex outlets.
13
<PAGE>
EXHIBIT A-2
12.3.2 System furniture will have one junction box per four (4)
cubicles with the following circuit configuration:
31 connections to cubicles. Whips furnished by ITDS.
One 20-amp dedicated circuit per junction box.
Three 20-amp circuits per (2) junction boxes.
12.4 Miscellaneous Electrical
12.4.1 Provide power wiring for HVAC equipment as outlined under
mechanical trades per drawings.
12.4.2 Provide telephone data outlets and conduit stubs into
ceiling area.
12.4.3 Provide (1) 150 KVA UPS system 488/208 and associated wiring
for computer room panels.
12.5 Site and Exterior Electrical
12.5.1 Provide lighting for the parking lot similar to previous two
buildings.
12.6 General Notes
12.6.1 The electrical work as described is further clarified
through the following notes:
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 area 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.
14
<PAGE>
EXHIBIT A-2
Junction boxes and conduit stubs into ceiling areas are to
be provided as previously noted for telephone communications
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 and
fire alarm system, with (7) card reader access pads at
entrances.
12.7 Equipment and materials
12.7.1 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".
The following appliances have been included:
(1) Microwave
(1) Refrigerator
(1) Disposal
(1) Dishwasher
13. CLARIFICATIONS, QUALIFICATIONS AND EXCLUSIONS
13.1 Clarifications
13.1.1 The amount to be paid for permits, review fees, inspections
fees, tap fees, assessment or other municipal fees is
included.
13.1.2 Quality control and testing fees are included in the base
proposal.
13.2 Qualifications
13.2.1 Materials will be new unless noted otherwise.
13.2.2 Items and work indicated as being furnished or performed by
the Client are not included in the Cost of the Work.
15
<PAGE>
EXHIBIT A-2
13.2.3 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
Work.
13.2.4 The facility will be delivered in a broom-clean condition
and all glass will be cleaned.
13.2.5 Client will be assisted by the Contractor in obtaining the
Certificate of Occupancy from the municipality.
13.2.6 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.
13.2.7 Should a governing body require that changes by 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.
13.2.8 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).
13.2.9 The Contractor is to assume responsibility for zoning and
regulations governing use of the site and building.
13.2.10 Client to provide and install the systems furniture and its
installation.
13.2.11 A telephone/data wiring allowance of $120,000 has been
included.
16
<PAGE>
EXHlBlT A-3
ITDS COST ABOVE STANDARD AS OF FEBRUARY 4, 1999
2215 Fox Drive/Lot 4
<TABLE>
<S> <C>
Electric Throughout and Generator 750 KVA, UPS
Transfer Switch and All Other Requested
Equipment as of 11/16/98 $ 540,880
Enclosures For Generator, Room for UPS, A/C
For UPS and Installation 67,887
Computer Floor 24,321
Telephone Equipment As Per Jim 132,000
Lieberts 112,530
Sprinkler 64,130
Counter, Cabinets, Carpet, Ceramic, Wallcovering 38,115
TOTAL COST ABOVE STANDARD $ 979,863
Less $8 per foot buildout allowance -200,000
--------
AMOUNT LESSEE TO PAY DIRECTLY TO PAR 3
DEVELOPMENT, L.L.C. FOR COST ABOVE STANDARD $ 779,863*
</TABLE>
*Payments to be made within 30 days after receipt of invoice for work completed:
<PAGE>
EXHIBIT B
[Diagram of property lot]
<PAGE>
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
____________________. 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.
An Illinois Limited Liability Company
By: FOX DEVELOPMENT CORPORATION
An Illinois Corporation
Its Managing Member
By: -------------------------------- --------------------------------
KIM B. FOX, Its President
<PAGE>
EXHIBIT D
FIRST ADDENDUM TO LEASE
THIS FIRST ADDENDUM TO LEASE is made and entered into this 25th day of February,
1999, by and between PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability
company (hereinafter "Lessor") and ITDS INTELICOM SERVICES, INC., a Delaware
corporation, formerly known as CSC INTELICOM, INC. (hereinafter "Lessee").
