DAVOX CORPORATION
Filed 3/15/02
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE
OCTOBER 7, 1996)
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission file number 0-15578
DAVOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 02-0364368
(State or other jurisdiction of (IRS
Employer
Incorporation or organization)
Identification No.)
6 Technology Park Drive
Westford, Massachusetts 01886
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 952-
0200
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $.10 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value, as of March 12, 2002 of Common Stock held by
non-affiliates of the registrant: $73,336,735 based on the last reported sale
price on the National Market System as reported by Nasdaq on that date.
Number of shares of Common Stock outstanding at March 12, 2002: 12,250,756
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 31,
2001. Portions of such Proxy Statement are incorporated by reference in Part
III.
CAUTIONARY STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. Statements set forth herein may
contain "forward-looking" information that involves risks and uncertainties.
Actual future financial or operating results may differ materially from such
forward-looking statements. Statements indicating that the Company "expects,"
"estimates," "believes," "is planning," or "plans to" are forward-looking, as
are other statements concerning future financial or operating results, product
offerings or other events that have not yet occurred. There are several
important factors that could cause actual results or events to differ
materially from those anticipated by the forward-looking statements. Such
factors are described throughout this filing, however the Company goes into
greater detail under Management's Discussion and Analysis of Financial
Condition and Results of Operations--Certain Factors That May Affect Future
Results. Although the Company has sought to identify the most significant risks
to its business, the Company cannot predict whether, or to what extent, any of
such risks may be realized nor can there be any assurance that the Company has
identified all possible issues that the Company may face.
ITEM 1. BUSINESS
----------------
GENERAL
Davox Corporation (the "Company") is a leading developer of customer
interaction management (CIM) solutions that help companies more effectively
manage customer interactions via the telephone, e-mail, and the Web. Our
solutions are used by more than 1,100 companies worldwide - including financial
institutions, telecommunications firms, utilities, and retailers - to improve
communication with customers, reduce operating costs and deliver superior
customer service.
The mission of the Company is to become the dominant global supplier of CIM
solutions that provide companies with a competitive advantage in attracting and
retaining valuable customers.
On January 10, 2002, the Company entered into an Agreement and Plan of Merger
by and among the Company, its wholly owned subsidiary, AP Acquisition
Corporation ("AP") and CellIt, Inc. ("CellIt"), whereby the parties agreed that
AP would be merged with and into CellIt, with CellIt becoming a wholly owned
subsidiary of the Company. The merger was subsequently closed on January 14,
2002. The Company is now doing business as Concerto Software, and upon
shareholder approval on May 2, 2002, will change its name to Concerto Software,
Inc.
The Company was incorporated in Massachusetts in 1981 and reorganized in
Delaware in 1982. The Company's common stock is listed on the NASDAQ National
Market under the symbol "DAVX". The Company is headquartered in Westford,
Massachusetts. The mailing address for the Company's headquarters is 6
Technology Park Drive, Westford, Massachusetts, 01886 and its telephone number
is (978) 952-0200. The Company can also be contacted through its web site at
www.concerto.com.
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MARKET OVERVIEW
---------------
The CIM software market includes systems for inbound routing and queuing of
telephone calls, outbound call campaign management using automated dialing
technologies, interactive voice response, automated e-mail response, and
Web-based customer contact. According to the market research firm Ovum, the
global market for CIM solutions is projected to grow to $5.4 billion by 2006
from $979 million in 2001, a 33% compounded annual growth rate (CAGR).
Companies worldwide recognize the need to more effectively attract, retain and
grow their customer base. In responding to this challenge, these companies are
aggressively implementing customer relationship management (CRM) strategies.
CRM strategies, as defined by the market research firm AMR Research, are
designed to "attract and harvest a customer base by creating and supporting
profitable customer relationships."
The customer contact center is a vital element of a CRM strategy. It is in the
contact center where a representative of the company is actually communicating
- through the telephone, e-mail or the web - with a customer. The quality of
these interactions is a key element in successfully attracting and retaining
customers.
To effectively manage communications with customers, a successful contact
center must perform a number of critical functions, including the following:
. Provide a company's customer service representatives with all the
information they need to quickly and accurately respond to customer
inquiries received via the telephone, the Web or through e-mail. This
information could include order status, account balances, shipping
information, previous purchase information, detailed product descriptions
or any other information from various sources that could be relevant to
serving customers.
. Maximize the productivity of the customer service representatives, ensuring
that their time is used effectively. The cost of customer service
representatives is typically the largest on-going expense of a contact
center.
. Provide customer service representatives with the ability to view a
complete history of communications with a customer, whether via telephone,
e-mail or the Web.
. Provide managers with historical and real time reporting data to make
effective decisions on how to allocate resources to maximize results.
. Intelligently route telephone calls and e-mails using business rules, to
the most appropriate customer service representative, in order to provide
faster, more accurate service and reduce the need to transfer calls.
. Smoothly transfer calls, along with the customer data, from one customer
service representative to another in order to save time and minimize the
customer's inconvenience.
. Conduct proactive customer contact campaigns efficiently and targeted to the
appropriate audience.
. Provide a mechanism to escalate customer contact from
the web to e-mail to voice as appropriate.
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In evaluating CIM solutions, prudent companies are looking for suppliers who
provide the following capabilities:
. Solutions that can manage customer contact over the telephone, e-mail and
the Web. o Solutions that can enhance agent productivity, management
control, and customer satisfaction.
. Solutions that can be integrated into the company's existing technology
infrastructure and can add value to these existing investments.
. Solutions that can be implemented rapidly and expanded to meet growing
needs.
. An ability to understand the needs of the contact center and reliably
service and support the solution.
The Company believes that it provides these capabilities to its prospects and
customers and that its solutions can have a significant positive impact for
those prospects and customers through increased revenues, reduced operating
costs, increased agent productivity and enhanced customer service. The Company
delivers these capabilities through the following technologies:
. Inbound call management - Manages inbound telephone calls by minimizing
hold times, routing calls to specific agents, and presenting relevant
customer information to those agents.
. Outbound campaign management - Provides tools for proactive customer
contact, including predictive and preview dialing, campaign and call
list management, scheduled recalls, and automated messaging. These
tools are designed to maximize agent productivity and effectively reach
targeted customers.
. Call blending - Monitors telephone traffic and shifts agents between
proactive customer contact activities and inbound call handling in
order to minimize hold times and maximize agent productivity.
. Desktop Automation - Provides customer service representatives with all
the information they need to quickly and accurately respond to
customers' inquiries coming in via the telephone and the web. This
information could include order status, account balances, shipping
information, previous purchase information, detailed product
descriptions or any other information from various sources that could
be relevant to serving customers. This functionality is marketed as
LYRICall/TM/, the Company's browser-based desktop automation software.
. Reporting - Provides real-time and historical reporting capabilities
that allow managers to make effective decisions on how to allocate
resources within the contact center and maximize results. This
reporting information covers all customer contact channels including
telephone, e-mail and the Internet.
. E-mail response - Allows companies to respond more quickly, accurately
and consistently to a high volume of e-mail inquiries from customers
and prospects. This feature automatically routes e-mail to the
appropriate agent, responds automatically or suggests response to
frequent inquiries, and generates reports on e-mail response service
levels and agent productivity.
. Web chat, collaboration and call-back - Provides companies with a means
to enhance their web sites to communicate more effectively with
customers and prospects. This feature allows a customer or prospect
reviewing a company's web site to click on an icon to initiate an
online discussion ("chat") or a telephone conversation with a live
agent.
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. Customer support - Provides contracted companies with 24x7 access to
telephone and Web based support and product maintenance updates to
improve system uptime and performance.
. Professional services - Provides companies with expert analysis,
recommendations and implementation services to optimize the
effectiveness of contact center systems and processes.
PRINCIPAL PRODUCTS AND APPLICATIONS
-----------------------------------
The Company's product strategy is focused on its three major product lines:
Ensemble/TM/ Customer Contact Suite, Unison/R/ Call Management System and
ContractPro/TM/ customer interaction management software.
ENSEMBLE/TM/ CUSTOMER CONTACT SUITE
Introduced in 1999, Ensemble is a CTI enabled comprehensive CIM solution. The
system provides inbound call routing, outbound call management, seamless call
blending, e-mail response management, web-based communications, agent desktop
automation, and historical and real-time reporting capabilities. Ensemble is a
modular platform, making it possible for companies to deploy the product in
stages and to increase functionality as their needs expand. It is designed to
integrate with existing investments in ACDs, PBXs, IVRs, and other contact
center technologies.
UNISON/R/ CALL MANAGEMENT SYSTEM
Introduced in 1993, the Unison/R/ Call Management System is designed to
automate proactive customer contact activities. It manages outbound and
call-blending applications and provides high-productivity tools to increase the
number of calls handled and the quality of each customer contact. Unison is
used primarily in customer contact centers handling credit/collections,
telemarketing, and fundraising campaigns.
Unison provides key outbound call management functionality, including
predictive and preview dialing, campaign and call list management, scheduled
recalls, automated messaging, real-time filtering, system alerts, and
voice/data transfers. The Unison system also provides a graphical management
console that monitors critical functions and displays information about calling
campaigns.
ContactPro/TM/ Customer Interaction Management Software
Introduced in 1997 by CellIt, ContactPro/TM/ is a single integrated platform
that routes, monitors, records, reports and administers all contact center
interactions. ContactPro incorporates inbound automatic call distribution with
skills- and rules-based routing, outbound predictive dialing, interactive voice
response, email management, web-based customer contract, including fax, voice
messaging, monitoring, recording and reporting. This integrated solution
eliminates much of the complexity and cost of integrating multiple point
solutions.
MARKETS AND DISTRIBUTION CHANNELS
The Company's products and services are sold worldwide through multiple
distribution channels, including a direct sales force, distributors and
resellers.
NORTH AMERICAN OPERATIONS
In North America, the Company sells its products primarily through a direct
sales force. The
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Company's headquarters is in Westford, Massachusetts with sales offices located
throughout the United States and Canada.
The Company's account executives and solution consultants take a
solutions-focused approach in working with prospective and existing customers.
A customer's business needs and integration requirements are clearly identified
and defined before the sale, ensuring customer expectations are properly met on
a timely basis. This consultative selling approach, combined with the Company's
own Professional Services resources for application development and
integration, ensure that the right solution is quickly deployed to meet
customer requirements.
In addition to direct sales in North America, the Company uses authorized
resellers to provide additional market coverage and revenue contribution. The
primary resellers include SBC Global Services Inc., Siemens and Verizon
Communications Inc.
The Company's products and their use are subject to a variety of laws. There is
no guarantee that such laws will not change in such a manner that could
prohibit certain uses of the Company's products. Such a change could
significantly delay, restrict or prohibit the Company's sale or licensing of
its technology. For instance, the banning of the use of automated dialers or
e-mail to solicit business would have a materially adverse impact on the
Company's operating and financial results.
INTERNATIONAL OPERATIONS
During 2001, the Company expanded its sales presence in key areas of the world,
establishing subsidiaries in India and the Netherlands. In addition, the
Company has subsidiaries in the United Kingdom, Germany, Australia, Singapore,
Canada, Brazil and Mexico, as well as a branch in Japan. The Company currently
plans to continue to expand its direct sales presence in the international
marketplace.
In addition to its direct sales presence in the international marketplace, the
Company licenses its products through indirect channels, utilizing distributors
and resellers. In 2001, the Company established new relationships with
distribution channels in Denmark and India. These indirect channel partners not
only have the ability to resell the Company's products, but also have
substantial skills in systems consulting, integration, and support to meet
customer requirements.
In connection with sales outside the United States, some of the Company's
products are subject to regulation by foreign governments, which requires the
Company to follow certain telecommunications and safety certification
procedures for these countries. Failure to obtain necessary local country
approvals or certifications will restrict the Company's ability to sell into
such countries. In addition, other factors including, but not limited to
currency rate fluctuation, import/export restrictions, political and economic
instabilities, war and other unknown or unforeseen eventualities, may affect
the Company's international sales.
International product revenue was approximately $15.3 million, $8.4 million and
$10.8 million, or approximately 35%, 18% and 20% of total product revenue in
2001, 2000, and 1999, respectively.
In 2001, the Company derived 66% of its product revenue from North America; 20%
from Europe, the Middle East, and Africa; 13% from Asia Pacific; and 1% from
Latin America.
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SUPPORT SERVICES
The Company offers a full line of warranty, maintenance support service and
support options in all of its geographic markets. Central to the Company's
maintenance service offerings is its Worldwide Support Center located at
Company headquarters in Westford, Massachusetts. The Company also operates
Centers of Excellence in the United Kingdom, Singapore and Mexico. From these
locations, support professionals manage telephone, web and e-mail requests from
customers for information and support. Using state-of-the-art case management
and diagnostic tools, these support centers provide end-to-end problem
resolution.
The Company's maintenance contract coverage includes access to its support Web
site for customer self help through a knowlegebase, case logging, interactive
problem resolution, periodic product maintenance updates and various levels of
support, including 24 hour [times] 365 day priority phone support, problem
escalation and on-site hardware maintenance requests.
The Company offers a tiered support program for its distribution partners.
Included in this program are periodic maintenance updates to distributors'
enrolled end-user base, access to the Company's partner web site, escalated
support for trained distributor personnel, recommended training curriculums and
a spare parts repair/exchange program.
The Company contracts hardware support in various locations with independent
third-party service providers who are recognized for quality support and
customer care practices. By contracting with third party providers for hardware
support, Davox can more effectively focus on developing and supporting its
software applications.
The Company believes that it has adequate resources internally and externally
to provide services to its customers and partners in the event services from
these third party organizations should cease in any manner; however, loss of
any one of these relationships could materially adversely affect the Company's
ability to provide support to its customers and partners in the geographic
region covered by such organizations until a substitute source could be found.
The Company's Educational Services department offers a variety of courses
designed to provide customer contact centers with the skills and knowledge
needed to enhance productivity and raise the level of service they deliver to
their customers. The Company's training facilities are located in Acton,
Massachusetts; Richardson, Texas; Miami , Florida; Singapore; and Slough,
United Kingdom. The Company also offers customized courses delivered on-site at
customer locations.
The Company's Professional Solutions Services group provides consulting and
integration services to Company customers. This organization offers consulting
expertise on agent desktop automation, database integration, call and work flow
automation, project management and other services to help customer contact
centers enhance the productivity and value of the Company's systems.
SUPPLIERS
While the majority of the Company's hardware needs are met by readily available
off-the-shelf technology, a small portion remains proprietary. Third-party
contractors manufacture these proprietary hardware components, and the Company
believes there are many qualified vendors for these services. The Company's
production process consists primarily of product
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staging, quality assurance, final test and systems integration, which typically
occurs at its Headquarters.
The Company attempts to maintain multiple sources of supply for key components
and believes it has adequate sources for its expected needs. While any of these
sources could be replaced if necessary, the Company might face significant
delays in establishing replacement sources or in modifying its products to
incorporate replacement components or software code. There can be no assurance
that the Company will not suffer delays resulting from non-performance by its
vendors or cost increases due to a variety of factors, including component
shortages or changes in laws or tariffs applicable to items imported by the
Company.
STRATEGIC PARTNERSHIPS
A complete CRM system is extremely complex and usually entails integration with
existing telecommunications systems, databases and front office applications to
adequately meet customer requirements. Currently, no single vendor provides all
the requisite elements for a fully integrated CRM system.
To meet this challenge and to increase its market opportunity, the Company has
undertaken strategic partnerships with various complementary technology and
platform vendors. These partners include Sun Microsystems, Siebel Systems,
People Soft, NICE Systems, Comverse Infosys, IEX Corporation, Witness Systems,
and Microsoft Corporation.
COMPETITION
The Company currently competes in the CIM market with, among others, Genesys
Telecommunications (a wholly-owned subsidiary of Alcatel), Cisco System's
Intelligent Contact Management product line, Aspect Communications, Divine
Inc., Interactive Intelligence Inc., and Avaya, Inc.
The Company believes that it has a number of advantages over its competitors in
the areas of product functionality, integration, deployment time and customer
service and support.
Certain of the Company's current and potential competitors are larger companies
that have greater financial, technical and marketing resources. It is possible
that competitors could produce products that perform the same or similar
functions as those performed by the Company's products. In addition, current
and potential competitors have established, and may in the future establish,
cooperative relationships among themselves or with third parties to increase
the ability of their products to address the needs of the Company's current or
prospective customers. Accordingly, it is likely that new competitors or
alliances among such competitors will emerge and may rapidly acquire
significant market share, which would have a material adverse effect on the
Company's business, financial condition and results of operations. In order to
be successful in the future, the Company must respond promptly and effectively
to the challenges of technological change, changing customer requirements and
competitive pressures. Increased competition could make it more difficult for
the Company to maintain its market presence.
SIGNIFICANT CUSTOMERS
The Company has more than 1,100 customers worldwide which represent a
cross-section of industries. For the year ended December 31, 2001 and 2000, no
single customer represented
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more than 10% of total revenue. For the year ended December 31, 1999, AT&T was
the Company's largest single customer, accounting for approximately 12% of
total revenue. Total revenue from the Company's top three customers amounted to
approximately 14%, 16% and 24% of total revenue in 2001, 2000, and 1999,
respectively. The Company believes that its dependence on any single end-user
customer or reseller is not likely to increase significantly as its products
continue to be accepted by both existing customers and new accounts in major
industries and markets worldwide.
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company's product development efforts are aimed at designing and developing
customer contact center software that meets software industry standards and
incorporates technologies and features that the Company believes its customers
require. Most of the Company's products are developed internally by research
and development teams located at the Company's headquarters in Westford,
Massachusetts, and at satellite development facilities located in Richardson,
Texas and Miami, Florida. The Company also licenses certain technology and
intellectual property rights from third parties. The Company believes that by
establishing mutually beneficial relationships with third-party technology
companies, the Company can provide its customers with emerging technologies in
the most timely and cost-effective manner.
The Company's continued success depends on, among other factors, maintaining
close working relationships with its customers, business partners and resellers
and anticipating and responding to their evolving applications needs. The
Company is committed to the development of new products, the improvement of
existing products, and the continued evaluation of new technologies.
The Company spent $18.0 million on research and development in 2001, compared
with $16.0 million in 2000 and $13.3 million in 1999. This represented
approximately 19%, 17%, and 14%, respectively, of total revenue in each of
those years. The Company currently expects to maintain its expenditure level in
research and development during 2002 in an effort to continue to expand the
functionality of its products.
The Company did not capitalize any of its software development costs in 2001,
2000, or 1999, as the additional development costs incurred to bring the
Company's products to a commercially acceptable level after technological
feasibility has been established are not significant.
SELLING, GENERAL AND ADMINISTRATIVE
During 2001, the Company's selling, general and administrative expenses
increased as the expansion of international locations continued. During 2001,
new offices were opened in India and the Netherlands.
INTELLECTUAL PROPERTY
The Company relies on a combination of patent, copyright, trademark, contract
and trade secret laws to establish and protect its proprietary rights in its
technology. The Company owns and licenses a number of patents relating to
predictive dialing, real-time telecommunication management, client/server
computer telephony software, and user interfaces. Software products are
furnished under software license agreements that grant customers licenses to
use, rather than to own, the products. The license agreements contain
provisions protecting the Company's ownership of the underlying technology.
Upon
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commencement of employment, employees execute a non-disclosure and invention
assignment agreement under which inventions developed during the course of
employment will, at the election of the Company, be assigned to the Company and
which further prohibits disclosure of confidential Company information. There
can be no assurances that the steps taken by the Company in this regard will be
adequate to prevent misappropriation or infringement of its technology or that
the Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technology, also see
"Item 3.Legal Proceedings." Effective protection of intellectual property
rights may be limited or unavailable in certain foreign countries.
EMPLOYEES
As of December 31, 2001, the Company had 439 employees worldwide, of whom 22
were engaged in operations; 280 in sales, marketing and customer support; 88 in
research, development and engineering; and 49 in administrative functions. In
connection with the acquisition of Cell[Ibreve]t, the Company added
approximately 30 employees, on a net basis. None of the Company's employees are
represented by a collective bargaining agreement, nor has the Company ever
experienced any work stoppage. The Company considers its relations with its
employees to be good.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission (including this Form 10-K) may contain statements which are
not historical facts, so-called "forward-looking statements". These
forward-looking statements may include, but are not limited to a discussion of
expected financial and operating results and expected results of the Company's
marketing efforts and product strategy. Such forward-looking statements involve
risks and uncertainties which may adversely impact whether or not such
forward-looking statements come true. In particular, but without limitation,
statements, using words such as "expects", "anticipates", "believes", "plans
to", "is planning" or "estimates" may be considered forward-looking. The
Company's actual future results may differ significantly from those stated in
any forward-looking statements. Factors that may cause such differences
include, but are not limited to, the factors discussed below. Each of these
factors, and others, are discussed from time to time in the Company's filings
with the Securities and Exchange Commission.
The Company's future results may be subject to substantial risks and
uncertainties. The Company purchases certain equipment for its products from
third-party suppliers and licenses certain components of its software code from
a number of third-party vendors. While the Company believes that third-party
equipment and software vendors could be replaced if necessary, the Company
might face significant delays in establishing replacement sources or in
modifying its products to incorporate replacement components or software code.
There can be no assurance that the Company will not suffer delays resulting
from non-performance by its vendors or cost increases due to a variety of
factors, including component shortages. The Company uses third-party service
providers and co-providers to fulfill its hardware support obligations and
professional services with its customers, therefore risks associated with
third-party service providers or co-providers availability or price increases
could cause results to be impacted. While the Company believes that its
currently contracted service providers and co-providers are adequate at this
time, the Company may face significant delays in establishing replacement
providers for such services.
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The Company relies on certain intellectual property protections to preserve its
intellectual property rights. Any invalidation of the Company's intellectual
property rights or lengthy and expensive defense of those rights could have a
material adverse affect on the financial position and results of operations of
the Company. In addition, third party claims of misappropriation or
infringement of their technology could have a material adverse affect on the
financial position and results of operations of the Company.
The development of new products, the improvement of existing products and the
continuing evaluation of new technologies are critical to the Company's
success. Successful product development and introduction depends upon a number
of factors, including anticipating and responding to the evolving applications
needs of customers and resellers, timely completion and introduction of new
products, and market acceptance of the Company's products.
The CIM solutions market is extremely competitive. Certain current and
potential competitors of the Company are more established, benefit from greater
market recognition and have substantially greater financial, development and
marketing resources than the Company.
Additionally, the Company's quarterly and annual financial and operating
results are affected by a wide variety of factors that could materially
adversely affect revenue and profitability, including: the risk inherent with
integrating two businesses and products as a result of the acquisition of
CellIt; general political and economic conditions; effects of terrorist acts;
the timing of customer orders; the Company's ability to introduce new products
on a timely basis; introduction of products and technologies by the Company's
competitors; retention of key employees; market acceptance of the Company's and
its competitors' products; effects of litigation described in Item 3. Legal
Proceedings; the ability to hire and retain key personnel and fluctuations.
International revenues are expected to continue to account for a significant
portion of the Company's total revenues in future periods. International sales
are subject to certain inherent risks, including, but not limited to those
risks discussed in this section and elsewhere in this Form 10-K: unexpected
changes in regulatory requirements and tariffs; difficulties in staffing and
managing foreign operations; longer payment cycles and problems in collecting
accounts receivable; exchange rate fluctuations; potentially adverse tax
treatment, and the inability to expand distribution channels. As a result of
the foregoing and other factors, the Company may experience material
fluctuations in future financial and operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition, results of operations and stock price.
ITEM 2. PROPERTIES
------------------
The Company's corporate offices are located at an 85,000 square foot, two-story
building in Westford, Massachusetts. The facility is occupied under a lease
that expires in September 2008. The Company leases a Richardson, Texas facility
of 9,297 square feet, which expires in March 2006. Also, the Company leases a
Miami, Florida facility of approximately 43,716 square feet, which was acquired
in the CellIt acquisition and expires December 2004. In addition, the Company
leases facilities for sales and service offices in ten states as well as in the
United Kingdom, Mexico, Singapore, the Netherlands, Germany, Australia, India
and Japan. The current aggregate annual rental payments for all of the
Company's facilities are approximately $3.1 million.
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ITEM 3. LEGAL PROCEEDINGS
-------------------------
In 1998, a customer of the Company was sued for patent infringement by
Manufacturing Administration and Management Systems, Inc. (MAMS) alleging that
the customer's use of a computer driven automated dialer infringes MAMS's
patent. Under the Company's contract with this customer, the Company is
obligated to defend and indemnify such customer against any such claims. In
1998, the Company sued MAMS in federal court in the Eastern District of New
York in an action entitled "Davox Corporation v. Manufacturing Administration
and Management Systems, Inc." In the lawsuit, the Company is seeking a
declaratory judgment that its products do not infringe the MAMS patent or, in
the alternative, that the MAMS patent is invalid. The Company believes that
MAMS's assertions of patent infringement are without merit, and the Company
will vigorously pursue this action against MAMS. While the outcome of this
litigation cannot be predicted with certainty at this time, management does not
believe that the outcome will have a material adverse effect on the Company's
business, financial condition or results of operations.
The Company is from time to time subject to claims arising in the ordinary
course of business. While the outcome of the claims cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the results of operations and financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2001.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
---------------------------------------------
The executive officers of the Company, the age of each, and the period during
which each has served in his present office are as follows:
Mr. James D. Foy (54) serves as President, Chief Executive Officer and
Director. Mr. Foy joined the Company in September 2001. Prior to joining the
Company, Mr. Foy served as President of Informix Software Corporation, a global
enterprise software company, from July 2000 to August 2001 and Executive Vice
President of the Transaction Business Group of Informix Software from April
1999 through June 2000. Mr. Foy also served as Vice President of Engineering at
Ardent Software Inc. (formerly Vmark Software Inc.), an international
enterprise software company, from April 1995 through March 1999.
Mr. Ralph Breslauer (38) serves as Executive Vice President, Global Sales and
Marketing. Mr. Breslauer joined the Company in January 2002. Prior to joining
the Company, Mr. Breslauer served as Senior Vice President of Worldwide Field
Operations for eRoom Technology, Inc., a collaboration software company, from
July 2000 through December 2001. Mr. Breslauer has also served as Vice
President of Marketing and Business Development for Informix Software
Corporation's TransAct Business Group, a global enterprise software company,
between December 1999 and July 2000. Prior to being acquired by Informix
Software Corporation, Mr. Breslauer served as Vice President of Marketing for
Databases and Tools at Ardent Software Inc., (formed as a result of the merging
of Vmark Software Inc. and Unidata Inc.) an international enterprise software
company, from November 1995 through December 1999 and as Executive Vice
President at System Builder Corporation, an international software development
tool company, from
12
August 1990 through November 1995.
Mr. Mark Donovan (47) serves as Senior Vice President, Operations and Customer
Services. since May 1998. Mr. Donovan joined the Company in September 1983 and
has held various management positions including Vice President, Customer
Service from June 1992 through June 1994.
Ms. Kristina Lengyel (34) serves as Vice President, Professional Services. Ms.
Lengyel joined the Company in January 2002. Prior to joining the Company, Ms.
Lengyel served as Senior Vice President of Operations and Chief Technology
Officer from December 2000 through June 2001, Vice President for Engineering
from October 1999 through December 2000, and Vice President for Customer
Integration Services from August 1996 through October 1999 at INSCI Corp, a
provider of document management solutions.
Mr. James F. Mitchell (55) serves as the Company Fellow since January 2000. Mr.
Mitchell is a co-founder of the Company and has served as Senior Vice President
and Chief Technical Officer since 1983. From September 1993 to August 1994, Mr.
Mitchell managed the domestic sales operations of the Company. Prior to
co-founding the Company, Mr. Mitchell served as Manager of Systems form
September 1979 through June 1981 at Applicon, Inc., a producer of CAD/CAM
products.
Mr. Michael J. Provenzano III (32) has served as Vice President of Finance,
Chief Financial Officer and Treasurer since July 2000. Mr. Provenzano joined
the Company in November 1999 as corporate controller. Prior to joining the
Company, Mr. Provenzano held positions of increasing responsibility at Arthur
Andersen LLP from September 1992 through November 1999, including experienced
audit manager in the high technology practice.
Mr. Alexander Tellez (36) serves as Executive Vice President of Engineering.
Mr. Tellez joined the Company in January 2002. Prior to the Company, Mr. Tellez
was co-Founder, President and Chief Executive Officer of CellIt, Inc., a
contact center systems company, from June 1995 to January 2002. Prior to
founding CellIt, Mr. Tellez served as Director of Strategic Systems for Vitas
Healthcare, a nationwide healthcare company, from March 1991 through June 1995.
Prior to Joining Vitas Healthcare, Mr. Tellez was a senior consultant with
Arthur Andersen LLP, an accounting and consulting firm, from March 1989 through
March 1991.
Officers are elected by and serve at the discretion of the Board of Directors.
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-------------------------------------------------------------------------
MATTERS
-------
Davox's common stock has been traded on the Nasdaq National Market
under the symbol "DAVX" since its initial public offering on April 28, 1987.
Prior to that date, there was no public market for Davox's common stock. The
following table sets forth the range of high and low sale prices per share of
common stock on the Nasdaq National Market for each quarter of the years ended
December 31, 2001 and 2000 as reported by the National Association of
Securities Dealers Automated Quotation System (NASDAQ). During 1997, the
Company effected a three-for-two stock split through the issuance of a 50%
stock dividend. All share and per share amounts affected by this split, that
are contained in this report on Form 10-K have been retroactively adjusted for
all periods presented.
Fiscal 2001
High Low
----------------------
First Quarter $14.88 $ 8.94
Second Quarter $13.00 $ 7.30
Third Quarter $10.50 $ 7.30
Fourth Quarter $10.00 $ 7.20
Fiscal 2000
High Low
----------------------
First Quarter $39.00 $19.00
Second Quarter $28.00 $ 9.63
Third Quarter $14.19 $ 7.75
Fourth Quarter $10.63 $ 6.13
As of March 12, 2002, there were approximately 470 holders of record
of the Company's common stock and approximately 3,677 beneficial shareholders
of the Company's common stock.
In January 1999, the Board of Directors authorized the purchase of up
to 3 million shares of the Company's common stock. In October 2000, the
Company's Board of Directors increased the total number of shares authorized to
be repurchased under the repurchase program to 6 million. Shares that are
repurchased may be used for various purposes including business acquisitions
and the issuance of shares pursuant to the Company's stock option and employee
stock purchase plans. Under the stock repurchase program, shares may be
repurchased, at management's discretion, from time to time at prevailing prices
in the open market. As of December 31, 2001, the Company had repurchased
2,861,900 shares and 3,138,100 shares were available for repurchase under this
repurchase program.
14
The Company has never paid cash dividends on its common stock and has
no present intentions to pay cash dividends in the future. The Company intends
to retain any future earnings to finance the growth of the Company.
The Company has not sold any equity securities during the period
covered by this report that were not registered under the Securities Act of
1933, as amended.
15
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
The following table sets forth certain condensed
consolidated financial data for each of the five
years in the period ended December 31, 2001:
Years Ended December 31,
----------------------------------------------------------------------------------
2001 2000 1999 1998 (a) 1997 (a)
---- ---- ---- -------- --------
(In Thousands, Except Per Share Amounts)
Condensed Consolidated Statement of Operations Data:
Total revenue $94,259 $94,256 $92,354 $88,948 $83,554
Cost of revenue 33,929 32,817 30,710 30,114 28,029
----------- ----------- ----------- ----------- ----------
Gross profit 60,330 61,439 61,644 58,834 55,525
Research, development and
engineering expenses 17,954 16,009 13,259 12,086 10,418
Selling, general and
administrative expenses 43,726 42,753 37,077 34,841 29,710
Non-recurring merger costs - - - 1,926 -
Non-recurring restructuring costs 2,623 - - - -
----------- ----------- ----------- ----------- ----------
Income (loss) from operations (3,973) 2,677 11,308 9,981 15,397
Other income, net 2,755 4,037 2,815 2,941 2,031
----------- ----------- ----------- ----------- ----------
Income (loss) before provision
for income taxes (1,218) 6,714 14,123 12,922 17,428
Provision for income taxes 126 2,081 2,118 4,393 2,507
----------- ----------- ----------- ----------- ----------
Net income (loss) $(1,344) $ 4,633 $12,005 $ 8,529 $14,921
========== =========== =========== =========== ==========
Earnings per share:
Basic ($0.11) $ 0.35 $ 0.89 $ 0.60 $ 1.15
=========== =========== =========== =========== ==========
Diluted ($0.11) $ 0.33 $ 0.85 $ 0.58 $ 1.05
=========== =========== =========== =========== ==========
Weighted average shares outstanding:
Basic 12,636 13,236 13,531 14,130 12,940
=========== =========== =========== =========== ==========
Diluted 12,636 13,945 14,165 14,822 14,270
=========== =========== =========== =========== ==========
December 31,
----------------------------------------------------------------------------------
2001 2000 1999 1998 (a) 1997 (a)
----------------------------------------------------------------------------------
(In Thousands)
Condensed Consolidated Balance Sheets Data:
Working capital $61,363 $66,585 $66,085 $62,756 $52,847
Total assets 97,156 102,180 99,043 89,423 81,560
Long-term obligations ---- ---- ---- ---- 297
Redeemable Preferred Stock ---- ---- ---- ---- 13,911
Stockholders' equity 70,468 75,738 72,514 69,327 44,464
(a) Historical financial information has been restated to reflect the
combination of Davox and AnswerSoft in 1998 accounted for as a pooling of
interests and the three-for-two stock split effected in the form of a stock
dividend payable to shareholders of record on May 13, 1997.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding anticipated future capital requirements,
the Company's future development plans, the Company's ability to obtain debt,
equity or other financing, and the Company's ability to generate cash from
operations, are based on current expectations. These statements are
forward-looking in nature and involve a number of risks and uncertainties, as
more fully described under "Certain Factors That May Affect Future Results."
Actual results may differ materially.
CRITICAL ACCOUNTING POLICIES
----------------------------
The discussion and analysis of our financial condition and results of
operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an on-going basis, the Company
evaluates its estimates, including those related to customer programs and
incentives, product returns, bad debts, inventories, investments, income taxes,
warranty obligations, restructuring, and contingencies and litigation. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
The Company believes the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of the consolidated
financial statements.
Revenue recognition. The Company generates software revenue from
licensing the rights to use its software products. The Company also generates
service revenues from the sale of product maintenance contracts and
implementation, education and consulting services. The Company recognizes
revenue in accordance with the provisions of the American Institute of
Certified Public Accountants Statement of Position (SOP) No. 97-2, Software
Revenue Recognition and SOP No. 98-9, Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions. Revenue from
software license fees are generally recognized upon delivery provided that
there are no significant post delivery obligations, persuasive evidence of an
agreement exists, the fee is fixed or determinable and collection of the
related receivable is probable. If acceptance is required beyond the Company's
standard published specifications, software license revenue is recognized upon
customer acceptance.
SOP 98-9 requires use of the residual method for recognition of
revenues when vendor-specific objective evidence exists for undelivered
elements but does not exist for the delivered elements of a multiple-element
arrangement. In such circumstances, the Company defers the fair value of the
undelivered elements and recognizes, as revenue, the remaining value for the
delivered elements.
Revenues for consulting, implementation and educational services are
recognized over the period in which services are provided. Maintenance revenue
is deferred at the time of software license shipment and is recognized ratably
over the term of the support period, which is typically one year. Amounts
collected prior to satisfying the revenue recognition criteria are reflected as
deferred
17
revenue in the Company's Balance Sheet.
Accounting for Income Taxes. The Company accounts for income taxes
using the liability method in accordance with SFAS No. 109, Accounting for
Income Taxes. Under the liability method, a deferred tax asset or liability is
determined based on the difference between the financial statement and tax bases
of assets and liabilities, as measured by the enacted tax rates assumed to be in
effect when these differences are expected to reverse.
The Company records a valuation allowance against its deferred tax
asset to the extent management believes it is more likely than not that the
asset will not be realized. As of December 31, 2001, the Company has provided a
valuation allowance against certain of the Company's tax credit carryforwards
due to the uncertainty of their reliazbility as a result of limitations on their
utilization in accordance with certain tax laws and regulations.
Allowance for Doubtful Accounts. The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. If the financial condition of the customers
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
Research and Development and Software Development Costs. Research and
development costs have been charged to operations as incurred. Statement of
Financial Accounting Standards (SFAS) No. 86, Accounting for the Costs of
Computer Software to Be Leased, Sold, or Otherwise Marketed, requires the
capitalization of certain computer software development costs incurred after
technological feasibility is established. Once technological feasibility of a
software product has been established, the additional development costs incurred
to bring the product to a commercially acceptable level are not significant.
Accordingly, all such software development costs have been expensed.
18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
revenue represented by items as shown in the Company's Consolidated Statements
of Operations. This table should be read in conjunction with the Selected
Financial Data, Consolidated Financial Statements and Notes to Consolidated
Financial Statements contained elsewhere herein.
Percentage of Total Revenue
For The Years Ended December 31,
2001 2000 1999
--------------------------------------------------------
Product revenue 46.0 % 50.0 % 58.2 %
Service revenue 54.0 50.0 41.8
--------------------------------------------------------
Total revenue 100.0 100.0 100.0
Cost of revenue 36.0 34.8 33.3
--------------------------------------------------------
Gross profit 64.0 65.2 66.7
Research, development
and engineering expenses 19.0 17.0 14.4
Selling, general and
administrative expenses 46.4 45.4 40.1
Non-recurring restructuring costs 2.8 - -
--------------------------------------------------------
Income (loss) from operations (4.2) 2.8 12.2
Other income, net 2.9 4.3 3.1
--------------------------------------------------------
Income before provision
for income taxes (1.3) 7.1 15.3
Provision for income taxes 0.1 2.2 2.3
--------------------------------------------------------
Net income (loss) (1.4 %) 4.9 % 13.0 %
==== == === == ==== ==
Total revenue was approximately $94.3 million, $94.3 million and $92.4
million for the fiscal years ended December 31, 2001, 2000 and 1999,
respectively. Total revenue remained consistent for the year ended December 31,
2001 compared to the same period in 2000 and increased 2.1% in fiscal year 2000
compared to fiscal year 1999.
Product revenue was approximately $43.4 million, $47.1 million and
$53.8 million in fiscal years 2001, 2000 and 1999, respectively. Product
revenue decreased 7.9% in 2001 due to weak economic conditions, especially in
North America. Product revenue decreased 12.3% in 2000 from 1999 due to a
decrease in the number of product shipments as a result of a slowdown of Unison
system sales and a longer sales cycle for Ensemble.
19
Cost of product revenue as a percentage of product revenue was 17.4%,
17.0%, and 18.2% in fiscal years 2001, 2000 and 1999, respectively. The
increase as a percentage of product revenue in 2001 was due to an increase in
costs of materials for production and a higher hardware component mix during
2001 as compared to the same period in 2000. The decrease as a percentage of
product revenue in 2000 as compared to 1999 was due to the decrease in the
number of product shipments that included the Company's Digital Communications
Server hardware as well as a continued decrease in the hardware content of the
Company's products.
Service revenue was approximately $50.9 million, $47.1 million, and
$38.6 million in fiscal years 2001, 2000 and 1999, respectively. Service
revenue increased 8.0%, 22.1% and 9.9% in 2001, 2000 and 1999, respectively.
The increase in 2001 and 2000 was due primarily to the growth in the Company's
installed customer base, resulting in new and renewed contract maintenance
revenue as compared to prior years.
Cost of service revenue as a percentage of service revenue was 51.9%,
52.6% and 54.2% in 2001, 2000 and 1999, respectively. The decreases as a
percentage of service revenue were attributable to the growth in service
revenue in 2001 and 2000, which exceeded the associated increases in the cost
of servicing a larger customer installed base. Also contributing to the
decrease is the continued focus to decrease discretionary expenses, such as the
use of outside contractors and travel.
In 2001 and 2000, no single customer represented more than 10% of the
Company's total revenue. Revenue from the Company's largest single customer in
1999 was approximately 12% of total revenue. Total revenue from the Company's
three largest customers amounted to 14%, 16% and 24% of total revenue in 2001,
2000 and 1999, respectively. The Company intends to continue to broaden its
base of existing and new customers by penetrating new markets, expanding its
direct international sales force and using alternate channels of distribution,
thereby decreasing its dependence on its largest end-user customers.
Research, development and engineering expenses were approximately
$18.0 million, $16.0 million and $13.3 million, representing 19.0%, 17.0% and
14.4% of total revenue during 2001, 2000 and 1999, respectively. The increase
in 2001 was primarily attributable to an increase in employees and higher
payroll and related expenses for most of the year compared to 2000. The
increase in 2000 was primarily attributable to an increase in employees and
higher payroll and related expenses compared to 1999.