WHEREAS, the parties entered into a certain Lease dated September 19, 1996,
concerning the real estate commonly known as 2101 Fox Drive, Champaign, Illinois
(hereinafter the "Lease"); and
WHEREAS, the parties desire to make certain amendments to the Lease.
NOW, THEREFORE, in consideration of the above premises and the mutual covenants
and promises contained herein, the parties hereby agree as follows:
1. Term. Section Five of the Lease is hereby amended by deleting it
in its entirety and inserting in its place the following:
"SECTION FIVE
TERM
The commencement date of the term of this Lease is November 22, 1996.
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 February
25th, 1999, by and between Lessor and Lessee concerning the real estate
commonly known as 2215 Fox Drive, Champaign, Illinois (hereinafter
referred to as the "2215 Fox Drive Lease"). The termination date of the
2215 Fox Drive Lease is seven (7) years from the Commencement Date of the
2215 Fox Drive Lease, as that term is defined in the 2215 Fox Drive Lease.
In the event Lessee shall have faithfully performed all covenants of this
Lease and Lessee has exercised Lessee's right to renew the 2215 Fox Drive
Lease for an additional three (3) 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 2215 Fox
Drive Lease. 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
Page 1 of 2
<PAGE>
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."
2. No Other Changes. Except as set forth above, no other amendments are made
to the Lease and the parties hereby acknowledge and agree that the Lease
remains in full force and effect.
3. Counterparts. To facilitate execution, this First Addendum to
Lease may be executed in as many counterparts as may be required;
and it shall not be necessary that the signature of, or on behalf
of, each party, or that the signatures of all persons required to
bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party,
appear on one or more of such counterparts. All counterparts
shall collectively constitute a single document.
4. Facsimile Signatures. The parties acknowledge that photocopies
of this First Addendum to Lease which have been executed by the
parties hereto or their respective agents shall be binding upon
the parties as if such photocopies were originals regardless of
whether such photocopies of this First Addendum to Lease have
been delivered by personal service, regular mail, facsimile
transmission or otherwise. Upon request from any party hereto,
all other parties agree to execute an original of this First
Addendum to Lease upon presentation thereof if said document has
previously been executed and delivered in photocopy form by
personal delivery, facsimile transmission, regular mail or
otherwise.
IN WITNESS WHEREOF, the parties have executed this First Addendum to Lease on
the day and year first above written.
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C. ITDS INTELICOM SERVICES, INC.
An Illinois Limited Liability Company A Delaware Corporation
By: Fox Development Corporation
An Illinois Corporation
Its Managing Member
By: /s/ Kim B. Fox By: /s/ Peter L. Masanotti
-------------------------- ------------------------------
Kim B. Fox, Its President Peter L. Masanotti, Its E.V.P.
Page 2 of 2
<PAGE>
EXHIBIT E
FIRST ADDENDUM TO LEASE
THIS FIRST ADDENDUM TO LEASE is made and entered into this 25th day of February,
1999, by and between PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability
company (hereinafter "Lessor") and ITDS INTELICOM SERVICES, INC., a Delaware
corporation, formerly known as CSC INTELICOM, INC. (hereinafter "Lessee").
WHEREAS, the parties entered into a certain Lease dated January 29, 1996,
concerning the real estate commonly known as 2109 Fox Drive, Champaign, Illinois
(hereinafter the "Lease"); and
WHEREAS, the parties desire to make certain amendments to the Lease.
NOW, THEREFORE, in consideration of the above premises and the mutual covenants
and promises contained herein, the parties hereby agree as follows:
1. Term. Section Five of the Lease is hereby amended by deleting it
in its entirety and inserting in its place the following:
"SECTION FIVE
TERM
The commencement date of the term of this Lease is October 4, 1996.