Selling, general and administrative expenses were approximately $43.7
million, $42.8 million and $37.1 million, representing 46.4%, 45.4% and 40.1%
of total revenue during 2001, 2000 and 1999, respectively. The increases in
2001 were primarily attributable to continued investment in international
operations as the Company continues to expand its global presence.
Additionally, higher payroll and related expenses were partially offset by a
decrease in travel expenses. The increase in 2000 was mostly attributable to
increased headcount, payroll and related expenses and the costs associated with
the setup and expansion of the Company's international subsidiaries.
During 2001, in response to the weak economic environment in North
America, the Company recorded a non-recurring restructuring charge totaling
approximately $2.6 million.
20
The components of the restructuring charge included a reduction in workforce of
approximately 97 people or 18% of the Company's then total workforce, which
effected all functional areas, costs associated with excess leased office space
due to the reduction in headcount and the departure of the Company's previous
president and chief executive officer.
Other income, derived primarily from investments in commercial paper,
corporate bonds, Eurodollar bonds, and money market instruments decreased 31.8%
in 2001 and increased 43.4% in 2000. The decrease in 2001 was due to lower
average cash balances as the Company repurchased 600,200 shares of its common
stock at an aggregate cost of $5.4 million during the year combined with lower
interest rates and investment yields compared to the same periods in 2000. The
increase in 2000 was due primarily to the significant increase in the average
cash and cash equivalent and marketable securities balances compared to the
previous fiscal year.
INCOME TAXES
The Company provided for income taxes at estimated annual effective
tax rates of 10.0%, 31.0% and 15.0% for 2001, 2000 and 1999, respectively. The
rate for 2001 is lower than the combined federal and state statutory tax rates
primarily due to the Company reporting a loss for its consolidated operations.
The Company's provision recorded for 2001 relates primarily to foreign income
taxes relating to its foreign subsidiaries. For 2000 and 1999, these effective
tax rates are lower than the combined federal and state statutory tax rates due
primarily to the utilization of net operating loss and tax credit carryforwards
and benefits derived from the Company's foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, the Company's principal sources of liquidity
were its cash and cash equivalent balances of approximately $20.1 million, and
its marketable securities of approximately $47.8 million. As of December 31,
2000, the Company's principal sources of liquidity were its cash and cash
equivalent balances of approximately $61.8 million, and its marketable
securities of approximately $9.0 million. The overall decrease in cash and cash
equivalents and marketable securities in 2001 was due primarily to the cash
used to buy equipment and utilization of $5.4 million in cash to repurchase
600,200 shares of its common stock.
The Company's primary investing activities were purchases of property
and equipment, and purchases and sales of marketable securities. Property and
equipment purchases were approximately $4.4 million in 2001 compared to
approximately $4.8 million and $3.4 million in 2000 and 1999, respectively.
Purchases and sales of marketable securities generated a net cash outflow of
approximately $38.8 million compared to an inflow of approximately $21.8
million in 2000 and a net cash outflow of approximately $3.1 million 1999.
Cash used in financing activities in 2001 was approximately $4.4
million which resulted from the Company's repurchase of its common stock,
partially offset by proceeds generated from the exercise of stock options and
shares purchased by employees under the Company's employee stock purchase plan.
Cash used in financing activities in 2000 was approximately $2.7 million and
resulted from the Company's repurchase of approximately 935,300 shares of its
common stock at an aggregate cost of approximately $8.6 million,
21
partially offset by proceeds generated from the exercise of stock options and
shares purchased by employees under the Company's employee stock purchase plan.
Working capital as of December 31, 2001 was approximately $61.4
million as compared to approximately $66.6 million as of December 31, 2000.
Total assets as of December 31, 2001 were approximately $97.2 million compared
to approximately $102.2 million as of December 31, 2000. The $5.2 million
decrease in working capital is primarily attributable to the previously
mentioned $2.8 million decrease in total cash and marketable securities
balances combined with a $1.1 million increase in deferred revenue, as the
Company's global installed customer base continues to grow.
Subsequent to December 31, 2001, the Company announced that it had
entered into an Agreement and Plan of Merger by and among the Company, AP
Acquisition Corporation (AP), a wholly owned subsidiary of the Company, and
CellIt, Inc. (CellIt), whereby the parties agreed that AP would be merged with
and into CellIt, with CellIt becoming a wholly owned subsidiary of the Company
on January 14, 2002 and in exchange for all of CellIt's outstanding preferred
and common stock, the Company paid approximately $10.2 million in cash and
issued approximately 544,000 shares of its common stock.
The Company's contractual obligations for future payments as of December 31,
2001 were composed of operating leases for the various office spaces leased by
the Company including, including the space acquired as a result of the merger
with CellIt. A summary of the amounts due under these operating leases is as
follows:
(Amounts Are In Thousands)
-------------------------------------------------------------------------------
Payments Due by Period
-------------------------------------------------------------------------------
Contractual Less than 1 1-3 4-5 After 5
Obligation Total year years years years
-------------------------------------------------------------------------------
Operating
Leases $14,157 $3,142 $5,664 $1,590 $3,761
-------------------------------------------------------------------------------
Subsequent to December 31, 2001, in connection with the acquisition of CellIt,
Inc., the Company assumed the obligations outstanding under CellIt's capital
and operating leases. The capital lease obligation is approximately $1.6
million, of which approximately $1.0 million will become due within the next
twelve months. The operating lease obligation is approximately $2.9 million,
of which approximately $0.9 million of this amount is due and payable in the
next twelve months.
Management believes, based on its current operating plan, that the
Company's existing cash and cash equivalents, marketable securities and cash
generated from operations will be sufficient to meet the Company's cash
requirements for the next twelve months.
IMPACT OF INFLATION
The Company believes that inflation did not have a material effect on
the results of operations in 2001, 2000 and 1999.
22
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS, OTHER FINANCIAL INSTRUMENTS, AND DERIVATIVE
-----------------------------------------------------------------------------
COMMODITY INSTRUMENTS.
--------------------
As of December 31, 2001 and 2000, the Company did not participate in
any derivative financial instruments or other financial and commodity
instruments for which fair value disclosure would be required under SFAS No.
107. The Company's investments are primarily short-term, Euro dollar bonds,
investment-grade commercial paper, and money market accounts that are carried
on the Company's books at amortized cost, which approximates fair market value.
Accordingly, the Company has no quantitative information concerning the market
risk of participating in such investments.
As of December 31, 2001 and 2000, the Company did not participate in
any derivative financial instruments or other financial and commodity
instruments for which fair value disclosure would be required under SFAS No.
133.
PRIMARY MARKET RISK EXPOSURES
The Company's primary market risk exposures are in the areas of
interest rate risk and foreign currency exchange rate risk. The Company's
investment portfolio of cash equivalent and short-term investments is subject
to interest rate fluctuations, but the Company believes this risk is immaterial
due to the short-term nature of these investments.
The Company's exposure to currency exchange rate fluctuations has been
and is expected to continue to be modest due to the fact that the operations of
its international subsidiaries are almost exclusively conducted in their
respective local currencies. International subsidiary operating results are
translated into U.S. dollars and consolidated for reporting purposes. The
impact of currency exchange rate movements on intercompany transactions was
immaterial for the years ending December 31, 2001, 2000, and 1999. Currently,
the Company does not engage in foreign currency hedging activities.
23
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------------------------
Index to Consolidated Financial Statements and Financial Statement Schedule
---------------------------------------------------------------------------
Page
-----
Report of Independent Public Accountants 25
Consolidated Balance Sheets as of December 31,
2001 and 2000 26
Consolidated Statements of Operations for the Years
Ended December 31, 2001, 2000 and 1999 27
Consolidated Statements of Stockholders' Equity and
Comprehensive Income (Loss) for the Years Ended
December 31, 2001, 2000 and 1999 28
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2001, 2000 and 1999 29
Notes to Consolidated Financial Statements 30
Report of Independent Public Accountants on Financial
Statement Schedule 52
Schedule II - Valuation and Qualifying Accounts 53
24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Davox Corporation:
We have audited the accompanying consolidated balance sheets of Davox
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2001
and 2000 and the related consolidated statements of operations, stockholders'
equity and comprehensive income (loss) and cash flows for each of the three
years in the period ended December 31, 2001. 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 auditing standards
generally accepted in the United States. 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Davox
Corporation and subsidiaries as of December 31, 2001 and 2000 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.
/s/ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 18, 2002
25
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par Value)
December 31,
ASSETS 2001 2000
------------------ ------------------
Current assets:
Cash and cash equivalents $ 20,105 $ 61,758
Marketable securities, at amortized cost 47,838 8,999
Accounts receivable, net of reserves of
$2,324 and $2,255 in 2001 and
2000, respectively 11,007 14,195
Prepaid expenses and other current assets 5,310 4,564
Deferred tax assets 3,791 3,511
------------------ ------------------
Total current assets 88,051 93,027
Property and equipment, net 6,447 5,863
Other assets 2,658 3,290
------------------ ------------------
$ 97,156 $ 102,180
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,307 $ 5,450
Accrued expenses 8,643 8,092
Customer deposits 4,664 5,914
Deferred revenue 8,074 6,986
------------------ ------------------
Total current liabilities 26,688 26,442
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.10 par value -
Authorized - 30,000 shares
Issued - 14,556 shares 1,456 1,456
Additional paid-in capital 82,136 82,676
Cumulative translation adjustments (345) (299)
Retained earnings 9,644 10,988
------------------ ------------------
92,891 94,821
Less - Treasury stock, 2,247 and 1,927 shares, at cost,
in 2001 and 2000, respectively (22,423) (19,083)
------------------ ------------------
Total stockholders' equity 70,468 75,738
------------------ ------------------
$ 97,156 $ 102,180
================== ==================
The accompanying notes are an integral part of these consolidated
financial statements.
26
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
For the Years Ended December 31,
2001 2000 1999
---- ---- ----
Product revenue $ 43,366 $ 47,135 $ 53,757
Service revenue 50,893 47,121 38,597
-------------- -------------- ----------
Total revenue 94,259 94,256 92,354
-------------- -------------- ----------
Cost of product revenue 7,528 8,012 9,809
Cost of service revenue 26,401 24,805 20,901
-------------- -------------- ----------
Total cost of revenue 33,929 32,817 30,710
-------------- -------------- ----------
Gross profit 60,330 61,439 61,644
-------------- -------------- ----------
Operating expenses:
Research, development and engineering 17,954 16,009 13,259
Selling, general and administrative 43,726 42,753 37,077
Restructuring costs 2,623 - -
-------------- ------------- ----------
Total operating expenses 64,303 58,762 50,336
-------------- -------------- ----------
Income (loss) from operations (3,973) 2,677 11,308
Other income (primarily interest), net 2,755 4,037 2,815
-------------- -------------- ----------
Income (loss) before provision for income taxes (1,218) 6,714 14,123
Provision for income taxes 126 2,081 2,118
-------------- -------------- ----------
Net income (loss) $ (1,344) $ 4,633 $ 12,005
============== ============== ==========
Earnings (loss) per share:
Basic $ (0.11) $ 0.35 $ 0.89
============== ============== ==========
Diluted $ (0.11) $ 0.33 $ 0.85
============== ============== ==========
Weighted average shares outstanding:
Basic 12,636 13,236 3,531
============== ============== ==========
Diluted 12,636 13,945 14,165
============== ============== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
27
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(In Thousands)
Cumulative Retained
Common Stock Additional Translation (Deficit)/ Treasury Stock
Shares $.10 Par Value Paid-in Capital Adjustments Earnings Shares Amount
------ -------------- --------------- ----------- ---------- ------ ------
BALANCE, December 31, 1998 $14,349 $ 1,435 $73,555 $ 11 ($5,650) 3 ($24)
Proceeds from exercise of stock
options, including related tax benefit 161 16 830 -- -- (11) 100
Proceeds from purchases under
employee stock purchase plan 46 5 306 -- -- (20) 170
Purchase of treasury stock -- -- -- -- -- 1,326 (10,217)
Translation adjustment -- -- -- (28) -- -- --
Net income -- -- -- -- 12,005 -- --
Comprehensive income for the year
ended December 31, 1999 -- -- -- -- -- -- --
------- ------- ------- ----- ------- ----- --------
BALANCE, December 31, 1999 14,556 1,456 74,691 (17) 6,355 1,298 (9,971)
Proceeds from exercise of stock
options, including related tax benefit -- -- 4,207 -- -- (405) 3,028
Proceeds from purchases under
employee stock purchase plan -- -- 71 -- -- (20) 143
Settlement of escrow shares (Note 7a) -- -- 3,707 -- -- 119 (3,707)
Purchase of treasury stock -- -- -- -- -- 935 (8,576)
Translation adjustment -- -- -- (282) -- -- --
Net income -- -- -- -- 4,633 -- --
Comprehensive income for the year
ended December 31, 2000 -- -- -- -- -- -- --
------- ------- ------- ----- ------- ----- --------
BALANCE, December 31, 2000 14,556 $ 1,456 $82,676 $(299) $10,988 1,927 $(19,083)
Proceeds from exercise of stock
options, including related tax benefit -- -- (776) -- -- (236) 1,737
Proceeds from purchases under
employee stock purchase plan -- -- 36 -- -- (45) 334
Stock-based compensation -- -- 200 -- -- -- --
Purchase of treasury stock -- -- -- -- -- 601 (5,411)
Translation adjustment -- -- -- (46) -- -- --
Net loss -- -- -- -- (1,344) -- --
Comprehensive loss for the year
ended December 31, 2001 -- -- -- -- -- -- --
------- ------- ------- ----- ------- ----- --------
BALANCE, December 31, 2001 14,556 $ 1,456 $82,136 $(345) $ 9,644 2,247 $(22,423)
======= ======= ======= ===== ======= ===== ========
Total
Stockholders' Comprehensive
Equity Income (loss)
BALANCE, December 31, 1998 $ 69,327
Proceeds from exercise of stock
options, including related tax benefit 946
Proceeds from purchases under
employee stock purchase plan 481
Purchase of treasury stock (10,217)
Translation adjustment (28) ($28)
Net income 12,005 12,005
-------
Comprehensive income for the year
ended December 31, 1999 -- $11,977
=======
--------
BALANCE, December 31, 1999 72,514
Proceeds from exercise of stock
options, including related tax benefit 7,235
Proceeds from purchases under
employee stock purchase plan 214
Settlement of escrow shares (Note 7a) --
Purchase of treasury stock (8,576)
Translation adjustment (282) (282)
Net income 4,633 4,633
-------
Comprehensive income for the year
ended December 31, 2000 -- $ 4,351
=======
--------
BALANCE, December 31, 2000 $ 75,738
Proceeds from exercise of stock
options, including related tax benefit 961
Proceeds from purchases under
employee stock purchase plan 370
Stock-based compensation 200
Purchase of treasury stock (5,411)
Translation adjustment (46) (46)
Net loss (1,344) (1,344)
-------
Comprehensive loss for the year
ended December 31, 2001 -- ($1,390)
=======
--------
BALANCE, December 31, 2001 $ 70,468
========
The accompanying notes are an integral part of these consolidated financial
statements.
28
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the Years Ended December 31,
2001 2000 1999
---- ---- ----
Cash Flows From Operating Activities:
Net (loss) income $ (1,344) $ 4,633 $ 12,005
Adjustments to reconcile net income (loss) to net cash
provided by operating activities -
Depreciation and amortization 3,824 3,968 3,606
Deferred tax assets (280) 1,300 876
Tax benefit from the exercise of stock options 274 1,649 438
Stock-based compensation 200 - -
Changes in current assets and liabilities -
Accounts receivable 3,191 6,158 (4,361)
Prepaid expenses and other current assets (746) (2,320) (565)
Accounts payable (143) (283) 768
Accrued expenses 564 (3,661) 2,354
Customer deposits (1,250) 2,392 1,623
Deferred revenue 1,088 1,527 1,688
----- ------ ------
Net cash provided by operating activities 5,378 15,363 18,432
----- ------- ------
Cash Flows From Investing Activities:
Purchases of property and equipment (4,404) (4,761) (3,358)
Decrease (increase) in other assets 632 (1,911) (85)
Purchases of marketable securities (90,377) (68,121) (84,073)
Sales and maturities of marketable securities 51,538 89,893 81,014
------- ------- -------
Net cash (used in) provided by investing activities (42,611) 15,100 (6,502)
------- ------ -------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options 687 5,586 508
Proceeds from employee stock purchase plan 370 214 481
Purchases of treasury stock (5,411) (8,576) (10,217)
------- ------- ------
Net cash used in financing activities (4,354) (2,776) (9,228)
--------- ------- ------
Effect of exchange rate differences on cash (66) (362) (28)
---- ----- ----
Net (decrease) increase in cash and cash equivalents (41,653) 27,325 2,674
Cash and cash equivalents, beginning of year 61,758 34,433 31,759
--------- ------- ------
Cash and cash equivalents, end of year $ 20,105 $ 61,758 $ 34,433
======== ======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for income taxes $ 234 $ 2,508 $ 1,363
======== ========= ========
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
Recoupment of acquisition escrow shares (Note 7a) $ ------ $ 3,707 -------
========= ========= ========
The accompanying notes are an integral part of these
consolidated financial statements
29
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies
Davox Corporation (the Company) is a leading developer of customer
interaction management solutions that help companies more effectively manage
customer interactions via telephone, e-mail and the Internet. These systems are
marketed directly, through joint marketing relationships and distribution
agreements. The Company markets its systems to financial institutions,
retailers, entertainment companies, telemarketing organizations,
telecommunications and transportation companies and utilities.
These consolidated financial statements reflect the application of
certain significant accounting policies as described below and elsewhere in the
accompanying consolidated financial statements.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
(b) Management Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
(c) Revenue Recognition
The Company generates software revenue from licensing the rights to use
its software products. The Company also generates service revenues from the sale
of product maintenance contracts, implementation, education and consulting
services. The Company recognizes revenue in accordance with the provisions of
the American Institute of Certified Public Accountants Statement of Position
(SOP) No. 97-2, Software Revenue Recognition and SOP No. 98-9, Modification of
SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.
Revenue from software license fees are generally recognized upon delivery
provided that there are no significant post delivery obligations, persuasive
evidence of an agreement exists, the fee is fixed or determinable and collection
of the related receivable is probable. If acceptance is required beyond the
Company's standard published specifications, software license revenue is
recognized upon customer acceptance.
30
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(c) Revenue Recognition (continued)
SOP 98-9 requires use of the residual method for recognition of
revenues when vendor-specific objective evidence exists for undelivered elements
but does not exist for the delivered elements of a multiple-element arrangement.
In such circumstances, the Company defers the fair value of the undelivered
elements and recognizes, as revenue, the remaining value for the delivered
elements.
Revenues for consulting, implementation and educational services are
recognized over the period in which services are provided. Maintenance revenue
is deferred at the time of software license shipment and is recognized ratably
over the term of the support period, which is typically one year. Amounts
collected prior to satisfying the revenue recognition criteria are reflected as
deferred revenue.
(d) Cash, Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original
maturities of ninety days or less to be cash equivalents. Cash equivalents
consist primarily of commercial paper. Marketable securities that the Company
has the positive intent and ability to hold to maturity are reported at
amortized cost and are classified as held-to-maturity. The Company's investments
consist of held-to-maturity securities that are investments in Euro dollar,
high-grade commercial paper instruments, certificates of deposit, corporate
bonds and notes at December 31, 2001 and 2000. All of these investments are
classified as current as they mature within one year.
31
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(d) Cash, Cash Equivalents and Marketable Securities (continued)
At December 31, 2001 and 2000, marketable securities consisted of the
following:
2001 2000
---- ----
Market Amortized Market Amortized
Value Cost Value Cost
------------------------------------------------
Euro dollar bond
(maturity 6-12 months) $ 5,697 $ 5,699 $------ $------
Commercial paper obligations
(maturity 4-9 months) 15,476 15,474 ------ ------
Certificates of deposit
(maturity 3-11 months) 1,911 1,903 ------ ------
Corporate bonds
(maturity 4-12 months) 25,421 25,336 35,466 35,482
Medium & short-term notes
(maturity 12 months) 414 414 1,000 1,000
--- --- ----- -----
48,919 48,826 36,466 36,482
Less: cash equivalents (988) (988) (27,467) (27,483)
----- ----- -------- --------
Marketable securities $47,931 $47,838 $ 8,999 $ 8,999
======= ======= ======= =======
32
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(e) Property and Equipment
The Company provides for depreciation and amortization of property and
equipment using the straight-line method by charges to operations in amounts to
allocate the cost of the property and equipment over their estimated useful
lives. The cost of property and equipment and their useful lives are summarized
as follows:
December 31,
------------
Estimated
Asset Classification Useful Life 2001 2000
-------------------- ----------- ---- ----
Office equipment and software 2-5 Years $24,018 $20,965
Rental and demonstration equipment 2-3 Years 316 316
Furniture and fixtures 5 Years 1,566 1,210
Leasehold improvements Life of Lease 1,707 711
----- ---
27,607 23,202
Less: Accumulated depreciation and amortization 21,160 17,339
------ ------
$ 6,447 $ 5,863
======= =======
(f) Long-lived assets
The Company assesses the realizability of its long-lived assets in
accordance with SFAS No. 121, Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of. To date, the Company has not
identified any impairments requiring adjustment.
(g) Research and Development and Software Development Costs
Research and development costs have been charged to operations as
incurred. Statement of Financial Accounting Standards (SFAS) No. 86, Accounting
for the Costs of Computer Software to Be Leased, Sold, or Otherwise Marketed,
requires the capitalization of certain computer software development costs
incurred after technological feasibility is established. Once technological
feasibility of a software product has been established, the additional
development costs incurred to bring the product to a commercially acceptable
level are not significant. Accordingly, all such software development costs have
been expensed.
33
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(h) Foreign Currency Translation
The Company considers the functional currency of its foreign
subsidiaries to be the local currency and, accordingly, their financial
information is translated into U.S. dollars using exchange rates in effect at
period-end for assets and liabilities and average exchange rates during each
reporting period for the results of operations. Adjustments resulting from
translation of foreign subsidiaries' financial statements are included as a
separate component of stockholders' equity. Translation gains and losses in
2001, 2000 and 1999 were not material.
(i) Earnings Per Share
Basic earnings per share is computed using the weighted average number
of common shares outstanding. Diluted earnings per share is computed using the
weighted average number of common shares outstanding and the effect of dilutive
common stock equivalents using the treasury stock method.
A reconciliation of basic and diluted weighted average shares
outstanding is as follows:
For the years ended December 31,
2001 2000 1999
---- ---- ----
Basic weighted average shares outstanding 12,636 13,236 13,531
Effect of dilutive common stock equivalents - 709 634
- --- ---
Diluted weighted average shares outstanding 12,636 13,945 14,165
====== ====== ======
In 2001, 2000 and 1999, 2,386, 1,509 and 1,657 common stock equivalent
shares, respectively, were not included in the diluted weighted average shares
outstanding, as their effect would be antidilutive.
(j) Off-Balance Sheet and Concentration of Credit Risk
The Company had no significant off-balance-sheet concentrations such as
foreign exchange contracts, options contracts of other foreign hedging
arrangements. Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
marketable securities and trade accounts receivable. The Company places its cash
investments in several financial institutions. The Company has
34
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(j) Off-Balance Sheet and Concentration of Credit Risk (continued)
not experienced significant losses related to receivables from any individual
customers or groups of customers in any specific industry or by geographic area.
The Company had two customers as of December 31, 2001 with amounts due of
approximately 14% and 10% of total accounts receivable and one customer as of
December 31, 2000 with an amount due of approximately 11% of total accounts
receivable.
(k) Fair Value of Financial Instruments
The Company's financial instruments consist of cash equivalents,
marketable securities, accounts receivable and accounts payable. The estimated
fair values of these financial instruments approximate their carrying value at
December 31, 2001 and 2000 due to the short-term nature of these instruments.
(l) Comprehensive Income (Loss)
SFAS No. 130, Reporting Comprehensive Income, requires disclosure of
all components of comprehensive income (loss) on an annual and interim basis.
The Company has disclosed comprehensive income (loss) for all periods presented
in the accompanying consolidated statements of stockholders' equity.
(m) New Accounting Standards
SFAS No. 141, Business Combinations, issued in July 2001, requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. The adoption of SFAS No. 141 did not have any impact on the
Company's consolidated financial statements.
SFAS No. 142, Goodwill and Other Intangible Assets, was
issued in July 2001. Under SFAS No. 142, goodwill is no longer
subject to amortization over its estimated useful life. Rather,
goodwill is subject to at least an annual assessment for impairment
by applying a
35
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(m) New Accounting Standards (continued)
fair-value-based test. Also under SFAS No. 142, intangible assets acquired in
conjunction with a business combination should be separately recognized if the
benefit of the intangible asset is obtained through contractual or other legal
rights, or if the intangible asset can be sold, transferred, licensed, rented or
exchanged, regardless of the acquirer's intent to do so. Intangible assets will
continue to be amortized over their respective useful lives under SFAS No. 142.
SFAS No. 142 became effective on January 1, 2001 and the adoption of SFAS No.
142 did not have a material impact on the Company's consolidated financial
statements.
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to (a) all entities
and (b) legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and/or the normal
operation of a long-lived asset, except for certain obligations of lessees. SFAS
No. 143 amends SFAS No. 19, Financial Accounting and Reporting by Oil and Gas
Producing Companies, and is effective for financial statements issued for fiscal
years beginning after June 15, 2002. The Company does not anticipate that the
adoption of SFAS No. 143 will have a material impact on its financial
statements.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 supersedes FASB SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, but retains
SFAS No. 121's fundamental provisions for (a) recognition/measurement of
impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 also supersedes the
accounting/reporting provisions of Accounting Principles Board (APB) Opinion No.
30, Reporting the Results of Operations -- Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for segments of a business to be disposed of but
retains APB No. 30's requirement to report discontinued operations separately
from continuing operations and extends that reporting to a component of an
entity that either has been disposed of or is classified as held for sale. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years. The Company does not anticipate that
the adoption of SFAS No. 144 will have a material impact on its financial
statements.
36
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
In November 2001, the Emerging Issues Task Force issued Topic No. D-103
relating to the accounting for reimbursement received for out-of-pocket expense.
In accordance with Topic D-103, reimbursements received for out-of-pocket
expenses incurred should be characterized as revenue in the statement of
operations. The Company has historically accounted for reimbursements received
for out-of-pocket expenses as a reduction to cost of service revenues in the
statement of operations to offset the costs incurred. The Company will adopt
Topic D-103 in financial reporting periods beginning after December 31, 2001 and
comparative financial statements for prior periods will be classified to comply
with the guidance in Topic D-103. During years ended December 31, 2001, 2000 and
1999, reimbursed out-of-pocket expenses totaled $688,000, $937,000 and $612,000
respectively. Accordingly, if the provision of Topic No. D-103 had been adopted
during these years ended, service revenues and cost of service revenues would
have been higher by the amounts noted.
(2) Accrued Expenses
Accrued expenses consist of the following:
December 31
-----------
2001 2000
---- ----
Payroll and payroll related $4,410 $3,951
Income taxes 1,346 1,288
Sales and property taxes 489 829
Restructuring costs 750 -----
Other 1,648 2,024
----- -----
$8,643 $8,092
====== ======
(3) Restructuring Costs
During 2001 in response to weak economic conditions in North America,
the Company incurred a restructuring charge of approximately $2.6 million,
related to reductions in its workforce, costs associated with excess leased
office space as a result of the workforce reductions and the departure of its
previous president and chief executive officer.
The components of the restructuring costs are as follows (in
thousands):
Severance and related costs $2,164
Excess leased office space 259
Stock-based compensation 200
------
$2,623
======
37
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(3) Restructuring Costs (continued)
The severance and related costs were due to reductions in headcount and
departure of the previous President and Chief Executive Officer. The Company
terminated 97 employees or 18% of its then workforce. These reductions affected
all departments within the organization.
The excess leased office space component of the restructuring charge
consisted of idle lease space as a result of the headcount reduction. This
amount was determined using current market value and taking into account, if
applicable, the ability to sublease any of the idle space.
The stock-based compensation charge related to an extension of the
period to exercise certain options granted to the Company's previous president
and chief executive officer.
A summary of the restructuring accrual activity is as follows:
Twelve Months Ended
December 31,
2001
Restructuring reserve:
Balance, beginning of period $ -
Provision 2,767
Revision of estimate (144)
Severance payments 1,774)
Facilities related payments (83)
Other payments (16)
------
Balance, end of period $ 750
=====
It is expected that the accrued restructuring costs will be completely
paid by September 2002.
(4) 401(k) Plan
The Company maintains the Davox Corporation 401(k) Retirement Plan (the
Plan), which is a deferred contribution plan that covers all full-time employees
over 21 years of age. Employees may join the Plan in the next quarterly
enrollment period following their date of hire. The participants may make pretax
deferred contributions to the Plan of up to 15% of the annual compensation, as
defined. Contributions to the Plan by the Company are discretionary and are
determined by the Board of Directors. The Company made
38
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(4) 401(k) Plan (continued)
discretionary contributions to the Plan of approximately $925, $917 and $777 for
the years ended December 31, 2001, 2000 and 1999, respectively.
(5) Income Taxes
The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes. Under the liability
method, a deferred tax asset or liability is determined based on the difference
between the financial statement and tax bases of assets and liabilities, as
measured by the enacted tax rates assumed to be in effect when these differences
are expected to reverse.
The components of the provision for income taxes consist of the
following:
For the Years Ended December 31,
2001 2000 1999
---- ---- ----
Current:
Federal $200 $1,281 $1,270
State 59 337 1,108
Foreign 210 - -
--- - -
Total current 469 1,618 2,378
--- ----- -----
Deferred:
Federal (290) 379 (230)
State (53) 84 (30)
Foreign - - -
- - -
Total deferred (343) 463 (260)
----- --- -----
$126 $2,081 $2,118
==== ====== ======
The provision for income taxes for the years ended December 31, 2001,
2000 and 1999 does not reflect approximately $274, $1,649 and $438 respectively,
of tax benefits included in additional paid-in capital related to disqualifying
dispositions and the exercise of non-qualified stock options.
39
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(5) Income Taxes (continued)
The approximate income tax effect of each type of temporary difference
comprising the deferred tax asset is approximately as follows:
December 31,
2001 2000
---- ----
Net operating loss carryforwards $ - $ 152
Depreciation 1,447 1,472
Tax credit carryforwards 2,980 2,445
Other temporary differences 4,096 3,511
------- ------
8,523 7,580
Less: Valuation allowance (2,350) (1,750)
------- ------
$ 6,173 $5,830
======= ======
Approximately $3,791 and $3,511 of the deferred tax assets are
classified as current at December 31, 2001 and 2000, respectively. Approximately
$2,382 and $2,319 of the deferred tax assets are classified as long-term and
included in other assets as of December 31, 2001 and 2000, respectively.
At December 31, 2001, the Company has available tax credit
carryforwards of approximately $2,980, which begin to expire in fiscal year
2005.
The Company records a valuation allowance against its deferred tax
asset to the extent management believes it is more likely than not that the
asset will not be realized. As of December 31, 2001, the Company has provided a
valuation allowance against certain of the Company's tax credit carryforwards
due to the uncertainty of their realizability as a result of limitations on
their utilization in accordance with certain tax laws and regulations.
40
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(5) Income Taxes (continued)
A reconciliation of the federal statutory tax rate to the Company's
effective tax rate is as follows:
Years Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Federal statutory tax rate (34.0%) 34.0% 34.0%
State income taxes, net of federal
income tax benefit 3.2 2.5 5.1
Change in valuation
allowance/utilization of net
operating loss and tax credit carryforwards 40.8 (3.7) (24.9)
Foreign sales corporation benefit - (2.8) (1.7)
Other - 1.0 2.5
- --- ---
10.0% 31.0% 15.0%
===== ===== =====
(6) Commitments and Contingencies
(a) Operating Lease Commitments
The Company leases its facilities and sales offices under operating
leases that expire at various dates through September 2008. Pursuant to the
lease agreements, the Company is responsible for associated maintenance costs
and real estate taxes. Total rental expense for all operating leases for the
years ended December 31, 2001, 2000 and 1999 amounted to approximately $2,703,
$2,203 and $1,720, respectively.
Future minimum lease payments, including those related to the CellIt
acquisition (See Note 11), at December 31, 2001 are approximately as follows:
Years Ending December 31, Amount
------------------------- ---------
2002 $ 3,142
2003 3,041
2004 2,623
2005 1,590
2006 1,471
Thereafter 2,290
-----
$14,157
=======
41
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(6) Commitments and Contingencies (continued)
(b) Litigation
In 1998, a customer of the Company was sued for patent infringement by
Manufacturing Administration and Management Systems, Inc. (MAMS) alleging that
the customer's use of a computer driven automated dialer infringes MAMS's
patent. Under the Company's contract with this customer, the Company is
obligated to defend and indemnify such customer against any such claims. In the
third quarter of 1998, the Company sued MAMS in federal court in the Eastern
District of New York in an action entitled "Davox Corporation v. Manufacturing
Administration and Management Systems, Inc.". In the lawsuit, the Company is
seeking a declaratory judgment that its products do not infringe the MAMS patent
or, in the alternative, that the MAMS patent is invalid. The Company believes
that MAMS's assertions of patent infringement are without merit, and the Company
will vigorously pursue this action against MAMS. While the outcome of this
litigation cannot be predicted with certainty at this time, management does not
believe that the outcome will have a material adverse effect on the Company's
business, financial condition or results of operations.
The Company is, from time to time, subject to claims arising in the
ordinary course of business. While the outcome of the claims cannot be predicted
with certainty, management does not expect these matters to have a material
adverse effect on the consolidated results of operations and financial condition
of the Company.
(7) Stockholders' Equity
(a) Recoupment of Acquisition Escrow Shares
In May 1998, the Company acquired AnswerSoft, Inc. (AnswerSoft), a
Richardson, Texas, developer of inbound call center software solutions, in
exchange for the issuance of an aggregate of 2,384 shares of Davox common stock,
including shares that were subject to outstanding AnswerSoft stock options and
warrants. In December 2000, 119 shares of the Company's common stock held in
escrow in connection with the acquisition were returned to the Company in
settlement of a claim against AnswerSoft. The returned escrow shares were
recorded in the accompanying consolidated statement of stockholders' equity at
the same price per share used to account for the acquisition.
42
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(b) 1986 Stock Plan
The Company's Amended and Restated 1986 Stock Plan (the 1986 Plan),
administered by the Board of Directors, authorized the issuance of a maximum of
3,696 shares of common stock for the exercise of options in connection with
awards or direct purchases of stock. The options granted vested over a four-year
period and expire ten years from the date of grant. As of December 31, 2001,
there were options to purchase 263 shares of common stock outstanding and fully
vested under this 1986 Plan. The 1986 Plan terminated pursuant to its terms in
September 1996
(c) 1988 Non-employee Director Stock Option Plan
The Company's Amended and Restated 1988 Non-employee Director Stock
Option Plan (the 1988 Plan), as amended, is administered by the Board of
Directors and authorizes the issuance of a maximum of 600 shares of common stock
for the exercise of options. The 1988 Plan provides for the automatic grant of
options to purchase 40 shares of common stock to each newly elected non-employee
director and additional option grants of 15 shares of common stock per biennial
anniversary of election to the Board of Directors. Options granted under the
1988 Plan vest 25% per year beginning one year from the date of grant and expire
five years from the date of grant. As of December 31, 2001, there were options
to purchase 130 shares of common stock outstanding and 246 options available for
future grants under the 1988 Plan.
(d) 1994 Stock Plan
In 1994, AnswerSoft's Board of Directors approved the adoption of an
employee stock option plan (the AnswerSoft Plan), as amended, which authorized
the grant of options to purchase up to 4,200 shares of AnswerSoft's common
stock. All outstanding options became immediately and fully vested upon
completion of the merger with Davox. The Company no longer grants options under
the AnswerSoft Plan. As of December 31, 2001, there were options to purchase 0.6
shares of common stock outstanding under the AnswerSoft Plan.
(e) 1996 Stock Plan
The Company's 1996 Stock Plan as amended (the 1996 Plan), administered by the
Board of Directors, authorizes the issuance of a maximum of 2,700 shares of
common stock for the exercise of options in connection with awards or direct
purchases of stock. Options grantedunder the 1996 Plan may be either
nonstatutory stock options or options intended to
43
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(e) 1996 Stock Plan (continued)
constitute Incentive stock options under the Internal Revenue Code.
Stock options may be granted to employees, officers, employee-directors or
consultants of the Company and are exercisable in such installments as the Board
of Directors may specify. The options currently vest over a four-year period. As
of December 31, 2001, there were options to purchase 2,671 shares of common
stock outstanding and 389 options available for future grants under the 1996
Plan.
(f) 2000 Stock Option Plan
exercise of non-statutory stock options in connection with awards or direct
purchases of stock. Stock options may be granted to employees or consultants of
the Company and are exercisable in such installments as the Board of Directors
may specify. The options currently vest over a four-year period. As of
December 31, 2001, there were options to purchase 1,110 shares of common stock
outstanding and 382 options available for future grants under the 2000 Plan.
(g) 2001 Stock Option Plan
In November of 2001, the Board of Directors approved the 2001
Stock Option Plan (the 2001 Plan) which authorized the maximum issuance of
20,000 shares of common stock for exercise of option. Options granted under the
2001 plan vest 25% per year beginning one year from the date of grant and expire
five years from date of grant. As of December 31, 2001 there were options to
purchase 20 shares of common stock outstanding and no options available for
future grants under the 2001 plan.
44
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(h) Stock Option Plans Summary
The following is a summary of the stock option activity for all plans
for the years ended December 31, 2001, 2000 and 1999:
Weighted
Number of Exercise Average
Options Price Range Exercise Price
--------- ----------- --------------
Outstanding, December 31, 1998 2,536 $0.77 - $34.13 $16.33
Granted 931 8.50 - 21.75 11.87
Exercised (172) 0.77 - 20.75 2.95
Canceled (246) 0.77 - 34.13 16.23
----- ------------- ------
Outstanding, December 31, 1999 3,049 0.77 - 34.13 15.73
Granted 1,814 6.50 - 29.50 13.24
Exercised (405) 1.33 - 34.13 13.81
Canceled (805) 6.50 - 34.13 18.30
----- ------------- ------
Outstanding, December 31, 2000 3,653 0.77 - 34.13 14.14
Granted 1,617 7.67 - 10.30 9.67
Exercised (236) 1.38 - 9.56 2.91
Canceled (860) 0.77 - 34.13 13.72
----- ------------- -------
Outstanding, December 31, 2001 4,174 $1.33 - $34.13 $13.13
===== ============== =======
Exercisable, December 31, 2001 1,855 $1.33 - $34.13 $15.79
===== ============== =======
Exercisable, December 31, 2000 1,518 $0.77 - $34.13 $15.94
===== ============== =======
Exercisable, December 31, 1999 1,410 $0.77 - $34.13 $14.88
===== ============== =======
The range of exercise prices for options outstanding and options exercisable at
December 31, 2001 are as follows:
Options Outstanding Options Exercisable
Remaining Number Weighted Number Weighted Average
Range of Contractual Life Of Average Exercise of Exercise Price
xercise Prices (in years) Options Price Options
-------------------------------------------------------------------------------------------------------
$ 1.33 - $ 1.67 2.34 30 $ 1.65 30 $ 1.65
2.01 - 2.33 2.74 153 2.33 153 2.33
3.25 - 4.75 2.42 31 3.63 31 3.63
6.17 - 9.10 7.10 1,014 7.69 456 7.87
9.26 - 13.06 9.18 1,633 9.85 170 10.40
14.63 - 21.75 6.72 466 17.05 352 17.22
24.33 - 34.13 5.93 847 26.44 663 26.19
--- ----- --- -----
4,174 $13.13 1,855 $15.79
===== ====== ===== ======
45
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(i) Employee Stock Purchase Plan
The Company has the 1991 Employee Stock Purchase Plan (the Purchase
Plan) under which a maximum of 0.8 shares of common stock may be purchased by
eligible employees on an annual basis. Substantially all full-time employees of
the Company are eligible to participate in the Purchase Plan. Shares are
purchased through accumulation of payroll deductions (of not less than 0.5% nor
more than 10% of compensation, as defined) for the number of whole shares,
determined by dividing the balance in the employee's account by the purchase
price per share, which is equal to 85% of the fair market value of the common
stock, as defined. During 2001, 2000 and 1999, approximately 45, 20 and 66
shares, respectively, were purchased under the Purchase Plan.
(j) Accounting for Stock-Based Compensation
The Company accounts for its employee stock-based compensation under
APB Opinion No. 25, Accounting for Stock Issued to Employees, and FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25. In accordance with SFAS
No. 123, Accounting for Stock-Based Compensation, the Company has adopted the
disclosure-only alternative under SFAS No. 123, which requires the disclosure
of the pro forma effects on earnings and earnings per share as if the
fair-value based method had been adopted, as well as certain other information.
The Company has computed the pro forma disclosures required under SFAS
No. 123 for all stock options granted and shares issued under the Purchase Plan
as of December 31, 2001, 2000 and 1999 using the Black-Scholes option pricing
model prescribed by SFAS No. 123.
46
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(j) Accounting for Stock-Based Compensation (continued)
The assumptions used and the weighted average information for the years
ended December 31, 2001, 2000 and 1999 are as follows:
Years ended December 31,
2001 2000 1999
---- ---- ----
Risk-free interest rates 3.91%-4.93% 5.17%-6.69% 4.60%-6.19%
Expected dividend yield --- --- ---
Expected lives 5.71 years 5.27 years 5.28 years
Expected volatility 73% 69% 68%
Weighted average grant date fair value of
options granted during the period $6.46 $8.49 $7.35
Weighted average remaining contractual
life of options outstanding 7.41 years 7.78 years 7.51 years
The effect of applying SFAS No. 123 would be as follows (per share amounts not
in thousands):
Years ended December 31,
2001 2000 1999
---- ---- ----
Net income (loss) as reported $ (1,344) $ 4,633 $ 12,005
======== ======== ========
Pro forma net income (loss) $ (7,797) $(4,412) $ 5,994
======== ======== ========
Earnings (loss) per share as reported:
Basic $ (0.11) $ 0.35 $ 0.89
======== ======= ========
Diluted $ (0.11) $ 0.33 $ 0.85
======== ======= ========
Pro forma earnings (loss) per share:
Basic $ (0.62) $ (0.33) $ 0.44
======== ======= ========
Diluted $ (0.62) $ (0.33) $ 0.42
======== ======= ========
47
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(k) Treasury Stock
The treasury balance reflects shares of the Company's common stock that
were repurchased by the Company and recorded at cost in Stockholders' Equity,
the majority of which were purchased as part of the repurchase program that was
approved by the Board of Directors in January 1999 and amended in October 2000.
Shares of common stock issued in conjunction with stock option
exercises are issued out of the Company's treasury account. The treasury balance
and associated cost is relieved using the FIFO method, with the difference
between the treasury cost of the shares issued and the price paid to the Company
for the value of the options charged to additional paid in capital.
(8) Segment and Geographic Information
In accordance with SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, the Company views its operations and manages
its business as principally one segment, software sales and associated services.
As a result, the financial information disclosed herein represents all of the
material financial information related to the Company's principal operating
segment.
The Company has two primary product lines: its Ensemble Customer
Contact Suite and Unison Call Management System. The following table represents
the Company's percentage of product revenue by product line for fiscal years
2001, 2000 and 1999:
2001 2000 1999
---- ---- ----
Unison 79.9% 89.5% 88.3%
Ensemble 15.3 4.7 -
Other 4.8 5.8 11.7
----- ----- ------
Total 100.0% 100.0% 100.0%
====== ====== ======
Product revenue from international sources was approximately $15,300,
$8,400 and $10,800 in 2001, 2000 and 1999, respectively. The Company's revenue
from international sources was primarily generated from customers located in
Europe, and Asia/Pacific. Substantially all of the Company's product sales for
the years ended December 31, 2001, 2000 and 1999 were shipped from its
headquarters located in the United States.
48
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(8) Segment and Geographic Information (continued)
The following table represents the percentage of product revenue by
customer's geographic region for fiscal years 2001, 2000 and 1999:
2001 2000 1999
---- ---- ----
United States 64.8% 82.2% 80.0%
UK 17.4 3.5 16.4%
Other Europe 3.1 9.1 -
Asia/Pacific 13.1 3.1 2.7
Other 1.6 2.1 0.9
--- ---- ----
Total 100.0% 100.0% 100.0%
====== ====== ======
Substantially all of the Company's assets are located in the United
States.
(9) Significant Customers
No single customer represented more than 10% of total revenue in 2001
and 2000. Revenue from the Company's largest single customer in 1999 was 12% of
total revenue.
49
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(10) Quarterly Results of Operations (Unaudited)
The following table presents a condensed summary of quarterly results of
operations for the years ended December 31, 2001 and 2000 (per share amounts not
in thousands):
Year Ended December 31, 2001
----------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Total revenue $24,697 $25,583 $22,142 $21,837
======= ======= ======= =======
Gross profit $15,654 $16,604 $13,724 $14,348
======= ======= ======= =======
Net income (loss) $ 332 $ 610 ($2,688) $ 403
======= ======= ======= =======
Earnings (loss) per share:
Basic $ 0.03 $ 0.05 ($0.21) $ 0.03
======= ======= ======= =======
Diluted $ 0.03 $ 0.05 ($0.21) $ 0.03
======= ======= ======= =======
Year Ended December 31, 2000
----------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Total revenue $26,383 $21,573 $22,479 $23,821
======= ======= ======= =======
Gross profit $18,576 $13,835 $13,960 $15,068
======= ======= ======= =======
Net income $ 3,607 $ 383 $ 231 $ 412
======= ======= ======= =======
Earnings per share:
Basic $ 0.27 $ 0.03 $ 0.02 $ 0.03
======= ======= ======= =======
Diluted $ 0.25 $ 0.03 $ 0.02 $ 0.03
======= ======= ======= =======
50
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Continued)
(Amounts In Thousands)
(11) Other items (Unaudited)
Subsequent to December 31, 2001, the Company announced that it had
entered into an Agreement and Plan of Merger by and among the Company, AP
Acquisition Corporation (AP), a wholly owned subsidiary of the Company, and
CellIt, Inc. (CellIt), whereby the parties agreed that AP would be merged with
and into CellIt, with CellIt becoming a wholly owned subsidiary of the Company
on January 14, 2002 and in exchange for all of CellIt's outstanding preferred
and common stock, the Company paid approximately $10.2 million in cash and
issued 544 shares of its common stock. The Company is now doing business as
Concerto Software and, upon shareholder approval, will become Concerto Software,
Inc.
51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Davox Corporation:
We have audited, in accordance with auditing standards generally
accepted in the United States, the consolidated financial statements of Davox
Corporation and subsidiaries included in this Form 10-K and have issued our
report thereon dated January 18, 2002. Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in the index is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and regulations and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and in our opinion, fairly
states, in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 18, 2002
52
DAVOX CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Amounts In Thousands)
Balance at Charged to Deductions Balance at
Beginning Costs and From End of
of Year Expenses Reserves Year
------- -------- -------- ----
Accounts Receivable Reserves:
Fiscal 2001 $2,255 $1,387 $1,318 $2,324
Fiscal 2000 $1,631 $1,018 $394 $2,255
Fiscal 1999 $1,175 $958 $502 $1,631
53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
Directors
The information concerning directors of the Company required under
this item is incorporated herein by reference to the Company's definitive proxy
statement pursuant to Regulation 14A, to be filed with the Commission not later
than 120 days after the close of the Company's 2001 fiscal year ended December
31, 2001 under the heading "Election of Directors."
Executive Officers
See Item 4A.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the close of
the Company's 2001 fiscal year ended December 31, 2001, under the heading
"Compensation and Other Information Concerning Directors and Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the close of
the Company's 2001 fiscal year ended December 31, 2001, under the headings
"Management and Principal Stock Holders of Davox" and "Election of Directors."
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS
------------------------------------------------
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission within 120 days after the close of the
Company's 2001 fiscal year ended December 31, 2001, under the headings
"Management and Principal Holders of Davox" and "Election of Directors."
54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
------------------------------------------------------------------------
(a) Financial Statements and Financial Statement Schedules
1. Financial Statements
The following financial information is incorporated in Item 8 above:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The following financial information is incorporated in Item 8 above:
Report of Independent Public Accountants on Financial Statement
Schedule II - Valuation and Qualifying Accounts.
All other schedules are not submitted because they are not applicable,
not required or because the information is included in the Consolidated
Financial Statements or Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K
The Company did not file any Current Report on Form 8-K during the
fourth quarter of the fiscal year ended December 31, 2001.
55
(c) List of Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
3.01(2) Restated Certificate of Incorporation of the
Registrant, as amended.
3.02(2) By-laws of the Registrant, as amended.
4.01(2) Description of Capital Stock contained in the Registrant's
Restated Certificate of Incorporation, as amended, filed
as Exhibit 3.01.
10.01(2) Amended and Restated 1988 Non-Employee Director Stock Option
Plan of the Registrant.
10.02(2) Form of Option Agreement under the Registrant's 1988
Non-Employee Director Stock Option Plan.
10.03(2) 1991 Employee Stock Purchase Plan, as amended.
10.04(1) 1996 Stock Plan of the Registrant, as amended.
10.05(1) Form of Incentive Stock Option Agreement under the
Registrant's 1996 Stock Plan.
10.06(1) Form of Non-Qualified Stock Option Agreement under the
Registrant's 1996 Stock Plan.
10.07(7) 2000 Stock Option Plan of the Registrant.
10.08(7) Form of Non-Qualified Stock Option Agreement under the
Registrant's 2000 Stock Option Plan.
10.09(8) 2001 Stock Option Plan of the Registrant.
10.10(8) Form of Non-Qualified Stock Option Agreement under the
Registrant's 2001 Stock Option Plan.
10.11(7) Executive Compensation Plan.
10.12(2) Lease agreement between Registrant and Michelson Farm Westford
Technology Park VI Limited Partnership for Westford
Technology Park Building Six.
10.13(4) First Amendment to Lease by and between the Registrant and
Michaelson Farm - Westford Technology Park Trust VI
Limited
56
Partnership for Westford Technology Park Building Six.
10.14 Lease agreement between CellIt, Inc., a wholly owned
subsidiary of Registrant and Codina West Dade Development
Corp. No. 4 for Westside Plaza II, 8300 Northwest 33/rd/
Street, Miami, FL 33122.
10.15 Second Amendment to Lease by and between CellIt, Inc., a
wholly owned subsidiary of the Registrant and Prudential
Insurance Company of America for Westside Plaza II, 8300
Northwest 33/rd/ Street, Miami, FL 33122.
10.16 Third Amendment to Lease by and between CellIt, Inc., a wholly
owned subsidiary of the Registrant and Prudential
Insurance Company of America for Westside Plaza II, 8300
Northwest 33/rd/ Street, Miami, FL 33122.
10.17 Sublease Agreement by and between CellIt, Inc., a wholly owned
subsidiary of Registrant and Velocitel, Inc. for 8200
square feet of Westside Plaza II, 8300 Northwest 33/rd/
Street, Miami, FL 33122.
10.18(4)(5) Third-party service provider agreement between the Registrant
and Grumman Systems Support Corporation.
10.19(4)(5) OEM Agreement by and between the Registrant and Kana
Communications, Inc. dated as of November 16, 1999.
10.20(7) Severance Agreement for David M. Sample, President and Chief
Executive Officer.
10.21(7) Severance Agreement for Jeffrey E. Anderholm, Executive Vice
President, Product Group.
10.22(7) Severance Agreement for Anthony A. Colangelo, Executive Vice
President, Worldwide Sales and International Operations.
10.23(4) Severance Agreement for Mark Donovan, Senior Vice President,
Operations & Customer Service.
10.24(8) Severance Agreement for James D. Foy, President and Chief
Executive Officer.
10.25(8) Severance Agreement and Release for David M. Sample, former
President and Chief Executive Officer.
10.26 Employment Agreement for Alexander Tellez, Executive Vice
President, Research and Development.
10.27 Secured Promissory Note and Assignment Agreement for Alexander
Tellez, Executive Vice President, Research and Development.
57
10.28 Severance Agreement for Ralph S. Breslauer, Executive Vice
President, Sales and Marketing.
10.29 Severance Agreement for Kristina Lengyel, Vice President,
Professional Services.
10.30 Severance Agreement for Michael J. Provenzano III, Vice
President, Finance and Chief Financial Officer.
10.31(6) Transition and Retention Agreement for Alphonse M. Lucchese,
Chairman.
10.32 Amended to Transition and Retention Agreement for Alphonse M.
Lucchese, Chairman.
21. Subsidiaries of the Registrant.
23. Consent of Arthur Andersen LLP.
(1) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1996.
(2) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1997.
(3) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1998.
(4) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1999.
(5) Confidential treatment granted. Redacted version previously filed.
(6) Previously filed as an exhibit to Form 10-Q for the quarter ended September
30, 2000.
(7) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 2000.
(8) Previously filed as an exhibit to Form 10-Q for the quarter ended September
30, 2001.
58
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, in the Town of Westford,
Commonwealth of Massachusetts, on the 12 day of March 2002.
Davox Corporation
By: /s/ James D. Foy
-------------------
James D. Foy
Chief Executive Officer
and President
POWER OF ATTORNEY
Each person whose signature appears below this Annual Report on Form 10-K
hereby constitutes and appoints James D. Foy and Mike J. Provenzano, III and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead in any and all
capacities (until revoked in writing) to sign all amendments (including
post-effective amendments) to this Annual Report on Form 10-K of Davox
Corporation, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary fully to all intents and purposes as he might or could do in person
thereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute, may lawfully do or cause to be
done by virtue hereof.
59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
--------- ----- ----
/s/ James D. Foy Chief Executive
------------------ Officer and President
James D. Foy (Principal Executive
Officer) March 12, 2002
/s/ Michael J. Provenzano III Vice President of
----------------------------- Finance and Chief
Michael J. Provenzano III Financial Officer
(Principal Financial
Officer) March 12, 2002
/s/ Alphonse M. Lucchese Director March 12, 2002
------------------------
Alphonse M. Lucchese
/s/ Michael D. Kaufman Director March 12, 2002
----------------------
Michael D. Kaufman
/s/ R. Scott Asen Director March 12, 2002
-----------------
R. Scott Asen
/s/ Peter Gyenes Director March 12, 2002
----------------
Peter Gyenes
60
Exhibit 10.14
LEASE AGREEMENT
Between
CODINA WEST DADE DEVELOPMENT CORP., NO. 4,
a Florida corporation,
as Landlord
and
CELLIT, INC.,
a Florida corporation
as Tenant
Dated: February 23, 1999
TABLE OF CONTENTS
LEASE AGREEMENT
No. Description Page
--- ----------- ----
1. Premises ....................................................... 1
--------
2. Lease Term ..................................................... 1
----------
3. Base Rent ...................................................... 2
---------
4. Rent Payment ................................................... 3
------------
5. Late Charge .................................................... 3
-----------
6. Partial Payment ................................................ 3
---------------
7. Construction of this Agreement ................................. 3
------------------------------
8. Use of Premises ................................................ 3
---------------
9. Definitions .................................................... 4
-----------
10. Repairs By Landlord ............................................ 4
-------------------
11. Repairs By Tenant .............................................. 6
-----------------
12. Alterations and Improvements ................................... 7
----------------------------
13. Operating Expenses ............................................. 7
------------------
14. Landlord's Failure to Give Possession .......................... 12
-------------------------------------
15. Acceptance and Waiver .......................................... 12
---------------------
16. Signs .......................................................... 12
-----
17. Advertising .................................................... 13
-----------
18. Removal of Fixtures ............................................ 13
-------------------
19. Entering Premises .............................................. 13
-----------------
20. Services ....................................................... 13
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-i-
21. Indemnities .................................................... 15
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22. Tenant's Insurance; Waivers .................................... 15
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23. Governmental Requirements ...................................... 17
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24. Abandonment of Premises ........................................ 17
-----------------------
25. Assignment and Subletting ...................................... 17
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26. Default ........................................................ 19
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27. Remedies ....................................................... 19
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28. Destruction or Damage .......................................... 20
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29. Eminent Domain ................................................. 21
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30. Service of Notice .............................................. 21
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31. Mortgagee's Rights ............................................. 21
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32. Estoppel ....................................................... 22
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33. Attorney's Fees ................................................ 22
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34. Parking ........................................................ 23
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35. Storage ........................................................ 23
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36. Waste Disposal ................................................. 23
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37. Surrender of Premises .......................................... 23
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38. Cleaning Premises .............................................. 23
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39. No Estate In Land .............................................. 23
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40. Cumulative Rights .............................................. 23
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41. Paragraph Titles; Severability ................................. 24
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42. Damage or Theft of Personal Property ........................... 24
------------------------------------
43. Holding Over ................................................... 24
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44. Security Deposit ............................................... 24
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-ii-
45. Building Allowance and Tenant's Plans .......................... 25
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46. Rules and Regulations .......................................... 27
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47. Quiet Environment .............................................. 27
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48. Entire Agreement ............................................... 27
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49. Limitation of Liability ........................................ 27
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50. Submission of Agreement ........................................ 27
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51. Authority ...................................................... 27
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52. Relocation ..................................................... 27
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53. Broker Disclosure .............................................. 27
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54. Notices ........................................................ 28
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55. Force Majeure .................................................. 28
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56. Special Stipulations ........................................... 29
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57. Recapture Fee .................................................. 29
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58. Right of First Offer ........................................... 29
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59. Right to Setoff ................................................ 29
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60. Waiver of Landlord's Lien ...................................... 29
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-iii-
BASIC LEASE PROVISIONS
----------------------
The following is a summary of some of the Basic Provisions of the Lease. In
the event of any conflict between the terms of these Basic Lease Provisions and
the referenced Sections of the Lease, the referenced Sections of the Lease shall
control.
1. Building (See Section 1): Westside Plaza II
8300 Northwest 33(rd) Street
Miami, Florida 33122
2. Premises (See Section 1):
Suite: 200
Floor: Second Floor
Rentable Square Feet: 27,058
3. Term (See Section 2): Five (5) years + Six (6) months
4. Base Rent - Initial Term (See Sections 2 and 3):
Lease Year Rate Per Rentable Monthly
(in months) Square Foot of Premises Installment
--------------- ----------------------- -----------
Initial six (6) $ 0.00 $ 0.00
months of Term
7-18 $15.25 $34,386.21
19-30 $15.78 $35,581.27
31-42 $16.33 $36,821.43
43-54 $16.90 $38,106.68
55-66 $17.49 $39,437.04
-------------------------------------------------------
5. Tenant's Share (See Section 13): 25.67%
6. Security Deposit (See Section 44): $49,606.00 and a
$250,000.00 Letter of Credit
7. Landlord's Broker (See Section 53): Codina Realty Services, Inc.
Oncor International
Tenant's Broker (See Section 53): Cushman & Wakefield of
Florida, Inc.
8. Notice Address (See Section 54) Codina Real Estate
Management, Inc.
8323 N.W. 12th Street, Suite 115
Miami, Florida 33128
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called the "Lease") is made and entered
into this day of February, 1999, by and between CODINA WEST DADE
------
DEVELOPMENT CORP., No. 4, a Florida corporation (hereinafter called "Landlord");
and CELLIT, INC., a Florida corporation (hereinafter called "Tenant").
1. Premises. Landlord does hereby rent and lease to Tenant and Tenant does
--------
hereby rent and lease from Landlord, for general office purposes of a type
customary for first-class office buildings, the following described space
(hereinafter called the "Premises"):
27,058 rentable square feet of space consisting of the entire 2(nd) floor
of a four-story building (the "Building") located on the real property described
in Exhibit "A" attached hereto (the "Property"), said Premises to be located as
----------
shown by diagonal lines on the drawing attached hereto as Exhibit "A-1" and made
------------
a part hereof by reference. The Premises shall be prepared for Tenant's
occupancy in the manner and subject to the provisions of Exhibit "B" attached
----------
hereto and made a part of hereof. Landlord and Tenant agree that the number of
rentable square feet described above has been confirmed and conclusively agreed
upon by the parties.
2. Lease Term.
----------
(a) Tenant shall have and hold the Premises for a term ("Term")
commencing on the date (the "Commencement Date") the general contractor delivers
to Tenant a certificate of occupancy from the appropriate governmental authority
for the Premises completed in accordance with the plans for the "Tenant
Improvements," as defined in Section 45 below. Assuming the "Space Plans," as
defined in Section 45 below, are delivered to Landlord on or before February 26,
1999, Landlord confirms that the Commencement Date shall be not later than June
18, 1999, and shall terminate at midnight on the last day (the "Expiration
Date") of the sixty sixth (66(th)) full calendar month following the
Commencement Date, unless sooner terminated or extended as hereinafter provided.
Promptly following the Commencement Date, Landlord and Tenant shall enter into a
letter agreement in the form attached hereto as Exhibit "C", specifying the
----------
Commencement Date, the Expiration Date and the exact amount of Base Rent payable
hereunder for the first Lease Year (as defined in Section 4 below). The
Commencement Date shall be accelerated by the "Delay Period," as defined below.
Furthermore, if a certificate of occupancy for the Premises is not delivered on
or before June 30, 1999 (subject to extension by an amount of time equal to the
Delay Period and due to force majeure), Landlord agrees to reimburse Tenant for
its "Relocation Costs," as defined below. In addition, if a certificate of
occupancy for the Premises is not delivered on or before August 31, 1999
(subject to extension by an amount of time equal to the Delay Period and due to
force majeure), unless Landlord agrees to reimburse Tenant for its "Relocation
Costs," as defined below, Tenant may elect to terminate this Lease ("Termination
Option") in which case all amounts paid by Tenant hereunder shall be returned to
Tenant and the parties shall be released from any and all liability hereunder.
Tenant must notify Landlord of its intent to terminate this Lease within five
(5) business days after August 31, 1999 (subject to extension by an amount of
time equal to the Delay Period and due to force majeure); if Tenant fails to
notify Landlord within such five (5) business day period, then Tenant's right to
terminate this Lease under this Section 2 shall terminate and be of no further
force or effect. The term "Relocation Costs" shall mean actual documented: (i)
moving costs from temporary premises, if any (other than Tenant's current
location), to the Premises and (ii) relocation of systems (computer, telephones,
etc.) (not to exceed Thirty Thousand Dollars ($30,000.00) for (i) and (ii) in
the aggregate); (iii) reprinting of announcement notices (not to exceed One
Thousand ($1,000.00) Dollars); and (iv) the increased (holdover) rent commencing
August 31, 1999 that Tenant is obligated to pay (and, in fact pays) to its
landlord under its current lease with Koala Miami Realty Holding Co. which shall
not exceed Nine Thousand and 00/100 Dollars
($9,000.00), which amount shall be verified by delivery to Landlord of a
statement of current monthly rent obligation certified as true and correct by
the President of Tenant. Notwithstanding anything herein to the contrary, under
no circumstances whatsoever shall Landlord be liable for any payments to Tenant
in the event a certificate of occupancy for the Premises is delivered on or
before June 30, 1999.
(b) Tenant shall have the option to renew the Lease for one term of
five (5) years ("Option Term") pursuant to the terms and conditions of this
Lease. The Base Rent during the Option Term shall be as follows:
Rate Per Rentable
Option Term Square Foot of Monthly
Lease Year Premises Installment
----------- ----------------- -----------
1 $18.10 $40,812.48
2 $18.73 $42,233.03
3 $19.39 $43,721.22
4 $20.07 $45,254.51
5 $20.77 $46,832.89
----------------------------------------------
Notice ("Exercise Notice") of Tenant's exercise of its option must be in
writing and received by Landlord at least nine (9) months prior to the
expiration of the initial Term of this Lease. In the event Tenant does not
notify Landlord of Tenant's intent to renew the Lease at least nine (9) months
prior to the expiration of the initial Term, time being of the essence, this
option to renew shall terminate and be null and void. Furthermore, Tenant shall
not be entitled to exercise this option to renew or extend if there are any
uncured defaults under the Lease. Landlord and Tenant shall, at the request of
either party, enter into an amendment to this Lease evidencing the exercise of
the foregoing option.
(c) The Delay Period shall be equal to the sum of the following: (i)
the number of days after February 26, 1999 by which the Tenant delivers to
Landlord the Space Plans; (ii) delays due to, in Landlord's reasonable
discretion, Tenant's request to incorporate items or materials in the Tenant
Improvements that are not available by the time necessary to allow Landlord to
complete Tenant's Work by June 18, 1999 (Landlord will notify Tenant as soon as
reasonably possible upon Landlord's determination that certain items or
materials may not be available as required above); (iii) delays due to, in
Landlord's reasonable discretion, change orders requested by Tenant; and (iv)
delays incurred as a result of Tenant's interference with completion of the
Tenant Improvements due to Tenant working in the Premises as permitted by
Section 45(c). For example, assume that the general contractor delivers a
certificate of occupancy on July 15,1999 and that, but for the Delay Period, the
Commencement Date would be July 15, 1999. Assume also that the Space Plans were
delivered on February 26 and that change orders requested by Tenant created an
additional 10 days of delay. Accordingly, the Commencement Date would be June
29,1999 (July 15,1999 accelerated by the sum of [7 days (delay in delivering the
Space Plans) plus 10 days (delays due to change orders)].
3. Base Rent. Tenant shall pay to Landlord, at Codina Real Estate
---------
Management Inc., 8323 N.W. 12(th) Street, Suite 115, Miami, Florida 33128, or at
such other place as Landlord shall designate in writing to Tenant, annual base
rent ("Base Rent") in the amounts set forth in the Basic Lease Provisions. The
term "Lease Year", as used in the Basic Lease Provisions and throughout this
Lease, shall mean each and every consecutive twelve (12) month period during the
Term of this Lease, with the first such twelve (12) month period commencing on
the seventh (7(th)) full calendar month following the Commencement Date;
provided,
-2-
however, if the Commencement Date occurs other than on the first day of a
calendar month the first Lease Year shall be that partial month plus the first
full twelve (12) months thereafter.
4. Rent Payment.
------------
(a) The Base Rent for each Lease Year shall be payable in equal
monthly installments, due on the first day of each calendar month, in advance,
in legal tender of the United States of America, without abatement, demand,
deduction or offset whatsoever, except as may be expressly provided in this
Lease. One full monthly installment of Base Rent shall be due and payable on the
date of execution of this Lease by Tenant for the first month's Base Rent and a
like monthly installment of Base Rent shall be due and payable on or before the
first day of each calendar month beginning with the eighth (8(th)) month
following the Commencement Date during the Term hereof; provided, that if the
Commencement Date should be a date other than the first day of a calendar
month, the monthly Base Rent installment paid on the date of execution-of this
Lease by Tenant shall be prorated to that partial calendar month, and the excess
shall be applied as a credit against the next monthly Base Rent installment.
Tenant shall pay, as Additional Rent, all other sums due from Tenant under this
Lease (the term "Rent", as used herein, means all Base Rent, Additional Rent and
all other amounts payable hereunder from Tenant to Landlord). Base Rent (but not
Additional Rent and other sums due hereunder) for the first six (6) calendar
months after the Commencement Date shall be permanently abated.
(b) Tenant shall pay, in addition to the Rent due hereunder, all sales
and/or use tax assessed against the Rent stated herein by all governmental
authorities, even though the taxing statute or ordinance may purport to impose
such sales tax against the Landlord. The payment of sales tax shall be made by
Tenant to Landlord on a monthly basis, concurrently with payment of the Base
Rent.
5. Late Charge. Other remedies for non-payment of Rent notwithstanding, if
-----------
any monthly installment of Base Rent or Additional Rent is not received by
Landlord on or before the date due, or if any payment due Landlord by Tenant
which does not have a scheduled due date is not received by Landlord on or
before the fifth (5(th)) day following the date Tenant was invoiced. interest
shall accrue from the date past due until paid at the lower of eighteen percent
(18%) per annum or the highest rate permitted by applicable law ("Default
Rate").
6. Partial Payment. No payment by Tenant or acceptance by Landlord of an
---------------
amount less than the Rent herein stipulated shall be deemed a waiver of any
other Rent due. No partial payment or endorsement on any check or any letter
accompanying such payment of Rent shall be deemed an accord and satisfaction,
but Landlord may accept such payment without prejudice to Landlord's right to
collect the balance of any Rent due under the terms of this Lease or any late
charge assessed against Tenant hereunder.
7. Construction of this Agreement. No failure of Landlord to exercise any
------------------------------
power given Landlord hereunder, or to insist upon strict compliance by Tenant of
his obligations hereunder, and no custom or practice of the parties at variance
with the terms hereof shall constitute a waiver of Landlord's right to demand
exact compliance with the terms hereof. Time is of the essence of this Lease.
8. Use of Premises.
---------------
(a) Tenant shall use and occupy the Premises for general office
purposes of a type customary for first-class office buildings and for no other
purpose. The Premises shall not be used for any illegal purpose, nor in
violation of any valid regulation of any governmental body, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises or the Building, nor in any
manner inconsistent with the first-class nature of the Building.
-3-
(b) Tenant shall not cause or permit the receipt, storage, use,
location or handling in the Premises nor cause or permit the receipt, storage,
use, location or handling on the Property (including the Building and Premises)
by any of its agents, employees, visitors, invitees, licensees or contractors
(collectively, "Tenant's Permitees") of any product, material or merchandise
which is explosive, highly inflammable, or a "hazardous or toxic material," as
that term is hereafter defined. "Hazardous or toxic material" shall include all
materials or substances which have been determined to be hazardous to health or
the environment, including, without limitation hazardous waste (as defined in
the Resource Conservation and Recovery Act); hazardous substances (as defined in
the Comprehensive Emergency Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act); gasoline or any other
petroleum product or by-product or other hydrocarbon derivative; toxic
substances, (as defined by the Toxic Substances Control Act); insecticides,
fungicides or rodenticide, (as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act); asbestos and radon and substances determined to be
hazardous under the Occupational Safety and Health Act or regulations
promulgated thereunder. Notwithstanding the foregoing, Tenant shall not be in
breach of this provision as a result of the presence in the Premises of de
minimis amounts of hazardous or toxic materials which are in compliance with all
applicable laws, ordinances and regulations and are customarily present in a
general office use (e.g., copying machine chemicals and kitchen cleansers).
(c) Notwithstanding anything herein to the contrary, Tenant shall
defend, indemnify, and hold harmless Landlord and Landlord's employees and other
agents from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs, or expenses of any kind or nature, known or
unknown, contingent or otherwise (including, without limitation, accountants'
and attorneys' fees (including fees for the services of paralegals and similar
persons), consultant fees, investigation and laboratory fees, court costs, and
litigation expenses at the trial and all appellate levels), arising out of, or
in any way related to (a) the presence, disposal, release, or threatened
release, by or caused by Tenant or Tenant's Permitees, of any hazardous or toxic
materials which are on, from, or affecting the soil, water, vegetation,
buildings personal property, persons, animals or otherwise; (b) any personal
injury, including wrongful death, or damage to property, real or personal,
arising out of or related to such hazardous or toxic materials; (c) any lawsuit
brought, threatened, or settled by Legal Authorities or other parties, or order
by Legal Authorities, related to such hazardous or toxic materials; and/or (d)
any violation of Governmental Requirements related in any way to such hazardous
or toxic materials. The provisions of this Section shall survive the expiration
or termination of this Lease.
9. Definitions. "Landlord," as used in this Lease, shall include the party
-----------
named in the first paragraph hereof, its representatives, assigns and successors
in title to the Premises. "Tenant" shall include the party named in the first
paragraph hereof, its heirs and representatives, and, if this Lease shall be
validly assigned or sublet, shall also include Tenant's assignees or subtenants,
as to the Premises, or portion thereof, covered by such assignment or sublease.
"Landlord" and "Tenant" include male and female, singular and plural,
corporation, partnership, limited liability company (and the officers, members,
partners, employees or agents of any such entities) or individual, as may fit
the particular parties.
10. Repairs By Landlord.
-------------------
(a) Tenant, by taking possession of the Premises, shall accept and
shall be held to have accepted the Premises as suitable for the use intended by
this Lease. Not later than five (5) business days after the Commencement Date,
Tenant shall submit a punch-list of any and all defects in the Premises which
are cosmetic in nature. Landlord shall exercise diligent, good faith efforts to
correct said punch-list items within forty five (45) days after receipt of such
punch-list, subject to availability of materials. Not later than thirty (30)
days after the Commencement Date, Tenant shall submit a punch-list of any and
all other defects in the Premises. Landlord shall exercise diligent, good faith
efforts to correct said additional punch-list items within forty five (45) days
after receipt of such punch-list, subject to availability of materials. Landlord
shall not be
-4-
required, after possession of the Premises has been delivered to Tenant, to make
any repairs or improvements to the Premises, except as set forth in this Lease.
Except for damage caused by casualty and condemnation (which shall be governed
by Section 28 and 29 below) and except and provided in Section 11, below, and
subject to normal wear and tear, Landlord shall maintain in good repair the
exterior walls, roof, common areas, foundation, structural portions and the
central portions of the Building's mechanical, electrical, plumbing and HVAC
systems (i.e., only those portions of central distribution, but not the branches
which serve only one tenant's space), provided such repairs are not occasioned
by Tenant, Tenant's Permitees or anyone in the employ or control of Tenant, and
provided further, that in the event Landlord or an affiliate of Landlord is
retained to complete the Tenant Improvements, then Landlord shall be liable for
any damage or injury to all or any part of the Building caused by Landlord or
its affiliate during installation of the Tenant Improvements.
(b) (i) Except as provided in Section 11 below, Landlord shall perform
repairs to the Premises (which, for purposes of this Section 10 shall include
the branches of the Building's mechanical, electrical, plumbing and HVAC
systems, i.e., only those portions of such systems which serve only the Tenant)
requested by Tenant as soon as reasonably possible (but in no events less than
seven (7) days unless such repairs constitute an emergency) considering the
existing circumstances at the time. In the event repairs, other than repairs
which are "Material Repairs", as defined below, are not completed within a
reasonable period of time, not to exceed thirty (30) days after written notice
to Landlord (except if an emergency exists, in which case Tenant shall only be
obligated to provide notice to the extent reasonably possible under the
circumstances), then Tenant may, (but shall not be obligated to), make the
repairs to the Premises and shall be reimbursed by Landlord for said repairs
within a reasonable time, not to exceed thirty (30) days after delivery to
Landlord of Tenant's invoice and supporting documentation for the same. If
Landlord does not reimburse Tenant within such thirty (30) day period, then
Tenant shall be entitled to deduct from rent payable by Tenant under the Lease
the amount set forth in the invoice plus interest at the Default Rate from the
date of Tenant's invoice, provided, however, that if Landlord or the Holder of
any Security Documents delivers to Tenant, within thirty (30) days after receipt
of Tenant's invoice, a written objection to the payment of such invoice, setting
forth with reasonable particularity Landlord's or the Holder's, as the case may
be, reasons for its claim or contending that the charges are excessive (in which
case Landlord shall pay the amount it contends would not have been excessive),
then Tenant shall not be entitled to such deduction from rent, and as Tenant's
sole remedy, Tenant may submit the dispute to arbitration as outlined in (ii)
below. Notwithstanding any provision set forth in the Lease to the contrary, if
(1) Tenant provides prior written notice to Landlord of an event or circumstance
regarding a Material Repair which requires the action of Landlord with respect
to repair and/or maintenance, (2) Landlord is, in fact, required to perform
repairs and/or maintenance under the terms of the Lease, and (3) Landlord fails
to commence such action within a reasonable period of time, given the
circumstances, after the receipt of such notice, but in any event not later than
thirty (30) days after receipt of such notice, and thereafter diligently pursue
such action to completion as soon as reasonably possible, then Tenant may (but
shall not be obligated to) proceed to take the required action after delivery of
an additional thirty (30) day notice to Landlord and the Holder (as defined in
Section 31 hereof) of any Security Documents (as defined in Section 31 hereof)
for which Landlord has given Tenant an address for notices (such second notice
given not earlier than the expiration of the first aforesaid thirty (30) day
period) specifying that the first thirty (30) day period has expired, the
specific action required and that Tenant intends to make such required action.
(ii) Tenant shall be entitled to make any such Material Repair
only if Landlord's failure to do so directly, materially and adversely affects
Tenant's use of the Premises. If Landlord believes that the requested Material
Repair is not required because it is not necessary pursuant to the terms of the
Lease, or if Landlord is already taking the Material Repair Landlord believes
appropriate in the circumstances in accordance with its obligations under the
Lease, Landlord shall have the option within said second thirty (30) day period
to submit the dispute to arbitration in the City of Miami, State of Florida,
pursuant to the commercial arbitration rules then in effect of the American
Arbitration Association (or at any other place or under any other form of
arbitration mutually acceptable to Landlord and Tenant) or commence the
requested Material Repair.
-5-
If such Material Repair is required under the terms of the Lease to be made by
Landlord and is not made by Landlord within such second thirty (30) day period
and Landlord has not submitted the dispute to arbitration, then Tenant shall be
entitled to prompt reimbursement by Landlord of Tenant's reasonable and
necessary, actual out-of-pocket costs and expenses in making such Material
Repair (and only such Material Repair as specified in the second thirty (30) day
notice given to Landlord). Such amounts shall be reimbursed by Landlord within
thirty (30) days after delivery to Landlord from Tenant of a detailed invoice
setting forth a particularized breakdown of the costs and expenses incurred in
connection with the Material Repair made by Tenant. In the event Tenant makes
such Material Repair, Tenant shall use only those contractors used by Landlord
in the Building for work on such systems or facilities unless such contractors
are unwilling or unable to perform, or timely perform, such work, in which event
Tenant may utilize the services of any other qualified contractor which normally
and regularly performs similar work in other first class office projects.
Further, if Landlord or the Holder of any Security Documents does not deliver a
detailed written objection to Tenant within thirty (30) days after Landlord's
receipt of an invoice by Tenant of its costs and expenses of making such
Material Repair which Tenant claims should have been made by Landlord, and if
such invoice from Tenant sets forth a particularized breakdown of its costs and
expenses incurred in connection with taking such Material Repair, then Tenant
shall be entitled to deduct from rent payable by Tenant under the Lease the
amount set forth in the invoice plus interest at the Default Rate from the date
of Tenant's invoice. If, however, Landlord or the Holder of any Security
Documents delivers to Tenant within thirty (30) days after receipt of Tenant's
invoice, a written objection to the payment of such invoice, setting forth with
reasonable particularity Landlord's reasons for its claim or that the charges
are excessive (in which case Landlord shall pay the amount it contends would not
have been excessive), then Tenant shall not be entitled to such deduction from
rent, but as Tenant's sole remedy, Tenant may submit the dispute to arbitration
in the City of Miami, State of Florida, pursuant to the commercial arbitration
rules then in effect of the American Arbitration Association (or at any other
place or under any other form of arbitration mutually acceptable to Landlord and
Tenant). If any arbitration conducted pursuant to this Section 10 determines
that Landlord shall pay an amount to Tenant and Landlord does not pay any such
amount as and when determined in such arbitration, then Tenant shall be entitled
to deduct the amount so unpaid by Landlord from the rent next falling due under
this Lease, with interest at the Default Rate on such unpaid amount from the
date such amount was required to be paid as determined in the arbitration. For
purposes of this Lease, the term "Material Repair" shall mean any repair to or
maintenance undertaking for the Premises which costs (including the costs of
preparing plans and permits, if required, and other "soft costs") in excess of
$5,000.
(c) Landlord shall diligently pursue correction of any latent defect
discovered by Tenant and of which Landlord has been notified, in writing, within
one (1) year of the Commencement Date. Landlord's liability to correct latent
defects shall not extend beyond one (1) year from the Commencement Date except
for defects of which Landlord has been notified during such one (1) year period.
(d) Notwithstanding anything in this Lease to the contrary, Tenant's
right of self-help contained in this Lease (whether under this Section 10 or
Section 20) is limited solely to the Premises and the branches of the Building's
mechanical, electrical, plumbing and HVAC systems, i.e., only those portions of
such systems which serve only the Tenant, and Tenant shall not be entitled nor
permitted to make repairs to the rest of the Building or the Property.
11. Repairs By Tenant. Except as described in Section 10 above, Tenant
-----------------
shall, at its own cost and expense, maintain the Premises in good repair and in
a neat and clean, first-class condition, including making all necessary repairs
and replacements. Tenant shall further, at its own cost and expense, repair or
restore any damage or injury to all or any part of the Building caused by Tenant
or Tenant's Permitees, including but not limited to any repairs or replacements
necessitated by (i) the construction or installation of improvements to the
Premises by or on behalf of Tenant, provided, however, that in the event
Landlord or an affiliate of Landlord is retained to complete the Tenant
Improvements, then Landlord shall be liable for any damage or injury to all or
any part of the Building caused by Landlord or its affiliate during installation
of the
-6-
Tenant Improvements or (ii) the moving of any Property into or out of the
Premises. If, after receipt of written notice from Landlord, Tenant fails to
make such repairs or replacements promptly, Landlord may, at its option, make
the repairs and replacements and the costs of such repair or replacements shall
be charged to Tenant as Additional Rent and shall become due and payable by
Tenant with the monthly installment of Base Rent next due hereunder.