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 February
25th 1999, by and between Lessor and Lessee concerning the real estate
commonly known as 2215 Fox Drive, Champaign, Illinois (hereinafter
referred to as the "2215 Fox Drive Lease"). The termination date of the
2215 Fox Drive Lease is seven (7) years from the Commencement Date of the
2215 Fox Drive Lease, as that term is defined in the 2215 Fox Drive Lease.
In the event Lessee shall have faithfully performed all covenants of this
Lease and Lessee has exercised Lessee's right to renew the 2215 Fox Drive
Lease for an additional three (3) year term, Lessor hereby grants Lessee
the right and option to renew this Lease for an additional period of three
(3) years, 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 2215 Fox Drive Lease. 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
Page 1 of 2
<PAGE>
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."
2. No Other Changes. Except as set forth above, no other amendments are made
to the Lease and the parties hereby acknowledge and agree that the Lease
remains in full force and effect.
3. Counterparts. To facilitate execution, this First Addendum to
Lease may be executed in as many counterparts as may be required;
and it shall not be necessary that the signature of, or on behalf
of, each party, or that the signatures of all persons required to
bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party,
appear on one or more of such counterparts. All counterparts
shall collectively constitute a single document.
4. Facsimile Signatures. The parties acknowledge that photocopies
of this First Addendum to Lease which have been executed by the
parties hereto or their respective agents shall be binding upon
the parties as if such photocopies were originals regardless of
whether such photocopies of this First Addendum to Lease have
been delivered by personal service, regular mail, facsimile
transmission or otherwise. Upon request from any party hereto,
all other parties agree to execute an original of this First
Addendum to Lease upon presentation thereof if said document has
previously been executed and delivered in photocopy form by
personal delivery, facsimile transmission, regular mail or
otherwise.
IN WITNESS WHEREOF, the parties have executed this First Addendum to Lease on
the day and year first above written.
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C. ITDS INTELICOM SERVICES, INC.
An Illinois Limited Liability A Delaware Corporation
Company
By: Fox Development Corporation
An Illinois Corporation
Its Managing Member
By: /s/ Kim B. Fox By /s/ Peter L. Masanotti
--------------------------- -------------------------------
Kim B. Fox, Its President Peter L. Masanotti, Its E.V.P.
Page 2 of 2
<PAGE>
EXHIBIT F
FIRST ADDENDUM TO LEASE
THIS FIRST ADDENDUM TO LEASE is made and entered into this 25th day of February,
1999, by and between PAR 3 DEVELOPMENT, L.L.C., an Illinois limited liability
company (hereinafter "Lessor") and ITDS INTELICOM SERVICES, INC., a Delaware
corporation, formerly known as CSC INTERCOM, INC. (hereinafter "Lessee").
WHEREAS, the parties entered into a certain Lease dated September 19, 1996,
concerning the real estate commonly known as 2201 Fox Drive, Champaign, Illinois
(hereinafter the "Lease"); and
WHEREAS, the parties desire to make certain amendments to the Lease.
NOW, THEREFORE, in consideration of the above premises and the mutual covenants
and promises contained herein, the parties hereby agree as follows:
1. Term. Section Five of the Lease is hereby amended by deleting it
in its entirety and inserting in its place the following:
"SECTION FIVE
TERM
The commencement date of the term of this Lease is October 4, 1996.
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 February
25th, 1999, by and between Lessor and Lessee concerning the real estate
commonly known as 2215 Fox Drive, Champaign, Illinois (hereinafter
referred to as the "2215 Fox Drive Lease"). The termination date of the
2215 Fox Drive Lease is seven (7) years from the Commencement date of the
2215 Fox Drive Lease, as that term is defined in the 2215 Fox Drive Lease.
In the event Lessee shall have faithfully performed all covenants of this
Lease and Lessee as exercised Lessee's right to renew the 2215 Fox Drive
Lease for an additional three (3) 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 2215 Fox
Drive Lease. 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.
Page 1 of 2
<PAGE>
A. The provisions of this Lease during said extension period
shall be the same as provided in this Lease."