12. Alterations and Improvements. Except for minor, decorative alterations
----------------------------
which do not affect the Building structure or systems, are not visible from
outside the Premises and do not cost in excess of $10,000.00 in the aggregate,
Tenant shall not make or allow to be made any alterations, physical additions or
improvements in or to the Premises without first obtaining in writing Landlord's
written consent for such alterations or additions, which consent may be granted
or withheld in the sole, unfettered discretion of Landlord (if the alterations
will affect the Building structure or systems or will be visible from outside
the Premises), but which consent shall not be unreasonably withheld, delayed or
conditioned (if the alterations will not affect the Building structure or
systems and will not be visible from outside the Premises). Upon Landlord's
request, Tenant will furnish Landlord plans and specifications for any proposed
alterations, additions or improvements and shall reimburse Landlord for its
reasonable cost to review such plans. Any alterations, physical additions or
improvements shall at once become the property of Landlord; provided, however,
Landlord, at its option, may require Tenant to remove any alterations, additions
or improvements in order to restore the Premises to the condition existing on
the Commencement Date so long as Landlord gives Tenant notice of such
requirement in writing at the time Landlord renders its written consent. All
costs of any such alterations, additions or improvements shall be borne by
Tenant. All alterations, additions or improvements must be made in a good,
first-class, workmanlike manner and in a manner that does not disturb other
tenants (i.e., any loud work must be performed during non-business hours) and
Tenant must maintain appropriate liability and builder's risk insurance
throughout the construction. Tenant does hereby indemnify and hold Landlord
harmless from and against all claims for damages or death of persons or damage
or destruction of property arising out of the performance of any such
alterations, additions or improvements made by or on behalf of Tenant. Under no
circumstances shall Landlord be required to pay, during the Term of this Lease
and any extensions or renewals thereof, any ad valorem or property tax on such
alterations, additions or improvements, Tenant hereby covenanting to pay all
such taxes when they become due. In the event any alterations, additions,
improvements or repairs are to be performed by contractors or workmen other than
Landlord's contractors or workmen, any such contractors or workmen must first be
approved, in writing, by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed. Landlord agrees to assign to Tenant any rights
it may have against the contractor of the Premises with respect to any work
performed by said contractor in connection with improvements made by Landlord at
the request of Tenant.
13. Operating Expenses.
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(a) Tenant agrees to reimburse Landlord throughout the Term, as
Additional Rent hereunder for Tenant's Share (as defined below) of the annual
Operating Expenses (as defined below). The term "Tenant's Share" shall mean the
percentage determined by dividing the rentable square footage of the Premises
(27,058) by the rentable square footage of the Building (105,403). Landlord and
Tenant hereby agree that Tenant's Share is twenty-five and 67/00 percent
(25.67%). If Tenant does not occupy the Premises during the entire full calendar
year in which the Term of this Lease commences or ends, Tenant's Share of
Operating Expenses for the applicable calendar year shall be appropriately
prorated for the partial year, based on the number of days Tenant has occupied
the Premises during that year.
(b) Operating Expenses shall be all those expenses of operating,
servicing, managing, maintaining and repairing the Property, Building, all
parking areas and related Common Areas (as well as an allocation of certain
Building and Property expenses, as reasonably allocated by Landlord to the
Building and the Property) in a manner deemed by Landlord reasonable and
appropriate and in the best interest of the tenants of the Building in a manner
consistent with first-class office buildings in the Airport/West Dade
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Submarket (the "A/WD Submarket") and in accordance with the Declaration (the
"Declaration") of Covenants, Conditions and Restrictions for Westside Corporate
Center (the "Project"), filed March 31,1989, in Official Records Book 14054 at
Page 1013 in the Public Records of Miami-Dade County, Florida, as amended.
Operating Expenses shall include, without limitation, the following:
(1) All taxes and assessments, whether general or special,
applicable to the Property and the Building, which shall include real and
personal property ad valorem taxes based on the maximum allowable discounts, and
any and all reasonable costs and expenses incurred by Landlord in seeking a
reduction of any such taxes and assessments. However, Tenant shall not be
obligated for taxes on the net income from the operation of the Building, unless
there is imposed in the future a tax on rental income on the Building in lieu of
the real property ad valorem taxes, in which event such tax shall be deemed an
Operating Expense of the Building. Landlord may employ professionals to contest
the tax burden on the Property, and the reasonable cost thereof, as well as any
reasonable fees, expenses and costs incurred in contesting any assessments,
levies or the tax rate applicable to the Property, shall be Operating Expenses.
In the event any assessments may be paid in installments, only the installment
of such assessment as would have been payable by Landlord during such year had
Landlord elected to pay such assessment in the maximum number of installments
permitted by law, together with all interest accrued thereon, shall be payable.
(2) Insurance premiums and deductible amounts, including, without
limitation, for commercial general liability, "all risks" property, rent loss
and other coverages carried by Landlord on the Building and Property.
(3) All utilities, including, without limitation, water, power,
heating, lighting, ventilation, sanitary sewer and air conditioning of the
Building, but not including those utility charges actually paid by Tenant or
other tenants of the Building.
(4) Janitorial and maintenance expenses, including:
(i) Janitorial services and janitorial supplies and other
materials used in the operation and maintenance of the Building;
and
(ii)The cost of maintenance and service agreements on
equipment, window cleaning, grounds maintenance, pest control,
security, trash and snow removal, and other similar services or
agreements.
(5) Management fees consistent with those charged by other
first-class office buildings in the A/WD Submarket and the market rental value
of a management office(or a charge equal to fair market management fees if
Landlord provides its own management services);
(6) The costs, including interest, of any capital improvement
made to the Building by or on behalf of Landlord after the date of this Lease
which is required under any governmental law or regulation (or any judicial
interpretation thereof) that was not applicable to the Building as of the date
of this Lease, and the cost, including interest, of the acquisition and
installation of any device or equipment designed to improve the operating
efficiency of any system within the Building. All such costs shall be amortized
on a straight line basis with a reasonable market interest rate over the
reasonable life of the capital investment items, with the reasonable life and
amortization schedule being determined in accordance with generally accepted
accounting principles except that in connection with the acquisition and
installation of any device or equipment designed to improve the operating
efficiency of any system within the Building, the annual costs shall not exceed
the annual savings reasonably projected by Landlord at the time of installation
of such device or equipment.
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(7) All services, supplies, repairs, replacements or other
expenses directly and reasonably associated with servicing, maintaining,
managing and operating the Building, including, but not limited to the lobby,
vehicular and pedestrian traffic areas and other Common Areas and including
reimbursements to Tenant for costs and expenses incurred by Tenant and
reimbursed by Landlord pursuant to Sections 10 and 20 of this Lease.
(8) Wages and salaries of Landlord's employees identified on
Exhibit "D" engaged in the maintenance, operation, repair and services of the
----------
Building, including taxes, insurance and customary fringe benefits.
(9) Legal and accounting costs.
(10)Costs to maintain and repair the Building and Property.
(11)Landscaping and security costs unless Landlord hires a third
party to provide such services pursuant to a service contract and the cost of
that service contract is already included in Operating Expenses as described
above.
(12)The Building's allocated share (as reasonably be determined
by Landlord) of certain expenses not a capital nature except as provided in
(b)(6), above, which are incurred on a Project-wide basis including, without
limitation, costs in connection with (i) landscaping, (ii) utility and road
repairs, (iii) security, (iv) signage installation, replacement and repair, (v)
taxes or assessments which are not assessed against a particular building or the
parcel on which it is located, and (vi) all charges and assessments which are
assessed pursuant to the Declaration.
Notwithstanding anything to the contrary contained herein,
Operating Expenses shall not include the following items (the "Excluded
Expenses"):
(i) The cost of any repairs, alterations, additions,
changes, replacements and other items which, under generally accepted accounting
principles, are classified as capital expenditures or capital improvements,
except as specifically contemplated by Section 13(b)(6) above.
(ii)Payments of principal and interest or other finance
charges made on any debt.
(iii) Non-cash items, such as deductions for depreciation
and amortization of debts, other than pursuant to Section 13(b)(6) above.
(iv)Leasing and/or brokerage commissions, attorneys' fees,
costs, disbursements and other expenses incurred in connection with negotiations
of leases with tenants or prospective tenants or disputes or litigation with any
such parties.
(v) Costs or expenses specifically relating to another
tenant's or occupant's space which were incurred in rendering any service or
benefit to such tenant or occupant for a service or benefit in excess of the
service or benefit that Landlord is required to provide Tenant hereunder.
(vi)Income, excess profits or franchise taxes, inheritance
taxes, transfer taxes and fees or other such taxes imposed on or measured by
the income of Landlord from the operation of the Building.
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(vii) Except for costs not in excess of commercially
reasonable deductibles, the cost of repairing or restoring the Building, or any
part thereof, that may be damaged or destroyed by any casualty or affected by
condemnation, whether or not insurance proceeds or condemnation awards are
recovered or are adequate for such purpose.
(viii All costs, concessions (including, without
limitation, rent abatement and construction allowances) and expenses incurred in
leasing or procuring new tenants or retaining existing tenants, including,
without limitation, advertising, printing supplies and promotional expenses,
leasing commissions and expenses for preparation of leases or renovating space
for new or existing tenants, or in enforcing the terms of any lease of space or
in connection with any change in the name of the Building.
(ix) Rental payments or other charges payable under or
pursuant to any ground lease between a third party, as lessor, and the Landlord,
as lessee, and any future ground lease, unless such payments or charges relate
to items which are includable in items (b)(1) through (b)(12), above.
(x) The cost of all items, goods and services, including
utilities sold and supplied to tenants for which Tenant, any tenant or occupant
of the Building or other third party, including insurers, directly reimburses
Landlord, except through operating expense reimbursement provisions.
(xi) If applicable, the cost of installing, operating and
maintaining any specialty service, such as, but not limited to, an observatory,
broadcasting facility, luncheon club, retail store, sundry shop, newsstand, car
wash, concession, athletic or recreational club.
(xii) Any payment of, or on account of, a fee paid to any
person or entity in connection with the wrongful termination of any management
person, entity, consultant or other third party retained to provide services to
the Building.
(xiii) Any costs or expenses incurred in connection with the
sale, financing, refinancing, mortgaging, syndicating or change of ownership of
the Building or any part thereof, including, without limitation, brokerage
commissions, attorneys' and accountants' fees, closing costs, title insurance
premiums, appraisals, marketing studies, transfer taxes and interest charges.
(xiv) Any insurance premium to the extent that Landlord is
entitled to be reimbursed therefor by any other tenant of the Building other
than as a part of Operating Expenses.
(xv) Any amount paid as a penalty as a result of a willful
violation of law by Landlord and any amount paid by Landlord to remediate any
substance which was released, used or disposed of by Landlord and, at the time
of such release, use or disposal, was a hazardous or toxic substance as defined
by the then existing Governmental Requirements.
(xvi) All liabilities, damages, awards and judgments for
injury or death to persons and for property damage arising from the ownership or
operation of the Building, and all court costs, attorneys' fees, paralegal fees,
expert witness fees and disbursements incurred in connection therewith.
(xvii)The cost of any items for which Landlord is
reimbursed by insurance or which is otherwise recovered or recoverable from
third parties, except to the extent of commercially reasonable deductibles.
(xviii)Any cost or expense otherwise constituting an
Operating Expense that is paid to any related party or affiliate of Landlord and
which is in excess of what is reasonable for comparable service from an
independent party of comparable experience and skill.
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(xix) Any payment made pursuant to a lease or similar
arrangement relating to an asset or other item, the cost of which, if the same
were purchased, would be depreciated or amortized as a capital expenditure in
accordance with generally accepted accounting principles, where such lease or
other arrangement is essentially a financed purchase of such asset or item.
(xx) Charitable-type and political contributions of
Landlord.
(c) Landlord shall, on or before the Commencement Date and on or
before December 20 of each calendar year, provide Tenant a statement of the
estimated monthly installments of Tenant's Share of Operating Expenses which
will be due for the remainder of the calendar year in which the Commencement
Date occurs or for the upcoming calendar year, as the case may be. By March 1 of
the following calendar year during the Term of this Lease, Landlord shall
furnish to Tenant an itemized statement of the Operating Expenses within the
Building for the calendar year then ended. Upon reasonable prior written request
given not later than thirty (30) days following the date Landlord's statement is
delivered to Tenant, Tenant may have access to Landlord's records in order to
audit or otherwise verify such expenses. Landlord will make such records
available during normal business hours at the place where such records are
normally kept. If Tenant does not notify Landlord of any objection to Landlord's
itemized statement within thirty (30) days of Landlord's delivery thereof,
Tenant shall be deemed to have accepted such statement as true and correct and
shall be deemed to have waived any right to dispute the excess Operating
Expenses due pursuant to that statement.
(1) Tenant shall pay to Landlord, together with its monthly
payment of Base Rent as provided in Sections 3 and 4 hereinabove (except with
respect to the initial six (6) months of the Lease when Base Rent Is not due and
payable but Additional Rent is due and payable), as Additional Rent hereunder,
the estimated monthly installment of Tenant's Share of the Operating Expenses
for the calendar year in question. At the end of any calendar year if Tenant has
paid to Landlord an amount in excess of Tenant's Share of Operating Expenses for
such calendar year, Landlord shall reimburse to Tenant any such excess amount
(or shall apply any such excess amount to any amount then owing to Landlord
hereunder, and if none, to the next due installment or installments of
Additional Rent due hereunder, at the option of Landlord). At the end of any
calendar year if Tenant has paid to Landlord less than Tenant's Share of excess
Operating Expenses for such calendar year, Tenant shall pay to Landlord any such
deficiency within thirty (30) days after Tenant receives the annual statement.
If it is determined by an audit that Landlord overstated Tenant's share of
Operating Expenses by more than five percent (5%) in the aggregate and Tenant
paid such overstated amount, Landlord shall also reimburse Tenant for the
reasonable cost of the audit within thirty (30) days after demand by Tenant,
together with interest at the Default Rate from the date of such demand by
Tenant until the date when payment has been made.
(2) For the calendar year in which this Lease terminates, and is
not extended or renewed, the provisions of this Section shall apply, but
Tenant's Share for such calendar year shall be subject to a pro rata adjustment
based upon the number of days prior to the expiration of the Term of this Lease.
Tenant shall make monthly estimated payments of the prorata portion of Tenant's
Share for such calendar year (in the manner provided above) and when the actual
prorated Tenant's Share for such calendar year is determined Landlord shall send
a statement to Tenant and if such statements reveals that Tenant's estimated
payments for the prorated Tenant's Share for such calendar year exceeded the
actual prorated Tenant's Share for such calendar year, Landlord shall include a
check for that amount along with the statement. If the statement reveals that
Tenant's estimated payments for the prorated Tenant's Share for such calendar
year were less than the actual prorated Tenant's Share for such calendar year,
Tenant shall pay the shortfall to Landlord within thirty (30) days of the date
Tenant receives Landlord's statement.
(3) If the Building is less than ninety-five percent (95%)
occupied throughout any calendar year of the Term, then the actual Operating
Expenses for the calendar year in question shall be increased to the amount of
Operating Expenses which Landlord reasonably determines would have been
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incurred during that calendar year if the Building had been fully occupied
throughout such calendar year. In no event, however, shall Landlord be entitled
to collect from tenants of the Building during any calendar year an amount in
excess of the actual Operating Expenses incurred by Landlord for such calendar
year.
(d) It is estimated that the Operating Expenses for the first calendar
year will be $6.75 per rentable square foot. Landlord represents that, to the
best of its knowledge, such amount contains the real property ad valorem tax
amount for the Building on a fully assessed basis. The foregoing is a
non-binding estimate and the actual amount of such expenses may differ,
provided, however, that Tenant shall not be required to pay more than $6.75 per
rentable square foot during the first calendar year of the Lease Term.
Notwithstanding anything to the contrary, increases in the "Aggregate
Controllable Expenses (as hereinafter defined) during the initial Term of this
Lease shall not exceed five percent (5%) per year on a cumulative compounded
basis. As used herein, "Aggregate Controllable Expenses" shall mean the
aggregate amount of all Operating Expenses other than real estate taxes,
utilities and insurance.
14. Landlord's Failure to Give Possession. Except as provided in Section 2,
-------------------------------------
above, Landlord shall not be liable for damages to Tenant for failure to deliver
possession of the Premises to Tenant if such failure is due to no fault of
Landlord, to the failure of any construction or remodeling of the Premises by
Tenant to be completed or to the failure of any previous tenant to vacate the
Premises. Landlord will use its diligent, good faith efforts to give possession
to Tenant by the scheduled Commencement Date of the Term.
15. Acceptance and Waiver. Landlord shall not be liable to Tenant, or
---------------------
Tenant's Permitees, or both of them (and, if Tenant is a corporation, its
officers, directors or employees) for any damage caused to any of them due to
the Building or any part or appurtenances thereof being improperly constructed
or being or becoming out of repair, or arising from the leaking of gas, water,
sewer or steam pipes, or from electricity, but Tenant, by moving into the
Premises and taking possession thereof, shall accept, and shall be held to have
accepted the Premises as suitable for the purposes for which the same are
leased, and shall accept and shall be held to have accepted the Building and
every appurtenances thereof, and Tenant by said act waives any and all defects
therein; provided, however, that this Section shall not apply to any damages or
injury caused by or resulting from the negligence or willful misconduct of
Landlord. In accordance with Section 10, above, Landlord shall exercise
diligent, good faith efforts to correct punch-list items within forty five (45)
days after receipt of the punch-list, subject to availability of materials.
16. Signs. A Building standard suite entry shall be installed on the door
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to the Premises or adjacent to the entry to the Premises and in the lobby
directory as part of the Work, as defined in Exhibit "B", at Landlord's cost.
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Otherwise, Tenant shall not paint or place signs, placards, or other
advertisement of any character upon the windows or inside walls of the Premises
except with the consent of Landlord which consent may be withheld by Landlord in
its absolute discretion, and except as provided herein, Tenant shall place no
signs upon the outside walls, common areas or the roof of the Building.
Subject to applicable "Governmental Requirements," as defined In
Section 23 below, and the rules and regulations, if any, of the Project, and for
so long as Tenant is leasing not less than 27,058 rentable square feet pursuant
to this Lease, and provided that Tenant is not in default under this Lease after
expiration of any applicable cure period, Tenant may place and maintain, with
the prior written approval of Landlord, which shall not be unreasonably
withheld, delayed or conditioned, on the northern side of the Building, at the
westernmost spot for signage on said northern side of the Building, at its sole
cost and expense, signage displaying Tenant's name and or logo. At the end of
the Term, upon surrender of the Premises or upon the removal or alteration of
the sign, Tenant shall repair, paint, and/or replace in a first-class manner the
Building fascia surface where sign was attached. Tenant shall not be entitled to
signage at the entrance of the parking lot servicing the Building or any other
monument signage.
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17. Advertising. Landlord may advertise the Premises as being "For Rent" at
-----------
any time following a default by Tenant which remains uncured and at any time
within one hundred eighty (180) days prior to the expiration, cancellation or
termination of this Lease for any reason and during any such periods may exhibit
the Premises to prospective tenants.
18. Removal of Fixtures. If Tenant is not in default hereunder after any
-------------------
applicable cure period, Tenant may, prior to the expiration of the Term of this
Lease, or any extension thereof, remove any fixtures and equipment which it has
placed in the Premises which can be removed without significant damage to the
Premises, provided Tenant repairs all damages to the Premises caused by such
removal.
19. Entering Premises. Landlord may enter the Premises at reasonable
-----------------
hours provided that Landlord's entry shall not unreasonably interrupt Tenant's
business operations and that prior notice is given when reasonably possible
(and, if in the reasonable opinion of Landlord any emergency exists, at any time
and without notice): (a) to make repairs, perform maintenance and provide other
services described in Section 20 below (no prior notice is required to provide
routine services) which Landlord is obligated to make to the Premises or the
Building pursuant to the terms of this Lease or to the other premises within the
Building pursuant to the leases of other tenants; (b) to inspect the Premises to
see that Tenant is complying with all of the terms and conditions of this Lease
and with the rules and regulations hereof; (c) to remove from the Premises any
articles or signs kept or exhibited therein in violation of the terms hereof;
and (d) to exercise any other right or perform any other obligation that
Landlord has under this Lease. Landlord shall be allowed to take all material
into and upon the Premises that may be required to make any repairs,
improvements and additions, or any alterations, without in any way being deemed
or held guilty of trespass and without constituting a constructive eviction of
Tenant. The Rent reserved herein shall not abate while said repairs, alterations
or additions are being made unless such repairs, alterations or additions are
due to the gross negligence or willful misconduct of Landlord (and only then to
the extent of that portion of the Premises which Tenant is unable to use during
the period of repair or alteration, but in no event shall Tenant be entitled to
maintain a set-off or counterclaim for damages against Landlord by reason of
loss from interruption to the business of Tenant because of the prosecution of
any such work). All such repairs, decorations, additions and improvements shall
be done during ordinary business hours, or, if any such work is at the request
of Tenant to be done during any other hours, the Tenant shall pay all overtime
and other extra costs.
20. Services.
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(a) The normal business hours of the Building shall be from 8:00 A.M.
to 6:00 P.M. on Monday through Friday, and 8:00 A.M. to 1:00 P.M. on Saturday,
exclusive of holidays reasonably designated by Landlord ("Building Holidays").
Initially and until further notice by Landlord to Tenant, the Building Holidays
shall be: New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving (and the day after Thanksgiving) and Christmas. Landlord shall
furnish the following services during the normal business hours of the Building
except as noted:
(1) Elevator service for delivery needs and elevator service 24
hours a day, seven days a week for passenger needs;
(2) Air conditioning at levels in keeping with that generally
provided in similar, first class office buildings in the A/WD Submarket, subject
to "Governmental Requirements," as defined below. (Tenant shall be permitted to
install a separately-metered supplemental air conditioning unit for use by
Tenant, in its computer room and other areas in the Premises designated by
Tenant provided: (i) Landlord approves the plans and specifications of such
unit, which approval shall not be unreasonably withheld; (ii) Landlord approves
of the contractor retained to install such unit. which approval shall not be
unreasonably withheld and the contractor complies with such requirements as
Landlord shall reasonably require; and (iii)Tenant pays all
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costs of installing, maintaining and operating such unit [including, but not
limited, to all utilities associated therewith]);
(3) Hot and cold running water for all restrooms and lavatories
24 hours a day, seven days a week;
(4) Soap, paper towels, and toilet tissue for public restrooms;
(5) Janitorial service Monday through Friday, in keeping with the
standards generally maintained in the A/WD Submarket;
(6) Custodial, electrical and mechanical maintenance services are
provided Monday through Friday;
(7) Electric power for lighting and outlets 24 hours a day, seven
days a week not in excess of a total of 3 watts per rentable square foot of the
Premises at 100% connected load;
(8) Replacement of Building standard lamps and ballasts as
needed;
(9) Repairs and maintenance as described in Section 10 of this
Lease; and
(10)General management, including supervision, inspections,
recordkeeping, accounting, leasing and related management functions.
(b)The services provided in subparagraph (a) herein, and the amount of
Rent prescribed herein, are predicated on and are in anticipation of certain
usage of the Premises by Landlord as follows:
(1) Air conditioning and heating design is based on occupancy
levels and electrical usage in keeping with that generally provided in similar,
first class office buildings in the A/WD Submarket; and
(2) Tenant shall have no right to any services in excess of those
provided herein, except that, subject to payment therefor by Tenant as provided
in this Section 20(b)(2), Tenant shall be entitled to air conditioning and
heating at any and all times requested by Tenant upon reasonable notice to
Landlord. If Tenant uses services in an amount or for a period in excess of that
provided for herein, including air conditioning and heating, then Landlord
reserves the right to: charge Tenant as Additional Rent hereunder a reasonable
sum as reimbursement for the direct cost of such added services; charge Tenant
for the cost of any additional equipment or facilities or modifications thereto,
necessary to provide the additional services; and/or to discontinue providing
such excess services to Tenant. In the event of disagreement as to the
reasonableness of the amount of such charge, the opinion of the appropriate
local utility company or an independent professional engineering firm selected
by Landlord in its reasonable discretion as to the amount of such charge shall
prevail.
(c)Except as provided in this subsection (c), Landlord shall not be
liable for any damages directly or indirectly resulting from the interruption in
any of the services ("service interruption") described above, nor shall any such
interruption entitle Tenant to any abatement of Rent or any right to terminate
this Lease. Landlord shall use all reasonable efforts to furnish uninterrupted
services as required above. For purposes of this Lease, the term "service
interruption" shall mean an interruption caused by the gross negligence or
willful misconduct of Landlord with respect to the facilities, utilities and
services set forth above in Section 20 of this Lease which renders the Premises
(or material portion thereof) untenantable for the purposes for which it is then
being used and which interruption was not caused by the act or omission of
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Tenant, its employees, licensees, invitees, agents or contractors. Upon the
occurrence of a service interruption, the Tenant shall have the right to give
written notice ("Tenant's Notice") to Landlord, which notice shall indicate the
specific nature of the problem and shall include the following language in
bold-face type: "IF LANDLORD SHALL FAIL TO COMMENCE CURATIVE ACTION WITHIN TWO
(2) BUSINESS DAYS, TENANT AT ITS OPTION SHALL HAVE THE RIGHT TO EXERCISE ITS
REMEDIES UNDER THE LEASE, INCLUDING SELF-HELP". If, within a period of two (2)
business days after Landlord's receipt of Tenant's Notice, Landlord fails to
commence action to correct such service interruption or thereafter fails to
diligently pursue such correction until such service interruption is cured, then
Tenant shall be entitled to the following remedies: (i) with respect to a
service interruption in the Premises (which, for purposes of this Section 20
shall include the branches of the Building's mechanical, electrical, plumbing
and HVAC systems, i.e., only those portions of such systems which serve only the
Tenant), after written notice to Landlord of its intent to do so, Tenant may
commence and prosecute such steps as may be reasonably necessary or proper to
correct such service interruption, in which case (with respect to a service
interruption caused by the gross negligence or willful misconduct of Landlord)
Landlord shall reimburse Tenant within twenty (20) days after receipt of demand
and copies of appropriate supporting documentation, all reasonable and customary
funds expended by Tenant in curing such failure. If Landlord does not reimburse
Tenant within such twenty (20) day period, then Tenant shall be entitled to
deduct from rent payable by Tenant under the Lease the amount set forth in the
supporting documentation plus interest at the Default Rate from the date of
Landlord's receipt of Tenant's documentation), and (ii) if the service
interruption caused by the gross negligence or willful misconduct of Landlord
continues for a period of five (5) or more consecutive business days after
Landlord's receipt of Tenant's Notice, Tenant shall be entitled to abatement of
Rent as to any portion or portions of the Premises that are untenantable due to
such service interruption (whether or not Landlord is attempting to cure same)
until such time as such portion or portions are again rendered tenantable; such
abatement shall commence on the sixth (6th) business day after Landlord's
receipt of Tenant's Notice and shall continue until the space is again
tenantable.
21. Indemnities. Tenant does hereby indemnify and save harmless Landlord
-----------
against all claims for damages to persons or Property which are caused anywhere
in the Building or on the Property caused by the negligence or willful
misconduct of Tenant, or Tenant's Permitees, or which occur in the Premises (or
arise out of actions taking place in the Premises) unless such damage is caused
by the gross negligence or willful misconduct of Landlord, its agents, or
employees. Landlord does hereby indemnify and hold Tenant harmless against all
claims for damage to persons or property which occurs in the Building or the
Property (other than in the Premises) if caused by the negligence or willful
misconduct of Landlord, its agents or employees. The indemnities set forth
hereinabove shall include the application to pay reasonable expenses incurred by
the indemnified party, including, without limitation, reasonable, attorneys' and
paralegal fees. The indemnities contained herein do not override the waivers
contained in Section 22(d) below.
22. Tenant's Insurance: Waivers.
---------------------------
(a) Tenant further covenants and agrees that from and after the date
of delivery of the Premises from Landlord to Tenant, Tenant will carry and
maintain, at its sole cost and expense, the following types of insurance, in the
amounts specified and in the form hereinafter provided for:
(1) Liability Insurance in the Commercial General Liability form
(or reasonable equivalent thereto) covering the Premises and Tenant's use
thereof against claims for personal injury or death, property damage and product
liability occurring upon, in or about the Premises, such insurance to be written
on an occurrence basis (not a claims made basis), to be in combined single
limits amounts not less than $3,000,000 and to have general aggregate limits of
not less than $5,000,000 for each policy year. The insurance coverage required
under this Section 22(a)(1) shall, in addition, extend to any liability of
Tenant arising out of the indemnities provided for in Section 21 and, if
necessary, the policy shall contain a contractual endorsement to that effect.
The general aggregate limits under the Commercial General Liability insurance
-15-
policy or policies must apply separately to the Premises and to Tenant's use
thereof (and not to any other location or use of Tenant) and such policy shall
contain an endorsement to that effect. The certificate of insurance evidencing
the Commercial General Liability form of policy shall specify all endorsements
required herein and shall specify on the face thereof that the limits of such
policy applies separately to the Premises.
(2) Insurance covering all of the items included in Tenant's
leasehold improvements, heating, ventilating and air conditioning equipment
maintained by Tenant, trade fixtures from time to time in, on or upon the
Premises, and alterations, additions or changes made by Tenant pursuant to
Section 12, in an amount not less than one hundred percent (100%) of their full
replacement value from time to time during the Term, providing protection
against perils included within the standard form of "all-risks" fire and
casualty insurance policy, together with insurance against sprinkler damage,
vandalism and malicious mischief. Any policy proceeds from such insurance shall
be held in trust by Tenant's insurance company for the repair, construction and
restoration or replacement of the property damaged or destroyed unless this
Lease shall cease and terminate under the provisions of Section 28 of this
Lease.
(3) Workers' Compensation and Employer's Liability insurance
affording statutory coverage and containing statutory limits with the Employer's
Liability portion thereof to have minimum limits of $100,000.00.
(b) All policies of the insurance provided for in Section 22(a) shall
be issued in form reasonably acceptable to Landlord by insurance companies with
a rating and financial size of not less than A-X in the most current available
"Best's Insurance Reports", and licensed to do business in the state in which
Landlord's Building is located. Each and every such policy:
(1) shall name Landlord as an additional insured (as well as any
mortgagee of Landlord and any other party reasonably designated by Landlord) and
the coverage in (1) and (2) shall also name Landlord as loss payee.
(2) shall (and a certificate thereof shall be delivered to
Landlord at or prior to the execution of the Lease) be delivered to each of
Landlord and any such other parties in interest within thirty (30) days after
delivery of possession of the Premises to Tenant and thereafter within thirty
(30) days prior to the expiration of each such policy, and, as often as any such
policy shall expire or terminate. Renewal or additional policies shall be
procured and maintained by Tenant in like manner and to like extent;
(3) shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least thirty (30) days notice in
writing in advance of any material change, cancellation, termination or lapse,
or the effective date of any reduction in the amounts of insurance; and
(4) shall be written as a primary policy which does not
contribute to and is not in excess of coverage which Landlord may carry.
(c) Any insurance provided for in Section 22(a) may be maintained by
means of a policy or policies of blanket insurance, covering additional items or
locations or insureds, provided, however, that:
(1) Landlord and any other parties in interest from time to time
designated by Landlord to Tenant shall be named as an additional insured
thereunder as its interest may appear;
(2) the coverage afforded Landlord and any such other parties in
interest will not be reduced or diminished by reason of the use of such blanket
policy of insurance;
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(3) any such policy or policies [except any covering the risks
referred to in Section 22(a)] shall specify therein (or Tenant shall furnish
Landlord with a written statement from the insurers under such policy
specifying) the amount of the total insurance allocated to the Tenant
improvements and property more specifically detailed in Section 22(a); and
(4) the requirements set forth in this Section 22 are otherwise
satisfied.
(d) Notwithstanding anything to the contrary set forth hereinabove,
Landlord and Tenant do hereby waive any and all claims against one another for
damage to or destruction of real or personal property to the extent such damage
or destruction can be covered by "all risks" property insurance of the type
described in Section 22(a)(2) above. Each party shall also be responsible for
the payment of any deductible amounts required to be paid under the applicable
"all risks" fire and casualty insurance carried by the party whose property is
damaged. These waivers shall apply if the damage would have been covered by a
customary "all risks" insurance policy, even if the party fails to obtain such
coverage. The intent of this provision is that each party shall look solely to
its insurance with respect to property damage or destruction which can be
covered by "all risks" insurance of the type described in Section 22(a)(2). To
further effectuate the provisions of this Section 22(d), Landlord and Tenant
both agree to provide copies of this Lease (and in particular, these waivers) to
their respective insurance carriers and to require such insurance carriers to
waive all rights of subrogation against the other party with respect to property
damage covered by the applicable "all risks" fire and casualty insurance policy.
(e) Landlord shall maintain such insurance coverages as required by
any institutional lender or lenders holding a mortgage encumbering its interest
in the Property or, in the event no such mortgages exist, Landlord shall
maintain at least $2,000,000 of Comprehensive General Liability Insurance,
casualty insurance in an amount approximately equal to the replacement cost of
the Building, in Landlord's reasonable opinion, and such other insurance
coverages for the Building and the Property as it reasonably deems necessary or
advisable. All premiums and other expenses of maintaining such insurance shall
be Operating Expenses under Section 13 (b) 2 of this Lease.
23. Governmental Requirements. Tenant shall, at its own expense, promptly
-------------------------
comply with all laws, rules, regulations, ordinances and requirements,
including, without limitation, the Americans with Disabilities Act, of all
municipal, local, county, state, federal and other applicable governmental
authorities ("Governmental Requirements") made necessary by reason of Tenant's
particular use and type of occupancy of the Premises. Landlord represents that,
to its knowledge, as of the date of this Lease, the Building, the Premises and
the parking areas are in compliance with Governmental Requirements.
24. Abandonment of Premises. In the event Tenant abandons or vacates the
-----------------------
Premises for more than one hundred eighty (180) consecutive days, Landlord may
elect to terminate this Lease and recapture all of the Premises, in which case
this Lease shall terminate, the then remaining Security Deposit shall be
returned to Tenant (after payment of expenses of repairing any damage to the
Premises [except natural wear and tear occurring from normal use of the
Premises, damage from casualty or condemnation] and any Rent or Additional Rent
still then due) and the parties shall be relieved of any and all obligations
hereunder except for those which specifically survive termination of this Lease.
25. Assignment and Subletting.
-------------------------
(a) Except as provided below, Tenant may not, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld, assign
this Lease or any interest hereunder, or sublet the Premises or any part
thereof, or permit the use of the Premises by any party other than Tenant.
Landlord shall be deemed to have reasonably withheld consent based on the
following considerations: (i) the financial strength of the proposed transferee;
(ii) the business reputation of the proposed transferee; (iii) whether the
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use of the Premises by the proposed transferee will be consistent with the uses
of other tenants in the Building; (iv) whether the transfer will violate an
exclusive use granted to another tenant in the Building; (v) whether the
proposed transferee is an existing tenant for the Building; and (vi) whether the
proposed transferee is a prospective tenant for the Building. Any assignment,
transfer or subletting by Tenant which is consented to by Landlord shall not
relieve or release Tenant from any liability hereunder except as provided in
Section 25(b). In conjunction with a sale by Tenant of substantially all of its
assets, Tenant may assign this Lease to the entity or person purchasing such
assets provided such entity or person assumes each and every obligation of
Tenant hereunder and has a "Net Worth," as defined below, equal to or greater
than Tenant as of the date of such sale, and such assignment shall not be
subject to Landlord's approval (other than a review by Landlord of the
assignee's Net Worth) and shall not be subject to the recapture provisions set
forth below. In the event that Tenant is a corporation or entity other than an
individual, any sale of a majority or controlling interest in Tenant shall be
considered an assignment for purposes of this paragraph unless at the time of
such sale Tenant's securities are publicly traded or such sale is made in
conjunction with or as a result of a public offering of Tenant's securities, in
which case such sale shall not be considered an assignment for purposes of this
paragraph. Consent to one assignment or sublease shall not destroy or waive this
provision, and all later assignments and subleases shall likewise be made only
upon the prior written consent of Landlord. Subtenants or assignees shall become
liable to Landlord for all obligations of Tenant hereunder, without relieving
Tenant's liability hereunder and, in the event of any default by Tenant under
this Lease which causes Landlord to terminate this Lease, Landlord may, at its
option, but without any obligation to do so, elect to treat such sublease or
assignment as a direct Lease with Landlord. In addition, upon any request by
Tenant for Landlord's consent to an assignment or sublease, Landlord may elect,
within thirty (30) days after any request by Tenant for Landlord's consent to an
assignment or sublease, to terminate this Lease and recapture all of the
Premises (in the event of an assignment request) or the applicable portion of
the Premises (in the event of a subleasing request); provided, however, if
Landlord notifies Tenant that Landlord elects to exercise this recapture right,
Tenant may, within five (5) business days of its receipt of Landlord's notice,
notify Landlord that Tenant withdraws its request to sublease or assign, in
which case Tenant shall continue to lease all of the Premises, subject to the
terms of this Lease and Landlord's recapture notice shall be null and void.
(b) Notwithstanding anything contained herein to the contrary, Tenant shall
be entitled to sublet any or all of the Premises pursuant to the terms of this
Lease or assign all of its rights, duties and obligations hereunder: (i) to a
subsidiary of Tenant so long as Tenant remains liable for each any every
obligation hereunder (and such subletting shall not be subject to Landlord's
recapture right referenced above); or (ii) subject to Landlord's reasonable
consent with respect to the items in Section 25(a)(ii) through (vi), above, to a
third party if: (A) the Net Worth of such subtenant/assignee is equal to or
greater than that of the Tenant as of the date hereof; and (B) the proposed
subtenant replaces the Cash Deposit plus the remaining amount of the "LOC," as
defined below, then required to be in place assuming the Landlord has not drawn
on it. Upon satisfaction of the preceding conditions, Tenant shall be released
from any future liability hereunder for that portion of the Premises sublet to
the subtenant or assigned. Net Worth shall be defined as financial assets
including bank accounts and certificates of deposit, marketable securities
traded on major exchanges, U.S. government and municipal bonds, and accounts
receivable minus unsecured debt and liabilities and debt secured in whole or in
part by financial assets as of the sublet date. In connection with (B), above,
in the event that Tenant shall sublet the Premises or assign this Lease to a
proposed subtenant/assignee that has a financial condition acceptable to
Landlord, in its sole discretion, on the date of such sublet or assignment, the
proposed subtenant/assignee shall not be obligated to replace the LOC then
required to be in place.
(c) If Landlord consents to an assignment by Tenant of this Lease or any
interest hereunder, or consents to a sublet of the Premises or any part thereof,
or permits the use of the Premises by any party other than Tenant, or if the
Premises are otherwise sublet or assigned as permitted in this Section 25, all
consideration paid in respect of a sublet or assignment shall be retained by
Landlord, provided, however, that so long as Tenant is not in default hereunder,
in the event Landlord receives consideration ("Excess Consideration") in excess
of the amounts due to Landlord under this Lease over the remaining Term (as the
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same may have been extended), Tenant shall be entitled to recover its "Marketing
Costs" to the extent of such Excess Consideration, as and when received by
Landlord. Marketing Costs shall be those customary and usual marketing expenses
and brokerage fees incurred by Tenant in obtaining a subtenant or assignee
26. Default. If Tenant shall default in the payment of Rent herein reserved
-------
when due and fails to cure such default within five (5) days after written
notice of such default is given to Tenant by Landlord; or if Tenant shall be in
default in performing any of the terms or provisions of this Lease other than
the provisions requiring the payment of Rent, and fails to cure such default
within thirty (30) days after written notice of such default is given to Tenant
by Landlord (or, if such default cannot be cured within thirty (30) days [other
than a default due to the failure to pay Rent or any other sum of money in which
case there shall be no additional cure time], Tenant shall not be in default if
Tenant promptly commences and diligently proceeds the cure to completion as soon
as possible and in all events within one hundred twenty (120) days); or if
Tenant is adjudicated a bankrupt; or in the event an assignment for the benefit
of creditors is made by Tenant; or if a permanent receiver is appointed for
Tenant's Property and such receiver is not removed within ninety (90) days after
written notice from Landlord to Tenant to obtain such removal; or if, whether
voluntarily or involuntarily, Tenant takes advantage of any debtor relief
proceedings under any present or future law, whereby the Rent, Additional Rent
or any part thereof, is, or is proposed to be, reduced or payment thereof
deferred; or if Tenant's effects should be levied upon or attached and such levy
or attachment is not satisfied or dissolved within thirty (30) days after
written notice from Landlord to Tenant to obtain satisfaction thereof; or
failure to comply within thirty (30) days after written notice from Landlord to
Tenant with any other term or provision contract or agreement between Landlord
and Tenant (or, if such default cannot be cured within thirty (30) days [other
than a default due to the failure to pay Rent or any other sum of money in which
case there shall be no additional cure time], Tenant shall not be in default if
Tenant promptly commences and diligently proceeds the cure to completion as soon
as possible and in all events cures any such default within one hundred twenty
(120) days after written notice from Landlord); or, if Tenant is an individual,
in the event of the death of the individual and the failure of the executor,
administrator or personal representative of the estate of the deceased
individual to have assigned the Lease within three (3) months after the death to
an assignee approved by Landlord; then, and in any of said events, Landlord, at
its option, may exercise any or all of the remedies set forth in Section 27
below.
27. Remedies. Upon the occurrence of any default set forth in Section 26
--------
above which is not cured by Tenant within the applicable cure period provided
therein, if any, Landlord may exercise all or any of the following remedies:
(a) terminate this Lease by giving Tenant written notice of
termination, in which event this Lease shall terminate on the date specified in
such notice and all rights of Tenant under this Lease shall expire and terminate
as of such date, Tenant shall remain liable for all obligations under this Lease
up to the date of such termination and Tenant shall surrender the Premises to
Landlord on the date specified in such notice, and if Tenant fails to so
surrender, Landlord shall have the right, without notice, to enter upon and take
possession of the Premises and to expel and remove Tenant and its effects
without being liable for prosecution or any claim of damages therefor;
(b) terminate this Lease as provided in the immediately preceding
subsection and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, the then present value of the following: (i) the total Rent
which would have been payable hereunder by Tenant for the period beginning with
the day following the date of such termination and ending with the Expiration
Date of the term as originally scheduled hereunder, minus (ii) the aggregate
reasonable rental value of the Premises for the same period (as determined by a
real estate broker licensed in the State of Florida not affiliated with
Landlord, who has at least ten (10) years experience, immediately prior to the
date in question evaluating commercial office space, taking into account all
relevant factors including, without limitation, the length of the remaining
Term, the then current market conditions in the general area, the likelihood of
reletting for a period equal to
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the remainder of the Term, net effective rates then being obtained by landlords
for similar type space in similar buildings in the general area, vacancy levels
in the general area, current levels of new construction in the general area and
how that would affect vacancy and rental rates during the period equal to the
remainder of the Term and inflation), plus (iii) the costs of recovering the
Premises, and all other expenses incurred by Landlord due to Tenant's default,
including, without limitation, reasonable attorneys' fees, plus (iv) the unpaid
Rent earned as of the date of termination, plus interest, all of which sum shall
be immediately due and payable by Tenant to Landlord;
(c) without terminating this Lease, and without notice to Tenant,
Landlord may in its own name, but as agent for Tenant enter into and take
possession of the Premises and re-let the Premises, or a portion thereof, as
agent of Tenant, upon any terms and conditions as reasonably determined by
Landlord. Upon any such re-letting, all rentals received by Landlord from such
re-letting shall be applied first to the costs incurred by Landlord in
accomplishing any such re-letting, and thereafter shall be applied to the Rent
owed by Tenant to Landlord during the remainder of the term of this Lease and
Tenant shall pay any deficiency between the remaining Rent as and when due
hereunder and the amount received by such re-letting; and/or
(d) pursue such other remedies as are available at law or in equity
other than intentionally allowing the Premises to remain unoccupied and collect
Rent from Tenant as it becomes due.
28. Destruction or Damage.
---------------------
(a) If the Building or the Premises are rendered totally untenantable
due to a service interruption off the Property ("Casualty Interruption") or are
totally destroyed by storm, fire, earthquake, or other casualty, or damaged to
the extent that, in Landlord's reasonable opinion the damage cannot be restored
within two hundred forty (240) days of the date the damage occurred, or if the
damage is not covered by standard "all risks" property insurance, or if the
Landlord's lender requires that the insurance proceeds be applied to its loan,
Landlord and Tenant shall each have the right to terminate this Lease effective
as of the date of such destruction or damage by written notice to the other on
or before sixty (60) days following the date of such damage and Rent and
Additional Rent shall cease as of the date of such casualty. Landlord shall
provide Tenant with notice within forty five (45) days following the date of the
damage of the estimated time needed to restore, whether the loss is covered by
Landlord's insurance coverage and whether or not Landlord's lender requires the
insurance proceeds be applied to its loan.
(b) If the Premises are damaged by any such casualty or casualties but
neither Landlord nor Tenant is entitled to or does not terminate this Lease as
provided in subparagraph (a) above, this Lease shall remain in full force and
effect. Landlord shall notify Tenant in writing within forty five (45) days of
the date of the damage that the damage will be restored (and will include
Landlord's good faith estimate of the date the restoration will be complete), in
which case Rent and Additional Rent shall abate as to any portion of the
Premises which is not usable, and Landlord shall restore the Premises to
substantially the same condition as before the damage occurred, whereupon full
Rent and Additional Rent shall recommence.
(c) In connection with any restoration under this Section 28, subject
to the other provisions of this Lease, including force majeure, Landlord shall
complete restoration of the Premises within three hundred sixty (360) days from
commencement of such restoration. In the event Landlord does not complete
restoration of the Premises (or if the Casualty Interruption is not cured)
within three hundred sixty (360) days from commencement of such restoration,
Tenant shall be entitled to terminate this Lease provided Tenant provides
written notification to Landlord of Tenant's intent to terminate this Lease
within thirty (30) days after expiration of such three hundred sixty (360) day
period. In the event Tenant does not notify Landlord of Tenant's intent to
terminate this Lease within such thirty (30) day period, time being of the
essence, Tenant's right to terminate this Lease shall terminate and be null and
void.
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29. Eminent Domain. If the whole of the Building or Premises, or such
--------------
portion thereof as will make the Building or Premises totally unusable in the
reasonable judgment of Landlord or Tenant for its intended purposes, is
condemned or taken by any legally constituted authority for any public use or
purpose, then in either of said events, each of Landlord and Tenant may
terminate this Lease by written notice to the other and the Term hereby granted
shall cease from that time when possession thereof is taken by the condemning
authorities, and Rent shall cease as of that date. If a portion of the Building
or Premises is so taken, but not such amount as will make the Premises unusable
in the reasonable judgment of Landlord for the purposes herein leased, or if
Landlord elects not to terminate this Lease, this Lease shall continue in full
force and effect and the Rent shall be reduced prorata in proportion to the
amount of the Premises so taken. The remaining Premises must be reasonably
sufficient to enable Tenant to operate its business in substantially the same
manner as prior to the condemnation or taking. Tenant shall have no right or
claim to any part of any award made to or received by Landlord for such
condemnation or taking, and all awards for such condemnation or taking shall be
made solely to Landlord. Tenant shall, however, have the right to pursue any
separate award that does not reduce the award to which Landlord is entitled.
30. Service of Notice. Deleted.
-----------------
31. Mortgagee's Rights.
------------------
(a) Tenant agrees that this Lease shall be subject and subordinate (i)
to any mortgage, deed to secure debt or other security interest now encumbering
the Property and to all advances which may be hereafter made, to the full extent
of all debts and charges secured thereby and to all renewals or extensions of
any part thereof, and to any mortgage, deed to secure debt or other security
interest which any owner of the Property may hereafter, at any time, elect to
place on the Property; (ii) to any assignment of Landlord's interest in the
leases and rents from the Building or Property which includes the Lease which
now exists or which any owner of the Property may hereafter, at any time, elect
to place on the Property; and (iii) to any Uniform Commercial Code Financing
Statement covering the personal property rights of Landlord or any owner of the
Property which now exists or any owner of the Property may hereafter, at any
time, elect to place on the foregoing personal property (all of the foregoing
instruments set forth in (i), (ii) and (iii) above being hereafter collectively
referred to as "Security Documents"). Tenant agrees within fifteen (15) days
after request of the holder of any Security Documents ("Holder") to hereafter
execute any documents which the counsel for Landlord or Holder may deem
reasonably necessary to evidence the subordination of the Lease to the Security
Documents. If Tenant fails to execute any such requested documents, Landlord or
Holder is hereby empowered to execute such documents in the name of Tenant
evidencing such subordination, as the act and deed of Tenant, and this authority
is hereby declared to be coupled with an interest and not revocable.
(b) In the event of a foreclosure pursuant to any Security Documents,
Tenant shall at the election of the Landlord, thereafter remain bound pursuant
to the terms of this Lease as if a new and identical Lease between the purchaser
at such foreclosure ("Purchaser"), as landlord, and Tenant, as tenant, had been
entered into for the remainder of the Term hereof and Tenant shall attorn to the
Purchaser upon such foreclosure sale and shall recognize such Purchaser as the
Landlord under the Lease. Such attornment shall be effective and self-operative
without the execution of any further instrument on the part of any of the
parties hereto. Tenant agrees, however, to execute and deliver at any time and
from time to time, upon the request of Landlord or of Holder, any instrument or
certificate that may be reasonably necessary or appropriate in any such
foreclosure proceeding or otherwise to evidence such attornment.
(c) If the Holder of any Security Document or the purchaser upon the
foreclosure of any of the Security Documents shall succeed to the interest of
Landlord under the Lease, such Holder or Purchaser shall have the same remedies,
by entry, action or otherwise for the non-performance of any agreement contained
in the Lease, for the recovery of Rent, Additional Rent or for any other default
or event of default hereunder that Landlord had or would have had if any such
Holder or Purchaser had not succeeded
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to the interest of Landlord. Any such Holder or Purchaser which succeeds to the
interest of Landlord hereunder, shall not be (a) liable for any act or omission
of any prior Landlord (including Landlord); or (b) subject to any offsets or
defenses which Tenant might have against any prior Landlord (including
Landlord). Nothing herein shall relieve Holder from any obligations under this
Lease, to the extent such obligations arise between the time it succeeds to the
interest of the landlord through the time it transfers its interest to another
party.
(d) Tenant hereby acknowledges that if the interest of Landlord
hereunder is covered by an assignment of Landlord's interest in Lease, Tenant
shall pay all Rent due and payable under the Lease directly to the Holder of the
assignment of Landlord's interest in Lease upon written notification of the
exercise of the rights thereunder by the Holder thereof.
(e) Notwithstanding anything to the contrary set forth in this Section
31, the Holder of any security Documents shall have the right, at any time, to
elect to make this Lease superior and prior to its Security Document. No
documentation, other than written notice to Tenant, shall be required to
evidence that the Lease has been made superior and prior to such Security
Documents, but Tenant hereby agrees to execute any documents ("Subordination
Agreement") reasonably requested by Landlord or Holder to acknowledge that the
Lease has been made superior and prior to the Security Documents. In addition,
Tenant's subordination to the interest of a Holder of the Security Documents as
provided in subparagraph (a) above, and Tenant's agreement to attorn as provided
in subparagraph (b) above, are expressly conditioned upon Landlord's providing
Tenant a nondisturbance agreement from the Holder of such Security Documents
substantially in the form attached hereto as Exhibit "E". Landlord represents
-----------
that the only existing Holder of the Security Documents as the date of execution
of this Lease is NationsBank. Upon Tenant's request], Landlord agrees to obtain
such a nondisturbance agreement from NationsBank, and from any other Holder, and
to deliver such nondisturbance agreements to Tenant.
32. Estoppels
---------
(a) Tenant's Estoppel. From time to time, upon not less than ten (10)
-----------------
days prior written request by Landlord, Tenant shall execute, acknowledge and
deliver to Landlord a written 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), the
dates to which the Rent has been paid, that to Tenant's knowledge, Tenant is not
in default hereunder and has no offsets or defenses against Landlord under this
Lease, and whether or not to the best of Tenant's knowledge Landlord is in
default hereunder (and if so, specifying the nature of the default), it being
intended that any such statement delivered pursuant to this paragraph may be
relied upon by a prospective purchaser of Landlord's interest or by a mortgagee
of Landlord's interest or assignee of any security deed upon Landlord's interest
in the Premises.
(b) Landlord's Estoppel. Landlord shall, from time to time, upon not
-------------------
less than ten (10) days prior written request by Tenant, execute, acknowledge
and deliver to Tenant a written 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), the dates to which the Rent has been paid, that to Landlord's
knowledge, whether or not Landlord is in default hereunder, and to Landlord's
knowledge, whether or not it has any offsets or defenses against Tenant under
this Lease, and whether or not to Landlord's knowledge Tenant is in default
hereunder (and if so, specifying the nature of the default). If Landlord fails
to deliver such statement or objections thereto within such ten (10) day period,
the statement delivered by Tenant shall conclusively be deemed to be correct and
accurate.
33. Attorney's Fees. In connection with any proceeding hereunder, the
---------------
prevailing party shall be entitled to recover, on demand, all costs, expenses
and fees, including reasonable attorneys' and paralegal fees through all trial
and appellate levels and court costs, incurred in connection therewith.
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34. Parking. No rights to specific parking spaces are granted under this
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Lease; however, subject to Landlord's rights pursuant to the last sentence of
this Section 34, Tenant shall be entitled to use up to five (5) spaces per each
1,000 rentable square feet of space in the Premises (136 total spaces) in the
parking facilities located on the Property. All parking spaces provided to
Tenant shall be unreserved and are to be used by Tenant, its employees and
invitees in common with the other tenants of the Building and their employees
and invitees. Landlord reserves the right to build improvements upon, reduce the
size of, relocate, reconfigure, eliminate, and/or make alterations or additions
to such parking facilities at any time and Landlord may also grant such
easements for ingress and egress through designated portions of the parking
areas within the Property, for the benefit of any other buildings in the
Project, as Landlord, in its sole discretion, deems necessary or desirable, so
long as Tenant's access and proximity to the parking facilities is not
materially and adversely affected for an unreasonable period of time. The use of
the parking spaces is provided by Landlord to Tenant without additional charge.
35. Storage. If Landlord makes available to Tenant any storage space
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outside the Premises, anything stored therein shall be wholly at the risk of
Tenant, and Landlord shall have no responsibility or liability for the items
stored therein.
36. Waste Disposal.
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(a) All normal trash and waste (i.e., waste that does not require
special handling pursuant to subparagraph (b) below) shall be disposed of
through the janitorial service.
(b) Tenant shall be responsible for the removal and disposal of any
waste in the Premises or elsewhere caused by Tenant, its employees, agents or
invitees, deemed by any governmental authority having jurisdiction over the
matter to be hazardous or infectious waste or waste requiring special handling,
such removal and disposal to be in accordance with any and all applicable
Governmental Requirements. Tenant agrees to separate and mark appropriately all
waste to be removed and disposed of through the janitorial service pursuant to
(a) above and hazardous, infectious or special waste to be removed and disposed
of by Tenant pursuant to this subparagraph (b). Tenant hereby indemnifies and
holds harmless Landlord from and against any loss, claims, demands, damage or
injury Landlord may suffer or sustain as a result of Tenant's failure to comply
with the provisions of this subparagraph (b).
37. Surrender of Premises. Whenever under the terms hereof Landlord is
---------------------
entitled to possession of the Premises, Tenant at once shall surrender the
Premises and the keys thereto to Landlord in the same condition as on the
Commencement Date hereof, natural wear and tear only excepted, and Tenant shall,
if required pursuant to Section 12 hereof, remove all of its personalty
therefrom. Landlord may forthwith re-enter the Premises and repossess itself
thereof and remove all persons and effects therefrom, using such force as may be
necessary without being guilty of forcible entry, detainer, trespass or other
tort. Tenant's obligation to observe or perform these covenants shall survive
the expiration or other termination of the Term of this Lease. If the last day
of the Term of this Lease or any renewal falls on Sunday or a legal holiday,
this Lease shall expire on the business day immediately preceding.
38. Cleaning Premises. Upon vacating the Premises, Tenant agrees to return
-----------------
the Premises to Landlord broom clean and in the same condition when Tenant's
possession commenced, natural wear and tear, damage caused by casualty and
condemnation excepted, regardless of whether any Security Deposit (as defined in
Section 44 below) has been forfeited.
39. No Estate In Land. Deleted.
-----------------
40. Cumulative Rights. All rights, powers and privileges conferred
-----------------
hereunder upon the parties hereto shall be cumulative but not restrictive to
those given by law.
-23-
41. Paragraph Titles; Severability. The paragraph titles used herein are
------------------------------
not to be considered a substantive part of this Lease, but merely descriptive
aids to identify the paragraph to which they refer. Use of the masculine gender
includes the feminine and neuter, and vice versa, where necessary to impart
contextual continuity. If any paragraph or provision herein is held invalid by a
court of competent jurisdiction, all other paragraphs or severable provisions of
this Lease shall not be affected thereby, but shall remain in full force and
effect.
42. Damage or Theft of Personal Property. All personal property brought
------------------------------------
into the Premises shall be at the risk of the Tenant only and Landlord shall not
be liable for theft thereof or any damage thereto occasioned by any acts of
co-tenants, or other occupants of the Building, or any other person, except,
with respect to damage to the Premises, as may be occasioned by the negligent or
willful act of the Landlord, its employees and agents.
43. Holding Over. In the event Tenant remains in possession of the Premises
------------
after the expiration of the Term hereof, or of any renewal term, with Landlord's
written consent, Tenant shall be a tenant at will and such tenancy shall be
subject to all the provisions hereof, except that the monthly rental for the
first month of any such holdover by Tenant shall be 150% of the monthly Base
Rent payable hereunder upon expiration of the Term hereof, or of any renewal
term, and 200% of the monthly Base Rent payable hereunder upon expiration of the
Term hereof, or of any renewal term, for each successive month thereafter. In
the event Tenant remains in possession of the Premises after the expiration of
the Term hereof, or any renewal term, without Landlord's written consent, Tenant
shall be a tenant at sufferance and may be evicted by Landlord without any
notice, but Tenant shall be obligated to pay rent for such period that Tenant
holds over without written consent at the same rate provided in the previous
sentence and shall also be liable for any and all other damages Landlord suffers
as a result of such holdover including, without limitation, the loss of a
prospective tenant for such space. There shall be no renewal of this Lease by
operation of law or otherwise. Nothing in this Section shall be construed as a
consent by Landlord for any holding over by Tenant after the expiration of the
Term hereof, or any renewal term.
44. Security Deposit. Tenant shall pay Landlord the sum of Forty-Nine
----------------
Thousand Six Hundred Six Dollars (49,606.00) (the "Cash Deposit") as evidence of
good faith on the part of Tenant in the fulfillment of the terms of this Lease,
which shall be held by the Landlord during the Term of this Lease, or any
renewal thereof. Under no circumstances will Tenant be entitled to any interest
on the Security Deposit. In addition, Tenant, concurrently with the execution of
this Lease, shall also provide to Landlord, a additional security, a letter of
credit (the "LOC") in the face amount of Dollars ( ) from a
------------- -----
financial institution located in Miami-Dade or Broward County, Florida, and in
form and substance reasonably satisfactory to Landlord. (The Cash Deposit and
the LOC are hereinafter collectively referred to as "Security Deposit"). The LOC
shall be for a term of five and one-half (5 1/2) years from the Commencement
Date, and subject to the provisions of this Section 44 and provided Tenant is
not in default hereunder beyond any applicable cure periods, the LOC shall be
reduced by Dollars ( ) on the eighteenth (18th) month after
---------- -------
the Commencement Date and by Dollars ( ) on eac h twelfth
------------ ---------
(12th) month thereafter. The Security Deposit may be used by Landlord (and the
Landlord may draw on the LOC), at its discretion, to apply to any amount owing
to Landlord hereunder, that is not paid prior to the expiration of any
applicable cure or grace periods, or to pay the expenses of repairing any damage
to the Premises, except natural wear and tear occurring from normal use of the
Premises or damage due to casualty (not caused by Tenant or Tenant's Permitees)
or condemnation, which exists on the day Tenant vacates the Premises, but this
right shall not be construed to limit Landlord's right to recover additional
sums from Tenant for damages to the Premises. In addition to any other rights
available to Landlord hereunder, the Security Deposit (including the LOC) may be
used by Landlord, at its discretion, if this Lease should for any reason
whatsoever be terminated due to Tenant's default prior to the normal Expiration
Date of the original term, or of any renewal thereof. If there are no payments
to be made from the Security Deposit
-24-
as set out in this paragraph, or if there is any balance of the Security Deposit
remaining after all payments have been made, the Security Deposit, or such
balance thereof remaining, will be refunded to the Tenant within thirty (30)
days after fulfillment by Tenant of all obligations hereunder. In no event shall
Tenant be entitled to apply the Security Deposit to any Rent due hereunder. In
the event of an act of bankruptcy by or insolvency of Tenant, or the appointment
of a receiver for Tenant or a general assignment for the benefit of Tenant's
creditors, then the Security Deposit shall be deemed immediately assigned to
Landlord. The right to retain the Security Deposit (and draw on the LOC) shall
be in addition and not alternative to Landlord's other remedies under this Lease
or as may be provided by law and shall not be affected by summary proceedings or
other proceedings to recover possession of the Premises. Upon sale or conveyance
of the Building, Landlord will transfer or assign the Security Deposit
(Including the balance of the LOC, if any) to any new owner of the Premises,
such new owner of the Premises will assume Landlord's obligations for the
Security Deposit and upon such transfer and assumption all liability of Landlord
for the Security Deposit shall terminate. Landlord shall be entitled to
commingle the Security Deposit with its other funds.
45. Building Allowance and Tenant's Plans. On or before February 26, 1999,
-------------------------------------
Tenant shall submit to landlord its space plans ("Space Plans") for the
improvements ("Tenant improvements") which shall comply with all Governmental
Ordinances, including the Americans with Disabilities Act. Landlord shall
approve or reject the Space Plans in writing, within five (5) business days of
Landlord's receipt thereof, with Landlord's approval not to be unreasonably
withheld, delayed or conditioned.
(a) (i) If Landlord fails to respond in writing within five (5)
business days of Tenant's initial delivery of Space Plans, and after delivery of
the notice required hereunder, Space Plans shall be deemed approved. If Landlord
rejects all or any portion of Space Plans, Landlord shall outline with
reasonable specificity, Its objections, and Tenant shall modify or amend Space
Plans accordingly. Any and all amendments and modifications to Space Plans shall
be submitted to Landlord for approval, and shall be approved or rejected by
Landlord, in the same manner as the initial delivery thereof.
(ii) Landlord shall submit to Tenant final plans and
specifications (Tenant's Plans") for the Tenant improvements. Tenant shall
approve or reject the Tenant's Plans in writing, within five (5) business days
of Tenant's receipt thereof, with Tenant's approval not to be unreasonably
withheld, delayed or conditioned. If Tenant fails to respond in writing within
five business (5) days of Landlord's delivery of Tenant's Plans, the Tenant's
Plans shall be deemed approved. If Tenant rejects all or any portion of Tenant's
Plans, Tenants shall outline with reasonable specificity, its objections, and
Landlord shall modify or amend Tenant Plans accordingly, Any and all amendments
and modifications to Tenant's Plans shall be submitted to Tenant for approval,
and shall be approved or rejected by Tenant within three (3) business days of
submission. Tenant hereby appoints Alexander Tellez as the authorized
representative of Tenant for purposes of dealing with Landlord with respect to
all matters involving, directly or indirectly, the Space Plans and the Tenant's
Plans.
(iii) In connection with the preparation of the Space Plans,
Landlord agrees to reimburse Tenant up to Fifteen Cents ($0.15) per rentable
square foot (27,058 rentable square feet) or a total of Four Thousand Fifty
Eight and 70/00 Dollars ($4,058.70). Landlord shall have the right to require
paid Invoices and such evidence of payment as may be reasonably required by
Landlord. In connection with the preparation of Tenant's Plans, upon receipt of
a building permit for the Tenant improvements, Tenant agrees to reimburse
Landlord for architectural and engineering fees incurred by Landlord in excess
of One Dollar and 60/00 ($1.60) per rentable square foot (27,058 rentable square
feet) or a total of Forty Three Thousand Two Hundred Ninety Two and 80/00
Dollars ($43,292.80). Tenant shall have the right to require paid invoices and
such evidence of payment as may be reasonably required by Tenant.
-25-
(b) All Tenant Improvements shall be made in accordance with Tenant's
Plans. Provided that Tenant is not in default of this Lease, Landlord shall
provide Tenant with an improvement allowance of Eighteen Dollars ($18.00) per
usable square foot or a total of Four Hundred Eighty Seven Thousand Forty Four
and 00/100 Dollars ($487,044.00) (the "TI Allowance"), and Landlord shall
complete at its cost the "Base Building Improvements," as outlined on Exhibit
-------
"F" attached hereto. Tenant agrees to reimburse Landlord for all costs, expenses
---
and fees ("Excess TI Costs") to complete the Tenant Improvements in excess of
the TI Allowance as follows:
(1) twenty-five percent (25%) of said Excess TI Costs will be
paid to Landlord upon completion of thirty percent (30%) of the Tenant
Improvements within thirty (30) days following submission of proof of completion
of such portion of the work.
(2) twenty-five percent (25%) of said Excess TI Costs will be
paid to Landlord upon completion of sixty percent (60%) of the Tenant
Improvements within thirty (30) days following submission of proof of completion
of such portion of the work
(3) thirty percent (30%) of said Excess TI Costs will be paid to
Landlord upon completion of ninety percent (90%) of the Tenant Improvements
within thirty (30) days following submission of proof of completion of the work.
(4) The remaining twenty percent (20%) shall be paid within two
(2) business days after completion of the Tenant Improvements and delivery of an
unconditional, permanent Certificate of Occupancy but in all events prior to
occupancy of the Premises by Tenant.
(c) Tenant and its contractors will be permitted by Landlord to enter
the Premises two (2) weeks prior to the estimated completion date of the Tenant
Improvements, in Landlord's reasonable determination, for the purpose of
installing its fixtures and other equipment, provided (x) Tenant shall have
obtained Landlord's approval of the plans for such work; and (y) Tenant shall
have deposited with Landlord the policies or certificates of insurance required
in Section 22 of the lease Agreement. Between the Effective Date and the
Commencement Date, the Tenant shall perform all duties and obligations required
by this Lease, including, without limitation, those provisions relating to
insurance and indemnification, saving and excepting only the obligation to pay
Base Rent and Additional Rent or any other event beyond Landlord's or Tenant's
control, which obligations shall commence as provided in Section 4.
(d) In accordance with the applicable provisions of the Florida
Construction Lien Law and specifically Florida Statutes Section 713.10, no work
performed by Tenant pursuant to this lease Agreement, whether in the nature of
erection, construction, alteration or repair, shall be deemed to be for the
immediate use and benefit of Landlord so that no mechanic's or other lien shall
be allowed against the Building or the estate of Landlord created hereunder by
reason of any consent given by Landlord to Tenant to improve the Premises.
Tenant agrees to advise any contractor, materialman or subcontractor performing
work on behalf of Tenant of this provision exculpating Landlord from liability
for such liens. In the event any mechanic's or other lien shall at any time be
filed against the Premises by reason of work, labor, services, or materials
performed or furnished, or alleged to have been performed or furnished, to
Tenant or to anyone holding the Premises through or under Tenant, Tenant shall
forthwith cause the same to be discharged of record or bonded to the
satisfaction of Landlord. If Tenant shall fail to cause such lien forthwith to
be so discharged or bonded within thirty (30) days after written notice from
Landlord of the filing thereof, then, in addition to any other right or remedy
of Landlord, Landlord may bond or discharge the same by paying the amount
claimed to be due, and the amount so paid by Landlord including reasonable
attorneys' fees incurred by Landlord either defending against such lien or in
the procuring the discharge of such lien, together with interest thereon at the
Default Rate, shall be due and payable by Tenant to Landlord as Additional Rent.
-26-
46. Rules and Regulations. The rules and regulations in regard to the
---------------------
Building, annexed hereto, and all reasonable rules and regulations which
Landlord may hereafter, from time to time, adopt and promulgate for the
government and management of said Building, are hereby made a part of this Lease
and shall, during the said term, be observed and performed by Tenant, its
agents, employees and invitees. Notwithstanding any provision to the contrary
provided in this Lease, any additions or modifications to the rules and
regulations by Landlord shall be consistent with first-class office buildings in
the A/WD Submarket and uniformly enforced against all tenants of said Building.
47. Quiet Enjoyment. Tenant, upon payment in full of the required Rent and
---------------
full performance of the terms, conditions, covenants and agreements contained in
this Lease, shall peaceably and quietly have, hold and enjoy the Premises during
the term hereof. Landlord shall not be responsible for the acts or omissions of
any other tenant, Tenant or third party that may interfere with Tenant's use and
enjoyment of the Premises.
48. Entire Agreement. This Lease contains the entire agreement of the
----------------
parties and no representations, inducements, promises or agreements, oral or
otherwise, between the parties not embodied herein shall be of any force or
effect.
49. Limitation of Liability. In the event of a sale of the Building, or an
-----------------------
assignment of this Lease, a demise of the Building and/or the land, or other
transfer of the Lease, the Building and/or the Project, Landlord shall be and
hereby is entirely freed and relieved of all further obligations hereunder. It
is specifically understood and agreed that there shall be no personal and or
entity liability on behalf Landlord, or any of Landlord's partners, officers,
directors, shareholders, members or representatives with respect to any of the
covenants, conditions, or provisions of this Lease. In the event of a breach or
default by Landlord of any of its obligations under this Lease, Tenant shall
look solely to the equity of Landlord in the Building and the Property for the
satisfaction of Tenant's remedies, except in the case of any liability for the
return of the Security Deposit as required pursuant to this Lease which shall
not be limited to the equity of the Landlord in the Building and the Property.
50. Submission of Agreement. Submission of this Lease to Tenant for
-----------------------
signature does not constitute a reservation of space or an option to acquire a
right of entry. This Lease is not binding or effective until execution by and
delivery to both Landlord and Tenant (the "Effective Date").
51. Authority. If Tenant executes this Lease as a corporation, limited
---------
partnership, limited liability company or any other type of entity, each of the
persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that Tenant is a duly organized and validly existing
corporation, that Tenant is qualified to do business in the State of Florida,
that Tenant has full right, power and authority to enter into this Lease, and
that each person signing on behalf of Tenant is authorized to do so. In the
event any such representation and warranty is false, all persons who execute
this Lease shall be individually, jointly and severally, liable as Tenant. Upon
Landlord's request, Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord confirming the foregoing representations and
warranties. Landlord hereby warrants and represents to Tenant that Landlord is a
corporation duly organized, validly existing and qualified to do business in the
State of Florida. Further, Landlord has full right, power and authority to enter
into this Lease, and that each person signing on behalf of Landlord is
authorized to do so. Upon Tenant's request, Landlord shall provide Tenant with
evidence reasonably satisfactory to Tenant confirming the foregoing
representations and warranties.
52. Relocation. Deleted.
----------
53. Broker Disclosure. Codina Realty Services, Inc. - Oncor International,
-----------------
a real estate broker licensed in the State of Florida, has acted as agent for
Landlord in this transaction and is to be paid
-27-
a commission by Landlord pursuant to a separate agreement. Cushman & Wakefield
of Florida, Inc., a real estate broker licensed in the State of Florida, has
acted as agent for Tenant in this transaction and is to be paid a commission by
Landlord pursuant to a separate agreement. Landlord represents that it has dealt
with no other broker other than the broker(s) identified herein. Landlord agrees
that, if any other broker makes a claim for a commission based upon the actions
of Landlord, Landlord shall indemnify, defend and hold Tenant harmless from any
such claim. Tenant represents that it has dealt with no broker other than the
broker(s) identified herein. Tenant agrees that, if any other broker makes a
claim for a commission based upon the actions of Tenant, Tenant shall indemnify,
defend and hold Landlord harmless from any such claim.
54. Notices. Any notice which is required or permitted to be given by
-------
either party under this Lease shall be in writing and must be given only by
certified mail, return receipt requested, by hand delivery to the President,
Vice President, Secretary, or Treasurer, or by nationally recognized overnight
courier service at the addresses set forth below. Any such notice shall be
deemed given two (2) days after deposit for delivery in the case of delivery by
certified mail and upon receipt if delivered in accordance with the other
permitted methods described above. The time period for responding to any such
notice shall begin on the date the notice is deemed given as provided
hereinabove, but refusal to accept delivery or inability to accomplish delivery
because the party can no longer be found at the then current notice address,
shall be deemed receipt. Either party may change its notice address by notice to
the other party in accordance with the terms of this Section 54. The following
are the initial notice addresses for each party:
Landlord's Notice Address: CODINA WEST DADE DEVELOPMENT
CORP., NO.4
c/o Codina Real Estate Management, Inc.
8323 N.W. 12th Street, Suite 115
Miami, Florida 33128
With a copy to:
BERMAN WOLFE & RENNERT, P.A.
100 Southeast Second Street, Suite 3500
Miami, Florida 33131-2130
Attn: Leon J. Wolfe, Esq.
Tenant's Notice Address: CELLIT, INC.
Westside Plaza II
8300 N.W. 33(rd) Street, Suite 200
Miami, Florida 33166
With a copy to:
KIRKPATRICK & LOCKHART, LLP
201 S, Biscayne Boulevard, 20th Floor
Miami, Florida 33131
Attn: Laura A. Gangemi, Esq.
55. Force Majeure. In the event of a strike, lockout, labor trouble, civil
-------------
commotion, an act of God, or any other event beyond Landlord's or Tenant's
control (a "force majeure event") which results in the Landlord or Tenant being
unable to timely perform its obligations under this Lease, so long as Landlord
or Tenant, as applicable, diligently proceeds to perform such obligations after
the end of the force majeure event, Landlord or Tenant, as applicable, shall not
be in breach hereunder, this Lease shall not terminate, and Tenant's obligation
to pay any Base Rent, Additional Rent, or any other charges and sums due and
payable
-28-
shall not be excused. In addition, under no circumstances shall any financial
difficulty or hardship or inability to pay by any party be deemed to be a force
majeure event.
56. Special Stipulations. The Special Stipulations, if conflicting, if any,
--------------------
are modifications to the terms of this Lease and such Special Stipulation shall
control in the event of any conflict with the other provisions of this Lease or
any exhibits hereto.
57. Recapture Fee.
-------------
(a)In the event Tenant does not exercise its option to renew the Lease
for the Option Term in accordance with Section 2(b) hereof, Tenant shall be
obligated to pay to Landlord in good and collectible funds the following amounts
("Recapture Fee") nine (9) months prior to expiration of the initial Term in the
event Tenant does not renew the Lease as provided herein: (i) $62,331.58
representing the unamortized portion of the Tenant Improvements and the
brokerage commission; plus (ii) $103,158.63 representing a rental payment equal
to three (3) months of Base Rent as if such payments of Base Rent would have
been due and payable for each month after expiration of the initial Term.
58. Right of First Offer. During the initial eighteen (18) months of this
--------------------
Lease and so long as Tenant is not then in default under this Lease that remains
uncured beyond any applicable cure or notice period, at such time as Landlord
notifies Tenant, in writing, of the availability of the third (3(rd)) floor of
the Building, Tenant shall have five (5) business days after Tenant's receipt of
Landlord's notice, within which to notify Landlord ("Tenant's Notice") of
Tenant's desire to lease the third (3(rd)) floor in its entirety for a term
equal to the then remaining initial Term. Within five (5) business days after
delivery of the Tenant's Notice, Landlord and Tenant will execute an amendment
to this Lease, for the third (3(rd)) floor of the Building, including the
Premises, which amendment shall provide that the third (3(rd)) floor shall be
subject to all the same terms and conditions as this Lease, except that there
shall be no rental abatements. If Tenant does not deliver Tenant's Notice within
the period provided herein, then this right of first offer will lapse and be of
no further force and effect and Landlord will have the right to lease the third
(3(rd)) floor, or any part thereof, to any third party, under any terms and
conditions, whether or not such terms and conditions are more or less favorable
than those offered to Tenant. This right of first offer to lease the third
(3(rd)) floor is personal to Cellit, Inc., and is not transferable.
59. Right to Setoff. If Landlord fails to pay when due Relocation Expenses,
---------------
the TI Allowance or, if Tenant's share of Operating Expenses was overstated by
more than five (5%) percent, the cost of an audit performed by Tenant, and such
failure continues for more than fifteen (15) days after the date by which
reimbursement is required under this Lease, Tenant shall have the right to
credit any such unpaid amount (plus interest at the Default Rate commencing with
the sixteenth (16th) day after the aforementioned fifteen (15) day period)
against the Rent until such unpaid amount has been fully credited.
60. Waiver of Landlord's Lien.Landlord waives all common law lien rights,
-------------------------
if any, and all statutory lien rights that Landlord may have pursuant to Florida
Statutes Chapter 83, with respect to all property now or hereafter placed in or
upon the Premises by Tenant.
-29-
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seats, the day and year first above written
WITNESSES TO LANDLORD: LANDLORD:
CODINA WEST DADE DEVELOPMENT CORP.,
/s/ H J Rodstein NO. 4, a Florida corporation
----------------------------
Print Name: H J Rodstein
-----------------
By:/s/ O. Ford Gibson
--------------------------------
/s/ Carmen C Castillo Print Name: O. Ford Gibson
---------------------------- -----------------------
Print Name: Carmen C Castillo Title:
----------------- -----------------------------
WITNESSES TO TENANT: TENANT:
CELLIT, INC., a Florida corporation
/s/ illegible
---------------------------
Print Name: illegible
-----------------
By:/s/ Alexander Tellez
--------------------------------
/s/ Diana Parker Print Name:Alexander Tellez
---------------------------- ------------------------
Print Name: Diana Parker Title: President & CEO
----------------- ----------------------------
-30-
EXHIBIT "A"
-----------
PROPERTY
A portion of Tracts 33 and 34 of FLORIDA FRUIT LANDS COMPANY'S SUBDIVISION NO.1,
in the Southwest 1/4 Section of 27, Township 53 South, Range 40 East, according
to the Plat thereof, as recorded in Plat Book 2, at Page 17, of the Public
Records of Dade County, Florida, being more particularly described as follows:
BEGIN at the Southeast corner of Tract "A", of RYDER CHILD CARE CENTER,
according to the plat thereof, as recorded in Plat Book 145, at Page 65, of the
Public Records of Dade County, Florida; thence North 01 DEG. 42'47" West along
the East line of said Tract "A" for 276.61 feet; thence run East for 196.65
feet; thence run North for 336.93 feet to a point of intersection with the South
Right-of-Way line of N.W. 33(rd) Street, as shown on the recorded Plat of
CORPORATE OFFICE PARK PHASE I, according to the plat thereof, as recorded in
Plat Book 135, at Page 9, of the Public Records of Dade County, Florida, said
point also being on the arc of a circular curve concave to the Northeast, which
radius point bears South 05 DEG. 36' 11" West; the following two (2) courses
along said South Right-of-Way Line of N. W. 33(rd) Street; 1) thence Easterly
along the arc of said circular curve, concave to the Northeast, having a radius
of 1050.00 feet and a central angle of 05 DEG.35' 09", for an arc distance of
102.37 feet to a point of tangency; 2) thence South 89 DEG. 58' 57" East for
251.24 feet; thence South 00 DEG.03' 58" East for 283.52 feet; thence North 89
DEG. 58' 02" East for 64.95 feet: thence South 00 DEG.03' 58" East for 322.65
feet to a point on the South line said Tract 34; thence South 89 DEG. 56' 02"
West along the South line of said Tract 34 for 623.93 feet to the POINT OF
BEGINNING.
EXHIBIT "A-1"
Westside Plaza II
2nd Floor
[GRAPHIC]
EXHIBIT "B"
-----------
(WORK LETTER)
To induce Tenant to enter into the Lease (to which this Exhibit B is
attached) and in consideration of the mutual covenants hereinafter contained,
Landlord and Tenant agree as follows:
1. Landlord shall construct, or cause to be constructed, leasehold
improvements to the Premises (the "Work") in accordance with the Tenant's Plans
(hereinafter defined). Tenant shall cause a preliminary layout to be precared on
or before February 26, 1999 for Landlord's approval. Landlord's failure to
approve or disapprove the layout within seven (7) business days of its
submission shall be deemed an approval. Upon approval of the layout, Landlord
shall prepare, or cause to be prepared, working drawings for the construction of
the standard building items and improvements, adequate in detail to perform the
Work and shall have mechanical (sprinkler, air conditioning, heating, electrical
and plumbing) drawing prepared by Landlord's mechanical engineer covering
mechanical elements of the Work (together with the preliminary layout, the
drawings are referred to as the "Tenant's Plans"). The Tenant's Plans (and any
modifications thereof) shall comply with all governmental standards, regulations
and requirements and shall be subject to Landlord's and Tenant's approval (which
approval shall not be unreasonably withheld and shall be granted if such
Tenant's Plans are prepared consistent with the preliminary layout prepared by
Tenant). Tenant's failure to approve or disapprove the Tenant's Plans within
three (3) business days of submission shall be deemed an approval.
2. Any other work desired by Tenant, and approved by Landlord (which
approval shall not be unreasonably withheld), shall be preformed by Landlord or
Landlord's contractors, unless Landlord otherwise consents in writing. If Tenant
desires any work in addition to the Work described in Section 1 hereof
("Additional Work"). Tenant shall cause the necessary drawings, plans and
specifications for the Additional Work to be included on the Tenant's Plans, or
shall submit to Landlord or Landlord's agent (at Tenant's sole cost and expense)
the necessary drawings, plans and specifications for the Additional Work so that
Landlord may include such work on the Tenant Plans which shall then be submitted
to Tenant for approval. Prior to commencing any such Additional Work requested
by Tenant, Landlord or Landlord's agent shall submit to Tenant a written
estimate of: (i) the cost of such Additional Work; and the number of days, if
any, that the Delay Period, as defined in Section 2 of the Lease, will be
Increased. If Tenant shall fail to approve said estimate within two (2) business
days from the receipt thereof, the same shall be deemed disapproved in all
respects by Tenant and Landlord shall not be authorized to proceed thereon. If
Tenant desires any changes in the Additional Work after having approved the
initial plans and cost estimate, Tenant shall be required to sign such field
order changes requested by Landlord or Landlord's contractors or agents to
evidence any such change desired by Tenant. Tenant acknowledges that no cost
estimate will be given for any changes in the Additional Work after the initial
cost estimate has been approved by Tenant, and Tenant shall be responsible for
any and all costs associated with any such change. Any time required to review
plans for Additional Work, incorporate the Additional Work into the Tenant Plans
and complete the Additional Work and changes thereto shall be added to the Delay
Period.