2. No Other Changes. Except as set forth above, no other amendments are made
to the Lease and the parties hereby acknowledge and agree that the Lease
remains in full force and effect.
3. Counterparts. To facilitate execution, this First Addendum to
Lease may be executed in as many counterparts as may be required;
and it shall not be necessary that the signature of, or on behalf
of, each party, or that the signatures of all persons required to
bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party,
appear on one or more of such counterparts. All counterparts
shall collectively constitute a single document.
4. Facsimile Signatures. The parties acknowledge that photocopies
of this First Addendum to Lease which have been executed by the
parties hereto or their respective agents shall be binding upon
the parties as if such photocopies were originals regardless of
whether such photocopies of this First Addendum to Lease have
been delivered by personal service, regular mail, facsimile
transmission or otherwise. Upon request from any party hereto,
all other parties agree to execute an original of this First
Addendum to Lease upon presentation thereof if said document has
previously been executed and delivered in photocopy form by
personal delivery, facsimile transmission, regular mail or
otherwise.
IN WITNESS WHEREOF, the parties have executed this First Addendum to Lease on
the day and year first above written.
LESSOR: LESSEE:
PAR 3 DEVELOPMENT, L.L.C. ITDS INTELICOM SERVICES, INC.
An Illinois Limited Liability A Delaware Corporation
Company
By: Fox Development Corporation
An Illinois Corporation
Its Managing Member
By: /s/ Kim B. Fox By: /s/ Peter L. Masanotti
------------------------- ------------------------
Kim B. Fox, Its President Peter L. Masanotti, Its E.V.P.
Page 2 of 2
EXHIBIT 21
Name of Subsidiary Jurisdiction of Incorporation
- ------------------------------ -----------------------------
ITDS Acquisition Corp. Delaware
ITDS Holding Company LLC Delaware
ITDS Intelicom Services, Inc. Delaware
ITDS LTDA Brazil
MDS, Inc. Delaware
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements: (i) Form S-8 (No. 333-21287) pertaining to the 1996 Stock Incentive
Plan of International Telecommunication Data Systems, Inc., (ii) Form S-8 (No.
333-21283) pertaining to the 1996 Employee Stock Purchase Plan of International
Telecommunication Data Systems, Inc., (iii) Form S-8 (No. 333-47865) pertaining
to the 1997 Stock Incentive Plan of International Telecommunication Data
Systems, Inc., (iv) Form S-8 (No. 333-57093) pertaining to the 1998 Stock
Incentive Plan of International Telecommunication Data Systems, Inc. and (v)
Post-Effective Amendment No. 1 on Form S-3 (No. 333-60223) pertaining to the
registration of 606,673 shares of Common Stock issued in connection with the
acquisition of the TRIS Division of Computer Sciences Corporation of our report
dated February 16, 1999 with respect to the consolidated financial statements of
International Telecommunication Data Systems, Inc. included in this Annual
Report (Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
audited balance sheets for the year ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000867889
<NAME> INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 40,735
<SECURITIES> 0
<RECEIVABLES> 34,713
<ALLOWANCES> 2,362
<INVENTORY> 0
<CURRENT-ASSETS> 78,131
<PP&E> 13,187
<DEPRECIATION> 5,450
<TOTAL-ASSETS> 155,156
<CURRENT-LIABILITIES> 21,306
<BONDS> 0
0
0
<COMMON> 173
<OTHER-SE> 133,652
<TOTAL-LIABILITY-AND-EQUITY> 155,156
<SALES> 115,460
<TOTAL-REVENUES> 115,460
<CGS> 0
<TOTAL-COSTS> 44,334
<OTHER-EXPENSES> 74,131
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<INTEREST-EXPENSE> 2,740
<INCOME-PRETAX> (4,195)
<INCOME-TAX> (1,095)
<INCOME-CONTINUING> (3,100)
<DISCONTINUED> 0
<EXTRAORDINARY> (826)
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<NET-INCOME> (3,926)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