3. Subject to Landlord's contractor's approval, Landlord shall permit
Tenant and Tenant's agents to enter the Premises two (2) weeks prior to the
Commencements Date of the Term of the Lease in order that Tenant may do such
other work as may be required by Tenant to make the Premises ready for Tenant's
use and occupancy. If Landlord permits such entry prior to such Commencement
Date, such permission is conditioned upon Tenant and its agents, contractors,
employees and invitees working in harmony and net interfering with Landlord and
its agents, contractors and employees in doing the Work and the Additional Work
or for other tenants and occupants of the Building. If at any time such entry
shall cause or threaten to cause disharmony or interference, Landlord shall have
the right to withdraw such permission upon 24 hours notice to Tenant. Tenant
agrees that any such entry into and occupation of the Premises shall be deemed
to be
1
to any of Tenant's work and installations made in the Premises or to properties
placed therein prior to the Commencement Date of the term of the Lease, the same
being at Tenant's sole risk.
4. Substantial completion of the Work shall be deemed to occur on the date
when the Work has been completed (except for punchlist items which do not
materially, adversely affect Tenant's use) and a Certificate of Occupancy has
been issued for the Premises. If the substantial completion of the Premises by
Landlord is delayed due to any act or omission of Tenant or Tenant's
representatives, including any delays by Tenant in the submission of plans,
drawings, specifications or other information or in approving any drawings or
estimates or in giving any authorization or approval, the Premises shall be
deemed substantially completed on the date when they would have been ready but
for such delay.
2
EXHIBIT "C"
-----------
ACKNOWLEDGEMENT, ACCEPTANCE AND AMENDMENT
Tenant herby acknowledges that the Premises demised pursuant to the Lease to
which this Exhibit "C" is attached (the "Lease"), and all tenant finish items to
be completed by the Landlord, or Landlord's contractors, have been
satisfactorily completed in every respect, except for the punch-list items set
forth below, and Tenant hereby accepts said Premises as substantially complete
and ready for the uses intended as set forth in the Lease. Landlord shall
exercise diligent, good faith efforts to correct said punch-list items, if any,
within forty five (45) days after receipt of the punch-list, subject to
availability of materials. Possession of the Premises is hereby delivered to
Tenant, and any damages to walls, ceilings, floors or existing work, except for
any damage caused by Landlord or Landlord's contractors in completing any
punch-list items, shall be the sole responsibility of Tenant.
If any improvements or tenant finishes are to be constructed or installed by
Tenant or Tenant's contractors, as previously approved by Landlord, Tenant
hereby agrees to indemnify and hold harmless Landlord from and against any
claims, demands, loss or damage Landlord may suffer or sustain as a result of
such work by Tenant or Tenant's contractors including, without limitation, any
claim of lien which may be filed against the Premises or Landlord's Property as
a result of such work by Tenant's contractors or representative. In the event
any such claim of lien is filed against Landlord's Property by any contractor,
laborer or materialman performing work on the Premises at Tenent's direction,
Tenant agrees to cause such lien to be discharged, by payment of the claim or
bond, within twenty (20) days of receipt of demand by Landlord.
Tenant and Landlord hereby further acknowledge and agree as follows:
1.The Commencement Date (as defined in the Lease) is , 1999 and the
------------
Expiration Date (as defined in the Lease) is , 2004.
-------------
2.The exact rentable square feet contained within the Premises is 27,058 square
feet: and if differing from Exhibit "A-1" attached to the Lease.
------------
3.Tenant's Share is 25.67%
4.The initial Base Rent payable under the Lease is $412,634.52 payable in equal
monthly installments as provided in the Lease.
5.Rent under the Lease will commence as of .
----------------
6.Tenant intends to occupy the Premises on .
----------------
7. (No.) keys to the Premises have been delivered to Tenant or Tenant's
--------
representative.
8. The punch list items that remain to be completed by Landlord or Landlord's
contractor are listed on Exhibit "C-2" attached hereto.
------------
9. This Acknowledgment, Acceptance and Amendment, when executed by Landlord and
Tenant, shall be attached to and shall become a part of the Lease. If any
provision contained herein conflicts with any provision of the Lease, the
provisions hereof shall supersede and control, and the Lease shall be deemed
modified and amended to conform with the provisions hereof.
10. Other agreements or modifications:
---------------------------------
EXHIBIT "D"
-----------
(Landlord's Employees)
Title Percentage Apportioned to Property
----- ----------------------------------
Property Manager 41%
Assistant 41%
Maintenance Worker 100%
EXHIBIT "E"
-----------
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
This Agreement is made as of this day of 1999, between
------ -----------
, (the "Mortgagee"), whose address is
--------------------------- ---------------
, and
------------------------------------------- ------------------------------
(the "Tenant"), whose address is
----------------------------------------------.
RECITALS
A. The Mortgagee intends to make a loan (the "Loan") to
-------------------
(the "Mortgager/Landlord"), which Loan is secured in, part by a first mortgage,
(the "Mortgage") from Mortgagor/Landlord to Mortgagee encumbering certain and
and the improvements, fixtures and personalty located thereon, collectively
known as ,(the "Premises")
----------------------------
B. Pursuant to the Mortgage, the Mortgagor/Landlord has also assigned to
the Mortgage all of the leases, rents, profits and security deposits affecting
or arising in connection with the Premises or any part thereof.
C. Tenant is a tenant in the Premises pursuant to a lease dated
-----------
as amended (the "Lease").
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter contained, the parties hereto do mutually covenant and agree as
follows:
1. The Recitals are true and correct and are made a part hereof.
2. Tenant hereby agrees that all rights of Tenant under the Lease are and
shall at all times continue to be subordinate to the lien of the Mortgage, as
said Mortgage may be amended, renewed increased, modified, consolidated,
replaced, or extended.
3. Mortgages agrees that during the term of the Lease and any extended term
thereof, so long as the Tenant is not in default thereunder beyond any
applicable cure periods. Tenant's possession of the demised premises (as
described in the Lease) shall not be disturbed and Tenant's rights and
privileges under the Lease shall not be diminished or interfered with by the
Mortgagee upon any proceeding to foreclosure the Mortgagee, and Mortgagee will
not join Tenant as a party defendant in any proceeding to forecicse the Mortgage
for the purpose of terminating the Lease.
4. In the event that, by reason of the foreclosure of the Mortgage for any
reason, Mortgagee or any successor or assigns of Mortgagee succeeds to the
interest of the Mortgagor/Landlord under the Lease then upon receipt of written
notice from the Mortgagee or such successor or assignee that has succeeded to
the rights of the Mortgagor/Landlord under the Lease, Tenant hereby agrees to
recognize Mortgagee or such successor or assignee as Tenant's landlord under the
Lease and hereby agrees to attem to Mortgagee of such successor or assignee.
Said Attemment is to be effective and self-operative without the execution of
any other instrument immediately upon Mortgagee or any successor or assignee of
Mortgagee succeeding to the rights of the Mortgagor/Landlord under the Lease,
and the Lease shall continue in accordance with its terms between Tenant, as
tenant, and Mortgagee or any successor or assignee of Mortgagee, as landlord,
provided, however, that Mortagagee or any successor or assignee of Mortgagee
shall not (i) Except for those prepayments of rent and the security deposit set
forth in the Lease, be bound by any prepayment of rent or additional rent,
deposit, rental security or any other sums paid to any prior landlord under the
Lease including, without limitation, the Mortgagor/ Landlord unless received and
receipted for by Mortgagee or its successor or assigns; (ii) be bound by any
amendment or modification of the lease made without the prior written consent of
Mortgagee or its successor or assignee, (iii) be personally liable under the
Lease and Mortgagee's or its successor's or assignee's liability under the Lease
shall be limited to the equity of Mortgagee in the Building and the Property,
except in the case of any liability for the return of the security deposit, for
which Mortgagee shall be liable, if and only if , Mortgagee receives the
security deposit from the Landlord;
5. Tenant hereby certifies that: (i) to Tenant's knowledge, there are no
defaults on the part of the landlord (including, without limitation, the
Mortgagor/Landlord) under the Lease; (ii) the Lease is a complete statement of
the agreement of the parties thereto with respect to the letting of the demised
premises; (iii) the Lease is in full force and effect (iv) all conditions to the
effectiveness or continuing effectiveness of the Lease required to be satisfied
as of the date hereof have been satisfied ; and (v) Tenant has not paid, and
shall not pay, rent for more that one month in advance.
6. Tenant will notify Mortgagee of any default by the Mortgagor/Landlord
which would entitle Tenant to cancel the Lease or abate the rent payable
therunder, and Tenant agrees that notwithstanding any provision of the Lease, no
notice of cancellation thereof and no abatement of rent thereunder shall be
effective unless Mortgagee has received the notice as aforesaid and has failed
within thirty (30) days of the date thereof to cure such default or if such
default cannot be cured within (30) days, has failed to commence and diligently
to prosecute the cure of the Mortgagor's/Landlord's default default which gave
rise to such right of cancellation or abatement.
7. Tenants agrees that it will not, without the prior written consent of
Mortgagee (i) modify the Lease or any extensions or renewals thereof; (ii)
terminates the Leasa except as provided by its terms; (iii) tender or accept a
surrender of the Lease or make a prepayment in excess of one month of any rent
thereunder, or (iv) subordinate or permit subordination of the Lease to any lien
subordinate to the Mortgage. Any such purported action without such consent
shall be void as against Mortgagee.
8. Tenant acknowledges and agrees that the provisions contained in the
Mortgage regarding the collection and application of insurance and condemnation
proceeds shall control over the Lease provisions regarding the collection and
application of insurance and condemnation proceeds.
9. All notice required to be given under this Agreement shall be in writing
and shall be delivered be hand or mail and shall be conclusively deemed to have
been received if delivered or attempted to be delivered by United States first
class mail, return receipt requested, postage prepaid, addressed to the party
for whom it is intanced at the following address. Any party may designate a
change of address by written notice to the other party, received by such other
party at least ten (10) days before such change of address is to become
effective.
Mortgagee:
------------------------
2
----------------------------
----------------------------
Attn:
-----------------------
Tenant:
----------------------------
----------------------------
----------------------------
Attn:
-----------------------
10. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day year first above written.
Signed, sealed and delivered TENANT:
in the presence of:
---------------------------
a corporation
------------
By: (SEAL)
---------------------- -----------------
Name(Print or Type) , as its
-------------------
---------------------------
----------------------
Name (Print or Type)
MORTGAGEE
---------------------------
a corporation
---------------------- -------------
Name(Print or Type)
By: (SEAL)
---------------------- -----------------
Name(Print or Type) ,as its
--------------------
---------------------------
3
STATE OF FLORIDA )
)
COUNTY OF MIAMI DADE )
The foregoing instrument was acknowledge before me this day of
-----
, 1999 by of on
------- ---------------------------------- ----------------------
behalf of the . He/She is personality Know to me or has
-----------------
produced as identification and did (not) take an oath.
--------------------
----------------------------------
Type or print name:
---------------
Notary Public
Serial No:
STATE OF FLORIDA )
)
COUNTY OF MIAMI DADE )
The foregoing instrument was acknowledged before me this day of
-----
1999 by of on behalf
---------- ------------------------ ---------------------
of the . He/She is personally know to me or has produced
----------------
as identification and did (not) take an oath.
--------------------------
----------------------------------
Type or print name:
---------------
Notary Public
Serial No:
4
EXHIBIT "F"
-----------
(BASE BUILDING IMPROVEMENTS)
GENERAL NOTES:
1. Items shall be provided as specified. Specifications are intended to denote
quality only, the manufacturer or provider of the items are the sole
discretion of the landlord.
2. Any changes, additions, deletions or substitutions shall be at the sole
expense of the Tenant. No exchanges or credits are given for quantities
requested that are less than those provided by the Landlord.
3. Where ratios are given, the standard practice will be to round "up"
from 1/2 or greater, and round "down" for less than 1/2.
4. All above Building Standard purchased by the Tenant shall meet minimum
state and local codes.
OFFICE SPACE IMPROVEMENTS:
A. CEILINGS
1 Entire office premises shall be 24" x 24" x 5/8 regular lay in
acoustical ceilings tile such as(USG Ellipse Clima 2' x 2' x 3/4')
beveled tegular or equal, to be installed in 1" white suspended
ceiling grid, above finish floor.
B. PLUMBING
2. Sprinkler heads to be semi-concealed with a chrome finish. Sprinkler
design to comply with minimum code requirements for standard office
buildout.
C. LIGHTING
1. Flourescent light fixtures shall be 2'x 4', 18 cell. parabolic
-----------------------------------------
fixture, Lithonia 2PM3.B-32 277-GLR/ES, with 3 lamps at 32 watts
(3-F32T8) or equal, color white, with One (1) fixture shall be
provided for every 85 feet of office space.
2. Fire Alarm System is to be installed in each tenant space to comply
-----------------
with the National Fire Protection Code and the South Florida Building
Code. Smoke detectors, audio and visual fire alarms and building
standard communication systems are by Simplex. Smoke Detectors,
ionization Type, ceiling mounted to match building standard Simplex
Catalog Number 2098-9201/9651, visual strobe light fire alarm to match
building standard, Simplex Catalog Number 4904-9112, communication
systems, fire alarm and voice communication speaker ceiling mounted to
match building standard, Simplex Catalog Number 4902-9705. Existing
junction boxes provided by base building. Fire extinguishers. 5 lb.
ABC Cry Chemical are provided in accordance with the current South
Florida Building Code.
D. HVAC
1. Office premises shall be air conditioned through the base building
HVAC system with VAV controls within each tenant space. Number of VAV
boxes as per the base building design. Supply and return air grills
shall be 2'x 2' perforated lay in type (building standard).
Exhibit 10.15
SECOND AMENDMENT TO LEASE AGREEMENT
-----------------------------------
THIS SECOND AMENDMENT TO LEASE AGREEMENT ("Second Amendment") is made and
entered into as of 26th day of MAY, 2000, but shall be deemed to be
retroactively effective as of March 30, 2000, by and between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Landlord"), and CELLIT,
INC., a Florida corporation ("Tenant").
WITNESSETH:
WHEREAS, Tenant and Landlord's predecessor in interest, Codina West Dade
Development Corp., No. 4. a Florida corporation, entered into that certain Lease
Agreement dated as of February 23,1999 (the "Lease Date"), as amended by that
certain First Amendment to Lease Agreement dated as of March 30, 2000 (the
"First Amendment") (as so amended, the "Lease") with respect to therein
described space comprising 27,058 rentable square feet (the "Original Premises")
located in the building known as Westside Plaza II, 8300 Northwest 33rd Street,
Miami, Florida 33122 (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend the Lease pursuant to the
terms and conditions hereinafter set forth in this Second Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein and in the Lease, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Landlord and Tenant hereby agree as follows:
1(a). THE FIRST AMENDMENT IS HEREBY SUPERCEDED BY THIS SECOND AMENDMENT AND BY
OPERATION OF THIS SUCCESSION, THE FIRST AMENDMENT SHALL BE OF NO FURTHER FORCE
AND EFFECT.
1(b). Confirmation and Acknowledgment. Tenant hereby acknowledges that the
-------------------------------
Original Premises, and all tenant finish items to be completed by the Landlord
(or Landlord's contractors), including, but not limited to, the provisions of
Section 45 of the Lease and Exhibit B to the Lease, have been satisfactorily
completed in every respect, and Tenant has accepted the Original Premises as
complete and ready for the uses intended as set forth in the Lease. The
foregoing sentence shall not compromise Landlord's obligations pursuant to
Sections 10(b) and 10(c) of the Lease. A certificate of occupancy for the
Original Premises was delivered on June 30, 1999 and therefore, the Commencement
Date is July 1, 1999 and the Expiration Date is December 31, 2004. Landlord is
not responsible for "Relocation Costs" and the "Termination Option" did not
ripen each as set forth in Section 2(a) of the Lease. Rent commenced under the
Lease as of January 1, 2000 [after the expiration of the Six (6) month free rent
period]. The provisions of this Section satisfy the requirement that the parties
enter into a letter agreement in the form attached to the Lease as Exhibit C, as
required by Section 2(a) of the Lease.
2. Original Premises. Landlord and Tenant hereby agree that the Lease contained
-----------------
a scrivener's error with respect to the number of rentable square feet contained
in the Original Premises. Effective as of the Lease Date
(a) The Original Premises shall be deemed to include 27,204 rentable
square feet for all purposes under the Lease. Tenant's Share shall be
deemed to be 25.96%, and the Base Rent - initial Term schedule set
forth in Section 4 of the Basic Lease Provisions is revised as
follows:
Rate per Rentable Square Foot of
Lease Year (in months) the Premises
--------------------- --------------------------------
01/01/99-12/31/99 $ 0.00
01/01/00-12/31/00 $15.17
01/01/01-12/31/01 $15.70
01/01/02-12/31/02 $16.24
01/01/03-12/31/03 $16.81
01/01/04-12/31/04 $17.40
(b) Notwithstanding the fact that the allowances made available pursuant
to Sections 45 (a)(iii) and 45 (b) were calculated based upon 27,058
rentable square feet, Tenant shall not be entitled to any additional
allowances based upon the increased rentable square footage due to the
scrivener's error.
(c) The schedule set forth in Section 2(b) is hereby revised as follows:
Rate per Rentable Square Foot of the
Option Term Lease Year Premises
---------------------- ------------------------------------
1 $18.10
2 $18.73
3 $19.39
4 $20.07
5 $20.77
(d) Section 13(a) is revised to delete the number 105,403 and to insert in
lieu thereof 104,799.
3. Expansion.
----------
a. Effective as of April 1, 2000, the Original Premises shall be increased
for all purposes under the Lease (except as set forth in Section 3(f) hereof) by
765 rentable square feet located on the first floor of the Building as shown on
Exhibit A attached hereto and made a part hereof (the "Expansion Space").
Effective as of the Expansion Effective Date, Item 2 of the Basic Lease
Provisions attached to the Lease and Section 1 of the Lease Agreement shall be
amended to reflect the addition of the Expansion Space, and the Original
Premises shall thereafter contain for all purposes under the Lease (except as
set forth in Section 3(f) hereof), 27,969 rentable square feet, and Tenant's
Share (Item 5 of the Basic Lease Provisions to the Lease) shall thereafter be
26.69%. The provisions of Section 8 of the Lease shall apply to the Expansion
Space with one exception: the Expansion Space may be used as storage space for
general storage [provided such general storage is in accordance with any
requirements of Florida Power and Light (or any similar entity having
jurisdiction over the Building) used in accordance with such reasonable rules
and regulations as may be imposed by Landlord from time to time] and/or storage
of a UPS battery system, HVAC air handlers and other electrical requirements
incidental to Tenant's use, in accordance with the terms of the Lease, of the
Original Premises. Tenant will not be charged a fee for the right to install
equipment for Tenant's power usage in the main electrical room located on the
first floor of the Building so long as such installation is in common with other
tenants of the Building and Landlord.
b. The term for the Expansion Space shall commence on April 1, 2000 and
shall expire on December 31, 2004, coterminous with the Term for the Original
Premises.
c. Effective as of April 1, 2000, Base Rent for the Expansion Space shall
be paid in accordance with the Lease, except that it shall be calculated not in
accordance with the schedule set forth at Section 4 of the Basic Lease
Provisions attached to the Lease (as modified above), but in accordance with the
following schedule:
Rate Per Rentable Square Foot per
Period Annum
----------------------------------- ---------------------------------
April 1, 2000 - May 31, 2000 $ 0.00
June 1, 2000 - December 31, 2000 $14.00
January 1, 2001 - December 31, 2001 $14.49
January 1, 2002 - December 31, 2002 $15.00
-2-
January 1, 2003 - December 31, 2003 $15.53
January 1, 2004 - December 31, 2004 $16.07
d. Except as set forth in Section 3(f) hereof, all other charges and
expenses under the Lease which are or will be applicable to the Original
Premises (excluding the Expansion Space) shall be applicable to both the
Expansion Space and the Original Premises from and after April 1, 2000.
Notwithstanding the foregoing to the contrary, Tenant shall not be responsible
for Tenant's Share of Operating Expenses attributable to the Expansion Space for
the months of April, 2000 and May, 2000.
e. On or before April 1, 2000, Tenant shall deposit with Landlord the
amount of $1,785.00 to be added to the existing Cash Deposit, and from and after
such date the Cash Deposit shall be deemed to include, in addition to the amount
set forth in the Lease, the foregoing amount for all purposes under the Lease.
f. The following provisions of the Lease shall either not apply to or be
modified in their application to the Expansion Space, as set forth below:
(i) The construction provisions of the Lease shall not apply to the
Expansion space;
(ii) The determination of the number of parking spaces available to
Tenant pursuant to Section 34 of the Lease shall not be adjusted following
the addition of the Expansion Space to the Original Premises, with Tenant
remaining entitled to use up to 136 total spaces;
(iii) Commencing on April 1, 2000 and continuing through the remainder
of the Term, Tenant shall be responsible for and shall promptly pay
directly to the supplier as billed as costs and charges for electricity,
janitorial services and any other utility or service used in, consumed in
or servicing the Expansion Space. If Tenant fails to pay any such costs or
charges Landlord may, at its option and upon reasonable notice to Tenant
and in addition to any other remedies, pay the same and in such event, the
amount of such payment, together with interest thereon at the lower of
eighteen percent (18%) per annum or the highest rate permitted by
applicable law from the date of such payment by Landlord, will be added to
Tenant's next due payment, as Additional Rent;
(iv) The services to be furnished by Landlord pursuant to Section
20(a) shall not be furnished by Landlord with respect to the Expansion
Space. Tenant shall be responsible for all utilities or services used in,
consumed in or servicing the Expansion Space;
(v) The following additional item shall be deemed to be an "Excluded
Expense", as defined in Section 13 of the Lease;
"the costs and charges for electrical service, janitorial service and
HVAC maintenance costs paid by Tenant and attributable to 689 usable square feet
of the Expansion Space (as defined in this Second Amendment)"
4. The provisions of the Work Letter attached to this Second Amendment as
Exhibit B are hereby incorporated by this reference.
5. Intentionally Deleted.
6. Tenant and Landlord each represent to the other that they have dealt with no
broker, finder real estate agent or other person entitled to a commission, fee
or other compensation in connection with or as a result to this Second Amendment
or the transactions contemplated hereby or hereunder other than Codina Realty
Services, Inc., Oncor International and Cushman & Wakefield of Florida, Inc.,
the fees for which
-3-
shall be paid by Landlord pursuant to a separate agreement. Each party hereby
indemnifies the other and holds the other harmless from any and all claims,
losses, costs and damages (including reasonable attorneys' fees) arising in
connection with the breach of aforesaid representation.
7. Landlord and Tenant affirm and covenant that each has the authority to enter
into this Second Amendment, to abide by the terms hereof, and that the
signatories hereto are authorized representatives of their respective entities
empowered by their respective entities to execute this Second Amendment.
8. To the extent the provisions of this Second Amendment are inconsistent with
the Lease, the terms of this Second Amendment shall control.
9. Except as expressly amended or modified herein, all other terms, covenants
and conditions of the Lease shall remain in full force and effect.
10. The conditions, covenants, and agreements contained herein shall be binding
upon the parties hereto and their respective successors and assigns.
11. Any terms used in this Second Amendment as defined terms, but which are not
defined herein, shall have the meanings attributed to those terms in the Lease.
-4-
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, the day and year first above written.
WITNESS TO LANDLORD: LANDLORD:
THE PRUDENTIAL INSURANCE COMPANY
/s/ Pete Miranda OF AMERICA, a New Jersey corporation
---------------------------
Print Name: Pete Miranda By: Codina Real Estate Management, Inc.,
---------------- its Agent
/s/ Yanet Roses By: /s/ William T. Wassey
--------------------------- -------------------------
Print Name: Yanet Roses Print Name: William T. Wassey
---------------- Title: President
WITNESSES TO TENANT: TENANT:
CELLIT , INC., a Florida corporation
/s/ Sylvie Brunner
--------------------------
Print Name: Sylvie Brunner By: /s/ Alexandra Tellez
--------------- -------------------------
Print Name: Alexandra Tellez
------------------
/s/ Jeanette Beibswingert Title: President & CEO
--------------------------
Print Name: Jeanette Beibswingert
----------------------
-5-
EXHIBIT A
---------
[GRAPHIC]
Exhibit 10.16
THIRD AMENDMENT TO LEASE AGREEMENT
----------------------------------
THIS THIRD AMENDMENT TO LEASE AGREEMENT ("Third Amendment") is made and
entered into as of the 26th day of May, 2000, by and between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Landlord"), and CELLIT,
INC., a Florida corporation ("Tenant").
WITNESSETH:
WHEREAS, Tenant and Landlord's predecessor in interest, Codina West Dade
Development Corp., No. 4, a Florida corporation, entered into that certain Lease
Agreement dated as of February 23, 1999, as amended by that certain First
Amendment to Lease Agreement dated as of March 30, 2000 and by that certain
Second Amendment to Lease Agreement dated on or about the date hereof but deemed
to be retroactively effective as of March 30, 2000 (the "Second Amendment") (as
so amended, the "Lease") with respect to therein described space comprising
27,969 (as amended) rentable square feet (the "Original Premises") located in
the building known as Westside Plaza II, 8300 Northwest 33rd Street, Miami,
Florida 33122 (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend the Lease pursuant to the
terms and conditions hereinafter set forth in this Third Amendment.
NOW, THEREFORE, In consideration of the foregoing and the mutual promises
and covenants contained herein and in the Lease, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Landlord and Tenant hereby agree as follows:
1. Expansion
---------
a. Effective as of the Expansion Effective Date (as defined in the Work
Letter attached hereto as Exhibit B), the Original Premises shall be increased
for all purposes under the Lease (other than the construction provisions
thereof) by 15,747 rentable square feet located on the third (3rd) floor of the
----------------------
Building as shown on Exhibit A attached hereto and made a part hereof (the
"Second Expansion Space"). Effective as of the Expansion Effective Date, Item 2
of the Basic Lease Provisions attached to the Lease and Section 1 of the Lease
Agreement shall be amended to reflect the addition of the Second Expansion
Space, the Original Premises shall thereafter contain for all purposes under the
Lease (other than the construction provisions thereof), 43,716 rentable square
feet; and Tenant's Share (Item 5 of the Basic Lease Provisions to the Lease)
shall thereafter be 41.71%.
b. The term for the Second Expansion Space shall commence on the Expansion
Effective Date and shall expire on December 31, 2004, coterminous with the Term
for the Original Premises.
c. Base Rent for the Second Expansion Space shall be paid in accordance
with the Lease, except that it shall be calculated not in accordance with the
schedules contained in the Lease, but in accordance with the following schedule:
Rate Per Rentable
Period Square Foot per Annum
-------------------------------------------- ---------------------
Expansion Effective Date - December 31, 2000 $15.25
January 1, 2001 - December 31, 2001 $15.78
January 1, 2002 - December 31, 2002 $16.33
January 1, 2003 - December 31, 2003 $16.90
January 1, 2004 - December 31, 2004 $17.49
d. All other charges and expenses under the Lease which are or will be
applicable to the Original Premises [excluding the Second Expansion Space and
the first Expansion Space (as described in
the Second Amendment) (the "First Expansion Space")] shall be applicable to the
Second Expansion Space from and after the Expansion Effective Date.
e. On or before the Expansion Effective Date, Tenant shall deposit with
Landlord a replacement LOC or supplemental LOC complying with the terms of
Section 44 such that after such date the LOC or LOCs held by Landlord pursuant
to the terms of Section 44 of the Lease shall be in the aggregate face amount of
$300,000.00 instead of $250,000.00 as set forth in the Lease .
f. The parking ratio of "five (5) spaces per 1,000 rentable square feet of
space in the Premises (136 spaces total)" set forth in Section 34 of the Lease,
as same has been amended previously, shall no longer be applicable. Subject to
the remaining provisions of Section 34 of the Lease, the total number of parking
spaces available to Tenant pursuant to Section 34 shall be 211. In the event
Tenant uses or encumbers parking spaces for Tenant's emergency generator,
uninterruptable power source or other equipment, fixtures or personally, such
spaces so used or encumbered shall be deemed to be included within the 211
available spaces and not in addition thereto.
2. The provisions of the Work Letter attached to this Third Amendment as Exhibit
B are hereby incorporated by this reference.
3. The parties hereto agree that Tenant's rights arising pursuant to Section 58
of the Lease have been waived and that this provision is of no further force and
effect .
4. Right of First Offer.
--------------------
(a) Following the Expansion Effective Date, so long as the Lease is in full
force and effect and no default exists beyond applicable notice and cure
periods. Landlord hereby grants to Tenant an ongoing right of first offer
(the "Right of First Offer") to expand the Premises to include any space
which "becomes available" (as defined herein) on the third (3rd) floor of
the Building (the "Offer Space") subject to the terms and conditions set
forth herein and subject and subordinate to prior rights of other tenants.
(b) After any part of the Offer Space has or will "become available" for
leasing by Landlord, Landlord shall not lease to another tenant the Offer
Space without first offering in writing (the "Offer") Tenant the right to
lease such Offer Space as set forth herein.
(i) The Offer Space shall be deemed to "become available" when
Landlord desires to lease all or a portion of the Offer Space.
(ii) Notwithstanding subsection (i) above, the Offer Space shall not
be deemed to "become available" if the space is assigned or subleased by
the current tenant of the space or re-let by the current tenant of the
space by renewal, extension, or renegotiation.
(c) The Offer shall contain (i) a description of the Offer Space and an
attached floor plan that shows the Offer Space; (ii) the date on which
Landlord expects the Offer Space to become available; and (iii) the
increase in Tenant's operating expense percentage. Upon receipt of the
Offer, Tenant shall have the right, for a period of six (6) business days
after receipt of the Offer, to exercise the Right of First Offer by giving
Landlord written notice that Tenant desires to lease the Offer Space upon
the same terms and conditions contained in this Lease (but excluding those
provisions specifically applicable to the First Expansion Space and
excluding the construction provisions contained therein; a tenant
improvement allowance shall be available as set forth below), including,
but not limited to, the calculation of rent (based on the rates for the
Second Expansion Space), which shall be adjusted based upon the Rentable
Square Feet contained in the Offer Space and the term for which Tenant will
lease the Offer Space. The term of the Lease with respect to the Offer
Space shall be coterminous with the Term of the Lease. Any Offer Space
added to the Premises shall be delivered by Landlord to Tenant "as is"
except that Landlord shall provide Tenant a tenant improvement
-2-
allowance (the "TI Allowance") as follows: (i) if the applicable Offer
Space has not been previously improved, the TI Allowance shall be equal to
the TI Allowance applicable to the Second Expansion Space (to wit, $25.75
per rentable square foot) (which amount shall be subject to increase as set
forth below), on a per rentable square foot basis, decreased by multiplying
such amount by a fraction, the numerator of which is the number of months
remaining in the initial Term of this Lease as of the commencement date
with respect to the applicable Offer Space and the denominator of which is
fifty (50) months or (ii) if the applicable Offer Space has been previously
improved the TI Allowance shall be an amount equal to $1.00 per rentable
square foot (which amount shall be subject to increase as set forth below)
multiplied by the number of years remaining in the initial Term (plus any
Option Term if properly exercised by Tenant in accordance with the
provisions of the Lease on or before the date of the Offer) of this Lease
as of the "commencement date" with respect to the applicable Offer Space.
The TI Allowance applicable under items (i) and (ii) above (the applicable
allowance being referred to as the "Base TI Allowance") shall be increased
(but not decreased) on an annual basis by multiplying the Base TI Allowance
by a fraction, the numerator of which is the figure at which the CPI (as
defined below) stands for the month most recently published prior to the
commencement date with respect to the applicable Offer Space and the
denominator of which is the figure at which the CPI stood one year (or the
date of the immediately prior publication, if more than one year) earlier
(with like adjustments being made for each earlier year through the
Expansion Effective Date). For example, if the Expansion Effective Date
occurs on November 1, 2000 and the commencement date with respect to the
Offer Space occurs on November 1, 2002, the Base TI Allowance shall be
subject to CPI increases as set forth above for the period November 1, 2001
through November 1, 2002 and the period November 1, 2000 through November
1, 2001. The term CPI shall mean the Miami Consumer Price Index. All Items,
All Urban Consumers (1982-1984 = 100), prepared by the Bureau of Labor
Statistics of the United States Department of Labor or such other
governmental agency then publishing such Index.
(d) If, within such six (6) business day period, Tenant exercises the Right
of First Offer, than Landlord and Tenant shall amend the Lease to include
the Offer Space subject to the same terms and conditions as the Lease, as
modified by the terms and conditions of the Offer. If this Lease is
guaranteed now or at anytime in the future, Tenant simultaneously shall
deliver to Landlord an original, signed, and notarized reaffirmation of
each Guarantor's personal guaranty, in form and substance acceptable to
Landlord.
(e) If, within such six (6) business day period, Tenant declines or fails
to exercise the Right of First Offer, Landlord shall then have the right to
lease the Offer Space in portions or in its entirety to a third party
without regard to the restrictions in this Right of First Offer and on
whatever terms and conditions Landlord may decide in its sole discretion,
and thereafter, this Right of First Offer shall terminate, and Tenant shall
have no further Right of First Offer on the Offer Space until such time as
"Offer Space" again "becomes available" triggering the applicability of
this Section and this Right of First Offer.
(f) This Right of First Offer is personal to Cellit Inc. and shall become
null and void upon the occurrence of an assignment of the Lease on a sublet
of all or a part of the Premises, which assignment or sublet requires
Landlord's consent pursuant to the terms of Section 25 of the of the Lease.
5. Tenant and Landlord each represent to the other that they have dealt with no
broker, finder, real estate agent or other person entitled to a commission, fee
or other compensation in connection with or as a result of this Third Amendment
or the transactions contemplated hereby or hereunder other than Codina Realty
Services, Inc. - Oncor International and Cushman & Wakefield of Florida, Inc.,
the fees for which shall be paid by Landlord pursuant to a separate agreement.
Each party hereby indemnifies the other and holds the other harmless from any
and all claims, losses, costs and damages (including reasonable attorney's fees)
arising in connection with a breach of the aforesaid representation.
-3-
6. Landlord and Tenant affirm and covenant that each has the authority to enter
into this Third Amendment, to abide by the terms hereof, and that the
signatories hereto are authorized representatives of their respective entities
empowered by their respective entities to execute this Third Amendment.
7. To the extent the provisions of this Third Amendment are inconsistent with
the Lease, the terms of this Third Amendment shall control.
8. Except as expressly amended or modified herein, all other terms, covenants
and conditions of the Lease shall remain in full force and effect.
9. The conditions, covenants, and agreements contained herein shall be binding
upon the parties hereto and their respective successors and assigns.
10. Any terms used in this Third Amendment as defined terms, but which are not
defined herein, shall have the meanings attributed to those terms in the Lease.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, the day and year first above written.
WITNESSES TO LANDLORD: LANDLORD:
/s/ Pete Miranda THE PRUDENTIAL INSURANCE COMPANY
--------------------------------- OF AMERICA, a New Jersey corporation
Print Name: Pete Miranda
----------------------
By: Codina Real Estate Management, Inc.,
its Agent
/s/ Yanet Roses
---------------------------------
Print Name: Yanet Roses By: /s/ William T. Wassey
---------------------- ------------------------------------
Print Name: William T. Wassey
Title: President
WITNESS TO TENANT: TENANT:
CELLIT, INC., a Florida corporation
/s/ Sylvie Brunner
---------------------------------
Print Name: Sylvie Brunner By: /s/ Alexander Tellez
---------------------- ------------------------------------
Print Name: Alexander Tellez
----------------------------
/s/ Jeanette Beibswingert Title: President & CEO
--------------------------------- -----------------------------
Print Name: Jeanette Beibswingert
----------------------
-4-
EXHIBIT A
---------
[GRAPHIC]
EXHIBIT B
Work Letter for Second Expansion Space
In addition to the mutual covenants and agreements contained in the Third
Amendment, Landlord and Tenant further agree as follows:
Section A:
1. From and after the date of this Third Amendment ("the Expansion Early
Entry Date"), Tenant and Tenant's agents may enter the Second Expansion
Space in order perform the Expansion Tenant Improvements (as hereinafter
defined). Tenants agrees that any such entry into and occupation of the
Second Expansion Space shall be deemed to be under all of the terms,
covenants, conditions and provisions of the Lease, as modified, except as
to the covenant to pay Base Rent and Operating Expenses, and further agrees
Landlord shall not be liable in any way for any injury, loss or damage
which may occur to any of Tenant's work and installations made in the
Second Expansion Space or to properties placed therein, the same being at
Tenant's sole risk.
2. Tenant hereby agrees to accept the Second Expansion Space "AS IS, WHERE
IS AND WITH ALL FAULTS" and Landlord is not obligated to construct any
tenant improvements therein. Tenant has inspected the Second Expansion
Space and is fully aware of its condition (such condition being referred to
as the ("Base Condition"). Notwithstanding the foregoing to the contrary,
Landlord shall diligently pursue correction of any latent defect (as
opposed to ordinary repair and maintenance) in the Base Condition (but
specifically excluding the Expansion Tenant Improvements) discovered by
Tenant and of which Landlord has been notified, in writing within one (1)
year of the Expansion Effective Date. Landlord's liability to correct
latent defects shall not extend beyond one (1) year from the Expansion
Effective Date except for latent defects of which Landlord has been
notified during such one (1) year period as set forth in the preceding
sentence.
3. Provided the Lease is in full force and effect and no default exists
beyond applicable notice or cure periods, Landlord shall provide to Tenant
a tenant improvement allowance (the "Expansion Tenant Improvement
Allowance") up to $ 360,216,75 the product of 13,989 usable square feet
------------ -------------
contained in the Second Expansion Space multiplied by $ 25.75.
--------
Section B:
1. Working Drawings for Second Expansion Space.
-------------------------------------------
A. Tenant's architect/engineer (such architect or engineer is subject to
Landlord's prior approval, which approval shall not be unreasonably
withheld or delayed) shall, at Tenant's sole cost, and expense, prepare and
deliver to Landlord detailed working drawings for the renovation,
alteration and improvement of the Second Expansion Space (the "Working
Drawings"). The Working Drawings shall be in such detail as Landlord may
reasonably require and shall be in compliance with all applicable statutes,
ordinances and regulations, provided however, that Landlord's approval of
the Working Drawings shall not be deemed to be a warrant or representation
that the Working Drawings comply with all applicable statutes, ordinances
or regulations. Landlord shall approve or disapprove in writing the Working
Drawings within five (5) business days following receipt of same from
Tenant. Landlord shall not unreasonably withhold its approval of the
Working Drawings. In the event Landlord disapproves the Working Drawings,
then Landlord and Tenant shall, in good faith, mutually attempt to resolve
any disputes. In the event Landlord fails to approve or disapprove the
Working Drawings within five (5) business days following receipt thereof,
then Landlord shall be deemed to have approved the same. As used herein,
and in the Third Amendment, the term "Expansion Tenant Improvements" shall
mean the improvements to be made to the Second Expansion Space by Tenant
pursuant to the approved Working Drawings.
-6-
B. After approval of the Working Drawings by Landlord any changes or
upgrades to the Working Drawings shall be mutually agreed upon in writing
by both Landlord and Tenant. Upon approval thereof by both parties, Tenant
shall make those changes to which Landlord and Tenant mutually agreed and
submit the revised portion of the Working Drawings to Landlord. Tenant
shall have no right to request any changes to the Working Drawings which
would materially alter either the Second Expansion Space or the exterior
appearance or basic nature of the Building as the same are contemplated by
the Working Drawings.
2. Construction of Expansion Tenant Improvements.
---------------------------------------------
At Tenant's sole cost and expense, Tenant shall cause to be constructed and
installed, in or upon the Second Expansion Space, the Expansion Tenant
Improvements in accordance with the Working Drawings. The construction and
installation of the Expansion Tenant Improvements shall be supervised and
coordinated by a general contractor selected by Tenant from a list of
approved general contractors provided by Landlord to Tenant (the "Approved
Contractor"). Once selected, Tenant shall deliver to Landlord a copy of the
contract or other written agreement between the approved Contractor and
Tenant. All permits, licenses and authorizations required or permitted by
all applicable governmental authorities relating to the Expansion Tenant
Improvements shall be procured and paid for by Tenant. Tenant shall cause
the Expansion Tenant Improvements to be completed by the Approved
Contractor: (i) in accordance with the Working Drawings and in a good and
workmanlike manner, (ii) in compliance with all applicable laws,
ordinances, regulations and covenants, (iii) without voiding any Building
warranties (in the event any such warranties are so voided, Tenant shall
indemnify Landlord for all costs, expenses, losses and liabilities incurred
by Landlord as a result thereof); and (iv) in such a manner so as not to
unreasonably interfere with the use of the Building by other tenants
thereof, with Tenant being required to schedule and coordinate all work by
Tenant, the Approved Contractor, sub-contractors, vendors and suppliers
through Codina Real Estate Management, Inc, in order to minimize any noise,
disturbance, nuisance or interruption to the other tenants of the Building.
Landlord shall have the right to reasonably (i) approve the work schedule
of Tenant and Tenant's contractors (including the Approved Contractor) in
the construction of the Expansion Tenant Improvements, (ii) approve
Tenant's move-in schedule for occupancy of the Second Expansion Space upon
completion of the Expansion Tenant Improvements, and (iii) inspect the
Second Expansion Space throughout the construction of the Expansion Tenant
Improvements. Tenant shall carry, or cause its contractors (including the
Approved Contractor) to carry, insurance reasonably satisfactory to
Landlord throughout the construction of the Expansion Tenant Improvements.
Upon issuance of a certificate of occupancy by the appropriate governmental
authority ("Substantial Completion") a representative of Tenant and a
representative of Landlord shall inspect the Second Expansion Space and
generate a list of "punch-list" items, if any, which punch list items
Tenant agrees to complete within a reasonable time thereafter. The date of
Substantial Completion is currently targeted to be December 1 2000. The
term "Expansion Effective Date" as used in this Third Amendment shall mean
the earlier to occur of (i) the date of Substantial Completion or (ii)
December 1, 2000 (subject to extension on a day-for-day basis for "force
majcure events" as defined in Section 55 of the Lease, and events of"
Landlord Delay" as hereinafter defined), regardless of whether the
Expansion Tenant Improvements are then Substantially Complete. The term"
Landlord Delay" shall mean those negligent acts of Landlord which directly,
solely and independently cause the actual date of Substantial Completion to
be delayed beyond the date Substantial Completion would have occurred but
for the Landlord Delay.
3. Not Used.
4. Indemnification.
----------------
Except as a result of Landlord's negligence or willful misconduct, Tenant
does hereby indemnify, agree to defend and save Landlord harmless from and
against any and all claims, liabilities, damages and expenses (including
reasonable attorney's fees) suffered, paid or incurred by Landlord arising
out of the construction and installation of the Expansion Tenant
Improvements,
-7-
including, specifically, the cost of any labor performed and materials
furnished to Second Expansion Space.
5. Expansion Tenant Improvement Allowance:
--------------------------------------
Tenant shall be responsible for all costs and expenses associated with the
Expansion Tenant Improvements. Provided that Tenant is not in default under
the Lease, this Third Amendment of this Work Letter beyond applicable grace
or cure periods. Landlord shall pay to Tenant the Expansion Tenant
Improvement Allowance toward the cost of the Expansion Tenant Improvements
(which shall be deemed to include costs of preparation of the Working
Drawings, preparation of any other plans, specifications or construction
drawings, permitting telecommunications cabling expenses, architectural and
engineering services and any special consultants hired by Tenant). Any
costs and expenses for the Expansion Tenant Improvements in excess of the
Expansion Tenant Improvement Allowance shall be paid solely by Tenant in
the event the costs and expenses for the Expansion Tenant Improvements are
less than the Expansion Tenant Improvement Allowance (such difference being
referred to as the "Excess Allowance". Tenant shall receive a credit
against the first installment of Base Rent following the Commencement Date
and continuing for each immediately subsequent month thereafter until
exhausted equal to a maximum of fifty percent (50%) of the Excess
Allowance, with Landlord retaining the remaining fifty percent (50%) and
Tenant forfeiting all rights thereto. The Expansion Tenant Improvement
Allowance shall be paid from time to time (but no more frequently than once
a month) within ten (10) business days following the date Landlord receives
from Tenant the following:
(i) Tenant's invoice for payment (the "Invoice"):
(ii) lien releases from all contractors (including the Approved
Contractor) performing any portion of the work comprising the
Expansion Tenant Improvements or any portion of the work
comprising the portion of the Expansion Tenant Improvements which
is the subject of the Invoice, as applicable;
(iii)a certificate from Tenant's architect or engineer, as applicable,
certifying in writing to Landlord that the Expansion Tenant
Improvements (or any portion of the work comprising the Expansion
Tenant Improvements which is the subject of the Invoice, as
applicable) has been substantially completed in accordance with
the Working Drawings and invoices, receipts and other evidence
reasonably required by Landlord to evidence the cost of the
Expansion Tenant Improvements (or portion of the work
comprising the Expansion Tenant Improvements which is the subject
of the Invoice, as applicable) made as of the date of Tenant's
request for payment; and
(iv) evidence that Tenant has procured and paid for all permits,
licenses and authorizations required by all applicable
governmental authorities relating to the Expansion Tenant
Improvements (or portion of the work comprising the Expansion
Tenant Improvements which is the subject of the Invoice, as
applicable);
(v) a certified written statement from the Tenant certifying to
Landlord that upon Tenant's receipt of the Expansion Tenant
Improvement Allowance, all costs relating to the Expansion
Tenant Improvements (or portion of the work comprising the
Expansion Tenant Improvements which is the subject of the
Invoice, as applicable) shall have been paid in full.
In the event Tenant complies with the foregoing but Landlord's fails to
pay the Expansion Tenant Improvement Allowance (or portion thereof) within
the aforesaid ten (10) business day period and provided the amounts and
information provided to Landlord with respect to such payment are not
reasonably in dispute. Tenant shall be entitled to offset until exhausted
the immediately payable Base Rent for the Original Premises to the extent
of Landlord's failure.
-8-
6. Florida Construction Lien Law.
-----------------------------
In accordance with the applicable provisions of the Florida Construction
Lien Law and specifically Florida Statutes Section 713.10 , no work
performed by Tenant pursuant to this Third Amendment, whether in the nature
of erection, construction, alteration or repair, shall be deemed to be for
the immediate use and benefit of Landlord so that no mechanic's or other
lien shall be allowed against the Building or the estate of Landlord
created hereunder by reason of any consent given by Landlord to Tenant to
improve the Second Expansion Space. Tenant agrees to advise any contractor
(including the Approved Contractor), materialman or subcontractor
performing work on behalf of Tenant of this provision exculpating Landlord
from liability for such liens. In the event any mechanic's or other lien
shall at any time be filed against the Property by reason of work, labor,
services, or materials performed or furnished, or alleged to have been
performed or furnished to Tenant or to anyone holding the Original Premises
and/or the Second Expansion Space through or under Tenant, Tenant shall
forthwith cause the same to be discharged of record or bonded to the
satisfaction of Landlord. If Tenant shall fail to cause such lien forthwith
to be so discharged or bonded within thirty (30) days after written notice
from Landlord of the filing thereof, then, in addition to any other right
or remedy of Landlord, Landlord may bond or discharge the same by paying
the amount claimed to be due, and the amount to be paid by Landlord
including reasonable attorneys' facts incurred by Landlord either defending
against such lien or in the procuring the discharge of such lien, together
with interest thereon at the Default Rate, shall be due and payable by
Tenant to Landlord as Additional Rent.
-9-
EXHIBIT B
Work Letter for Expansion Space
In addition to the mutual covenants and agreements contained in the Second
Amendment, Landlord and Tenant further agree as follows:
Section A:
1. From and after the date of this Second Amendment (the "Expansion Early
Entry Date"), Tenant and Tenant's agents may enter the Expansion Space in
order perform the Work (as hereinafter defined). Tenant agrees that any
such entry into and occupation of the Expansion Space shall be deemed to be
under all of the terms, covenants, conditions and provisions of the Lease,
except as to the covenant to pay Base Rent and Operating Expenses, and
further agrees Landlord shall not be liable in any way for any injury, loss
or damage which may occur to any of Tenant's work and installations made in
the Expansion Space or to properties placed therein, the same being at
Tenant's sole risk.
2. Tenant hereby agrees to accept the Expansion Space "AS IS, WHERE IS AND
WITH ALL FAULTS", and Landlord is not obligated to construct any tenant
improvements therein. Tenant has inspected the Expansion Space and is fully
aware of its condition.
3. Landlord shall provide to Tenant a tenant improvement allowance (the
"Expansion Tenant Improvement Allowance") equal to $7,650.00, the product
of 765 rentable square feet contained in the Expansion Space multiplied by
$10.00.
Section B:
1. Working Drawings for Expansion Space.
-------------------------------------
A. Tenant, or Tenant's architect/engineer (such architect or engineer is
subject to Landlord's prior approval, which approval shall not be
unreasonably withheld or delayed) shall, at Tenant's sole cost and expense,
prepare and deliver to Landlord detailed working drawings for the
renovation, alteration and improvement of the Expansion Space to allow for
increased amperage to separately meter electric service thereto, to
prevent sound attenuation and noise levels emanating from the Expansion
Space from exceeding "NC-30" and such other items as may be mutually
acceptable to both Landlord and Tenant (the "Working Drawings"). The
Working Drawings shall be in such detail as Landlord may reasonably require
and shall be in compliance with all applicable statutes, ordinances and
regulations; provided, however, that Landlord's approval of the Working
Drawings shall not be deemed to be a warranty or representation that the
Working Drawings comply with all applicable statutes, ordinances or
regulations. Landlord shall approve or disapprove in writing the Working
Drawings within five (5) business days following receipt of same from
Tenant. Landlord shall not unreasonably withhold its approval of the
Working Drawings. In the event Landlord disapproves the Working Drawings,
then Landlord and Tenant shall, in good faith, mutually attempt to resolve
any disputes. In the event Landlord fails to approve or disapprove the
Working Drawings within five (5) business days following receipt thereof,
then Landlord shall be deemed to have approved the same. As used herein,
and in the Second Amendment, the term "Expansion Tenant Improvements" shall
mean the improvements to be made to the Expansion Space by Tenant pursuant
to the approved Working Drawings.
B. After approval of the Working Drawings by Landlord, any changes or
upgrades to the Working Drawings shall be mutually agreed upon in writing
by both Landlord and Tenant. Upon approval thereof by both parties, Tenant
shall make these changes to which Landlord and Tenant mutually agreed and
submit the revised portion of the Working Drawings to Landlord. Tenant
shall have no right to request any changes to the Working Drawings which
would materially alter
-7-
either the Expansion Space or the exterior appearance or basic nature of
the Building, as the same are contemplated by the Working Drawings.
2. Construction of Expansion Tenant Improvements.
---------------------------------------------
Tenant shall, at Tenant's sole cost and expense, construct or install, or
cause to be constructed and installed, in or upon the Expansion Space, the
Expansion Tenant Improvements in accordance with the Working Drawings. All
permits, licenses and authorizations required or permitted by all
applicable governmental authorities relating to the Expansion Tenant
Improvements shall be procured and paid for by Tenant. The Expansion Tenant
Improvements shall be completed by Tenant: (i) in accordance with the
Working Drawings in a good and workmanlike manner; (ii) in compliance with
all applicable laws, ordinances, regulations and covenants, (iii) without
voiding any Building warranties (in the event any such warranties are so
voided, Tenant shall indemnify Landlord for all costs, expenses, losses and
liabilities incurred by Landlord as a result thereof): and (iv) in such a
manner so as not to unreasonably interfere with the use of the Building by
other tenants thereof, with Tenant being required to schedule and
coordinate all work by Tenant and Tenant's contractors, sub-contractors,
vendors and suppliers through Codina Real Estate Management, Inc, in order
to minimize any noise, disturbance, nuisance or interruption to the other
tenants of the Building. Landlord shall have the right to reasonably (i)
approve the work schedule of Tenant and Tenant's contractors in the
construction of the Expansion Tenant Improvements, (ii) approve Tenant's
move-in schedule for occupancy of the Expansion Space upon completion of
the Expansion Tenant Improvements, (iii) inspect the Expansion Space
throughout construction of the Expansion Tenant Improvements, and (iv)
approve Tenant's construction contractor. Tenant shall carry, or cause its
contractor to carry, insurance reasonably satisfactory to Landlord
throughout the construction of the Expansion Tenant Improvements. Upon
substantial completion, as determined by Landlord in its reasonable
discretion, of the Expansion Tenant Improvements, a representative of
Tenant and a representative of Landlord shall inspect the Expansion Space
and generate a list of "punch list" items, if any, which punch list items
Tenant agrees to complete within a reasonable time thereafter. If Tenant
fails to complete the Expansion Tenant Improvements by April 1, 2000, all
obligations under the Lease attributable to the Expansion Space, including,
but not limited to, Tenant's obligations to pay Rent, shall nevertheless
begin on the Commencement Date.
3. Release of Liens.
-----------------
The consent by Landlord to the construction of the Expansion Tenant
Improvements by Tenant shall not be construed as any assumption by
Landlord, either express or implied, of any liability of any nature against
Landlord, the Expansion Space, the Original Premises, the Building or the
Property for the payment of any labor performed or any materials furnished
in connection with the construction or installation of the Expansion Tenant
Improvements. In the event any such claim for payment or any materialmen's
or mechanics' liens are filed against Landlord, the Expansion Space or the
Original Premises (including Tenant's leasehold interest in either), the
Building or the Property, then Tenant agrees to forthwith pay the same or
cause such security therefore to be deposited for the payment and discharge
of the same as may be reasonably required by Landlord. Tenant further
agrees that, upon completion of the Expansion Tenant Improvements, Tenant
shall provide Landlord written lien releases from any and all contractors
who have performed work in the Expansion Space.
4. Indemnification.
---------------
Tenant does hereby indemnify, agree to defend and save Landlord and Agent
harmless from and against any and all claims, liabilities, damages and
expenses (including reasonable attorney's fees) suffered, paid or incurred
by Landlord or Agent arising out of the construction and installation of
the Expansion Tenant Improvements, including specifically, the cost of any
labor performed and materials furnished to Expansion Space.
-8-
5. Expansion Tenant Improvement Allowance.
--------------------------------------
Tenant shall be responsible for all costs and expenses associated with the
Work. Provided that Tenant is not in default under the Lease beyond
applicable grace or cure periods, this Second Amendment or this Work
Letter, Landlord shall pay to Tenant the Expansion Tenant Improvement
Allowance toward the cost of the Expansion Tenant Improvements and the
preparation of the Working Drawings (and all incidental costs related
thereto) (collectively, the "Work"). Any costs and expenses for the Work in
excess of the Expansion Tenant Improvement Allowance shall be paid solely
by Tenant. In the event the costs and expenses for the Work are less than
the Expansion Tenant Improvement Allowance, Landlord shall retain any such
excess, and Tenant hereby forfeits all rights thereto. The Expansion Tenant
Improvement Allowance shall be paid at such time as Tenant delivers to
Landlord:
(i) Tenant's invoice for payment
(ii) lien releases from all contractors performing any portion of the
work comprising the Work
(iii)a certificate from Tenant's architect or engineer, as applicable,
certifying in writing to Landlord that the Work has been
substantially completed in accordance with the Working Drawings
and invoices, receipts and other evidence reasonably required by
Landlord to evidence the cost of the Work made as of the date of
Tenant's request for payment; and
(iv) evidence that Tenant has procured and paid for all permits,
licenses and authorizations required by all applicable
governmental authorities relating to the Expansion Tenant
Improvements;
(v) a certified written statement from the Tenant certifying to
Landlord that upon Tenant's receipt of the Expansion Tenant
Improvement Allowance, all costs relating to the Work shall have
been paid in full.
-9-
Exhibit 10.17
SUBLEASE AGREEMENT
------------------
THIS SUBLEASE AGREEMENT (sometimes hereinafter referred to as the
"Sublease") is made and entered into as of the day of May, 2001, by and
-------- ---
between CELLIT, INC., a Florida corporation (hereinafter called "Sublandlord"),
-----------
whose address for purposes hereof is Westside Plaza II, 8300 N.W. 33(rd) Street,
Suite 200, Miami, Florida 33166 and VELOCITEL, INC., a Delaware corporation
whose address for purposes hereof is 8300 N.W. 33(rd) Street, Suite 300, Miami,
Florida 33166 (hereinafter called "Subtenant").
---------
WITNESSETH
----------
WHEREAS, by Lease Agreement entered into February 23, 1999 between
Sublandlord and Codina West Dade Development Corp., No. 4, a Florida corporation
("Prior Landlord"), as assigned by Prior Landlord to the Prudential Insurance
--------------
Company of America (the "Master Landlord"), and as amended by (a) First
---------------
Amendment to Lease Agreement dated as of March 30, 2000 between Master Landlord
and Sublandlord, (b) Second Amendment to Lease Agreement retroactively effective
as of March 30, 2000 between Master Landlord and Sublandlord and (c) Third
Amendment to Lease Agreement dated as of May 26, 2000 between Master Landlord
and Sublandlord (collectively, the "Master Lease"), Sublandlord leases from
------------
Master Landlord approximately 43,716 square feet of rentable area on the 2(nd)
and 3(rd) floors (the "Master Lease Premises") in the building known as Westside
---------------------
Plaza II, located at 8300 N.W. 33(rd) Street, Suite 2000, Miami, Florida 33166
(the "Building"); and
--------
WHEREAS, Subtenant desires to sublease a portion of the Master Lease
Premises from Sublandlord.
NOW, THEREFORE, for and in consideration of the foregoing and for other
good and valuable consideration and of the mutual agreements hereinafter set
forth, Sublandlord and Subtenant stipulate, covenant and agree as follows:
1. Capitalized Terms. Except as otherwise defined herein, all capitalized
-----------------
terms shall have the same meaning as ascribed to such terms in the Master Lease.
A true and correct copy of the Master Lease is attached hereto as Exhibit "A"
----------
and made a part hereof by this reference.
2. Sublease Premises. Subject to and upon the terms and conditions
-----------------
hereinafter set forth, Sublandlord does hereby sublease to Subtenant a portion
of the Master Lease Premises consisting of 8,200 square feet of rentable area
(the "Sublease Premises") Suite 300, located on the third floor of the Building
-----------------
and as depicted in red on Exhibit "B" attached hereto and made a part hereof by
----------
this reference. Subtenant acknowledges and agrees that it has inspected and
measured the Sublease Premises and agrees that for all purposes under this
Sublease that the Sublease Premises contains 8,200 rentable square feet.
Sublandlord makes no representations or warranties as to the size of the
Sublease Premises.
3. Term. The term of this Sublease (the "Term") shall commence (the
---- ----
"Commencement Date") on the date hereof and shall end on the earlier of (a)
-----------------
December 30,
2004 or (b) the date on which the Master Lease expires or terminates, unless
sooner terminated or extended as provided herein.
4. Rent.
----
a. Subtenant agrees to pay to Sublandlord base rent for each year of
the Term as follows (herein called the "Base Rent"):
---------
Year of Term Annual Base Rent Monthly Base Rent Per Rentable Square Foot
------------- ---------------- ----------------- ------------------------
1 to 6 month 68,250 11,375 21.00
7 to 12 month 86,100 14,350 21.00
2 176,300 14,692 21.50
3 180,400 15,033 22.00
4 184,500 15,375 22.50
Provided Subtenant does not commit a default under this Sublease, Base Rent for
the first six (6) months of the Term shall be calculated based only on 6,500
rentable square feet, so that the monthly Base Rent for each of the first six
(6) months of the Term shall be $11,375 plus applicable sales tax. Further, to
accommodate Subtenant's move-in and phone and data hookup, Sublandlord agrees
that Base Rent for the first 45 days of the Term shall be abated and shall not
be due and payable. Base Rent is payable in advance in equal monthly
installments, without any offset or deduction whatsoever, in lawful money (legal
tender for public or private debts) of the United States of America, at
Sublandlord's address as stated above, or elsewhere as designated from time to
time by Sublandlord's written notice to Subtenant, on the first day of each
month beginning with the calendar month in which the Commencement Date occurs.
If the Commencement Date occurs on any day of the month except the first day,
Subtenant shall pay the monthly installment of Base Rent as provided for in this
Section 4.a for such commencement month on a pro rata basis (such proration to
be based on the actual number of days in the commencement month). Base Rent for
any partial month of occupancy at the end of the term will be prorated, such
proration to be based on the actual number of days in the partial month. Upon
due date, Subtenant shall deliver to Sublandlord the first month's rent,
including sales tax, in the total amount of $12,114.38 which Sublandlord shall
apply to the first month Base Rent is due hereunder.
b. In addition to the Base Rent, Subtenant shall pay to Sublandlord
additional rent (herein called "Additional Rent") (the Base Rent and Additional
---------------
Rent, together with all other charges and other sums due from Subtenant to
Sublandlord hereunder, are herein collectively referred to as the "Rent"),
----
consisting of the following:
i) an amount equal to a proportionate share of the increases in
Operating Expenses over those for the base year of 2001. Operating Expenses
shall be calculated in accordance with the terms of the Master Lease and shall
be due and payable to Sublandlord on those dates due and payable by Sublandlord
to Master Landlord under the terms of the Master Lease. Sublandlord shall
provide Subtenant with copies of all notices and calculations it actually
receives from Master Landlord with respect to Operating Expenses. Subtenant's
proportionate share of increases in Operating Expenses shall be determined by
dividing the rentable square
2
footage of the Sublease Premises (8,200) by the rentable square footage of the
Building as determined by Master Landlord from time to time. Subtenant's
obligation to pay its proportionate share of Operating Expenses and Real Estate
Taxes shall survive any expiration or termination of this Sublease;
ii) all such other sums of money which shall become due from and
payable by Subtenant under this Sublease. Any such amount (including any
expenditure made by Sublandlord for which Subtenant is liable under this
Sublease) shall be due and payable by Subtenant with the succeeding installment
of Base Rent (unless some other date is expressly provided herein for payment of
such amount).
c. If Sublandlord shall at any time or times accept Rent after it
shall become due and payable, such acceptance shall not constitute a waiver of
any of Sublandlord's rights hereunder or excuse such delay or delays on
subsequent occasions.
d. Subtenant shall pay to Sublandlord each month a sum equal to any
sales tax, tax on rents, and any other charges, taxes and/or impositions now in
existence or subsequently imposed based upon the privilege of renting the space
leased under this Sublease or upon the amount of Rent collected whether such
taxes, charges or impositions are assessed on Rent or any other sums due or
payable pursuant to this Sublease. Subtenant's liability for such taxes and/or
impositions shall be payable whether assessed at the time Rent is paid or
retroactively and shall survive any expiration or termination of this Sublease.
Nothing herein shall, however, be taken to require Subtenant to pay any part of
any federal or state tax on income imposed upon Sublandlord.
5. Condition of Sublease Premises. Subtenant acknowledges and agrees that
------------------------------
Subtenant accepts the Sublease Premises in "AS IS" condition. Subtenant hereby
waives any and all rights it may have against the Sublandlord as a result of any
defect within the Sublease Premises.
6. Furnishings. Sublandlord shall provide Subtenant during the term of this
-----------
Sublease with those items of furnishings described on Exhibit "C" attached
----------
hereto and by this reference made a part hereof (collectively referred to herein
as the "Furnishings"). Subtenant acknowledges and agrees that Subtenant accepts
-----------
the Furnishings in "AS IS" condition. Subtenant shall maintain the Furnishings
in their current condition, normal wear and tear excepted. The Furnishings shall
remain the property of Sublandlord and shall at all times during and after the
term of this Sublease remain on the Sublease Premises.
7. Security Deposit. Concurrently with the execution of this Sublease by
----------------
Subtenant, Subtenant has deposited with Sublandlord the sum of $34,125.00, the
receipt of which is hereby acknowledged by Sublandlord. Within ten (10) business
days of the commencement of the seventh month of the Term, Subtenant shall
deposit with Sublandlord an additional $8,925.00, thereby providing a total
security deposit of $43,050.00. Failure of Subtenant to timely deliver such
additional sum of $8,925.00 shall, without notice or grace, be an immediate
default hereunder. Such initial sum of $34,125.00 and the additional sum of
$8,925.00 are collectively referred to as the "Security Deposit." This sum shall
----------------
be retained by Sublandlord as security for the payment by Subtenant of the Rents
and all other payments agreed in this Sublease to be paid by Subtenant and for
the faithful performance by Subtenant of the terms, provisions, covenants and
conditions of this Sublease. Sublandlord at Sublandlord's
3
option may at the time of any default by Subtenant apply said sum or any part of
it towards the payment of the Rent and towards the performance of each and
every one of Subtenant's covenants under this Sublease, and for any sum which
Sublandlord may spend or be required to spend because of Subtenant's default,
including any damages or deficiency in reletting, but such covenant and
Subtenant's liability under this Sublease shall thereby be discharged only pro
tanto; Subtenant shall remain liable for any amounts that such sum shall be
insufficient to pay. Sublandlord may exhaust any or all rights and remedies
against Subtenant before resorting to said sum, but nothing in this Sublease
shall require or be deemed to require Sublandlord to do so. If Sublandlord
applies all or part of the Security Deposit as provided in this paragraph,
Subtenant shall, promptly upon demand of Sublandlord, deposit with Sublandlord
the amount so applied so that Sublandlord shall have the full Security Deposit
on hand at all times during the term. In the event this Security Deposit shall
not be utilized for any such purpose, then, provided Subtenant has fully
performed under this Sublease and has vacated the Sublease Premises and
surrendered all keys to the Sublease Premises, but not if Sublandlord has
terminated this Sublease due to Subtenant's default under any provision of this
Sublease, it shall be returned by Sublandlord to Subtenant within thirty (30)
days after the expiration of the term or the determination and payment of all
amounts due under this Sublease, if any, whichever occurs later. Sublandlord
will not be required to pay Subtenant any interest on the Security Deposit and
Sublandlord may commingle the Security Deposit with its own funds.
8. Assignment by Subtenant. The Subtenant may not assign, transfer or
-----------------------
pledge this Sublease or sublet the Sublease Premises unless the prior written
consent of the Sublandlord is first obtained, which consent may be withheld in
Sublandlord's sole and absolute discretion.
9. Parking. Subtenant acknowledges and agrees that no parking is available
-------
for the Sublease Premises and that Sublandlord shall have no obligation to
provide any parking to Subtenant of any nature whatsoever. Notwithstanding the
foregoing, Sublandlord agrees to make available to Subtenant up to five (5)
parking spaces per 1,000 rentable square feet of the Sublease Premises, not to
exceed an aggregate of forty (40) parking spaces, to the extent Sublandlord is
provided at least five (5) parking spaces per 1,000 rentable square feet for the
Master Lease Premises. Any parking spaces provided to Subtenant shall be
unreserved, and Subtenant's use of such parking spaces is subject to the rights
of Master Landlord as provided in Section 34 of the Master Lease.
10. Master Lease.
------------
a. The parties agree that this Sublease is conditioned upon the
approval of the Master Landlord. The Subtenant agrees that it shall comply,
without delay, with all requirements of the Master Landlord with respect to its
consent to this Sublease. This Sublease is subject and subordinate to all of the
terms of the Master Lease with the same force and effect as if fully set forth
herein at length, excepting only as otherwise specifically provided herein. All
of the terms with which Sublandlord is bound to comply under the Master Lease
shall, to the extent only that they apply to the Sublease Premises and except as
otherwise provided herein, be binding upon Subtenant, and all of the obligations
of the Master Landlord set forth in the Master Lease shall, to the extent that
they apply to the Sublease Premises and except as otherwise provided herein,
inure to Subtenant's benefit. It is the intention of the parties that, except as
otherwise provided in this Sublease, the relationship between Sublandlord and
Subtenant shall be governed by the language of the various articles of the
Master Lease as if they were set forth in this Sublease in full, and the words
"Landlord," "Tenant," "Lease" and "Premises" as used in the
4
Master Lease, shall read respectively, "Sublandlord," "Subtenant," "Sublease"
and "Sublease Premises."
b. For the purposes of this Sublease, the following provisions of the
Master Lease are hereby deleted or modified as follows:
(i) the Basic Lease Provisions are deleted;
(ii) Articles 1, 2, 3 and 4 are deleted;
(iii) Article 10 is deleted;
(iv) the clause "Except as described in Section 10 above," on the
first line of Article 11 is deleted. The clause "provided, however, that in the
event Landlord or an affiliate of Landlord is retained to complete the Tenant
Improvements, then Landlord shall be liable for any damage or injury to all or
any part of the Building caused by Landlord or its affiliate during installation
of the Tenant Improvements" in Article 11 is deleted;
(v) Articles 12, 13 and 15 are deleted;
(vi) the last sentence of Article 15 is deleted;
(vii) Articles 16, 19, 20, 22(e), 25, 28, 29, 34, 35, 44, 45, 53,
54, and 57-60 are deleted;
(viii) All exhibits are deleted;
(ix) the First Amendment is deleted;
(x) the Second Amendment is deleted; and
(xi) the Third Amendment is deleted.
c. Subtenant covenants and agrees that Subtenant shall not do or
suffer or permit anything to be done which would constitute a default under the
Master Lease or would cause the Master Lease to be canceled, terminated or
forfeited by virtue of any rights of cancellation, termination, or forfeiture
reserved or vested in the Master Landlord under the Master Lease, and that
Subtenant will indemnify and hold harmless Sublandlord from and defend
Sublandlord against all claims, liabilities, losses and damage of any kind
whatsoever that Sublandlord may incur by reason of, resulting from or arising
out of any such default, cancellation, termination or forfeiture.
11. Master Landlord's Responsibilities. Subtenant recognizes that
----------------------------------
Sublandlord is not in a position to furnish the services set forth in the Master
Lease or to perform certain other obligations which are not within the control
of Sublandlord, such as, without limitation, maintenance, repairs and
replacements to the Building and Sublease Premises, compliance with laws, and
restoration of the Sublease Premises and/or Building after casualty or
condemnation. Therefore, notwithstanding anything to the contrary contained in
this Sublease, Subtenant agrees that Subtenant shall look solely to the Master
Landlord to furnish all services and to perform all obligations agreed upon to
be furnished and performed by the Master Landlord under the Master
5
Lease. Sublandlord shall not be liable to Subtenant or be deemed in default
hereunder for failure of the Master Landlord to furnish or perform the same.
Without limiting the generality of the foregoing, Subtenant shall not be
entitled by reason of the interruption, stoppage or suspension of any of the
Building systems or services for any reason whatsoever to claim any actual or
constructive eviction either in whole or in part nor to any other diminution or
abatement of Rent (except and only to the extent Sublandlord actually receives
an abatement of Rent with respect to the Sublease Premises pursuant to Article
28 of the Master Lease) or other compensation nor shall this Sublease or any of
the obligations of the Subtenant be affected or reduced.
12. Condemnation; Damage by Fire or Other Casualty.
----------------------------------------------
a. In the event of any taking by eminent domain or damage by fire or
other casualty to the Sublease Premises, thereby rendering the Sublease Premises
wholly or partially untenantable, Subtenant shall acquiesce in and be bound by
any action taken pursuant to the terms of the Master Lease or other agreement
entered into between Sublandlord and the Master Landlord with respect thereto;
and if, by application of the provisions of the Master Lease or separate
agreement between the Master Landlord and Sublandlord, the Master Lease is
terminated, this Sublease shall likewise terminate. If, however, the Master
Lease remains in effect, this Sublease shall remain in effect except that the
Base Rent and Additional Rent shall be abated proportionately during the period
of time that the Sublease Premises are wholly or partially untenantable,
provided however, that such abatement shall in no event exceed the abatement
granted to Sublandlord under the Master Lease for the Sublease Premises and
provided further, that no compensation or claim or reduction will be allowed or
paid by Sublandlord by reason of inconvenience, annoyance or injury to
Subtenant's business arising from the necessity of effecting repairs to the
Sublease Premises or any portion of the Building, regardless of whether or not
such repairs are required by operation of any provision of the Master Lease.
b. Without limiting the generality of Section 11 of this Sublease,
Subtenant acknowledges that Sublandlord shall have no obligation to repair or
restore the Sublease Premises in case of damage by fire or other casualty or to
restore any uncondemned portion in the case of a taking by or as a result of the
exercise of the power of eminent domain, and any repair or restoration of the
Sublease Premises shall only be as provided by the Master Landlord pursuant to
the Master Lease.
13. Signage. Subtenant shall, at Subtenant's sole cost and expense and to
-------
the extent made available by Master Landlord, arrange with Master Landlord for
Building standard suite signage and Building standard lobby directory signage,
the location and design of which shall be subject to Master Landlord's prior
written consent and Sublandlord's prior written consent which shall not be
unreasonably withheld. Subtenant shall be entitled to no other signage rights.
14. Alterations. Subtenant shall not make or allow to be made any
-----------
alterations, physical additions or improvements in or to the Sublease Premises
without first obtaining in writing Sublandlord's written consent for each such
alteration or addition, which consent may be granted or withheld in the sole
discretion of Sublandlord.
15. Right of Entry. Sublandlord shall have the right to enter onto the
--------------
Sublease Premises for purposes of inspection and, at Sublandlord's sole option,
correct any defect and/or
6
perform any repair obligation that is the obligation of Subtenant. Any repair by
Sublandlord shall not cure any default of Subtenant.
16. Notices. All notices, offers, acceptances, rejections, consents,
-------
requests and other communications hereunder shall be in writing and shall be
deemed to have been given (a) when delivered in person, or (b) when sent by
telecopier, telex or other telegraphic means (with receipt confirmed), or (c) on
receipt after being sent by express mail or delivery service guaranteeing
overnight delivery, provided that in each of (a), (b) and (c) a copy is mailed
by first class registered or certified mail, postage prepaid, return receipt
requested, in each case addressed to the parties at the addresses set forth in
the first paragraph of this Sublease, or to such other person or address as any
such party shall furnish by notice to the other parties in writing. Notices need
not be given or made by an officer of either party but shall be deemed
sufficiently given if made by the counsel of such party, and all of such notices
shall be deemed in compliance hereof provided only that they be given in the
manner specified herein.
17. Brokers. The parties each represent and warrant to the other that the
-------
only real estate brokers, salesmen or finders involved in this transaction are
Cushman & Wakefield of Florida, Inc. and Courvoisier Realty, to whom Sublandlord
shall pay a brokerage commission pursuant to a separate agreement. If a claim
for brokerage in connection with the transaction is made by any other broker,
salesman or finder claiming to have dealt through or on behalf of one of the
parties hereto (the "Indemnitor"), said Indemnitor shall indemnify, defend and
----------
hold the other party hereunder, and such other parties' officers, directors,
agents and representatives (collectively, the "Indemnitees") harmless from all
-----------
liabilities, damages, claims, costs, fees and expenses whatsoever (including
reasonable attorney's fees and court costs through the trial and appellate
level) with respect to said claim for brokerage. The provisions of this Section
shall survive any cancellation or termination of this Sublease.
18. Radon Gas. Radon is a naturally occurring radioactive gas that, when it
---------
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
19. Sublandlord's Right to Perform for Subtenant's Account. If Subtenant
------------------------------------------------------
fails to observe or perform any term or condition of this Sublease as and when
required hereunder after giving effect to any applicable grace periods, if any,
applicable thereto, then Sublandlord may immediately or at any time thereafter
perform the same for the account of Subtenant. If Sublandlord makes any
expenditure or incurs any obligation for the payment of money in connection with
such performance for Subtenant's account (including reasonable attorneys' fees
and costs in instituting, prosecuting and/or defending any action or proceeding
through appeal), the reasonable sums paid or obligations incurred, with interest
thereon at the highest lawful rate, shall be paid by Subtenant to Sublandlord
within five (5) days after rendition of a bill or statement to Subtenant.
20. Severability. If any term, provisions, covenant, or condition of
------------
this Sublease, or the application thereof to any person of circumstance, shall,
to any extent be invalid or unenforceable, the remainder of this Sublease, or
the application of such term, provision, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, provision, covenant or condition
7
of this Sublease shall be valid and be enforceable to the fullest extent
permitted by law. This Sublease shall be construed in accordance with the laws
of the State of Florida without regard to principles of conflicts of law.
21. Time. It is understood and agreed between the parties hereto that time
----
is of the essence of all the terms, provisions, covenants, and conditions of
this Sublease.
22. Definitions and Paragraph Headings. The terms Sublandlord, Master
----------------------------------
Landlord and Subtenant as herein contained shall include singular and/or plural,
masculine, feminine, and/or neuter, heirs, successors, executors,
administrators, personal, representatives and/or assigns wherever the context so
requires or admits. The terms, provisions, covenants, and conditions of this
Sublease are expressed in the total language of this Sublease and the paragraph
headings are solely for the convenience of the reader and are not intended to be
all inclusive.
23. Entire Agreement. This Sublease contains the entire agreement between
----------------
the parties hereto and all previous negotiations leading thereto, and it may be
modified only by an agreement in writing signed by Sublandlord and Subtenant. No
surrender of the Sublease Premises, or of the remainder of the terms of this
Sublease shall be valid unless accepted by Sublandlord in writing. Subtenant
acknowledges and agrees that Subtenant has not relied upon any statement,
representation, prior written, or prior or contemporaneous oral promises,
agreements or warranties, except such as are expressed herein.
24. No Recording. Subtenant shall not record this Sublease nor a memorandum
------------
of this Sublease in any public records, including without limitation, the Public
Records of Miami-Dade County, Florida.
25. Counterparts. This Sublease may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
26. Master Landlord's Approval. This Sublease is conditioned upon the
--------------------------
consent hereto by Master Landlord. Subtenant shall be responsible for payment of
any and all reasonable fees and/or costs of Master Landlord which Sublandlord
may be obligated to pay under the terms of the Master Lease. In the event Master
Landlord fails to consent to this Sublease on or prior to the date that is ten
(10) days after the date of this Sublease, then Sublandlord shall return the
Security Deposit plus first month's Base Rent to Subtenant, and thereafter this
Sublease shall be null and void.
8
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered
this Sublease on the day and year first above written.
WITNESSES: SUBLANDLORD:
/s/ illegible CELLIT, INC., a Florida corporation
-----------------------------
By: /s/ illegible
----------------------------- ---------------------------------
Title: CFO
[CORPORATE SEAL]
SUBTENANT:
VELOCITEL, INC., a Delaware corporation
-----------------------------
/s/ illegible By: /s/ illegible
----------------------------- ---------------------------------
Title: illegible
[CORPORATE SEAL]
9
EXHIBIT "A"
-----------
Master Lease
------------
A-1
EXHIBIT "B"
-----------
Depiction of Sublease Premises
------------------------------
B-1
[GRAPHIC]
EXHIBIT "C"
-----------
Furnishings
-----------
C-1
FURNITURE LIST - SUBLEASE
-------------------------
14 Sets of Office Furniture. Each Set includes the following:
1 Bow Front Desk with 2 Drawers
1 Bride
1 Rectangular Surface
2 Drawer Lateral File
1 Book Case
1 Conference Table
20 Cubicle Spaces. Each Cubicle includes the following:
1 Three-Drawer Unit
1 Two-Drawer Unit
1 Two-Overhead Bin Unit
2 Cubicle Work Spaces. Each containing the following:
2 Work Tables
CONSENT TO SUBLEASE
-------------------
This Consent to Sublease (this "Agreement") is executed as of March 14th,
---------
2001 between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation ("Landlord"), CELLIT, INC., a Florida corporation ("Tenant"), and
-------- ------
VELOClTEL, INC., a Delaware corporation ("Subtenant").
---------
RECITALS:
A. Tenant and Landlord entered into the Lease Agreement dated as of
February 23, 1999, as amended by that certain First Amendment to Lease Agreement
dated as of March 30, 2000, as amended by that certain Second Amendment to Lease
Agreement dated as of May 26, 2000, and as amended by that certain Third
Amendment to Lease Agreement dated as of May 26, 2000 (as so amended, the
"Lease"), under which Landlord is leasing to Tenant therein described space
-----
comprising 43,716 square feet office building commonly known as Westside Plaza
II, located at 8300 N.W. 33(rd) Street, Miami, Florida 33122. Capitalized terms
used herein but not defined shall be given the meanings assigned to them in the
Lease.
B. Tenant desires to sublet approximately 8,200 square feet as more
particularly described in Exhibit A hereto (the "Subleased Premises") to
--------- ------------------
Subtenant, and Subtenant desires to assume all of Tenant's obligations under the
Lease, subject to the terms and conditions contained herein.
AGREEMENTS:
For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Consent. Subject to the terms and conditions contained in this
-------
Agreement, Landlord hereby consents to the subletting by Tenant of the Subleased
Premises to Subtenant pursuant to the Sublease Agreement between Tenant and
Subtenant, the exact form of which is attached hereto as Exhibit B (the
---------
"Sublease"). Landlord's consent contained herein shall not waive its rights as
--------
to any subsequent assignment, sublease or other transfer. This Consent is a
consent only to the subletting itself and the occupancy of the Subleased
Premises by the Subtenant and shall not be deemed a consent to any other
provisions contained in the Sublease.
2. Assumption of Liabilities. Tenant and Subtenant shall be jointly and
-------------------------
severally liable to Landlord for all of the obligations of the "Tenant" under
------
the Lease, including, without limitation, Tenant's indemnification obligations,
and Landlord may enforce the same directly against Subtenant; however, Subtenant
shall be liable to Landlord only for the amount of rent (including any
pass-through expenses) agreed to be paid by Subtenant under the terms of the
Sublease.
3. No Obligations Created. Each of the parties to this Agreement agree and
----------------------
acknowledge that Landlord shall have no obligation or liability under the terms
of the Sublease. Without limiting the generality of the foregoing, Landlord
shall have no liability (and shall not be bound by) any modifications, deletions
or waivers of any provision of the Lease as embodied in the Sublease or any
other agreement between Tenant and Subtenant. Additionally, Landlord shall have
no obligation to give notice of any default under the Lease except to Tenant
(and only to the extent required under the Lease) and shall have no obligation
to deal with any party other than Tenant with respect to the Lease or the
Subleased Premises. Nothing in this Agreement or otherwise shall create privity
of estate between Landlord and Subtenant, and Subtenant irrevocably waives any
claims based on, or alleged to have arisen from, such an estate. Subtenant
hereby releases, acquits and forever discharges Landlord and its agents,
employees, officers, directors, partners and affiliates from any and all claims,
liabilities and obligations arising out of or in any way related to the Sublease
which Subtenant or any party claiming by, through or under Subtenant now has or
may ever have in the future against Landlord or any of such other parties.
Subtenant acknowledges that Landlord would not have entered this Agreement
without such release.
4. Indemnification. To the fullest extent allowed by law, Subtenant shall
---------------
indemnify, defend and hold harmless Landlord from and against any and all loss,
liability, attorneys' fees, expenses and claims arising out
1
of any injury to person or damage to property on or about the Subleased Premises
caused by any act or omission of Subtenant, its agents, servants, contractors,
employees or invitees.
5. Condition of Subleased Premises. Landlord makes no representations or
-------------------------------
warranties, express or implied, concerning the condition of the Subleased
Premises and Subtenant accepts the Subleased Premises in their "as-is" condition
as of the date hereof.
6. Subordination. The Sublease shall in all respects be subject and
-------------
subordinate to the Lease and to all modifications, amendments and extensions
thereof, and any term, condition or provision contained in the Sublease in
conflict with the Lease shall be null and void as to Landlord (although
effective between Tenant and Subtenant) notwithstanding Landlord's consent to
the subletting. Subject to Landlord's rights in Paragraph 13 below, any
termination of the Lease shall result in a termination of the Sublease.
7. Brokerage. Neither Tenant nor Subtenant has dealt with any broker or
---------
agent in connection with the negotiation or execution of this lease, other
than Cushman & Wakefield of Florida, Inc. Courvoisier Realty, whose commission
shall be paid by Tenant pursuant to a separate written agreement. In no event
shall Landlord be liable for any leasing or brokerage commission with respect to
the negotiation and execution of the Sublease or this Agreement. Tenant and
Subtenant shall each jointly and severally indemnify, defend and hold Landlord
harmless from and against all costs, expenses, attorneys' fees and other
liability for commissions or other compensation claimed by any broker or agent
claiming the same by, through or under the indemnifying party with respect to
the Sublease or this Agreement.
8. Notices. All notices and other communications given pursuant to the
-------
Lease and this Agreement shall be in writing and shall be (a) mailed by first
class, United States mail, postage prepaid, certified, with return receipt
requested, and addressed to the parties hereto at the address listed below, (b)
hand delivered to the intended addressee, or (c) sent by prepaid telegram,
cable, facsimile transmission, or telex followed by a confirmatory letter.
Notice sent by certified mail, postage prepaid, shall be effective three
business days after being deposited in the United States mail; all other notices
shall be effective upon delivery to the address of the addressee. The parties
hereto may change their addresses by giving notice thereof to the other in
conformity with this provision. Without limiting the provisions of Section 3
hereof, the addressees for notice set forth below shall supersede and replace
any addresses for notice set forth in the Lease.
Landlord's Notice Address: The Prudential Insurance Company of America
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2116
Attention: PRlSA Asset Manager
With a copy to: Codina Real Estate Management, Inc.
8323 N.W. 12(th) Street, Suite 115
Miami, Florida 33126
Tenant's Notice Address: Cellit, Inc.
8300 N.W.33(rd) Street, Suite 200
Miami,Florida 33166
Subtenant's Notice Address: Velocitel, Inc.
8300 N. W. 33rd Street, Suite 300
Miami, Florida 33166
9. Ratification. Tenant and Subtenant hereby ratify and confirm their
------------
respective obligations under the Lease, and represent and warrant to Landlord
that, as of the date hereof, they have no defenses thereto Additionally,
Tenant, and Subtenant further confirm and ratify that, as of the date hereof,
(a) the Lease is and remains in good standing and in full force and effect, and
(b) neither of such parties has any claims, counterclaims, set-offs or defenses
against Landlord arising out of the Lease or in any way relating thereto or
arising out of any other transaction between Landlord, Tenant or Subtenant.
2
10. Binding Effect; Governing Law. Except as modified hereby, the Lease
-----------------------------
shall remain in full effect and this Agreement shall be binding upon Landlord,
Tenant, and Subtenant and their respective successors and assigns. If any
inconsistency exists or arises between the terms of this Agreement and the terms
of the Lease, the terms of this Agreement shall prevail. This Agreement shall be
governed by the laws of the state in which the Subleased Premises are located.
11. Amendment; Entire Agreement. This Agreement shall not be amended or
---------------------------
modified except by an instrument in writing signed by all the parties hereto and
this Agreement contains all of the agreements, understandings, representations
and warranties of the parties with respect to the subject matter hereof.
12. Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall constitute an original, but all of which shall constitute
one document.
13. Direct Lease. If Landlord shall recover or come into possession of the
------------
Subleased Premises before the stated expiration date of the Lease, Landlord
shall have the right, but not the obligation, to take over the Sublease and to
succeed to all rights of Tenant thereunder, Tenant hereby assigning (effective
as of the date of Landlord's succession to Tenant's estate in the Subleased
Premises) the Sublease if Landlord shall elect to take over. The subletting
thereunder is subject to the condition that, from and after the termination of
the Lease or re-entry by Landlord thereunder or other succession by Landlord to
Tenant's estate in the Subleased Premises, Subtenant hereby waives any right to
surrender possession or to terminate the Sublease and, at Landlord's election,
shall be bound to Landlord for the balance of the term thereof and shall attorn
to and recognize Landlord as its landlord, under all of the then executory terms
of the Sublease, except that Landlord shall not be (a) liable for any previous
act, omission or negligence of Tenant under the Sublease, (b) subject to any
counterclaim, defense or offset theretofore accruing to Subtenant against
Tenant, (c) bound by any previous modification or amendment of the Sublease made
without Landlord's consent or by any previous prepayment of more than one
month's rent and additional rent unless paid as provided in the Sublease, or (d)
obligated to perform any repairs or other work in the Subleased Premises or the
Building beyond Landlord's obligations under the Lease, and Subtenant shall
execute and deliver such instruments as Landlord may reasonably request to
evidence and confirm such attornment.
3
EXECUTED as of the date first written above.
WITNESSES: LANDLORD:
/s/ illegible THE PRUDENTIAL INSURANCE
----------------------------- COMPANY OF AMERICA
Print Name: illegible
-----------------
-----------------------------
Print Name: illegible By: /s/ illegible
----------------- ----------------------------------
Name: illegible
---------------------------
Title: illegible
--------------------------
WITNESSES: TENANT:
CELLIT, INC.
-----------------------------
Print Name:
-----------------
By: /s/ illegible
----------------------------------
Name: illegible
---------------------------
Title: illegible
--------------------------
-----------------------------
Print Name:
-----------------
WITNESSES: SUBTENANT:
VELOCITEL, INC
----------------------------
Print Name:
-----------------
By: /s/ illegible
----------------------------------
Name: illegible
---------------------------
Title: illegible
--------------------------
----------------------------
Print Name:
-----------------
4
EXHIBIT A
---------
[DEPICTION OF SUBLEASED PREMISES]
---------------------------------
1
EXHIBIT B
---------
[SUBLEASE]
----------
1
Exhibit 10.26
EMPLOYMENT AGREEMENT
--------------------
Alex Tellez
-----------
This Employment Agreement ("Agreement") is made and entered into on this
___ day of January, 2002, by and between Davox Corporation (the "Company" or
"Davox") and Alex Tellez (hereinafter called the "Executive").
RECITALS
--------
A. The Executive is currently employed as President & Chief Executive
Officer of CELLIT, Inc.
B. CELLIT, Inc. has merged with and into Dolphin Acquisition Corp., which
is a wholly-owned subsidiary of Davox
C. The Executive possesses intimate knowledge of the business and affairs
of CELLIT, Inc.
D. Davox values Executive's knowledge of the business affairs of CELLIT,
INC. and desires to employ Executive.
E. The Executive wishes to leave the employ of CELLIT, Inc. and become
employed by Davox and is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties agree as follows:
ARTICLE I
Employment At-Will and Best Efforts
-----------------------------------
1.1 Subject to Article III, Executive's employment with the Company is on
an "at-will" basis. Either the Company or the Executive may terminate
Executive's employment at any time, for any or no reason, with or without prior
notice.
1.2 During the period of Executive's employment by the Company, Executive
shall devote his full time and best efforts to the Company's business, and he
shall neither pursue any business opportunity outside the Company nor take any
position with any organization other than the Company without the approval of
the Company's Chief Executive Officer; provided, however, that Executive may
participate in professional, civic, social and/or charitable activities that do
not adversely affect his ability to carry out his responsibilities to the
Company.
ARTICLE II
Compensation
------------
2.1 The Executive shall be employed as Executive Vice President
Engineering reporting to the President & Chief Executive Officer of Davox
Corporation. Executive shall receive during the term of this Agreement a base
salary at the annual rate of Two Hundred Thousand Dollars ($200,000).
Executive's salary is subject to the review and discretion of Davox's Chief
Executive Officer.
2.2 Executive shall be eligible to participate in the Executive Incentive
Compensation Program. Total combined incentive at 100% of plan for the
year shall be equal to 50% of base salary. Eligibility is extended on
a quarterly and annual basis subject to the terms and conditions of
the the Incentive Compensation Plan. Bonus criteria is based on
Executive and company performance. A copy of the plan shall be
furnished to the executive annually.
2.3 Executive shall be eligible to participate in all benefits plans
offered by the Company subject to the general terms and conditions of each such
plan, and as such plans are amended from time-to-time.
2.4 Davox will grant employee the option to purchase 125,0000 shares of
Davox's common stock. The option will be subject to the terms and conditions of
Davox's Stock Option Plan and Davox's standard Stock Option Agreement, which
will include, among other terms and conditions, a vesting schedule.
2.5 Executive shall be eligible for vacation time each calendar year
during the term of this Agreement, subject to the terms and conditions of the
Company's standard vacation policy, as it is amended from time-to-time.
2.6 Executive will be reimbursed for all authorized business expenses in a
manner consistent with the Company's standard expense reimbursement policy, as
it is amended from time-to-time.
2.7 Executive's years of employment with CELLIT, Inc. shall be credited as
years of service to the Company for purposes of all Company plans and policies.
ARTICLE III
Severance
---------
3.1 Executive will be eligible for severance payments if terminated "for
economic reason" as defined in Article 3.2 below. If terminated for economic
reasons as defined herein, the Company shall continue Executive's then current
base salary and medical benefits (at the Company's cost) for a period of six (6)
months from the date of termination or until such time as Executive obtains new
employment, whichever occurs first.
2
3.2 For purposes of this Article III, a termination "for economic reasons"
shall mean: (i) the Executive's inclusion in an economic layoff; (ii) the
Executive's inclusion in a downsizing which results in the elimination of
Executive's position; or (iii) a downsizing and/or reorganization which would
require Executive to relocate more than seventy-five (75) miles.
3.3 Receipt of the severance payment set forth in Article 3.1 is contingent
upon Executive's execution of a release of claims in a form reasonably
acceptable to the Company.
ARTICLE IV
Definitions
-----------
4.1 Company: The term "Company" in Articles V through XI, exclusively, of
-------
this Agreement shall mean Davox Corporation and any parent, subsidiary,
affiliate, successor or assign of Davox Corporation (including without
limitation CELLIT, Inc. and its subsidiaries and affiliates).
4.2 Confidential Information: The term "Confidential Information" shall
------------------------
mean any trade secret, proprietary or confidential information concerning the
organization, personnel, business or finances of the Company, or of any third
party which the Company is under an obligation to keep confidential, and that is
maintained by the Company as confidential. Such Confidential Information shall
include, but is not limited to, trade secrets, proprietary or confidential
information respecting existing and future products and services, designs,
methods, formulas, drafts of publications, research, know-how, techniques,
systems, databases, processes, software programs or code, developments or
experimental work, works of authorship, customer lists and/or customer
information, business plans, marketing plans, financial information, sales
techniques, projects, the Company's salary and/or pay rates, and other Company
personnel information.
4.3 Developments: The term "Developments" shall mean any invention,
------------
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
trade secret or intellectual property right whatsoever or any interest therein
(whether or not patentable or registrable under copyright, trademark or similar
statutes, including, but not limited to, the Semiconductor Chip Protection Act,
or subject to analogous protection).
ARTICLE V
Disclosure of Developments
--------------------------
5.1 Executive agrees that he will forthwith communicate in writing to the
Board of Directors of the Company, or such officer or individual as the Board of
Directors of the Company may from time to time designate, a full and complete
disclosure of any and all Developments, research and other information,
discoveries and improvements made, developed,
3
conceived and/or reduced to practice by him, alone, or jointly with others (i)
while in the employ of the Company and (ii) during a one [1] year period
following the termination of his employment or other association with the
Company if such Developments, research, discoveries or improvements relate to
the business of the Company.
5.2 The business of the Company includes any technical or business
interest that has been worked on by the Company in the past (including without
limitation any technical or business interest of CELLIT, Inc. and its
subsidiaries and affiliates), or in which there is work in progress at the
Company during the period of Executive's employment with the Company. The
business interests of the Company include Company operations or activities in
the planning stages. Executive understands that this disclosure of Developments
and the following assignment of Developments does not cover any of his patents
or patents applications that are filed or based exclusively on inventions made
by Executive before his employment or association with CELLIT, Inc.
------
ARTICLE VI
Assignment of Developments
--------------------------
6.1 If at any time or times during Executive's employment or other
association with the Company (including Executive's employment or other
association with CELLIT, Inc. and its subsidiaries and affiliates), Executive
has in the past (either alone or with others) made, conceived, created,
discovered, invented or reduced to practice any Development, and/or Executive
shall going forward (either alone or with others) make, conceive, create,
discover, invent or reduce to practice any Development, that (i) relates to the
business of the Company or any customer of or supplier to the Company or any of
the products or services being developed, manufactured or sold by the Company or
which may be used in relation therewith; or (ii) results from tasks assigned to
Executive by the Company; or (iii) results from the use of premises or personal
property (whether tangible or intangible) owned, leased or contracted for by the
Company, then all such Developments and the benefits thereof are and shall
immediately become the sole and absolute property of the Company and its
assigns, as works made for hire or otherwise. Executive shall promptly disclose
to the Company (or any persons designated by it) each such Development. At the
Company's expense, Executive hereby assigns all rights (including, but not
limited to, rights to inventions, patentable subject matter, copyrights and
trademarks) Executive may have or may acquire in the Developments and all
benefits and/or rights resulting therefrom to the Company and its assigns
without further compensation and shall communicate, without delay, and without
disclosing to others the same, all available information relating thereto (with
all necessary plans and models) to the Company.
6.2 Executive will assist, upon request, in locating writings and other
physical evidence of the making of Executive's Developments and provide
unrecorded information relating to them, and give testimony in any proceeding in
which any of Executive's Developments or any application or patent directed
thereto may be involved, provided that if Executive is no longer employed by the
Company reasonable compensation shall be paid for such services. To the extent
feasible, the Company will use its best efforts to request such assistance at
times and places as will least interfere with any other employment of the
Executive.
4
6.3 If the Company is unable, after reasonable effort, to secure
Executive's signature on any application for patent, copyright, trademark or
other analogous protection or other documents regarding any legal protection
relating to a Development assigned or assignable to the Company under this
Article VI, whether because of Executive's physical or mental incapacity or for
any other reason whatsoever, Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as his agent
and attorney-in-fact, to act for and in his behalf and stead to execute and file
any such application or applications or other documents and to do all other
lawfully permitted acts to further the prosecution and issuance of patent,
copyright or trademark registrations or any other legal protection thereon with
the same legal force and effect as if executed by Executive.
6.4 Executive will promptly disclose to the Company all material which
Executive has produced, composed or written, and which Executive shall produce,
compose or write, individually or in collaboration with others, which arises out
of work delegated to Executive by the Company. Executive agrees that all such
material constitutes a work for hire, and at the expense of the Company,
Executive hereby assigns to the Company all his interest in such copyrightable
material and will sign all papers and do all other acts necessary to assist the
Company to obtain copyrights on such material in any and all countries.
6.5 Any Development relating to the Company's business made by
Executive within one [1] year following the termination of his employment (and
which is required to be disclosed in accordance with Section 5.1 above) shall be
presumed to be owned by the Company.
6.6 Executive represents that the Developments identified in the
Appendix attached hereto, if any, comprise all the Developments that he has made
or conceived prior to his employment by the Company, which Developments are
excluded from this Agreement. Executive understands that it is only necessary to
list the title of such Developments and the purpose thereof, but not details of
the Development itself. IF THERE ARE ANY SUCH DEVELOPMENTS TO BE EXCLUDED, THE
UNDERSIGNED SHOULD INITIAL HERE; OTHERWISE IT WILL BE DEEMED THAT THERE ARE NO
SUCH EXCLUSIONS. ______________.
ARTICLE VII
Non-Disclosure
--------------
7.1 Executive agrees that he will not, at any time, whether during or
after the termination of his employment, without first obtaining the written
approval of the Board of Directors of the Company, or of such officer or
individual as the Board of Directors of the Company may from time to time
designate, divulge or disclose to any person or entity outside of the Company,
whether by private communications or by public address or publication, or
otherwise, any Confidential Information, except to the extent that such
disclosure is necessary to perform Executive's duties and fulfill Executive's
responsibilities as an employee of the Company or is required by law or legal
process. All original and copies of any Confidential Information or other
written materials relating to the business of the Company, however and whenever
produced, shall be the sole property of the Company, and shall be surrendered to
the Company upon termination of Executive's employment.
5
7.2 Subject to Section 7.1, Executive shall keep confidential all
matters entrusted to him and shall not use or attempt to use any Confidential
Information, including confidential information related to third parties which
the Company is obligated to maintain as confidential, except as may be required
in the ordinary course of performing his duties as an employee of the Company,
nor shall he use any Confidential Information in any manner which may injure or
cause loss or may be calculated to injure or cause loss to the Company, whether
directly or indirectly.
ARTICLE VIII
Non-Competition
---------------
8.1 Executive agrees that while in the employ of the Company and for
one [1] year thereafter (the "Restriction Term"), regardless of the reasons for
his termination, Executive shall not, directly or indirectly, alone or as a
consultant, partner, officer, director, employee, joint venturer, lender or
stockholder of any entity (a) accept employment or establish any other
relationship with any business within the United States that is in competition
with the products or services created, developed or under development,
manufactured or planning to be manufactured, marketed or planning to be
marketed, distributed or planning to be distributed, sold or planning to be
sold, by the Company at the time of his termination (collectively, the "Products
and Services"), or (b) engage in any business or activity within the United
States that is in competition with the Products and Services, provided, however,
that the record or beneficial ownership of five [5] percent or less of the
outstanding publicly traded capital stock of any entity shall not be deemed, in
and of itself, to be in violation of this Article.
8.2 Executive acknowledges and agrees that any violation by him of the
terms of this Article by either accepting employment or establishing any other
relationship that is in competition with the Company's Products and Services
will result in the inevitable disclosure (either intentionally or otherwise) of
the Company's valuable and sensitive Confidential Information.
ARTICLE IX
Non-Solicitation Of Customers
------------------------------
9.1 Executive agrees that during the Restriction Term, regardless of
the reasons for his termination from employment, he will not directly or
indirectly, alone or as a consultant, partner, officer, director, employee,
joint venturer, lender or stockholder of any entity, solicit or do business in
any capacity that competes with any of the Company's Products and Services with
any customer of the Company or any potential customer of the Company (a) with
whom Executive had contact during the course of his employment with the Company,
or (b) about whom Executive obtained Confidential Information during the course
of his employment with the Company.
6
ARTICLE X
Non-Solicitation/Non-Hire Of Employees
---------------------------------------
10.1 Executive agrees that during the Restriction Term, regardless of
the reasons for his termination, he will not directly or indirectly, alone or as
a consultant, partner, officer, director, employee, joint venturer, lender or
stockholder of any entity, recruit, solicit for hire, hire or knowingly and with
his involvement encourage (explicitly or implicitly) any company or business
organization in which he is employed or which is directly or indirectly
controlled by him to recruit, solicit for hire or hire any Company employee,
agent, representative or consultant, or any such person who has terminated
his/her relationship with the Company within six months of Executive's departure
from the Company.
ARTICLE XI
Company Property
----------------
11.1 Except for de minimis personal use, at Executive's cost, Executive
agrees that during his employment he shall not make, use or permit to be used
any Company Property otherwise than for the benefit of the Company. The term
"Company Property" shall include all notes, memoranda, reports, lists, records,
drawings, sketches, rolodexes, specifications, software programs, software code,
data, computers, cellular telephones, pagers, palm pilots and their equivalents,
credit and/or calling cards, keys, access cards, documentation or other
materials of any nature and in any form, whether written, printed, electronic or
in digital format or otherwise, relating to any matter within the scope of the
business of the Company or concerning any of its dealings or affairs, and any
other Company property in Executive's possession, custody or control. Executive
further agrees that he shall not, after the termination of his employment, use
or permit others to use any such Company Property. Executive acknowledges and
agrees that all Company Property shall be and remain the sole and exclusive
property of the Company. Immediately upon the termination of his employment
Executive shall deliver all Company Property in my possession, and all copies
thereof, to the Company.
ARTICLE XII
Acknowledgement By Executive
----------------------------
12.1 Executive acknowledges and confirms that (i) the restrictive
covenants contained in this Agreement are reasonably necessary to protect the
legitimate business interests of the Company, and (ii) the restrictions
contained in this Agreement (including without limitation the length of the term
of the provisions) are not overboard, overlong, or unfair and are not the result
of overreaching, duress or coercion of any kind. Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of each of the
covenants contained in this Agreement will not cause him any undue hardship,
financial or otherwise, and that enforcement of each of the covenants contained
herein will not impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to obtain income
required for the comfortable support of him and his family and the satisfaction
of the needs of his creditors. The Executive acknowledges and confirms that his
special knowledge of
7
the business of the Company is such as would cause the Company serious injury or
loss if he were to use such ability and knowledge to the benefit of a competitor
or were to compete with the Company in violation of the terms of this Agreement.
The Executive further acknowledges that the restrictions contained in this
Agreement are intended to be, and shall be, for the benefit of and shall be
enforceable by, the Company's successors and assigns.
ARTICLE XIII
General Provisions
------------------
13.1 Executive agrees that this Agreement shall be binding upon him
irrespective of the duration of his employment or other association with the
Company, the reasons for the cessation of his employment or other association
with the Company, or the amount of his wages and/or salary.
13.2 Executive agrees that any breach of this Agreement by him will
cause irreparable damage to the Company and in the event of such breach the
Company shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent the
violations of my obligations hereunder.
13.3 This Agreement sets forth the complete, sole and entire agreement
between the parties with respect to the subject matter herein and supersedes any
and all other agreements, negotiations, discussions, proposals, or
understandings, whether oral or written, previously entered into, discussed or
considered by the parties, including that certain Amended and Restated
Employment Agreement that Executive entered into with CELLIT, Inc. on November
19, 1998. Executive represents, warrants and agrees that entering into the
instant Agreement, and the employment relationship with the Company, does not
constitute a termination without cause by CELLIT, Inc. of Executive as that term
is used in the Amended and Restated Employment Agreement. No modification or
variation to this Agreement shall be deemed valid unless in writing and signed
by the Company and Executive.
13.4 Executive does not have the right to assign or delegate his rights
or obligations hereunder to any other person and this Agreement shall be binding
upon Executive's heirs, executors, administrators and legal representatives. The
Company has the right to assign this Agreement by operation of law or otherwise,
without notice, to any entity which acquires by merger or otherwise a majority
voting interest in Company. This Agreement shall inure to the benefit of the
successors and assigns of the Company.
13.5 Executive represents and warrants to the Company that he is not
under any obligations to any person, firm, corporation, or other business entity
other than the Company, and has no other interest which is inconsistent or in
conflict with this Agreement, or which would prevent, limit or impair, in any
way, the performance by him of any of the covenants hereunder or his duties in
his employment with the Company. Executive has not entered into, and shall not
enter into, any agreement either oral or written in conflict herewith.
13.6 Any waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other
8
provision hereof. In addition, any amendment to or modification of this
Agreement or any waiver of any provision hereof must be in writing and signed by
the Company and Executive.
13.7 The parties agree that each provision and the subparts of each
provision herein shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses of the Agreement. Moreover, if one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to scope, activity, subject or otherwise, so as to be
unenforceable by law, such provision or provisions shall be construed by the
appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall
then appear. The parties hereby further agree that the language of all parts of
this agreement shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either of the parties.
13.8 The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
13.9 Executive acknowledges and agrees that the Company conducts
business throughout the United States and that the Company has an interest in
the uniform interpretation and enforcement of its Employment Agreements.
Accordingly, the Company and Executive acknowledge and agree that this Agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts and shall in all respects be interpreted, enforced
and governed under the internal and domestic laws of such state, without giving
effect to the principles of conflicts of laws of such state.
9
AGREED AND ACCEPTED:
Employee: /s/ Alex Tellez Date: 1/10/02
------------------ -------
Alex Tellez
Witness: /s/ Jose Villena Date: 1/10/02
---------------- -------
Company: Davox Corporation
By: /s/ Paul R. Lucchese
---------------------
Name: Paul R. Lucchese
----------------
Title: VP, General Counsel & Secretary
-------------------------------
10
APPENDIX - TITLE/PURPOSE OF DEVELOPMENTS
The following is a complete list of all Developments and the purpose of
those Developments:
X No Developments
--------
________ See Below
Developments and purpose:
------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
/s/ Alex Tellez
---------------
Employee Signature
Alex Tellez
-----------
Print Name
11
Exhibit 10.27
SECURED PROMISSORY NOTE &
ASSIGNMENT AGREEMENT
$125,000 March 13, 2002
1. FOR VALUE RECEIVED, the undersigned, Alexander Tellez on behalf of himself
and the A. Tellez Limited Partnership, (Obligor"), hereby promises to pay to the
order of Davox Corporation a Delaware corporation or its successors ("Lender"),
at its principal office at 6 Technology Park Drive, Westford, MA 01886 or at
such other place as may be designated from time to time in writing by Lender,
the principal sum of One-Hundred-Twenty-Five-Thousand Dollars and Zero Cents
($125,000) together with interest in arrears from and including the date hereof
on the unpaid principal balance hereunder at the mid-term Monthly Applicable
Federal Rate (AFR) of interest. Interest shall be calculated on the basis of
actual number of days elapsed and a year of 365 or 366 days, as applicable.
Notwithstanding any other provision of this Promissory Note, Lender does not
intend to charge and Obligor shall not be required to pay any interest or other
fees or charges in excess of the maximum permitted by applicable law; any
payments in excess of such maximum shall be credited to reduce principal
hereunder. Principal and interest shall be payable in lawful money of the United
States of America.
2. All principal and interest hereunder shall be due and payable on the earlier
of: (i) January 14, 2004 or on the date that Obligor is no longer employed by
Lender (the "Maturity Date"). Notwithstanding the immediately preceding
sentence, the Lender, in its sole discretion, may at any time or from time to
time extend the Maturity Date by one or more periods of seven (7) days each.
3. Obligor acknowledges that certain Deferred Common Holder Payments, as
defined in the Agreement and Plan of Merger By And Among Davox Corporation, AP
Acquisition Corporation and Cellit, Inc. ("Merger Agreement"), are to be paid
to Obligor pursuant to the terms of the Merger Agreement. Obligor hereby
assigns to Lender all Delayed Common Holder Payments to Mr. Alexander Tellez
and the A. Tellez Limited Partnership up to a maximum of the principal and
interest owing hereunder. If this Agreement is not enough evidence for the
Escrow Agent (as defined in the Merger Agreement), Obligor will execute and
deliver whatever writings are required to ensure that such Delayed Common
Holder Payments are automatically paid to Lender when they become payable.
Lender shall be paid all Delayed Common Holder Payments of Obligor's until such
time as all principal and interest thereon is paid in full. Notwithstanding the
foregoing, in the event the Escrow Agent will not pay such Deferred Common
Holder Payments directly to Lender, Obligor must do so immediately upon receipt
of such funds until all such principal and interest thereon is paid in full.
4. If any day on which a payment is due pursuant to the terms of this
Promissory Note is not a day on which banks in the Commonwealth of
Massachusetts are generally open (a "Business Day"), such payment shall be due
on the next Business Day following.
5. This Promissory Note may be prepaid at any time, without premium or
penalty, in whole or in part. Any prepayment of principal shall be accompanied
by a payment of accrued interest in respect of the principal being prepaid.
6. If this Promissory Note is not paid in accordance with its terms, Obligor
shall pay to Lender, in addition to principal and accrued interest thereon, all
costs of collection of the principal and accrued
Promissory Note -- Page 2
interest, including, but not limited to, reasonable attorneys' fees, court
costs and other costs for the enforcement of payment of this Promissory Note.
7. No waiver of any obligation of Obligor under this Promissory Note shall be
effective unless it is in a writing signed by Lender. A waiver by Lender of any
right or remedy under this Promissory Note on any occasion shall not be a bar to
exercise of the same right or remedy on any subsequent occasion or of any other
right or remedy at any time.
8. Any notice required or permitted under this Promissory Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the
fifth Business Day after mailing, if mailed to the party to whom notice is to
be given, by certified mail, return receipt requested, postage prepaid, and
addressed to the addressee at the address of the addressee set forth herein, or
to the most recent address, specified by written notice, given to the sender
pursuant to this paragraph.
9. This Promissory Note shall be enforceable in accordance with the laws of
the Commonwealth of Massachusetts, and shall be construed in accordance
therewith, and shall have the effect of a sealed instrument.
10. In the event any one or more of the provisions of this Promissory Note
shall for any reason be held to be invalid, illegal or unenforceable, in whole
or in part or in any respect, or in the event that any one or more of the
provisions of this Promissory Note operate or would prospectively operate to
invalidate this Promissory Note, then and in any such event, such provision(s)
only shall be deemed null and void and shall not affect any other provision of
this Promissory Note and the remaining provisions of this Promissory Note shall
remain operative and in full force and effect and in no way shall be affected,
prejudiced, or disturbed thereby.
OBLIGOR: Alexander Tellez
By: /s/ Alexander Tellez
Name: Alexander Tellez
AGREED AND ACCEPTED:
--------------------
Davox Corporation
/s/ Michael J. Provenzano, III
Michael Provenzano
VP Finance & CFO
Exhibit 10.28
DAVOX CORPORATION
EXECUTIVE VICE PRESIDENT, SALES & MARKETING
SEVERANCE AGREEMENT
DAVOX Corporation ("DAVOX") will provide to you the following terms and
condition of salary and benefits continuation:
1. Termination Due to Merger / Acquisition - You will receive 12 months base
salary, medical and dental benefits continuation in the event your
employment with Davox Corporation is terminated as a result of a merger or
acquisition that results in the elimination, consolidation or relocation of
your position.
2. Termination within 9 months from Start Date - You will receive 6 months
base salary, medical and dental benefits continuation in the event your
employment with Davox Corporation is terminated for any reason other than a
Merger / Acquisition within the first 9 months of your employment with
Davox Corporation. Notwithstanding the foregoing, if you voluntarily resign
within 9 months from your start date, you will not receive any base salary,
medical or dental benefits continuation.
3. Termination after 9 months from Start Date - You will receive 6 months base
salary, medical and dental benefits continuation in the event your
employment with Davox Corporation is terminated following your first 9
months with the company and for reasons other than those associated with
job performance or Merger & Acquisition. Notwithstanding the foregoing, if
you voluntarily resign after 9 months from your start date, you will not
receive any base salary, medical or dental benefits continuation.
Following the effective date of termination, as set forth in writing and
furnished to you by DAVOX, your employment with DAVOX shall cease and you shall
not hold yourself as an employee, agent, or representative of DAVOX.
Continuation of base salary and benefits shall further be subject to your
compliance with any then existing company policies and such other terms as may
be in effect between you and DAVOX pertaining to the disclosure of confidential
or proprietary information.
Approval:
/s/ James D. Foy 2/21/02
--------------------------------- -------
President & Chief Executive Officer Date
/s/ Ralph Breslauer 2/21/02
--------------------------------- -------
Executive Vice President, Sales & Marketing Date
EXHIBIT 10.29
DAVOX CORPORATION
VICE PRESIDENT, PROFESSIONAL SERVICES
SEVERANCE AGREEMENT
DAVOX Corporation ("DAVOX") will provide to you the following terms and
condition of salary and benefits continuation:
(1.) DAVOX shall provide a continuation of your base salary and medical
benefits at DAVOX's cost, as may be in effect at the time of a
qualifying termination as set forth in subclause 2, commencing upon
the date of termination, for a period of six (6) months or until such
time as you assume new employment, whichever comes first;
(2.) DAVOX shall provide continuation of base salary and benefits as set
forth in subclause (1) in the event your employment is terminated for
the following reasons: (a) economic layoff; (b) downsizing of the
Professional Services organization which results in the elimination of
your position as Vice President, Professional Services; or (c)
reorganization of the Professional Services organization which would
require you to relocate.
Following the effective date of termination, as set forth in writing and
furnished to you by DAVOX, your employment with DAVOX shall cease and you shall
not hold yourself as an employee, agent, or representative of DAVOX.
Continuation of base salary and benefits shall further be subject to your
compliance with any then existing company policies and such other terms as may
be in effect between you and DAVOX pertaining to the disclosure of confidential
or proprietary information.
DAVOX has final authority to determine all questions of eligibility to receive
benefits under this arrangement and to interpret and construe the terms of this
arrangement.
Approval:
/s/ James D. Foy 2/21/02
-------------------------------------- -------
President & Chief Executive Officer Date
/s/ Kristina Lengyel 2/21/02
-------------------------------------- -------
Vice President, Professional Services Date
Exhibit 10.30
DAVOX CORPORATION
VICE PRESIDENT FINANCE & CHIEF FINANCIAL OFFICER
SEVERANCE AGREEMENT
DAVOX Corporation ("DAVOX") will provide to you the following terms and
condition of salary and benefits continuation:
(1.) DAVOX shall provide a continuation of your base salary and medical
benefits at DAVOX's cost, as may be in effect at the time of a
qualifying termination as set forth in subclause 2, commencing upon
the date of termination, for a period of six (6) months or until such
time as you assume new employment, whichever comes first;
(2.) DAVOX shall provide continuation of salary and benefits as set forth
in subclause (1) in the event your employment is terminated for the
following reasons: (a) economic layoff; (b) downsizing of the Finance
organization which results in the elimination of your position as Vice
President Finance & Chief Financial Officer; or (c) reorganization of
the Finance organization which would require you to relocate.
Following the effective date of termination, as set forth in writing and
furnished to you by DAVOX, your employment with DAVOX shall cease and you shall
not hold yourself as an employee, agent, or representative of DAVOX.
Continuation of salary and benefits shall further be subject to your compliance
with any then existing company policies and such other terms as may be in effect
between you and DAVOX pertaining to the disclosure of confidential or
proprietary information.
DAVOX has final authority to determine all questions of eligibility to receive
benefits under this arrangement and to interpret and construe the terms of this
arrangement.
Approval:
/S/ Alphonse M. Lucchese 8/1/00
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Chairman & Chief Executive Officer Date
/S/ Michael J. Provenzano 6/12/00
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Vice President Finance & Chief Financial Officer Date
Exhibit 10.32
DAVOX CORPORATION
AMENDEDMENT TO TRANSITION AND
-----------------------------
RETENTION AGREEMENT
-------------------
AGREEMENT made and entered into between DAVOX Corporation ("DAVOX" or the
"Company"), a Delaware corporation with a usual place of business at 6
Technology Park Drive, Westford, MA 01886, and Alphonse M. Lucchese ("Mr.
Lucchese").
WHEREAS, Mr. Lucchese and the Board of Directors of the Company have mutually
agreed to amend the Transition and retention Agreement effective as of November
7, 2000 (the "Agreement") as specifically stated herein;
WHEREAS, the operations of the Company will require Mr. Lucchese's continued
participation during the Term (as defined below); and
WHEREAS, the Board of Directors desires to provide an incentive for Mr.
Lucchese to continue his participation;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
terms, provisions and conditions set forth in this Transition and Retention
Agreement Amendment (the "Amendment"), the Company and Mr. Lucchese agree as
follows:
1. All capitalized terms herein shall have the meaning ascribed to each
in the Agreement or as specifically set forth herein.
2. This Amendment will become effective November 7, 2001 and continue
until December 31, 2002 (the "Term").
3. Section 4 of the Agreement shall be and is hereby modified as
follows: Delete Section 4 of the Agreement in its entirety and
replace it with the following, "Mr. Lucchese's title and role will
remain Chairman of the Board of Directors and Advisor to the CEO. In
this full-time role, Mr. Lucchese will act as an advisor to the
current President and Chief Executive Officer or his successor. Mr.
Lucchese will remain a W-2 full-time regular employee of the Company
during the Term or any extension thereof.
4. Section 5 of the Agreement shall be and is hereby modified as
follows: Delete Section 5 of the Agreement in its entirety and
replace it with the following, "The Company will continue to pay Mr.
Lucchese an annualized salary of $400,000 through December 31, 2001.
Between January 1, 2002 and through December 31, 2002, The Company
will pay Mr. Lucchese an annual salary of $200,000. The CEO
incentive compensation plan (as amended) which is in place as of
November 7, 2001 will remain in place and be applicable to Mr.
Lucchese up to and through December 31, 2001. During the Term, or
any extension thereof, Mr. Lucchese will be provided, at Company
cost, medical and dental coverage, which is the same in all
materials respects, as that which he currently holds. Additionally,
the Company will continue to pay all of the rent payments for the
apartment located at Bear Hill, Waltham, Massachusetts through
December 31, 2001."
5. Section 6 of the Agreement shall be and hereby is deleted in its
entirety, provided however Mr. Lucchese can sit on other Boards of
Directors.
6. This Amendment may be signed in one or more counterparts, each of
which shall constitute the same instrument.
7. Integration Clause: The parties agree that the Agreement and this
------------------
Amendment are the complete and exclusive statement of the agreement
between the parties, which supersedes all prior proposals,
understandings and all other agreements, oral or written, between
the parties relating to these Agreements. Unless specifically
modified herein, the Agreement shall remain unchanged.
AGREED AND APPROVED:
FOR DAVOX CORPORATION: FOR ALPHONSE M. LUCCHESE:
/s/ James D. Foy /s/ Alphonse M. Lucchese
--------------------------------- ------------------------
By James D. Foy - President & CEO Alphonse M. Lucchese
Exhibit 21
Davox Corporation
List of Subsidiaries
Name of Subsidiary Jurisdiction of
Incorporation
------------------ ---------------
Concerto Software (Asia Pacific) Pte. Ltd. Singapore
Concerto Software GmbH Germany
Concerto Software (Canada) Inc. Nova Scotia
Concerto Software (UK) Limited England
Davox Sales Corporation Barbados
Davox Belgium S.P.R.L. Belgium
Davox International Holdings, Inc. Massachusetts
Concerto Software Mexico, S. de R.L. de C.V. Mexico
Davox Securities Corporation Massachusetts
Davox do Brasil Ltda. Sao Paulo
Concerto Software (Australia) Pty Limited New South Wales
Davox Corporation Hong Kong Limited Hong Kong
Davox (Japan) Corporation (Branch) Tokyo
Davox (Japan) Corporation Delaware
Concerto Software BV Amsterdam
Davox India Private Limited New Delhi
CellIt, Inc. Florida
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K into the Company's previously filed
Registration Statement File No.'s 333-42492, 333-83687, 333-52551, 333-30727,
333-16209, 333-07003, 33-47618, 33-47619, 33-51578, 33-89582 and 333-72850.
/s/ Arthur Andersen LLP
Boston, Massachusetts
March 12, 2002